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Year-to-Date Sales Up 194% Over 1998

The company recorded a net loss for the quarter of $7.9 million or $1.14 per share compared to a net loss of $5.4 million of $6.25 per share for 1998. For the first six months of 1999, the company reported a net loss of $11.0 million or $2.27 per share compared to a net loss of $10.9 million or $8.22 per share for the same period of 1998. Investments in new products as well as increased legal expenses contributed to the increased net operating loss in the second quarter. In addition, the company recorded a one-time $1.2 million non-cash write-off associated with the restructuring of a credit facility.

``More than 7 million A3D-enabled products have shipped worldwide,'' said Kip Kokinakis, Aureal's President and CEO, ``and we believe that our constantly growing user base is one of the most significant assets of our company. We look to continue to expand our business to fully leverage this customer base, developing and refining the products that are intended to give our customers the best possible audio experience. Most recently, we announced the expected introduction of high quality speaker products later this year. We are also currently exploring additional Internet audio possibilities beyond our current 3D Web-related venture with Flatland Online Inc., whose products we now ship with our Vortex products.''

``Throughout the first half of this year Aureal has taken on a number of initiatives to expand its sales channels in the US and internationally,'' said Brendan O'Flaherty, Aureal's Senior Vice President and General Manager of Systems. ``These moves have decreased our dependence on any one sales channel and broadened our customer base such that we are less dependent on any single customer.''

``As we continued to expand our business this quarter, we have naturally seen growth in each of the major expense categories,'' said David Domeier, Aureal's Senior Vice President of Finance. ``Increased costs included expenditures to support additional audio board designs for a number of customers as well as to design and build our first speaker products. We're also continuing to develop new chip designs to bolster our already strong leadership in the digital audio processing field. Other increased costs for the quarter included development and promotion of our A3D technology as the exclusive 3D audio engine for Flatland Online's Rover product and generally increased print and online promotion of the Aureal brands. Finally, general and administrative expenses expanded in the second quarter partially due to expenditures relating to lawsuits pending with and against Creative Technology, Ltd.''

During the quarter, the company successfully executed its previously announced capital restructuring program. This program included raising $20 million in equity capital, the conversion of all of the company's Preferred B and C shares into common stock, and a 1-for-15 reverse stock split. The restructuring program enabled the company to reduce its existing credit facility including the cancellation of warrants previously granted to a lender. Aureal replaced its previous line of credit with a new, smaller credit facility that the company anticipates will provide a lower cost of funds.

``The completion of our restructuring program has helped us reach our goal of improving our financial and trading profile,'' said David Domeier, Aureal's Senior Vice President of Finance. ``The program has successfully generated additional capital for our growth strategy, improved our capital structure, and reduced the number of shares outstanding.''

About Aureal

Aureal is a leading provider of advanced audio solutions for the computer, consumer, entertainment, Internet and professional audio markets. The company designs, builds and distributes advanced audio semiconductor, add-in board, and software solutions for personal computers and consumer electronics devices through the OEM, integrator/reseller/VAR and direct-to-customer channels. Aureal also licenses technology designed to define and improve advanced audio standards in the marketplace.

Leading industry partners include Compaq Computer Corporation, Dell Computer Corporation, Sony Electronics and Diamond Multimedia Systems. Aureal's award-winning product line includes A3D positional audio technology, Vortex audio processors and Vortex-based sound cards, and A3D Pro sound design software. For more information on Aureal or its products and industry leading audio technologies, please visit our Websites at www.aureal.com and www.a3d.com.

Forward-Looking Statements

Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including, but not limited to, dependence on the PC and consumer electronics industries and on product lines based on new technologies; foundry capacity, availability and reliability; competition and pricing pressures; and other risks detailed from time to time in the company's periodic reports filed with the Securities and Exchange Commission.

NOTE: Aureal, the Aureal logo, A3D, and A3D Pro are trademarks, and Vortex is a registered trademark of Aureal Inc. Other names may be trademarks of their respective owners.

                                 Aureal Inc.
                  Second Quarter 1999 Financial Information
               (dollars in thousands, except per share amounts)

                      Condensed Statements of Operations

                                       Six Months Ended   Three Months Ended
                                       July 4,  June 28,   July 4,  June 28,
                                        1999      1998      1999      1998
                                                    (Unaudited)

    Sales                             $20,641    $7,018    $8,063    $3,436
    Gross Profit                        7,307     2,192     3,050     1,403
    Operating Expenses:
      Research and Development          6,999     5,534     3,635     2,916
      Sales and Marketing               5,002     2,984     2,930     1,628
      General and Administrative        3,787     1,676     2,620       816
        Total Operating Expenses       15,788    10,194     9,185     5,360
    Operating Loss                     (8,481)   (8,002)   (6,135)   (3,957)
    Interest Expense and Other          2,481     2,930     1,807     1,489
    Net Loss                         $(10,962) $(10,932)  $(7,942)  $(5,446)
    Accretion/Dividends
     related to Preferred Stock        (1,484)  (12,121)     (290)  (12,121)
    Net Loss Attributable
     to Common Stockholders          $(12,446) $(23,053)  $(8,232) $ (17,567)
    Basic Loss per Share
     Attributable to Common
     Stockholders                     $ (2.27)  $ (8.22)   $(1.14)   $(6.25)
    Average Number
     of Shares Outstanding
     (adjusted for 1-for-15 reverse
      stock split on June 10, 1999      5,488     2,803     7,221     2,809

                             Condensed Balance Sheets

                                                    July 4,          Jan. 3,
                                                      1999            1999
                                                  (Unaudited)

    Current Assets                                   $16,211        $10,471
    Property and Equipment                             2,415          2,480
    Other Long-term Assets                               161            687
      Total Assets                                   $18,787        $13,638
    Current Liabilities                              $10,897        $14,057
    Long-term Liabilities                                303            889
      Total Liabilities                               11,200         14,946
    Stockholders' Equity (Deficit)                     7,587         (1,308)
      Total Liabilities
       and Stockholders' Equity (Deficit)            $18,787        $13,638
    Number of Common Shares Outstanding
     (adjusted for 1-for-15 reverse stock split
      on June 10, 1999)                                9,961          3,178