Press Release



ZTE's New e3 Mobile Phone Incorporates QSound Labs' microQ™ Technology



Recently Released, the e3 includes microQ’s Advanced Audio Functions for Polyphonic Ringtones



Calgary, Alberta - July 27, 2005 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio, and voice software solutions, today announced a royalty based licensing agreement with ZTE Corporation, China’s leading telecommunication manufacturer and wireless solutions provider, for the microQ Synthesizer Engine. The technology has been incorporated into its e3 mobile phone, an intelligent mobile phone product that integrates personal communications, information management and Internet connections. The product was launched in Mainland China in early June.

"The e3 is a milestone product for ZTE, we believe that by integrating QSound’s microQ technology we have provided the superior sound quality to meet our customer's demand and added a feature that will make this product considerably more competitive in the mobile phone market," said GM He ShiYou of Handset Division, ZTE Corporation.

"ZTE is a major player in the fastest growing telecom market in the world, so this design win represents a significant step for our microQ product suite," said David Gallagher, President and CEO of QSound Labs. "In choosing microQ for their new mobile phones, ZTE added further credence to the emergence and value of software solutions in the mobile market."

About microQ
The microQ feature set is unmatched by any single vendor. It is a compact, hardware-independent and highly efficient software audio engine providing functions such as polyphonic ringtones, video game sounds, music playback, digital effects and recording for portable applications, including Internet appliances, hand-held and mobile devices. A low-cost and flexible option for consumer electronics and mobile device manufacturers, microQ is inherently modular, scalable and portable. Its core components include a digital audio playback engine, a wavetable synthesis engine with a scalable sample set, and a multi-channel stereo mixer. Additionally, microQ offers a wide range of processes to control frequency response, dynamics and spatial enhancements, as well as full 3D positional audio for games.

About ZTE Corporation
Founded in 1985 and based in Shenzhen, ZTE is the pioneer of China’s telecommunications equipment manufacturing industry and a comprehensive provider of telecommunications equipment, mobile terminals and services. With its three products series, i.e. wireless, network and terminal (mobile phones), ZTE is capable of providing global customers with diversified integrated telecommunications networking solutions and a wide range of professional services an a 24 x 7 basis, and has been involved in the market of international telecommunications operation services.

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 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 Broadcom, Qualcomm, Vodafone, PacketVideo, Toshiba, Philips, Sanyo and RealNetworks among others. To hear 3D audio demos and learn more about QSound, visit our web site at

This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, distribution of microQ-enabled mobile phones, and anticipation of continuing adoption of microQ in the mobile marketplace. 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 licensing and use of microQ, acceptance of microQ by OEM’s, ODM’s and consumers, continued growth of the mobile devices market, 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 SEC. 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.





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