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Company Announces Profit of $204,553 or $.02 Per Share; Consolidated Gross Margin Increases 20.5 Percentage Points Over Q2 2001; Total Cash Position Improves by $687,331 From Year End 2001

For the second quarter ended June 30, 2002, the company reported revenues of $4,028,360, with earnings of $204,553 or $0.02 per share compared to the second quarter 2001 revenues of $4,844,375 and a net loss of $979,888 or a loss of $0.08 per share. For the six months ended June 30, 2002, the company reported revenues of $7,583,740, with a net loss of $486,177 or a loss of $0.04 per share, compared to the same prior year period of $9,175,256 in revenues and net loss of $2,545,422 or a loss of $0.20 per share. The company's cash position improved by $687,331 from the year ended December 31, 2001 with cash, cash equivalents and investments totaling $20.3 million for the six months ended June 30, 2002.

Thomas C. K. Yuen, chairman and CEO of SRS Labs said, "Our return to profitability is an important milestone for SRS Labs. We are pleased to have achieved this goal. We now can leverage our business model which focuses on high margin, high volume and high growth businesses, and build upon this momentum to further improve our bottom line results and enhance shareholder value."

SRS Labs, Inc. will host a conference call today to discuss second quarter operating performance. The conference call featuring Mr. Yuen, will be broadcast live over the Internet today at 4pm EDT. To listen, log on at http://www.firstcallevents.com/service/ajwz361269921gf12.html or link to the conference from the investor section of SRS Labs' website at http://www.srslabs.com/Investors.asp .

About SRS Labs, Inc.

SRS Labs, Inc. ( www.srslabs.com ) and its subsidiaries provide advanced technology solutions for high growth consumer markets, including home theater, DVD, portable audio, wireless devices, game consoles, automotive, broadcast, Internet and personal computer software. SRS Labs, the parent company, develops the core audio and voice technologies and licenses these patented technologies to over 200 well-known manufacturers and semiconductor companies, including Sony, RCA, Philips, Kenwood, Mitsubishi, Hitachi, Microsoft, and Pioneer. ValenceTech, Ltd., ( www.valencetech.com ) SRS Labs' Hong Kong-based subsidiary, is a leading fabless application specific integrated circuit (ASIC) design and manufacturing company providing analog and digital ASIC solutions to the world's leading manufacturers of consumer electronics, gaming, telecommunications and computer products. SRS Labs' subsidiary, SRSWOWcast Technologies, ( www.srstechnologies.com ) focuses on the Internet and broadcast markets by developing and licensing customized hardware and software products incorporating SRS Labs' patented technologies. The information on the above-referenced websites is not incorporated by reference into this press release.

Except for historical information contained in this release, statements in this release, including those of Mr. Yuen in paragraph three are forward-looking statements and projections (which include statements concerning plans and objectives of management for future operations) that are based on management's belief, as well as assumptions made by, and information currently available to, management. While the Company believes that its expectations are based upon reasonable assumptions, there can be no assurances that the Company's goals and strategy will be realized. Numerous factors (including risks and uncertainties) may affect the Company's actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of the Company. Some of these factors include the general market conditions concerning semiconductor business, the impact of competitive products and pricing, the timely development and release of technologies by the Company, general business and economic conditions, especially in Asia, and other factors detailed in the Company's Form 10-K and other periodic reports filed with the SEC. SRS Labs specifically disclaims any obligation to update or revise any forward-looking statement whether as a result of new information, future developments or otherwise.

For further information please contact: Investors, Tami Yanito of SRS Labs, Inc., +1-949-442-1070, ext. 3093, tami@srslabs.com.

                                SRS LABS, INC
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (unaudited)

                              Quarter Ended              Year-To-Date
                                 June 30,                   June 30,
                            2002         2001          2002         2001
    Revenues:
     Semiconductor
      revenue           $2,365,297    $1,499,606   $3,836,439    $2,583,519
     Licensing revenue   1,435,841     1,625,801    3,231,563     2,790,282
     Component and
      distribution rev     207,266     1,606,546      442,197     3,670,974
     Product revenue        20,551       102,232       45,470       116,488
     Internet and
      broadcast revenue       (595)       10,190       28,071        13,993
       Total revenues    4,028,360     4,844,375    7,583,740     9,175,256
    Cost of sales        1,114,815     2,335,065    1,908,160     4,636,355

    Gross margin         2,913,545     2,509,310    5,675,580     4,538,901
    Expenses:
     Sales & marketing     923,460     1,154,036    2,193,219     2,545,416
     Research &
      development          937,521       896,884    1,902,597     1,774,978
     General &
      administrative       889,500     1,568,940    2,113,706     3,130,866

    Income (loss) from
     operations            163,064    (1,110,550)    (533,942)   (2,912,359)
    Other income, net      228,586       245,009      316,550       479,050
    Minority interest       20,282        44,810       40,030       117,638
    Income (loss) before
     income tax exp.       411,932      (820,731)    (177,362)   (2,315,671)
    Income tax expense     207,379       159,157      308,815       229,751
    Net income (loss)     $204,553     $(979,888)   $(486,177)  $(2,545,422)

    Net income (loss)
     per common share:
     Basic                   $0.02        ($0.08)      ($0.04)       ($0.20)
     Diluted                 $0.02        ($0.08)      ($0.04)       ($0.20)

    Weighted average
     number of shares
     used in the
     calculation of
     net income (loss)
     per common share
      Basic             12,682,449    12,625,783   12,675,928    12,597,526
      Diluted           12,746,527    12,625,783   12,675,928    12,597,526


                                SRS LABS, INC.
                         CONSOLIDATED BALANCE SHEETS

                                                    June 30,    December 31,
                                                      2002          2001
                                                  (Unaudited)
                               ASSETS
    Current Assets
     Cash and cash equivalents                    $6,308,979    $19,011,167
     Investments available for sale                       --        582,556
     Accounts receivable, net                        848,018        870,016
     Inventories, net                              1,806,278      1,624,067
     Prepaid expenses and other current assets       560,115        631,844
     Deferred income taxes                           219,429        219,429

      Total Current Assets                         9,742,819     22,939,079

     Investments available for sale               13,972,075             --
     Furniture, fixtures & equipment, net          1,580,477      1,672,801
     Intangible assets, net                        2,714,752      2,852,009
     Deferred income taxes                           799,499        799,499

      Total Assets                               $28,809,622    $28,263,388

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
     Accounts payable                             $1,419,270       $822,698
     Accrued liabilities                           1,824,069      1,357,105
     Income taxes payable                          1,278,013      1,144,493

      Total Current Liabilities                    4,521,352      3,324,296

     Minority interest                               363,049        403,079
     Commitments and contingencies

    Stockholders' Equity
     Preferred stock - $.001 par value
      2,000,000 shares authorized;
      no shares issued and outstanding
     Common stock - $.001 par value
      56,000,000 shares authorized;
      12,818,769 and 12,789,644
      shares issued; and 12,646,269
      and 12,664,744 outstanding at
      June 30, 2002 and December 31, 2001,
      respectively                                    12,819         12,790
     Additional paid-in capital                   55,801,625     55,745,867
     Cumulative other comprehensive loss            (136,540)       (74,055)
     Accumulated deficit                         (31,182,772)   (30,696,595)
     Less treasury stock at cost,
      172,500 and 124,900 shares at
      June 30, 2002 and December 31, 2001,
      respectively                                  (569,911)      (451,994)

      Total Stockholders' Equity                  23,925,221     24,536,013
      Total Liabilities and
       Stockholders' Equity                      $28,809,622    $28,263,388

SOURCE: SRS Labs, Inc.