Since its inception in 1988, QSound Labs, Inc. has established itself as one of the world's leading audio technology companies. The Company has developed proprietary audio solutions that include virtual surround sound, positional audio and stereo enhancement for the mobile devices, consumer electronics, PC/multimedia, and Internet markets. QSound Labs' cutting-edge audio technologies create rich 3D audio environments allowing consumers to enjoy stereo surround sound from two, four and up to 7.1 speaker systems. The Company's customer and partner roster includes ARM, BenQ, Broadcom, MiTAC, Panasonic, Qualcomm, Sony Vaio and Toshiba among others. To hear 3D audio demos and learn more about QSound, visit our web site at http://www.qsound.com.

This release contains forward-looking statements concerning the Company's continued listing on The Nasdaq Capital Market. Investors are cautioned that such forward-looking statements involve risk and uncertainties which could cause actual results to differ materially from those reflected in the forward-looking statements. Such risks and uncertainties include, but are not limited to, risks associated with successful distribution of QSound's products and technologies, QSound's ability to carry out its product development, business strategy and marketing plans, dependence on intellectual property, rapid technological change, competition, general economic and business conditions, and other risks detailed from time to time in QSound's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements are based on the current expectations, projections and opinions of QSound's management, and QSound undertakes no obligation to publicly release the results of any revisions to such forward-looking statements which may be made, for example to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Contacts:
QSound Labs, Inc.
Paula Murray
(954) 796-8798
Email: paula.murray@qsound.com
Website: www.qsound.com

SOURCE: QSound Labs, Inc.

mailto:paula.murray@qsound.com
http://www.qsound.com

Shares of QSound Labs slipped 13 cents to $1.50 in early trading. Casey Logan cl/vj

COPYRIGHT

Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

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The Company reported a working capital surplus of $766,000 as at September 30, 2008 of which cash comprised $1,068,000.

"The first shipments of mQFX enhanced phones commenced in this quarter and are expected to ramp moving forward. However revenues from mQSynth have been decreasing in FY2008, thus the Company continues to report an operating loss" stated David Gallagher, President and CEO of QSound Labs. "The unexpected request by one of our customers to issue a credit note regarding previously reported revenues, has been reflected in the third quarter financial statements and has had the effect of reducing working capital by $286,000. Given the current macro and micro economic circumstances, management has implemented a cost containment program designed to support existing revenue streams and pursue new customer opportunities for the foreseeable future. The Company has included a going concern note in the third quarter financial statements to address these conditions"

"In addition to mQFX, the Company is pursuing licensing opportunities for its new products, Ripp3D and QVoice. Ripp3D is an industry leading 3D graphics solution for mobile 3D games and QVoice is a feature rich noise reduction and echo cancellation software solution for mobile devices, headsets and automotives."

About QSound Labs, Inc.

Since its inception in 1988, QSound Labs, Inc. has established itself as one of the world's leading audio technology companies. The Company has developed numerous innovative, proprietary audio solutions based on extensive research into human auditory perception. These technologies include stereo enhancement, virtual surround sound, 3D positional audio and voice enhancement for the mobile devices and consumer electronics markets. QSound Labs' cutting-edge audio technologies create rich, immersive 3D audio environments allowing consumers to enjoy stereo surround sound from headphones or from two, four and up to 7.1 speaker systems. The company's customer and partner roster includes Aricent, ARM, Broadcom, CSR, LG, MiTAC, Panasonic, Pantech, Qualcomm, Samsung, Sony VAIO, Symbian, STMicroelectronics, and Toshiba among others. QSound Labs supports its semiconductor, software and OEM partners globally with offices in Canada, China, Korea and Japan. To hear 3D audio demos and learn more about QSound, visit our web site at www.qsound.com.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, expectation of increasing shipments of mQFX enabled phones, new customer opportunities, licensing opportunities for Ripp3D and QVoice, and implementation of cost containment measures. Investors are cautioned that such forward-looking statements involve risk and uncertainties, which could cause actual results, performance or achievements of QSound, or industry results to differ materially from those reflected in the forward-looking statements. Such risks and uncertainties include, but are not limited to, risks associated with continued growth of demand for QSound's technologies in the mobile devices market, successful licensing of Ripp3D and QVoice, QSound's ability to implement its cost containment program while carrying out its product development, business strategy and marketing plans, loss of relationships with companies that do business with QSound, successful distribution of QSound-enabled products by licensees, dependence on intellectual property, rapid technological change, competition, global deterioration in economic and business conditions, and other risks detailed from time to time in QSound's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements are based on the current expectations, projections and opinions of QSound's management, and QSound undertakes no obligation to publicly release the results of any revisions to such forward-looking statements which may be made, for example to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Consolidated
Balance Sheets
As at September 30, 2008 and December 31, 2007 (unaudited)
(Expressed in United States dollars under United States GAAP)
----------------------------------------------------------------------------
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                                     September 30, 2008   December 31, 2007
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ASSETS
Current assets
 Cash and cash equivalents                 $  1,067,600        $  1,232,255
 Accounts receivable (net)                      468,884             506,648
 Note receivable                                 25,330              27,400
 Inventory                                        2,557              12,217
 Deposits and prepaid expenses                  203,393             188,568
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                                              1,767,764           1,967,088
Property and equipment                          229,509             258,414
Deferred development costs                      151,242             194,915
Intangible assets                             2,931,134              70,260
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                                           $  5,079,649        $  2,490,677
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
 Accounts payable and accrued liabilities  $    257,203        $    262,718
 Obligation to arrange repurchase of shares     500,000                   -
 Current portion of long term debt              114,777                   -
 Deferred revenue                               129,750              22,820
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                                              1,001,730             285,538
Liability for pension benefit                    66,643               5,079
Long term debt                                1,846,554             118,220
Shareholders' equity
 Share capital                               48,250,222          47,675,739
 Warrants                                     2,386,741           1,027,114
 Contributed surplus                          2,969,113           2,959,339
 Deficit                                    (51,278,498)        (49,479,722)
 Accumulated Other Comprehensive Loss          (162,856)           (100,630)
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                                              2,164,722           2,081,840
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                                           $  5,079,649        $  2,490,677
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Consolidated
Statements of Operations, Comprehensive Loss and Deficit
(unaudited)
(Expressed in United States dollars under United States GAAP)
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                        Three months ended             Nine months ended
                  September 30,  September 30,  September 30,  September 30,
                          2008           2007           2008           2007
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REVENUE
 Royalties,
  licenses and
  engineering
  fees            $    346,868   $    618,131   $  1,326,412   $  1,890,999
 Product sales          48,212         54,163        153,919        183,685
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                       395,080        672,294      1,480,331      2,074,684
Sales refund           285,912                       285,912
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                       109,168                     1,194,419
Cost of product sales    3,363         15,167         37,728         71,337
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                       105,805        657,127      1,156,691      2,003,347
EXPENSES:
 Marketing             300,922        302,253        872,024      1,036,081
 Operations             38,228         36,490        111,842        103,395
 Product engineering   224,603        200,063        721,046        548,062
 Administration        287,399        264,405        903,522        846,670
 Foreign exchange loss   2,495            915          3,787          1,106
 Amortization          142,100         50,635        225,887        151,151
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                       995,747        854,761      2,838,108      2,686,465
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Loss before other
 items                (889,942)      (197,634)    (1,681,417)      (683,118)
OTHER ITEMS:
 Interest income         4,497         16,168         14,959         59,812
 Interest expense      (27,102)       (20,794)       (58,181)       (61,705)
 Accretion expense     (19,070)        (8,361)       (57,207)       (24,882)
 Gain on sale of
  capital assets             -              -              -            586
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                       (41,675)       (12,987)      (100,429)       (26,189)
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Loss before taxes     (931,617)      (210,621)    (1,781,846)      (709,307)
Foreign withholding
 tax                    (3,353)        (8,021)       (16,929)       (32,557)
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Net loss and
 comprehensive loss
 for the period       (934,970)      (218,642)    (1,798,775)      (741,864)
Deficit, beginning
 of period         (50,343,527)   (50,098,495)   (49,479,722)   (49,575,273)
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Deficit, end of
 period           $(51,278,497)  $(50,317,137)  $(51,278,497)  $(50,317,137)
----------------------------------------------------------------------------
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Loss per common
 share (basic and
 diluted)         $      (0.09)  $      (0.02)  $      (0.18)  $      (0.08)
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Consolidated
Statements of Cash Flows
(unaudited)
(Expressed in United States dollars under United States GAAP)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        Three months ended             Nine months ended
                  September 30,  September 30,  September 30,  September 30,
                          2008           2007           2008           2007
----------------------------------------------------------------------------
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Cash provided by
 (used in):
OPERATIONS
 Loss for the
  period            $ (934,970)    $ (218,642)  $ (1,798,775)    $ (741,864)
Items not
 requiring
 (providing) cash:
 Amortization          142,100         45,581        225,887        151,151
 Stock based
  compensation          48,289         45,906         25,355        215,402
 Accretion expense      19,070         (2,487)        57,207         24,882
 Employee future
  benefits              11,034              -           (661)             -
 Gain on sale of
  capital assets             -              -              -           (586)
 Other                       -           (355)          (637)        (1,722)
Changes in non-cash
 working capital
 balances              298,353        261,675        134,014       (627,945)
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                      (416,125)      (391,672)    (1,357,611)      (980,682)
FINANCING
 Issuance of common
  shares and warrants
  (net)              1,918,530         59,644      1,918,530        156,499
 Subscriptions for
  issuable shares   (1,750,000)             -              -              -
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                       168,530         59,644      1,918,530        156,499
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INVESTMENTS
 Note receivable          (293)             -          2,707         36,000
 Purchase of property
  and equipment        (16,672)        (4,545)       (30,502)       (13,912)
 Purchase of intangible
  assets              (690,584)        (3,876)      (697,779)        (7,011)
 Proceeds on sale of
  capital assets             -              -              -            586
----------------------------------------------------------------------------
                      (707,549)        (8,421)      (725,574)        15,663
----------------------------------------------------------------------------
(Decrease) increase
 in cash and cash
 equivalents          (955,144)      (324,547)      (164,655)      (808,520)
Cash and cash
 equivalents,
 beginning of period 2,022,744      1,832,503      1,232,255      2,316,476
----------------------------------------------------------------------------
Cash and cash
 equivalents,
 end of period       1,067,600      1,507,956      1,067,600      1,507,956
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Contacts:
QSound Labs, Inc.
David Gallagher
(403) 291-2492
Website: www.qsound.com

SOURCE: QSound Labs, Inc.

http://www.qsound.com