10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period          to

Commission File Number 0-21123

SRS LABS, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0714264
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2909 Daimler Street, Santa Ana, California 92705

(Address of principal executive offices) (Zip Code)

(949) 442-1070

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

As of July 30, 2009, 14,458,990 of the issuer’s common stock, par value $.001 per share, were outstanding.

SRS LABS, INC.

Quarterly Report on Form 10-Q

For the Three and Six Months Ended June 30, 2009

Index

PART I-FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and December 31, 2008	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008 (Unaudited)	5
	Condensed Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2009 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008 (Unaudited)	7
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	16
PART II-OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
SIGNATURES		23

2

FORWARD-LOOKING INFORMATION

As used herein, the “Company,” “SRS Labs,” “SRS,” “we,” “us,” or “our” means SRS Labs, Inc., its wholly-owned Delaware subsidiary, SRSWOWcast.com, Inc. and its wholly-owned Chinese subsidiary, Shenzhen Representative Office of SRS Labs, Inc.

This Quarterly Report on Form 10-Q contains forward-looking statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. All statements other than statements of historical facts included in this Quarterly Report relating to our future operating results, profitability, growth and capital requirements, our investment and expansion plans, changes in our competitive position, the outcome of certain disputes, changes in economic conditions or capital markets and changes in customer usage patterns and preferences, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as may, will, should, could, expect, plan, intend, forecast, anticipate, believe, estimate, predict, potential, likely or similar expressions or variations of these terms. The forward-looking statements contained in this Quarterly Report involve known and unknown risks, uncertainties and situations that may cause our or our industry’s actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. Factors that might cause actual events or results to differ materially from those indicated by these forward-looking statements may include the matters listed in Item 1A Risk Factors of this Form 10-Q, including, but not limited to, the loss of any significant customer; the acceptance of new SRS Labs products and technologies; our ability to increase our brand awareness and enter into new or expanded license arrangements; the impact of competitive products and pricing; general economic and business conditions that may adversely impact sales of consumer products incorporating our technologies or that otherwise may impact our operating results and future performance; the timely development and release of technologies by the Company; and other factors identified from time to time in our filings with the Securities and Exchange Commission (“SEC”).

Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors.

3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SRS LABS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2009			December 31, 2008
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	26,847,944		$	31,599,087
Accounts receivable, net	382,950			332,711
Prepaid expenses and other current assets	933,718			864,095
Short-term investments	12,505,000			7,836,000
Total Current Assets	40,669,612			40,631,893
Property and equipment, net	424,513			423,921
Intangible assets, net	2,443,711			2,354,725
Deferred income taxes, net	4,489,752			3,471,421
Total Assets	$	48,027,588		$	46,881,960
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	500,874		$	314,382
Accrued liabilities	998,345			996,268
Deferred revenue	1,484,031			1,802,024
Total Current Liabilities	2,983,250			3,112,674
Commitments and Contingencies (Note 4)
Stockholders’ Equity
Preferred stock—$.001 par value; 2,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock—$.001 par value; 56,000,000 shares authorized; 14,458,990 and 14,419,418 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively	14,460			14,420
Additional paid-in capital	63,726,537			62,639,075
Accumulated deficit	(18,696,659		)	(18,884,209		)
Total Stockholders’ Equity	45,044,338			43,769,286
Total Liabilities and Stockholders’ Equity	$	48,027,588		$	46,881,960

See accompanying notes to the condensed consolidated financial statements

4

SRS LABS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009		2008
Revenues	$	5,055,528		$	4,178,144		$	10,759,538	$	9,119,132
Cost of sales	62,201			40,370			134,173		66,319
Gross profit	4,993,327			4,137,774			10,625,365		9,052,813
Operating expenses:
Sales and marketing	2,711,351			2,483,915			5,450,491		4,627,537
Research and development	1,189,517			852,771			2,364,183		1,779,533
General and administrative	1,373,757			1,527,597			2,805,884		2,965,955
Total operating expenses	5,274,625			4,864,283			10,620,558		9,373,025
Operating (loss) income	(281,298		)	(726,509		)	4,807		(320,212		)
Other income, net	92,185			333,363			196,818		783,324
(Loss) income before income taxes	(189,113		)	(393,146		)	201,625		463,112
Income taxes	9,139			15,326			14,075		13,232
Net (loss) income	$	(198,252	)	$	(408,472	)	$	187,550	$	449,880
Net (loss) income per common share:
Basic	$	(0.01	)	$	(0.03	)	$	0.01	$	0.03
Diluted	$	(0.01	)	$	(0.03	)	$	0.01	$	0.03
Weighted average shares used in the per share calculations:
Basic	14,429,972			15,777,795			14,424,724		15,777,991
Diluted	14,429,972			15,777,795			14,685,986		16,280,923

See accompanying notes to the condensed consolidated financial statements

5

SRS LABS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock			Additional Paid-In		Accumulated
	Shares	Amount		Capital		Deficit			Total
BALANCE, December 31, 2008	14,419,418	$	14,420	$	62,639,075	$	(18,884,209	)	$	43,769,286
Proceeds from exercise of stock options	39,572	40		140,099		—			140,139
Share-based compensation	—	—		947,363		—			947,363
Net income	—	—		—		187,550			187,550
BALANCE, June 30, 2009	14,458,990	$	14,460	$	63,726,537	$	(18,696,659	)	$	45,044,338

See accompanying notes to the condensed consolidated financial statements

6

SRS LABS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2009			2008
Cash Flows from Operating Activities:
Net income	$	187,550		$	449,880
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	338,726			347,947
Provision for doubtful accounts	25,527			7,470
Deferred taxes	(1,018,331		)	(824,929		)
Share-based compensation	947,363			917,242
Loss on disposition of property and equipment	3,361			—
Write-off of intangible assets	3,750			—
Changes in operating assets and liabilities:
Accounts receivable	(75,766		)	711,147
Prepaid expenses and other current assets	(69,623		)	102,995
Accounts payable	186,492			62,763
Accrued liabilities	2,077			105,471
Deferred revenue	(317,993		)	855,640
Net cash provided by operating activities	213,133			2,735,626
Cash Flows from Investing Activities:
Purchase of investments	(4,669,000		)	(4,984,000		)
Proceeds from sale of investments	—			5,500,000
Proceeds from sale of property and equipment	17,600			—
Purchase of property and equipment	(121,102		)	(128,180		)
Expenditures related to intangible assets	(331,913		)	(326,683		)
Net cash (used in) provided by investing activities	(5,104,415		)	61,137
Cash Flows from Financing Activities:
Proceeds from exercise of stock options	140,139			42,789
Purchase of treasury stock	—			(122,053		)
Net cash provided by (used in) financing activities	140,139			(79,264		)
Net (Decrease) Increase in Cash and Cash Equivalents	(4,751,143		)	2,717,499
Cash and Cash Equivalents, Beginning of Period	31,599,087			39,615,291
Cash and Cash Equivalents, End of Period	$	26,847,944		$	42,332,790
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes	$	1,049,182		$	783,846
Supplemental Disclosure of Non-Cash Investing Activities:
Unrealized gain on investments	$	—		$	48,125

See accompanying notes to the condensed consolidated financial statements

7

SRS LABS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.             Basis of Presentation and Summary of Significant Accounting Policies and Estimates

As used herein, the “Company,” “SRS Labs,” “SRS,” “we,” “us,” or “our” means SRS Labs, Inc., its wholly-owned Delaware subsidiary, SRSWOWcast.com, Inc., and its wholly-owned Chinese subsidiary, Shenzhen Representative Office of SRS Labs, Inc.  The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the SEC for interim reporting. In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation of our financial position and results of operations have been included.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations for presentation of interim financial information. Therefore, the condensed interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. The results of operations for the interim period are not necessarily indicative of the results to be expected for any other interim period or for the full year.  Amounts related to disclosure of December 31, 2008 balances within these condensed consolidated financial statements were derived from the audited consolidated financial statements for the year ended December 31, 2008.

Estimates

The preparation of financial statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.  By their nature, estimates are subject to an inherent degree of uncertainty.  Actual results could differ materially from those estimates. See the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008 for an additional discussion of the significant accounting policies and estimates used in the preparation of our financial statements.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid investments that are readily convertible to known amounts of cash and are so near maturity that they present insignificant risk of changes in value because of interest rates. Cash and cash equivalents generally consist of cash, money market funds and instruments with original maturities of three months or less.  The Company places its cash in banks and its cash and cash equivalents in money market funds at certain financial institutions in excess of amounts insured by federal agencies.  The Company does not believe that it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.  The Company performs periodic evaluations of the relative credit standing of these financial institutions.  For the three and six months ended June 30, 2009, the Company did not experience any losses on its cash equivalents.

Short-term Investments

Short-term investments consist of certificates of deposit with original maturities ranging from six to twelve months.  The Company has not experienced any losses on its short-term investments.

Customer Concentrations

For the three months ended June 30, 2009 and 2008, one customer, Samsung, accounted for approximately 44% and 38%, respectively, of our revenue.  For the six months ended June 30, 2009 and 2008, one customer, Samsung, accounted for approximately 42% and 40%, respectively, of our revenue.  In June 2009, the Company amended its agreement with Samsung TV effective January 1, 2010.  The Company has modified its pricing schedule in exchange for a commitment for Samsung TV to deploy the Company’s technologies on its televisions in 2010.

8

Income Taxes

The Company currently has net operating loss carryforwards to offset income taxes. Consequently, no significant provision is reflected in the accompanying interim consolidated financial statements.  Refer to our Annual Report on Form 10-K for the year ended December 31, 2008 for additional disclosure in this regard.

2.             Intangible Assets

Intangible assets consist of the following:

	June 30, 2009			December 31, 2008
Patents	$	3,857,880		$	3,618,338
Accumulated amortization	(1,922,834		)	(1,785,531		)
Patents, net	1,935,046			1,832,807
Other intangibles:
License agreements acquired in purchase of SRSWOWcast	640,071			640,071
Capitalized software and hardware for several technologies	622,072			582,800
Total of other intangibles	1,262,143			1,222,871
Accumulated amortization, other intangibles	(753,478		)	(700,953		)
Other intangibles, net	508,665			521,918
Intangible assets, net	$	2,443,711		$	2,354,725

Amortization expense associated with our intangibles was $123,219 and $121,407 in the three months ended June 30, 2009 and 2008, respectively, and $239,177 and $247,573 in the six months ended June 30, 2009 and 2008, respectively.  Amortization expense is included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

3.             Net Income Per Common Share

Basic net income or loss per common share is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding during each year. Diluted net income or loss per common share reflects the maximum dilution, based on the average price of the Company’s common stock during each period, and is computed similar to basic income or loss per share except that the denominator is increased to include the number of additional shares that would have been outstanding if potentially dilutive stock options and warrants had been exercised.

Basic and diluted net income per share are as follows:

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009		2008
BASIC EPS
Net (loss) income	$	(198,252	)	$	(408,472	)	$	187,550	$	449,880
Denominator: weighted average common shares outstanding	14,429,972			15,777,795			14,424,724		15,777,791
Net (loss) income per share	$	(0.01	)	$	(0.03	)	$	0.01	$	0.03
DILUTED EPS
Net (loss) income	$	(198,252	)	$	(408,472	)	$	187,550	$	449,880
Denominator: weighted average common shares outstanding	14,429,972			15,777,795			14,424,724		15,777,991
Common equivalent shares outstanding:
Options	—			—			261,262		502,932
Total diluted shares	14,429,972			15,777,795			14,685,986		16,280,923
Net (loss) income per share diluted	$	(0.01	)	$	(0.03	)	$	0.01	$	0.03

9

There were outstanding options to purchase an aggregate of 3,459,086 and 3,069,248 shares of the Company’s common stock for the three months ended June 30, 2009 and 2008, respectively, that were not included in the table above because they would be anti-dilutive.  There were outstanding options to purchase an aggregate of 2,705,647 and 1,937,419 shares of the Company’s common stock for the six months ended June 30, 2009 and 2008, respectively, that were not included in the table above because they would be anti-dilutive.

4.             Commitments and Contingencies

On June 8, 2007, the Company sent a letter to Sony Corporation (“Sony”) relating to the possible infringement of several SRS patents by Sony’s S-Force technology. Sony responded to the letter by filing a Complaint for Declaratory Relief in the U.S. District Court in the Southern District of New York on July 6, 2007. In November 2007, Sony and SRS entered into a standstill agreement for the purpose of conducting discussions towards an amicable resolution of the dispute, and the Complaint for Declaratory Relief was dismissed.  While the standstill agreement has expired, the parties continue to negotiate regarding this matter.  In October 2008, an independent third party hired to evaluate the Sony S-Force technology informed SRS that they had completed their evaluation based on the information provided by Sony.  Based on their study, they confirmed SRS’ position that the S-Force technology infringes our patents.  The basis for this infringement position has been provided to Sony for their review.  Sony has not agreed with the position of the independent third party.  SRS continues to evaluate its alternatives in this matter and cannot assure that it will prevail in this dispute.  SRS is unable to determine at this time the impact that this matter may have, if any, on the Company’s consolidated financial position, results of operations or cash flows.

From time to time, we may be involved in other litigation matters and disputes arising in the normal course of business. Any such matters and disputes could be costly and time consuming, subject us to damages or equitable remedies, and divert our management and key personnel from our business operations.

5.             Segment Information

The Company operates in one reportable segment as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008.  The following schedule presents the Company’s revenue by geographic area.  Licensing-related revenue is summarized based on the location of the licensee’s corporate headquarters.  For product and online sales, revenue is allocated to the Americas.  The Americas region includes North, Central and South America.  Starting in 2008, the Greater China region was broken down into the China and Asia Pacific region.  The China region includes all licensees with their corporate headquarters located in mainland China.  The Asia Pacific region includes all licensees with their corporate headquarters located in Taiwan and Hong Kong.

	Three Months Ended June 30,								Six Months Ended June 30,
	2009		%		2008		%		2009		%		2008		%
Geographic Area Revenue:
Korea	$	2,794,662	55	%	$	2,136,306	51	%	$	5,554,680	52	%	$	4,659,761	51	%
Americas	1,105,622		22		438,847		11		2,014,106		18		797,129		8
Japan	673,046		14		1,323,778		32		1,918,207		18		3,019,432		33
China	345,683		7		132,072		3		877,091		8		334,182		4
Asia Pacific	68,325		1		90,030		2		213,766		2		164,231		2
Europe	68,190		1		57,111		1		181,688		2		144,397		2
Total	$	5,055,528	100	%	$	4,178,144	100	%	$	10,759,538	100	%	$	9,119,132	100	%

10

6.             Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (“FASB”) issued Staff Position (“FSP”) 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP 107-1 and APB 28-1”). FSP 107-1 and APB 28-1 amend FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about the fair value of financial instruments in interim financial statements as well as in annual financial statements. It also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. We adopted FSP 107-1 and APB 28-1 on April 1, 2009 and it did not affect our consolidated financial position, results of operations, or cash flows.

In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (“FAS 165”). FAS 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. FAS 165 was effective for interim or annual financial periods ending after June 15, 2009. The adoption of FAS 165 did not affect our consolidated financial position, results of operations, or cash flows.

In June 2009, the FASB   issued   Statement No. 168,     “The     FASB     Accounting     Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162” (“FAS 168”). The Codification will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of FAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. FAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. FAS 168 is not expected to have a material impact on our consolidated financial position, results of operations, or cash flows.

7.             Fair Value Measurements

Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”). The purpose of SFAS 157 is to define fair value, establish a framework for measuring fair value and enhance disclosures about fair value measurements.  The standard describes three levels of inputs that may be used to measure fair value:

·Level 1 inputs: Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

·Level 2 inputs: Level 2 inputs are from other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

·Level 3 inputs: Level 3 inputs are unobservable and should be used to measure fair value to the extent that observable inputs are not available.

The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.

Financial assets carried at fair value as of June 30, 2009 are classified below:

	Level 1		Level 2		Level 3		Total
Money market funds	$	26,662,015	$	—	$	—	$	26,662,015
Certificates of deposit	—		12,505,000		—		12,505,000
Total	$	26,662,015	$	12,505,000	$	—	$	39,167,015

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

This information should be read in conjunction with the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2008, and the unaudited condensed interim consolidated financial statements and notes thereto included in this Quarterly Report.

Overview

We are the recognized global leader in the practical application of psychoacoustics, the science behind how the human ear operates, and in the post processing segment of the market for audio delivery.  Our award-winning audio enhancement technologies and solutions dramatically restore audio and voice to its natural state, the way it was originally recorded, in both dimension and clarity, thus providing a superior consumer experience for a wide variety of consumer electronic devices such as televisions, personal computers and mobile phones.

Our business is focused on developing and licensing audio, voice and surround sound technology solutions to many of the world’s leading original equipment manufacturers (“OEMs”), software providers and semiconductor companies, and limited sales and marketing of stand alone software and hardware products through the Internet.

Critical Accounting Policies

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our unaudited consolidated financial statements for the three and six months ended June 30, 2009 and 2008, which have been prepared in accordance with GAAP.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may materially differ from our estimates.

Results of Operations

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

Revenues

Our revenues consist primarily of royalties generated from the license of SRS Labs’ audio and voice technologies.  Our license agreements typically have multi-year or automatic renewal terms, and either require: (a) per-unit royalty payments for all products implementing our technologies and/or solutions; (b) fixed annual or quarterly royalty payments; or (c) a minimum fixed annual or quarterly royalty payment, which allow the licensee to ship up to a pre-determined number of units during the specified time period, with additional per-unit royalty payments thereafter.  The majority of our license agreements are per-unit royalty arrangements, which are generally reported by the licensee in the quarter following shipment of the consumer electronics device and are therefore are typically recognized by us following shipment by the OEM.  Revenues associated with fixed royalty payments are recognized ratably over the term of the license agreement.  We also sell some of our products and solutions via the Internet.  Revenues associated with those sales are recognized upon shipment and were not material in the three and six months ended June 30, 2009 or 2008.  The Company may experience fluctuations in revenue associated with the seasonal nature of the consumer electronics industry.

Our revenues were $5,055,528 for the three months ended June 30, 2009, compared to $4,178,144 for the three months ended June 30, 2008, an increase of $877,384.  In our home entertainment market, our total revenues increased by $745,942 in the current quarter as compared to the prior year period. Within this market, flat panel revenue increased by $800,842 mainly due to increased revenue from Samsung TV and new licensees such as Vizio and other China based TV OEMs.  In June 2009, the Company amended its agreement with Samsung TV effective January 1, 2010.  The Company has modified its pricing schedule in exchange for a commitment for Samsung TV to deploy the Company’s technologies on its televisions in 2010.  Our revenues in the personal telecommunications market increased by $309,575 in the current quarter as compared to the prior year period primarily due to increased revenues from

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Samsung Mobile.  Our revenues from the personal computer market increased by $263,013, primarily due to revenue generated from several new licensees, including Dell and Hewlett Packard. In the automotive market, revenues decreased by $194,496 primarily due to decreased revenues from our Japanese customers in this market who provide line install, dealer option and after market automotive audio systems to many of the significant Japanese automotive manufactures.  Revenues in the portable media devices market decreased by $211,651 primarily due to decreased revenues from MP3 players, cameras and docking stations.

The following table presents our licensing revenues mix by market:

	Three Months Ended June 30,
	2009		2008
Home entertainment (TV, set top box)	69	%	65	%
Personal telecommunications (mobile phone, PDA)	13		9
PC (software, hardware)	10		6
Portable media devices (digital media player, headphone)	5		11
Automotive	3		9

Sales and Marketing

Sales and marketing expenses consist primarily of employee salaries, sales consultants’ fees and related expenses, sales commissions and costs associated with branding activities. Sales and marketing expenses were $2,711,351 for the three months ended June 30, 2009, compared to $2,483,915 for the same prior year period, an increase of $227,436 or 9%.  This increase was primarily attributable to an increase in payroll and related costs associated with the addition of 12 sales and marketing personnel since June 30, 2008, offset by an pproximate $200 thousand decrease in costs associated with the timing of the Company’s annual world wide sales meeting.  The Company’s world wide sales meeting was held in the second quarter in the prior year and will be held in the third quarter in the current year.   The current year expected cost of this meeting is expected to be approximately $90,000 and will be expensed fully in the third quarter of  2009.  Included in sales and marketing expenses is share-based compensation expense of $131,101 and $127,962 for the three months ended June 30, 2009 and 2008, respectively.  We expect that sales and marketing expenses will continue to increase as we plan to hire additional sales personnel to penetrate target markets and key regions.  As a percentage of total revenues, sales and marketing expenses decreased from 59% for the quarter ended June 30, 2008 to 54% for the same period this year.

Research and Development

Research and development expenses consist of salaries and related costs of employees engaged in ongoing research, design and development activities and costs for engineering materials and supplies. Research and development expenses were $1,189,517 for the three months ended June 30, 2009, compared to $852,771 for the same prior year period, an increase of $336,746 or 39%.  This increase was primarily attributable to an increase in payroll and related costs associated with hiring an additional eight engineers and an increase in share-based compensation.  Included in research and development expenses is share-based compensation expense of $111,096 and $85,324 for the three months ended June 30, 2009 and 2008, respectively.  We expect that research and development expenses will continue to increase in 2009 as we continue add to our research and development team in order to support our global licensees and to accelerate the implementation of our technology with a greater number of customers and devices. As a percentage of total revenues, research and development expenses increased from 20% for the quarter ended June 30, 2008 to 24% for the same period this year.

General and Administrative

General and administrative (“G&A”) expenses consist primarily of employee-related expenses, attorneys’ fees, accounting fees and other professional fees. G&A expenses were $1,373,757 for the three months ended June 30, 2009, compared to $1,527,597 for the same prior year period, a decrease of $153,840 or 10%. The decrease was primarily due to reduced accounting, legal and other professional fees offset by increased share-based compensation.  Included in G&A expenses is share-based compensation expense of $238,766 and $200,812 for the three months ended June 30, 2009 and 2008, respectively.  As a percentage of total revenues, G&A expenses decreased from 37% for the quarter ended June 30, 2008 to 27% for the same period this year.

Other Income, Net

Other income, net consists of interest income. Other income, net was $92,185 for the three months ended June 30, 2009, compared to $333,363 for the same prior year period, a decrease of $241,178 or 72%. This decrease was primarily attributable to lower interest rates.

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Income Taxes

Income tax expense for the three months ended June 30, 2009 was $9,139, compared to $15,326 in the same prior year period.  The income tax provision consisted primarily of taxes paid on licensing revenues in the current quarter that were sourced from countries requiring foreign tax withholdings, principally Korea.  We reduced our tax provision and our valuation allowance on our deferred tax assets by $501,513 and $361,855 for the three months ended June 30, 2009 and 2008, respectively, based on our assessment of the future estimated realization of such assets.

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008

Revenues

Our revenues were $10,759,538 for the six months ended June 30, 2009, compared to $9,119,132 for the six months ended June 30, 2008, an increase of $1,640,406 or 18%.  In our home entertainment market, our total revenues increased by $837,503 in the six months ended June 30, 2009.  Within this market, flat panel revenue increased by $815,232 mainly due to increased revenue from Samsung and new licensees such as Vizio, offset by decreased revenues from certain Japanese TV OEMs, such as Toshiba and Panasonic.  Our revenues in the personal telecommunications market increased by $802,788 in the current quarter primarily due to increased revenues from Samsung Mobile and NEC.  Our revenues from the personal computer market increased by $487,909, primarily due to revenue generated from several new licensees, including Dell, and Hewlett Packard.  In the automotive market, revenues decreased by $140,047 due to decreased automotive sales world wide. Revenues in the portable media devices decreased by $312,748 primarily due to decreased revenues from MP3 players, digital cameras, and docking stations.

The following table presents our licensing revenues mix by market:

	Six Months Ended June 30,
	2009		2008
Home entertainment (TV, set top box)	68	%	71	%
Personal telecommunications (mobile phone, PDA)	13		7
PC (software, hardware)	9		5
Automotive	5		8
Portable media devices (digital media player, headphone)	5		9

Sales and Marketing

Sales and marketing expenses were $5,450,491 for the six months ended June 30, 2009, compared to $4,627,537 in the same prior year period, an increase of $822,954 or 18%.  This increase was primarily attributable to an increase in payroll and commissions and related costs, such as payroll taxes, benefits, recruitment, associated with the addition of 14 sales and marketing personnel.  The global sales team’s travel expenses have increased approximately $210,000 since the prior year due to both the increase in sales represtantives and the increase in sales opportunities.  In addition, we also increased our advertising and branding efforts, which resulted in an increase in expense of approximately $145,000 in the six months ended June 30, 2009.  Offsetting these increases, was a decrease in sales expense of approximately $200,000 in the current quarter, which was due to moving the date of the Company’s annual world wide sales meeting from the second to the third fiscal quarter.  Included in sales and marketing expenses is share-based compensation expense of $246,917 and $269,856 for the six months ended June 30, 2009 and 2008, respectively.  As a percentage of total revenues, sales and marketing expenses were 51% for the six months ended June 30, 2008 and 2009.

Research and Development

Research and development expenses were $2,364,183 for the six months ended June 30, 2009, compared to $1,779,533 for the same prior year period, an increase of $584,650 or 33%.  This increase was primarily attributable to an increase in payroll and related costs associated with hiring an additional eight engineers.  Included in research and development expenses is share-based compensation expense of $218,819 and $208,950 for the six months ended June 30, 2009 and 2008, respectively.  As a percentage of total revenues, research and development expenses increased from 20% for the six months ended June 30, 2008 to 22% for the same period this year.

General and Administrative

G&A expenses were $2,805,884 for the six months ended June 30, 2009, compared to $2,965,955 for the same prior year period, a decrease of $160,071 or 5%. The decrease was primarily attributable to a decrease in accounting, legal and other professional fees. Included in G&A expenses is share-based compensation expense of $481,627 and $438,436 for the six months ended June 30, 2009 and 2008, respectively.  As a percentage of total revenues, G&A expenses decreased from 33% for the six months ended June 30, 2008 to 26% for the same period this year.

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Other Income, Net

Other income, net was $196,818 for the six months ended June 30, 2009, compared to $783,324 for the same prior year period, a decrease of $586,506 or 75%. This decrease was primarily attributable to lower interest rates.

Income Taxes

Income tax expense was $14,075 and $13,232 for the six months ended June 30, 2009 and 2008, respectively. The income tax provision consisted primarily of taxes paid on licensing revenues in the current quarter that were sourced from countries requiring foreign tax withholdings, principally Korea.  We reduced our tax provision and our valuation allowance on our deferred tax assets by $1,018,331 and $824,929 for the six months ended June 30, 2009 and 2008, respectively, based on our assessment of the future estimated realization of such assets.

Liquidity and Capital Resources

Our principal source of liquidity to fund ongoing operations at June 30, 2009 consisted of cash, cash equivalents and short-term investments of $39,352,944.  At June 30, 2009, we had cash and cash equivalents of $26,847,944 and short-term investments of $12,505,000.  Cash and cash equivalents generally consist of cash, money market funds and other money market instruments with original maturities of three months or less. The money market funds are primarily invested in US government obligations.  The cash and certificates of deposit are FDIC insured.  Short-term investments consist of certificates of deposit with original maturities ranging from 6 to 12 months.

Net cash provided by operating activities was $213,133 and $2,735,626 during the six months ended June 30, 2009 and 2008, respectively.  The decrease in our cash flows from operating activities was primarily the result of changes in our operating assets and liabilities specifically, a decrease in our deferred revenue of $317,993 during the six months ended June 30, 2009 compared to an increase of $855,640 during the six months ended June 30, 2008.  The decrease in deferred revenue during the six months ended June 30, 2009 was due to the Company recognizing revenue from customers who prepaid us royalties.  During the six months ended June 30, 2008, the Company received the final lump sum payment under the multi-year license agreement with LG Electronics, which caused deferred revenue to increase.  Additionally, accounts receivable increased $75,766 during the six months ended June 30, 2009 as compared to decreasing $711,147 during the six months ended June 30, 2008.  The increase in accounts receivable as of June 30, 2009 was primarily due to increased revenues recorded in the current quarter.  Furthermore, cash flow from operating activities decreased primarily due to a decrease in our net income of $262,330 from $449,880 during the six months ended June 30, 2008 to $187,550 during the six months ended June 30, 2009.

Net cash used in investing activities was $5,104,415 during the six months ended June 30, 2009 and net cash provided by investing activities was $61,137 during the same period in the prior year.  Net cash used by investing activities during the six months ended June 30, 2009 was attributable primarily to the purchase of short-term investments.

We believe our existing cash, cash equivalents and short-term investment balances together with cash generated from operating activities, will be sufficient to meet our anticipated cash needs for at least the next twelve months.  Our future capital requirements will depend on many factors, including our level of revenues, the timing and extent of spending to support product development efforts, the impact of existing adverse economic conditions, the expansion of sales and marketing activities, the timing of introductions of new products and the continuing market acceptance of our products.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations and trading price of our common stock. Please refer to Item 1A, “Risk Factors” herein for information concerning these and other uncertainties that could negatively impact us.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the information called for by this Item 3 from the disclosures set forth in Part II, Item 7A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

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Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and President and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q and, based on this evaluation, have concluded that our disclosure controls and procedures are effective.

Changes in Internal Controls. There have been no changes in our internal controls over financial reporting that occurred during our second quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II: OTHER INFORMATION

Item 1.  Legal Proceedings

The information set forth under Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, is incorporated herein by reference.  For an additional discussion of certain risks associated with legal proceedings, see Item 1A “Risk Factors.”

Item 1A. Risk Factors

You should carefully consider the risk factors described below, as well as the other information included in this Quarterly Report on Form 10-Q and in other filings with the SEC, prior to making a decision to invest in our securities. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known or that we currently believe to be less significant may also adversely affect us.

We are exposed to risks in our licensing business related to product and customer concentration.

Currently, we generate a majority of our revenue in the home entertainment market, principally through the inclusion of SRS technology inside flat panel LCD and plasma televisions. We expect that the consumer home entertainment market will continue to account for a significant portion of our licensing revenues for the foreseeable future. In addition to significant fluctuations in consumer spending on consumer electronic products, retail prices for certain consumer electronics products that include our audio technology have decreased significantly. We expect that this trend will continue for the foreseeable future. In addition, from time to time, certain of our OEM and semiconductor manufacturer customers may account for a significant portion of our revenues. For example, for the year ended December 31, 2008, Samsung accounted for approximately 42% of our consolidated revenues. These manufacturers could develop their own technologies or decide to exclude our technologies from their products altogether in an effort to reduce cost.  For example, during 2007, we were informed by Sony that they were no longer using our technology in the majority of their televisions.  The loss of any key customer could have a material adverse affect on our financial condition and results of operations.

General economic conditions may reduce our revenues and harm our business.

Our business is exposed to adverse changes in general economic conditions, because products that incorporate our technologies are entertainment-oriented and generally discretionary goods. The current slowdown or decline in U.S. and foreign economic growth has adversely affected consumer confidence, disposable income and spending. As a result, sales by our licensees of consumer electronics and other products incorporating our technologies may not grow as rapidly as in prior periods or may even decrease, which could adversely affect our licensing revenue.  Furthermore, deteriorating economic conditions and other factors may result in increased under-reporting or non-reporting of royalty bearing revenues by our licensees as well as increased unauthorized use of our technologies, which could adversely affect our revenues.

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Our business is highly dependent on the consumer electronics market, which is characterized by short product life cycles, rapid technological changes, fluctuations in demand and seasonality, and is subject to risks related to product transitions and supply of other components.

The consumer electronics market is characterized by intense competition, rapidly evolving technology, and ever-changing consumer preferences. These factors result in the frequent introduction of new products, short product life cycles and significant price competition. As a result, we may need to develop new products or technologies or modify our existing technologies to integrate with the new products and technologies developed by our customers. We anticipate that we will continue to expend considerable resources on research and development in the future in order to continue to modify our existing technologies and introduce new products and technologies.  If we are unable to develop or modify the necessary technologies to meet the changing needs of our customers on a timely basis, or at all, or if we are unable to provide such technologies at competitive prices, our customers may reduce their use of our technologies and our revenues may decline. In addition, the dynamic nature of this market limits our ability and the ability of our customers to accurately forecast quarterly and annual sales. If we, or our customers, are unable to adequately manage product transitions, our business and results of operations could be negatively affected.

We depend on the sale by our licensees of products that incorporate our technologies, and a reduction in those sales would adversely affect our licensing revenue.

We derive most of our revenue from the licensing of our technologies to consumer electronics product manufacturers. We do not manufacture consumer electronics products ourselves and our licensing revenue is dependent on sales by our licensees of products that incorporate our technologies. We cannot control these manufacturers’ product development or commercialization efforts or predict their success. In addition, our license agreements, which typically require manufacturers of consumer electronics products and media software vendors to pay us a specified royalty for every electronics product shipped that incorporates our technologies, do not require these manufacturers to include our technologies in any specific number or percentage of units, and only a few of these agreements guarantee us a minimum aggregate licensing fee. Accordingly, if our licensees sell fewer products incorporating our technologies, decline to actively market products incorporating our technologies or otherwise face significant economic difficulties, our revenue will decline. Changes in consumer tastes or trends, changes in industry standards or adverse changes in business and economic conditions may also adversely affect our licensing revenue.

Pricing pressures on the consumer electronics product manufacturers, who incorporate our technologies into their products, could limit the licensing fees we charge for our technologies, which could reduce our revenues.

The markets for the consumer electronics products in which our technologies are incorporated are intensely competitive and price sensitive. Retail prices for consumer electronics products that include our technologies have decreased significantly, and we expect prices to continue to decrease for the foreseeable future. In response, manufacturers have sought to reduce their product costs, which can result in downward pressure on the licensing fees we charge our customers who incorporate our technologies into their products. Alternatively, our customers may seek to eliminate our technologies in their products in favor of internally developed technologies. A decline in the licensing fees we charge could materially and adversely affect our operating results.

We face intense competition from companies with greater brand recognition and resources.

The digital audio, consumer electronics and entertainment markets are intensely competitive, subject to rapid change, and significantly affected by new product introductions and other market activities of industry participants.

Some of our current and potential competitors enjoy notable competitive advantages, including:

·Greater name recognition;

·      Larger distribution channels and long standing relationships with consumer electronics products designers and manufacturers;

·A more extensive customer base;

·Broader product and service offerings;

·      Greater resources for competitive activities, such as research and development, strategic acquisitions, alliances, joint ventures, sales and marketing, and lobbying industry and government standards; and

·More technicians and engineers.

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·      Decoding and encoding technology offerings of our competitors have become standards in certain consumer electronic products that may offer them a perceived advantage in licensing competitive products.

As a result, these current and potential competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements.

We may also experience competition from certain of our customers who decide to develop their own sound technologies instead of licensing such technologies.  Any increased competition may adversely impact our revenues, margins and earnings.

Inaccurate licensee royalty reporting and unauthorized use of our intellectual property could materially adversely affect our operating results.

Our licensing revenue is generated primarily from consumer electronics product manufacturers who license our technologies and incorporate them in their products. Under a significant percentage of our existing arrangements, these licensees typically pay us a specified royalty for every product they ship that incorporates our technologies. We rely on our licensees to accurately report the number of units shipped that incorporate our technologies. We calculate our license fees, prepare our financial reports, projections and budgets, and direct our sales and product development efforts based on these reports we receive from our licensees. However, it can be difficult for us to independently determine whether or not our licensees are reporting shipments accurately. This is especially true with respect to software incorporating our technologies because software can be copied relatively easily and we often do not have easy ways to determine how many copies have been made. Most of our license agreements permit us to audit our licensees’ records, but audits are generally expensive and time consuming and initiating audits could harm our customer relationships. We expect that we will continue to be subject to understatement and non-reporting of royalty bearing revenues by licensees, which could adversely affect our operating results. Conversely, to the extent that our licensees overstate the number of products incorporating our technologies, negative corrections could result in reductions of royalty revenue in subsequent periods. Some of our licensees may begin to more closely scrutinize their past licensing statements, which may result in an increased receipt of negative corrective statements

We also may experience problems with non-licensee consumer electronics product manufacturers and media software vendors, particularly in emerging economies, incorporating our technologies or incorporating our technologies and trademarks into their products without our authorization and without paying us any licensing fees. This unauthorized use of our intellectual property could adversely affect our operating results.

Our business and future prospects depend upon the strength of our brand. Awareness of our brand depends to a significant extent upon decisions by our customers to display our trademarks on their products, and if our customers do not display our trademarks on their products, our ability to increase our brand awareness may be harmed.

Because we engage in relatively little direct brand advertising, the promotion of our brand depends upon consumer electronics industry participants displaying our trademarks on their products that incorporate our technologies.  Although we do generally require our customers to place our brand on their products, some are not required to do so. Maintaining the SRS brand and our position as an industry standard is critical to maintaining and expanding our licensing revenues and entering into new or broadening existing licensing relationships.  If our customers choose for any reason not to display our trademarks on their products, our ability to maintain or increase our brand awareness may be harmed, which would have an adverse effect on our business and prospects. In addition, if we fail to maintain high quality standards for our products, or the products that incorporate our technologies through the quality control evaluation process that we require of our licensees, the strength of our brand could be adversely affected.

Licensee products that incorporate our technologies, from time to time, experience quality problems that could damage our brand, decrease revenues and increase operating expenses.

Licensee products that incorporate our technologies often are complex and sometimes contain undetected software or hardware errors, particularly when first introduced or when new versions are released. In addition, those products are often combined with, or incorporated into, products from other companies, sometimes making it difficult to identify the source of a problem. Any negative publicity or negative impact relating to these product problems (even if unrelated to our technologies) could adversely affect the perception of our brand. In addition, these errors could result in loss of, or delay in, market acceptance of those products or our technologies, or cause delays in delivering them and meeting customer demands, any of which could reduce our revenue and raise significant customer relations issues. Although we generally attempt to contractually limit our liability for our licensees’ defective products, we may elect to help reengineer those products, which could increase our expenses and adversely affect our operating results.

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We may engage in acquisition activities, which could require significant capital infusions and may result in operating challenges, dilution to our stockholders and other adverse consequences.

We may in the future acquire, or consider the acquisition of, complementary businesses, products and/or technologies. Acquisitions may require significant capital infusions and, in general, involve a number of special risks, including, but not limited to, the following:

·Potential disruption of our ongoing business and the diversion of our resources and management’s attention to acquisition activities and integration challenges;

·The failure to retain or integrate key acquired personnel;

·The challenge of assimilating diverse business cultures, and the difficulties in integrating the operations, technologies and information systems of the acquired companies;

·Increased costs to integrate and improve managerial, operational, financial and other administrative systems and to eliminate duplicative services;

·The need to implement or improve internal controls, procedures and policies appropriate for a public company at businesses that prior to the acquisition were privately-held or otherwise lacked such adequate controls, procedures or policies;

·Unanticipated or unknown obligations or liabilities relating to an acquisition;

·Possible write-offs, impairment charges, compensation charges or other adverse tax or accounting consequences related to an acquisition; and

·Integration challenges across diverse geographies, cultures, economies or regulatory environments.

Our competitors are also soliciting potential acquisition candidates, which could both increase the price of any acquisition targets and decrease the number of attractive available acquisitions.  We cannot assure you that we will pursue an acquisition or be able to identify or consummate any acquisition, successfully integrate any acquisition or realize the benefits anticipated from any acquisition.  Future acquisitions may also require us to obtain additional equity or debt financing, which may not be available on favorable terms, on a timely basis or at all.

We are subject to risks associated with substantial international operations.

We conduct sales and customer support operations in a number of countries throughout the world that require refinement to adapt to the changing market conditions on a regional basis. In addition, many of our significant customers are headquartered in the Asia Pacific region, particularly Korea and Japan. Approximately 88%, 90% and 91% of our revenues were derived from customers with headquarters located in the Asia Pacific markets during the years ended December 31, 2008, 2007 and 2006, respectively. We expect to continue to derive a significant portion of our revenues from sales to customers in these markets for the foreseeable future. Also, a substantial number of products incorporating our technologies are manufactured, assembled and tested by third parties in Asia. As a result, we are subject to a number of risks of conducting business outside of the United States, any of which could have a material adverse impact on our business and results of operations, including:

·global economic downturn;

·      political, social and economic instability, and the risk of war, terrorist activities or other international incidents in Asia and elsewhere abroad;

·currency fluctuations;

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·difficulties and costs of staffing and managing foreign operations;

·unexpected changes in, or impositions of, government requirements;

·adverse changes in tariffs and other protectionist laws and business practices that favor local competitors;

·potentially longer payment cycles and greater difficulty in collecting receivables from foreign entities;

·      the burdens of complying with a variety of non-U.S. laws and reduced protection of our intellectual property in some countries;

·potentially adverse tax consequences and the complexities of foreign value added tax systems; and

·Other factors beyond our control, including natural disasters and major health concerns.

We have a long and unpredictable sales cycle, which can result in uncertainty and delays in generating additional revenues.

Historically, because of the complexity of our technologies, it can take a significant amount of time and effort to explain the benefits of our technologies to potential new customers and to negotiate a sale. For example, it typically takes six to nine months after our first contact with a prospective customer before we start licensing our technology to that customer and another six to nine months to begin generating revenues. In addition, purchases of our products are usually made in connection with new design starts by our customers, the timing of which is outside of our control. Accordingly, we may be unable to predict accurately the timing of any significant future sales of our products. We may also spend substantial time and management attention on potential license agreements that are not consummated, or in which the consumer electronic product ultimately does not sell in large quantities, thereby foregoing other higher revenue opportunities.

If our patents and other intellectual property rights do not adequately protect our products, we may lose market share to our competitors and be unable to operate our business profitably.

Our ability to compete may be affected by our ability to protect our proprietary information. We have filed numerous U.S. and foreign patent applications and to date have a number of issued U.S. and foreign patents covering various aspects of our technologies. We cannot guarantee that the steps taken by us to protect our intellectual property will be adequate to prevent misappropriation of our technology or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as do the laws of the U.S. It is possible that third parties may assert claims or initiate litigation against us or our customers with respect to existing or future products. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to determine the scope and validity of our proprietary rights. Litigation in the technology industry is common.  We are currently engaged in a dispute with Sony concerning the possible infringement of several SRS patents by Sony’s S-Force technology, but cannot assure you that we will be successful in such dispute and such litigation may adversely effect our ability to license other technologies to Sony. Claims and litigation brought against us or initiated by us could be costly and time consuming and could divert our management from our business. The outcome of any litigation is uncertain and could require us to pay significant damages or could prevent us from licensing some or all of our technologies, which could significantly harm our business and results of operations.

If we lose the services of our key personnel, or if we are unable to attract and retain other key personnel, we may not be able to manage our operations or meet our growth objectives.

Our future success depends to a large extent upon the continued service of key personnel, including engineering, sales and administrative staff. We anticipate that any future growth will require us to recruit and hire a number of new personnel in engineering, operations, finance, sales and marketing. Competition for such personnel can be intense, and it is possible that we may not be able to recruit and retain necessary personnel to operate our business and support future growth.

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The market price of our common stock is volatile and your investment in our common stock could suffer a decline in value.

The trading price of our common stock has been, and will likely continue to be, subject to wide fluctuations in response to quarterly variations in our operating results, announcements of new products or technological innovations by us or our competitors, strategic alliances between us and third parties, general market fluctuations and other events and factors. Changes in earnings estimates made by brokerage firms and industry analysts relating to the markets in which we do business, or relating to us specifically, have in the past resulted in, and could in the future result in, an immediate and adverse effect on the market price of the common stock. Even though our stock is quoted on the NASDAQ Global Market, our stock has had and may continue to have low trading volume and high volatility. The historically low trading volume of our stock makes it more likely that a severe fluctuation in volume, either up or down, will significantly impact the stock price. Because of the relatively low trading volume of our stock, our stockholders may have difficulty selling our common stock. In addition, the stock market in general, and the NASDAQ Global Market and the market for technology and small market cap companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, the market prices of securities of technology companies have been particularly volatile. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance.

Our certificate of incorporation and bylaws as well as Delaware law contain provisions that could discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock.

Our certificate of incorporation, our bylaws and Delaware law contain provisions that might enable our management to discourage, delay or prevent a change in control. In addition, these provisions could limit the price that investors would be willing to pay in the future for shares of our common stock.

Item 4.  Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of SRS Labs, Inc. was held on June 17, 2009 for the purpose of (a) electing two Class I directors to the Board of Directors and (b) voting on a proposal to ratify the appointment of Squar, Milner, Peterson, Miranda & Williamson, LLP as independent auditors for the fiscal year ending December 31, 2009.

Winston E. Hickman and Carol L. Miltner were elected to serve as Class I directors of the Company for a three-year term expiring at the 2012 Annual Meeting of Stockholders.  David Dukes continued as a Class II Director.  Sam Yau and Thomas C. K. Yuen continued as Class III Directors. The tabulation of the votes cast for the election of Winston E. Hickman and Carol L. Miltner were as follows:

Nominee	Votes For	Votes Withheld
Winston E. Hickman	11,685,615	1,560,580
Carol L. Miltner	11,687,202	1,558,993

The proposal to ratify the appointment of Squar, Milner, Peterson, Miranda & Williamson, LLP as independent auditors for the fiscal year ending December 31, 2009 was approved.  The tabulation of votes was as follows:

Votes For	Votes Against	Abstentions	Broker Non-Votes
12,034,273	1,201,704	10,218	0

Item 5.  Other Information

On August 3, 2009, the Company adopted the Amended and Restated Change in Control Protection Plan (the “CIC Plan”), which amended and restated the original plan that was previously adopted in 2005.  The CIC Plan generally provides that if a participant’s employment is terminated without “cause” or if the participant resigns for “good reason” (both as defined in the CIC Plan) during a two-year period following a change in control (as defined in the CIC Plan), the participant will be entitled to receive a severance payment.  Under the CIC Plan and its predecessor plan, the size of severance payment that would be due to a participant upon the occurrence of a covered termination ranges from one to two times the participant’s “base amount” depending on the participant’s position with the Company. Under the CIC Plan, the “base amount” includes the participant’s base salary in effect immediately preceding the change in control plus the participant’s

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cash bonus and cash commissions paid by the Company during the last completed calendar year immediately preceding the year in which a change of control occurs.  The CIC Plan modified the definition of “base amount” because it previously included all of the participant’s annual W-2 taxable income paid on average over the five years prior to the change in control, which overstated the intended benefits under the CIC Plan.  The CIC Plan also provides that the Company will pay a participant’s COBRA premiums for a period of up to 18 months following a covered termination.

The existing participants under the CIC Plan have entered into amended participation agreements substantially in the same form as their existing agreements subject to the modifications discussed above.  Under the CIC Plan, Thomas C.K. Yuen, the Company’s Chairman of the Board, Chief Executive Officer and President, would be entitled to two times his base amount, upon the occurrence of a covered termination within a two year period following a change in control. Ulrich Gottschling, the Company’s Chief Financial Officer, Treasurer and Secretary, and Alan D. Kraemer, the Company’s Executive Vice President and Chief Technology Officer, would each be entitled to one and one-half times their base amount upon the occurrence of a covered termination within a two year period following a change in control; Jeff Klaas, the Company’s Vice President, Global Sales, and Sarah Yang, the Company’s Vice President, Software Engineering, would each be entitled to one times his or her base amount upon the occurrence of a covered termination within a two-year period following a change in control. Any participant, like Mr. Yuen, that has an employment agreement or severance agreement with the Company that provides for severance-related benefits will not be entitled to receive any benefits under the CIC Plan unless the participant waives any and all severance benefits under the employment or severance agreement within five business days after a covered termination.  This description is qualified in its entirety by the CIC Plan and the forms of participation agreement, copies of which are attached as Exhibits to this report.

Item 6.  Exhibits

The exhibits listed below are hereby filed with the SEC as part of this Report.

Exhibit Number		Description
3.1		Certificate of Incorporation of the Company, previously filed with the SEC as Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, specifically included in Amendment No. 1 to such Registration Statement filed with the SEC on July 3, 1996 (File No. 333-4974-LA), which is incorporated herein by reference.
3.2		Bylaws of the Company, previously filed with the SEC as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 1999, filed with the SEC on November 12, 1999, which is incorporated herein by reference.
10.1	†	Amended and Restated Change In Control Protection Plan, adopted August 3, 2009, together with the forms of Participation Agreements and the Grantor Trust Agreement.
31.1		Certification of Chief Executive Officer of SRS Labs, Inc., pursuant to Rule 13a-14 of the Securities Exchange Act.
31.2		Certification of Chief Financial Officer of SRS Labs, Inc., pursuant to Rule 13a-14 of the Securities Exchange Act.
32.1		Certification of Chief Executive Officer of SRS Labs, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer of SRS Labs, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

† A contract, compensatory plan or arrangement in which executive officers are eligible to participate.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SRS LABS, INC., a Delaware corporation
Date:  August 6, 2009	By:	/S/ THOMAS C.K. YUEN
	Thomas C.K. Yuen
	Chairman of the Board and Chief Executive Officer
	(Principal Executive Officer)
Date:  August 6, 2009	By:	/S/ ULRICH GOTTSCHLING
	Ulrich Gottschling
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

The exhibits listed below are hereby filed with the SEC as part of this Report.

Exhibit Number		Description
3.1		Certificate of Incorporation of the Company, previously filed with the SEC as Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, specifically included in Amendment No. 1 to such Registration Statement filed with the SEC on July 3, 1996 (File No. 333-4974-LA), which is incorporated herein by reference.
3.2		Bylaws of the Company, previously filed with the SEC as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 1999, filed with the SEC on November 12, 1999, which is incorporated herein by reference.
10.1	†	Amended and Restated Change In Control Protection Plan, adopted August 3, 2009, together with the form of Participation Agreement for Officers and the Grantor Trust Agreement.
31.1		Certification of Chief Executive Officer of SRS Labs, Inc., pursuant to Rule 13a-14 of the Securities Exchange Act.
31.2		Certification of Chief Financial Officer of SRS Labs, Inc., pursuant to Rule 13a-14 of the Securities Exchange Act.
32.1		Certification of Chief Executive Officer of SRS Labs, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer of SRS Labs, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

† A contract, compensatory plan or arrangement in which executive officers are eligible to participate.

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EX-10.1

EXHIBIT 10.1

SRS LABS, INC.

AMENDED AND RESTATED
CHANGE IN CONTROL PROTECTION PLAN
(also functioning as a Summary Plan Description)

As Amended and Restated on August 3, 2009

SRS LABS, INC.

AMENDED AND RESTATED
CHANGE IN CONTROL PROTECTION PLAN
(also functioning as a Summary Plan Description)

Table of Contents

		PAGE
1.	BENEFITS PAYABLE UNDER THE PLAN	1
	(a)Change in Control Severance Benefit	1
	(b)Paid Leave in Lieu of Notice	1
	(c)Definition of Change in Control	2
2.	PLAN ELIGIBILITY	3
3.	VESTING AND ELIGIBILITY RULES FOR BENEFITS	3
	(a)Covered Terminations	3
	(b)Definitions	4
	(c)Agreements Precedent to Collecting Benefits; Recapture of Benefits	5
4.	ADDITIONAL BENEFITS	6
5.	TAXES, AND AUTHORIZATIONS FOR TAX LAW COMPLIANCE	7
6.	RELATION TO OTHER PLANS AND AGREEMENTS	7
7.	CLAIMS PROCEDURES	8
	(a)Claims Normally Not Required	8
	(b)Disputes	9
	(c)Time for Filing Claims	9
	(d)Procedures	9
8.	PLAN ADMINISTRATION	11
	(a)Discretion	11
	(b)Finality of Determinations	11
	(c)Drafting Errors	11
	(d)Scope	11
9.	COSTS, INDEMNIFICATION, AND REIMBURSEMENT FOR LITIGATION EXPENSES	12
10.	PLAN AMENDMENT AND TERMINATION; LIMITATION ON EMPLOYEE RIGHTS; CONDITIONS OF RECEIPT OF BENEFITS	12
	(a)Sponsor May Amend or Terminate the Plan	12

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	(b)Application of Amendment or Termination of the Plan		12
	(c)No Right to Continued Employment		13
11.	PLAN FUNDING		13
12.	GOVERNING LAW		13
13.	MISCELLANEOUS		13
14.	OTHER INFORMATION		13
	(a)Type of Plan		13
	(b)Addresses, etc.		13
	(c)Agent for Service of Legal Process		14
	(d)Funding		14
	(e)Plan Amendment or Termination		14
	(f)Statement of ERISA Rights		14
	(g)Whom to Call for Additional Information		15
Exhibit A		Form of Participation Agreement – Version 1 (Persons with Employment/Severance Agreements) and Version 2 (Persons without Employment/Severance Agreements)
Exhibit B		Grantor Trust Agreement

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SRS LABS, INC.

AMENDED AND RESTATED
CHANGE IN CONTROL PROTECTION PLAN

Plan Document and Summary Plan Description

SRS Labs, Inc. (the “Company”) recognizes that a corporate change in control may adversely affect certain employees.  To treat these employees in a fair and compassionate manner, the Company has adopted this Amended and Restated Change in Control Protection Plan (the “Plan”).

This document is the Plan’s plan document, and also functions as its summary plan description.  This Plan will control in case of conflict with any other document.  Throughout this Plan, the term “Sponsor” is used when the Company is acting in its non-fiduciary capacity as Plan sponsor and settlor.  The term “Plan Administrator” is used when the Company is acting in the limited capacity of interpreting the Plan and determining eligibility for benefits (see Section 8 below for detailed information).

The Plan became effective on April 27, 2005 and was amended and restated on August 3, 2009.   Even if the Plan expires or is terminated, the Sponsor will thereafter honor any vested but unpaid benefits under the Plan (subject to Section 10 below).  References to Sponsor, the Company, and their affiliates also refer to any successor to their interests.

1.Benefits Payable Under the Plan

(a)Change in Control Severance Benefit

You will become entitled to severance benefits pursuant to this Plan if, while this Plan is in effect and while you are eligible under Section 2 for Plan participation, your employment terminates under the circumstances described in Section 3(a).  The severance benefits (“Change in Control Benefits”) to be paid to you after your termination date shall be determined pursuant to an agreement, substantially in the form attached as Exhibit A (the “Participation Agreement”), that you sign pursuant to Section 2 as a condition for becoming a Plan participant. The Sponsor will make all decisions relating to who is offered a Participation Agreement and the terms, conditions, and benefits promised under the Participation Agreement.

(b)Paid Leave in Lieu of Notice

To the extent that the Federal Worker Adjustment and Retraining Notification Act applies to you, if you become entitled to Change in Control Benefits under the Plan, to the extent you have been given less than sixty (60) days’ advance written notice of the date your active services actually terminate, you will be given a Paid Leave in Lieu of Notice for the balance of that 60-day period, as follows:

(i)During your Paid Leave in Lieu of Notice, you will be an inactive employee but you will be entitled to the same employee benefits and participation rights to which you would have been entitled under our company-wide employee benefit plans had your active employment continued.

(ii)If you resign or die during a paid leave, your paid leave will end and the Change in Control Benefits that you would have received during the balance of the paid leave will be paid to you (or, if you have died, to your estate) in a lump sum.  All other paid leave benefits will stop on the day you resigned or died, except for any group insurance coverage that by its terms continues until the end of the calendar month in which you terminate.

(iii)This Paid Leave in Lieu of Notice runs concurrently with the Change in Control Benefits provided for in Section 1(a) hereof and is not in addition to Change in Control Benefits provided for in this Plan.

(c)Definition of Change in Control

The term “Change in Control” shall mean the occurrence of any of the following events, subject to the Plan Administrator’s absolute discretion to interpret this definition in a manner that conforms with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and associated regulations:

(i)The Company is merged, consolidated or reorganized into or with another corporation or other legal person and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock (as that term is defined in subsection (iii) hereof) of the Company immediately prior to such transaction;

(ii)The Company sells all or substantially all of its assets to any other corporation or other legal person, less than a majority of the combined voting power of the then-outstanding voting securities of which are held directly or indirectly in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale;

(iii)Any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing more than 50%  of the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors of the Company (“Voting Stock”); or

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(iv)The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in, or in response to, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a  Change in Control of the Company has occurred.

Notwithstanding the foregoing provisions of (a) subsections (iii) or (iv) hereof, a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because the Company, an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities of such entity (an “Affiliate”), any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of voting securities of the Company, whether in excess of 50% or otherwise, or because the Company reports that a Change in Control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership; or (b) Subsection (iii) hereof, a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because a person who is a holder of five percent (5%) or more of the Voting Stock and who also is an officer and director of the Company on the date of this Agreement acquires more than 50% of the Voting Stock.

Notwithstanding the foregoing provisions of subsections (i) and (ii) hereof, a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because the Company engages in an internal reorganization, which may include a transfer of assets to one or more Affiliates, provided that such transaction has been approved by at least two-thirds of the Directors of the Company and as a result of such transaction or transactions, at least 80% of the combined voting power of the then-outstanding securities of the Company or its successor are held in the aggregate by the holders of Voting Stock immediately prior to such transactions.

2.Plan Eligibility

You are eligible for this Plan only if the Sponsor has provided you with a Participation Agreement signed by a duly authorized officer of the Company confirming your eligibility for the Plan.  If you execute the Participation Agreement and return it to the Company within thirty (30) days after receiving it, you will be a “Participant”.  If your Participation Agreement expires for any reason before you become vested in the right to collect Change in Control Benefits, you will immediately cease to be a Participant.

3.Vesting and Eligibility Rules for Benefits

(a)Covered Terminations

If you are a Participant, incur a Covered Termination (as defined below), and satisfy the conditions set forth in Section 3(c) below, you will become vested in your right to receive the Change in Control Benefits set forth in your Participation Agreement.  If you terminate employment for any other reason, you will not be eligible for any benefits under this Plan.  For example, you will not be eligible for Change in Control Benefits under the

3

Plan if the Plan Administrator determines, in its sole discretion, that your Employment (as defined below) has either (i) terminated before a Change in Control occurs, or (ii) terminated on or after a Change in Control by reason of —

(i)your resignation without Good Reason (as defined below);

(ii)your death; or

(iii)your discharge for Cause (as defined below), as determined by the Sponsor in its sole discretion.

(b)Definitions

(i)For purposes of this Plan, a “Covered Termination” shall mean that, at a time on or two (2) years after a Change in Control either (I) you have resigned from Employment for Good Reason (as defined below), or (II) your Employment is involuntarily terminated by the Company without Cause (as defined below).  A Covered Termination shall not include a transfer of your Employment to the parent of the Company, if any, or an affiliate of the parent, or an affiliate of the Company, or any successor to the Company’s obligations under this Plan, whether through a merger, acquisition of the Company or any related entity or their assets, or a contractual assumption of the Plan or its liabilities in anticipation of or after a Change in Control, in which case you shall continue to be a Participant under the Plan and any reference herein to “Company” shall refer to the entity that is your employer.

(ii)For  purposes of this Plan, “Employment” shall mean your employment (I) with the Company, (II) the parent of the Company, if any, or an affiliate of the parent, or an affiliate of the Company, or (III) any successor to the Company’s obligations under this Plan, whether through a merger, an acquisition of the Company or any related entity, or a contractual assumption of the Plan or its liabilities.

(iii)For purposes of this Plan, “Cause” shall mean (I) your engagement in fraud, misappropriation or a material breach of the Company’s code of ethics; (II) your engagement in intentional conduct which is materially injurious, monetarily or otherwise, to the Company or its affiliates, (III) your commission of an act of deliberate and material dishonesty; (IV) your failure to follow a lawful and material directive related to your job responsibilities or otherwise related to your position at the Company; (V) your commission of a crime or causing the Company to commit a crime; or (VI) your conviction, guilty plea or plea of nolo contendere either to any felony, or to any misdemeanor involving dishonesty or moral turpitude, provided however, in case of (II) and (IV), such events shall not constitute “Cause” until after you have been given written notice of such and have failed to cure such within thirty (30) days following such notice.

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(iv)For purposes of this Plan, and unless otherwise stated in a Participant’s Participation Agreement, “Good Reason” shall mean (I) any material reduction by the Company in your base salary below the amount in effect immediately prior to the Change in Control; (II) the requirement that you change your principal location of work to any location that is in excess of forty (40) miles from your location of work as of the effective time of the Change in Control; (III) the substantial curtailment of your rights, duties and responsibilities as an Employee as compared to those you were performing before the Change in Control.  In addition, Good Reason shall mean the liquidation, dissolution, merger, consolidation or reorganization of the Company, or the transfer of all or substantially all of the Company’s assets, unless the successor (by liquidation, dissolution, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its assets have been transferred (directly or by operation of law) assumes the duties and obligations of the Company under this Plan.  Notwithstanding the foregoing, “Good Reason” shall only be found to exist if prior to your resignation for Good Reason, you have provided written notice to the Company within ninety (90) days following the existence of such Good Reason event indicating and describing the event resulting in such Good Reason, and the Company does not cure such event within thirty (30) days following the receipt of such notice.  In the event the Company fails to timely cure, you must resign within ninety (90) days following the expiration of the cure period in order for the resignation to constitute Good Reason.

(c)Conditions Precedent to Collecting Benefits; Recapture of Benefits

As a condition precedent to your vesting in the right to collect any benefits pursuant to this Plan, the Sponsor may in its discretion require that you execute any one or more of the following agreements in a form satisfactory to the Sponsor (provided such agreements if required must be executed and delivered to the Company within 21 days following your receipt of such agreements) and comply with the following obligations:

(i)A general release of any and all past, present, or future claims (whether or not such claims relate to the Plan) that you may have against the Company, its subsidiaries and affiliates, and their officers, directors, employees and agents, and a covenant not to bring any action in respect of any claim so released.

(ii)An agreement not to make disparaging comments (whether orally or in writing) regarding the Company or its subsidiaries and affiliates, its officers and employees, its products and services, or any other aspect of the Company’s business either during or following termination of your employment with the Company.

(iii)An agreement that you will not, without the prior written consent of the Company, disclose to any entity or person any information which is treated as confidential by the Company (“Confidential Information”), and is not generally known or available to the public, provided, that you may make disclosures of such Confidential Information to the extent required by law or legal process.  The term “Confidential Information” shall include:

5

(A)information regarding the business methods, business policies, procedures, techniques, business or strategic plans, trade secrets, pricing policies, or other processes of or developed by the Company;

(B)any names and addresses of customers or clients, and any data on or relating to past, present or prospective customers or clients;

(C)formulae, inventions, research or development projects or results, or other knowledge developed by the Company; and

(D)any other confidential information relating to or dealing with the business operations or activities of the Company; made known to you or learned or acquired by you while in the employ of the Company, which is not generally known to others outside the Company, whether written or otherwise, regarding earnings, plans, strategies, prospective and executed contracts and other business arrangements.

(iv)Upon termination of your employment, you must return all property of the Company and reimburse the Company for any personal telephone calls, credit card charges and other expenses, and pay all amounts due to the Company.

Notwithstanding any other provision of the Plan, you will not be treated as having satisfied the requirements of this Section 3(c) unless (I) you execute any one or more of the above agreements that the Sponsor may for any reason require, (II) you deliver such agreements to the person, and within the time period above and prescribed in such agreement, and (III) you do not make a legally valid revocation of such agreement.  In the event the Sponsor determines that you have breached any of the conditions set forth in this Subsection 3(c) or any agreement referenced hereunder, the Company shall (in addition to any other remedies it may have) not be required to provide any of Change in Control Benefits pursuant to the Plan, and you shall be obligated to return to the Company, upon demand, an amount (plus simple interest) equal to all of the Change in Control Benefits that you have received under this Plan.

4.Additional Benefits

(a)If you become entitled to Change in Control Benefits under this Plan, you will also be reimbursed for COBRA continuation premiums you pay for yourself, your spouse, and your dependents for the period, if any, set forth in your Participation Agreement.  For COBRA purposes, however, the date on which you terminate employment will commence the period for which you are entitled to continuation coverage under COBRA (meaning that the Company’s payment of COBRA premiums may not extend the duration of your COBRA eligibility).  The regular COBRA procedures and rules will apply.

(b)Upon the death of a Participant receiving Change in Control Benefits, the beneficiary(ies) of the Participant (whom he or she designated for purposes of group life insurance benefits) shall be entitled to receive such Change in Control Benefits on the same terms that would have applied if the Participant had survived to collect all benefits.

6

5.Taxes, and Authorizations for Tax Law Compliance

Taxes will be withheld from your Change in Control Benefits to the extent the Plan Administrator, it its sole discretion, determines that this is appropriate or is required by law.  You are solely responsible and liable for the satisfaction of all taxes and penalties, including any taxes arising under Section 409A of the Code  that may arise in connection with your Plan participation or your receipt of Change in Control Benefits.  Accordingly, neither the Sponsor, the Plan Administrator, nor any person associated with them has any obligation or authority to provide you with tax planning advice, or to take actions that minimize or eliminate any or all of the taxes or penalties which you incur or may incur pursuant to the Plan.  The Plan Administrator shall nevertheless have the discretion to unilaterally modify your rights under this Plan (including your rights under any Participation Agreement) in a manner that —

(a) voids or modifies any terms of the Plan or your Participation Agreement to the extent it would violate Section 409A of the Code, and

(b) for any payment that would otherwise violate Section 409A of the Code, to provide Change in Control Benefits only in connection with a distribution event that is allowable under Section 409A of the Code.  For example, the Plan Administrator may delay paying your Change in Control Benefits for up to six months and one day if the Plan Administrator reasonably determines that an earlier payment will violate Section 409A(a)(2)(B)(i) of the Code.

The Plan Administrator has the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of determining your rights under the Plan and your Participation Agreement.

6.Relation to Other Plans and Agreements; 280G Limitations

By signing your Participation Agreement, you recognize and agree that any prior severance or similar plan of the Company (including a prior version of this Plan or a related Participation Agreement) that might apply to you is hereby revoked and ineffective as to you; provided that, unless specifically provided in your Participation Agreement, neither this Plan nor your Participation Agreement will affect any outstanding employment, equity award,  or other written agreement between you and the Company.  No Change in Control Benefits that you receive will be taken into account for purposes of determining benefits under other benefit plans, retirement or pension plans, 401(k) plans, or similar retirement arrangements.  All such retirement-related plans or similar arrangements, to the extent inconsistent with this Plan, are hereby so amended.

The amount of any cash payment to be received by Participant  pursuant to this Plan shall be reduced (but not below zero) to the extent required so that no portion of any payment or benefit in the nature of compensation received or to be received by Participant (whether payable pursuant to the terms of this Plan or pursuant to any other plan, contract, agreement or arrangement with the Employer or any other person) (such payments or benefits are referred to collectively as the “Total Payments”) shall be treated as an “excess parachute payment” within the meaning of section 280G(b)(1) of the Code. Only amounts

7

payable under this Plan, and no other payments or benefits included in the Total Payments, shall be reduced pursuant to this Section 6.  Notwithstanding the foregoing, Participant may elect in writing to reduce other benefits payable by the Company to Participant outside of the Plan (in lieu of reducing all or some of the benefits payable hereunder) in order to avoid having any such “excess payments;” provided that the written notice of such election must be received by the Company’s Chief Executive Officer prior to the date on which any payments are required to be made under the Plan.

The determination of whether any reduction in payments is required pursuant to  Section 6 of this Plan shall be made in writing by the Company’s independent public accountants, or such other independent accounting firm or tax advisors selected by the Plan Administrator in its sole discretion (the “Accountants”), whose determination shall be conclusive and binding upon Participant and the Company for all purposes under this Plan.  For the purposes of making the calculations required by this Section 6, the Accountants may make reasonable assumptions and approximations regarding applicable taxes and applicable tax rates and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code, applicable regulations and other authority.  The Plan Administrator and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section.  The Accountants shall provide detailed supporting calculations, in writing, to both the Plan Administrator and the Participant of determinations made pursuant to this Section 6.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

In the event of any uncertainty as to whether a reduction in payments to a Participant is required pursuant to Section 6 of this Plan, the Company shall initially make the payment to Participant, and Participant shall be required to refund to the Company any amounts ultimately determined not to have been payable under the terms of this Plan.

The Company and the Participant shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the applicability of Section 280G or 4999 of the Code to any portion of the Total Payments.  In the event of any controversy with the Internal Revenue Service or other taxing authority with regard to the applicability of Section 280G or 4999 of the Code to any portion of the Total Payments, the Company shall have the right, exercisable in its sole discretion, to control the resolution of such controversy at its own expense.  Participant and the Company shall in good faith cooperate in the resolution of such controversy.

7.Claims Procedures

(a)Claims Normally Not Required

Normally, you do not need to present a formal claim to receive the Change in Control Benefits payable under this Plan.

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(b)Disputes

If any person (claimant) believes that benefits are being denied improperly, that the Plan is not being operated properly, that fiduciaries of the Plan have breached their duties, or that the claimant’s legal rights are being violated with respect to the Plan, the claimant must file a formal claim with the Plan Administrator within the time period set forth in Section 7(c).  The Plan Administrator will handle all such claims in accordance with the procedures set forth in Section 7(d).  This requirement applies to all claims that any claimant has with respect to the Plan, including claims against fiduciaries and former fiduciaries, except to the extent the Plan Administrator determines, in its sole discretion, that it does not have the power to grant all relief reasonably being sought by the claimant.  See Section 14(f) for information about your rights in the event the Administrator denies your claim.

(c)Time for Filing Claims

A formal claim must be filed within ninety (90) days after the date the claimant first knew or should have known of the facts on which the claim is based (or, if earlier, the date that is 120 days after your employment terminates for any reason), unless the Sponsor in writing consents otherwise.  The Plan Administrator will provide a claimant, on request, with a copy of the claims procedures established under subsection 7(d). If a claimant files an untimely claim, no benefits of any kind shall be payable under the Plan.

(d)Procedures

The Plan Administrator will adopt procedures for considering claims, which it may amend from time to time, as it sees fit.  If the Plan Administrator does not offer a Participant the payment of Plan benefits within 10 days after such benefits are due and payable, the Participant must file a claim for benefits on a form prescribed by the Plan Administrator and within the time frame set forth in subsection (c) above.  If the claimant’s claim for a benefit is wholly or partially denied, the Plan Administrator will furnish the claimant with a written notice of the denial.  This written notice must be provided to the claimant within a reasonable period of time (generally within ninety (90) days, unless special circumstances require an extension of time for processing the claim, in which case a period not to exceed one hundred and eighty (180) days) after the receipt of the claimant’s claim by the Plan Administrator.  (If such an extension of time is required, written notice of the extension will be furnished to the claimant prior to the termination of the initial 90-day period, and will indicate the special circumstances requiring the extension.)  Written notice of denial of the claimant’s claim must contain the following information:

(i)the specific reason or reasons for the denial;

(ii)a specific reference to those provisions of the Plan on which such denial is based;

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(iii)a description of any additional information or material necessary to perfect the claimant’s claim, and an explanation of why such material or information is necessary; and

(iv)a copy of the appeals procedures under the Plan and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) following an adverse determination of the claimant’s claim.

If the claimant’s claim has been denied, and the claimant wishes to submit his or her request for a review of his or her claim, the claimant must follow the following Claims Review Procedure:

1.Upon the denial of his or her claim for benefits, the claimant may file his or her request for review of his or her claim, in writing, with the Plan Administrator or claims processor;

2.The claimant must file the claim for review not later than sixty (60) days after he or she has received written notification of the denial of his or her claim for benefits.

3.The claimant has the right to review and obtain copies of all relevant documents relating to the denial of his or her claim and to submit any issues and comments, in writing, to the Plan Administrator;

4.If the claimant’s claim is denied, the Plan Administrator must provide the claimant with written notice of this denial within sixty (60) days after the Plan Administrator’s receipt of the claimant’s written claim for review.  There may be times when this 60-day period may be extended.  This extension may only be made, however, where there are special circumstances which are communicated to the claimant in writing within the 60-day period.  If there is an extension, a decision will be made as soon as possible, but not later than one hundred and twenty (120) days after receipt by the Plan Administrator of the claimant’s claim for review; and

5.The Plan Administrator’s decision regarding the claimant’s claim for review will be communicated to the claimant in writing, and if the claimant’s claim for review is denied in whole or part, the decision will include:

(B)the specific reason or reasons for the denial;

(C)specific references to the pertinent provisions of the Plan on which the decision was based;

(D)a statement that the claimant may receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits; and

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(E)a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA.

8.Plan Administration

(a)Discretion

The Plan Administrator is responsible for the general administration and management of the Plan and shall have all powers and duties that the Plan Administrator, in its sole discretion, deems necessary to fulfill its responsibilities, including, but not limited to, the discretion to interpret and apply the Plan and to determine all questions relating to eligibility for benefits.  The Plan Administrator and all Plan fiduciaries shall have the discretion to interpret or construe ambiguous, unclear, or implied (but omitted) terms in any fashion they deem to be appropriate in their sole and absolute discretion, and to make any findings of fact needed in the administration of the Plan.  The validity of any such interpretation, construction, decision, or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly arbitrary or capricious.

(b)Finality of Determinations

Unless arbitrary and capricious, all actions taken and all determinations by the Plan Administrator or by Plan fiduciaries will be final and binding on all persons claiming any interest in or under the Plan.  To the extent the Plan Administrator or any Plan fiduciary has been granted discretionary authority under the Plan, the Plan Administrator’s or Plan fiduciary’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter.

(c)Drafting Errors

If, due to errors in drafting, any provision of the Plan or any Participation Agreement does not accurately reflect its intended meaning, as demonstrated by consistent interpretations or other evidence of intent (by the Sponsor or the Plan Administrator, as the case may be), or as determined by the Plan Administrator in its sole and absolute discretion, the provision shall be considered ambiguous and shall be interpreted by the Plan Administrator and all Plan fiduciaries in a fashion consistent with its intent, as determined in the sole and absolute discretion of the Plan Administrator (but with regard to the intent of the Sponsor as settlor).

(d)Scope

This Section may not be invoked by any person to require the Plan to be interpreted in a manner inconsistent with its interpretation by the Plan Administrator or other Plan fiduciaries.

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9.Costs, Indemnification, and Reimbursement for Litigation Expenses

(a)All costs of administering the Plan and providing Plan benefits will be paid by the Company.

(b)To the extent permitted by applicable law and in addition to any other indemnities or insurance provided by the Company, the Company shall indemnify and hold harmless its (and its affiliates’) current and former officers, directors, employees, and agents against all expenses, liabilities, and claims (including legal fees incurred to defend against such liabilities and claims) arising out of their discharge in good faith of their administrative and fiduciary responsibilities with respect to the Plan.  Expenses and liabilities arising out of willful misconduct will not be covered under this indemnity.

(c)In the event that, at any time on or after the date three (3) months before a Change in Control, a Participant substantially prevails over the Company or any successor to its interests in any dispute that arises between the Participant and the Company with respect to the terms or interpretation of the Plan, whether instituted by formal legal proceeding or otherwise (including any action that the Participant takes to enforce the terms of his or her Participation Agreement or to defend against any action taken by the Company), the Company shall reimburse the Participant for all costs and expenses, include reasonable attorney’s fees, arising from such dispute, proceedings, or actions.  Such reimbursement will however be subject to proof of such costs.

10.Plan Amendment and Termination; Limitation on Employee Rights; Conditions of Receipt of Benefits

(a)Sponsor May Amend or Terminate the Plan

The Sponsor, acting through its Board of Directors or its delegate, has the right in its sole and absolute discretion to amend the Plan, to extend its term, or to terminate the Plan, prospectively.

(b)Application of Amendment or Termination of the Plan

Notwithstanding the foregoing, any amendment or termination of the Plan that occurs within the three-month period before a Change in Control, in connection with a Change in Control, or within two years after a Change in Control shall only apply to those Participants:

(i)who consent individually and in writing to the amendment or termination; or

(ii)whose vested Change in Control Benefits, or rights under the Plan to become entitled to the Change in Control Benefits set forth in his or her Participation Agreement are not adversely affected by such amendment or termination.

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Any decision or interpretation that is made either after a Change in Control or pursuant to this subparagraph (b) shall be subject to judicial review under a de novo standard, and not under the arbitrary and capricious standard that is generally intended to apply (and shall apply) to all other Plan determinations and interpretations.

(c)No Right to Continued Employment

This Plan shall not give any employee the right to be retained in the service of the Company, and shall not interfere with or restrict the right of the Company to terminate or retire the employee for any lawful reason.

11.Plan Funding

The Company shall pay any Change in Control Benefits from its general assets.  Notwithstanding the foregoing, in the event of a Change in Control, the Company shall establish and fund an irrevocable grantor (a/k/a rabbi) trust from which all Change in Control Benefits shall be paid.  The agreement which shall be used to establish such trust is attached hereto as Exhibit B.

12.Governing Law

This Plan is a welfare plan subject to ERISA, and it shall be interpreted, administered, and enforced in accordance with that law.  To the extent that state law is applicable, the statutes and common law of the State of Delaware (excluding its choice of laws principles) shall apply.

13.Miscellaneous

Where the context so indicates, the singular will include the plural and vice versa.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.  Unless the context clearly indicates to the contrary, a reference to a statute or document shall be construed as referring to any subsequently enacted, adopted, or executed counterpart.

14.Other Information

(a)Type of Plan

This is a welfare plan.

(b)Addresses, etc.

The Company’s address, telephone number, and employer identification number are as follows:

SRS Labs, Inc.

2909 Daimler Street

Santa Ana, California  92705

Attention: Chair, Compensation Committee of the Board of Directors

Telephone: 949.442.1070

EIN: 33-0714264

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The Plan’s Plan Year is as follows:

Plan Year:Calendar

The address for the Plan Administrator shall be the address of the Company set forth above.

(c)Agent for Service of Legal Process

The Plan Administrator is the Plan’s agent for service of legal process.

(d)Funding

The Plan is funded out of the Company’s general assets.

(e)Plan Amendment or Termination

The Sponsor has reserved the right to amend and terminate the Plan as set forth in Section 10 herein.

(f)Statement of ERISA Rights

As a participant in this Plan, you are entitled to certain rights and protections under a federal law called the Employee Retirement Income Security Act of 1974 (as noted above, “ERISA”).  ERISA provides that all plan participants shall be entitled to:

·Examine, without charge, at the Plan Administrator’s office and other specified locations, all documents governing the Plan, including insurance contracts, and a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor.

·Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including copies of the latest annual report (Form 5500 Series) and updated summary plan description. The administrator may make a reasonable charge for the copies.

·Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report.

In addition to creating rights for Plan participants ERISA imposes duties on the people who are responsible for the operation of this Plan. The people who operate this Plan are called “fiduciaries,” and have a duty to operate this Plan prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your

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employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for a benefit is denied in whole or in part, you must receive a written explanation of the reason for this denial. You have the right to have the Plan Administrator review and reconsider your claim, as described elsewhere in this Summary Plan Description. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request certain materials required to be furnished by the Plan and do not receive them within 30 days, or if you have any other claim with respect to the Plan, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials you have requested and that you be paid up to $110 a day until you receive them, unless the materials were not sent because of reasons beyond the Plan Administrator’s control.  If you have a claim for benefits which is denied or ignored, in whole or in part, you should file a claim under the Plan’s claims procedures or you may file suit in a state or federal court. In addition, if you disagree with the Plan’s decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court. If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay the court costs and legal fees. If you are successful the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds that you should have used the Plan’s claims procedures or that your claim is frivolous.   If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest office of the Pension and Welfare Benefits Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.  You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration or by visiting its website (http://www.dol.gov/ebsa/).

(g)Whom to Call for Additional Information

If you have any questions, please contact the Plan Administrator.

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Exhibit A/Version 1

(Persons with Employment/

Severance Agreements)

SRS LABS, INC.

AMENDED AND RESTATED

CHANGE IN CONTROL PROTECTION PLAN

Participation Agreement

WHEREAS, SRS Labs, Inc. (the “Company”) sponsors and maintains the SRS Labs, Inc. Amended and Restated Change in Control Protection Plan (the “Plan”), and has executed this agreement (the “Participation Agreement”) in order to offer                                (the “Officer”) the opportunity to participate in the Plan;

WHEREAS, the Officer has received a copy of the Plan (which also serves as its summary plan description); and

WHEREAS, the parties acknowledge that capitalized terms not defined in this Participation Agreement shall have the meaning assigned to them in the Plan; and

WHEREAS, the Officer understands that participation in the Plan requires that the Participant to agree irrevocably to the terms of the Plan and the terms set forth below; and

WHEREAS, the Employee has had the opportunity to carefully evaluate this opportunity, and desires to become a “Participant” in the Plan under the conditions set forth herein.

NOW, THEREFORE, the parties hereby AGREE as follows:

1.If the Officer incurs a Covered Termination while the Plan is in effect and the Officer has satisfied all other conditions precedent to collecting benefits under the Plan, the Officer shall within sixty (60) days thereafter (subject to Section 5 of the Plan and to Section 2 of this Participation Agreement) receive the following benefits (the “Change in Control Benefits”):

(i)A lump sum payment in cash equal to          times the Officer’s “base amount.”  The term “base amount” refers to (A) the Officer’s base salary in effect immediately preceding the Change in Control; plus (B) the Officer’s cash bonus and cash commissions paid by the Company (before deductions for taxes and other withholdings) during the last completed calendar year immediately preceding the year in which a Change in Control occurred.  The base amount shall not include perquisites, allowances, per diem payments, stock options or other equity compensation or fringe benefits.

(ii)In the event Officer elects COBRA continuation coverage on a timely basis, and makes the premium payments therefor, the Company’s shall promptly reimburse the Officer for such premiums for the Officer’s COBRA coverage for a period of              (    ) months following the Officer’s Covered Termination.

Each of the Officer’s benefits provided under this Section shall be subject to any reduction or withholding required or permitted under the Plan.

2.Notwithstanding Section 1 of this Participation Agreement, the Officer shall not receive the Change in Control Benefits set forth in Section 1 above if the Officer is entitled to collect severance-related benefits (the “Contract Benefits”) pursuant to a separate written employment agreement or severance agreement that the Officer has entered into with the Company or any of its affiliates, unless the Officer waives any and all Contract Benefits in writing within five business days after the Covered Termination.  If the Officer waives the Contract Benefits, the Officer shall become entitled to receive the Change in Control Benefits in accordance with the terms and conditions of the Plan and this Participation Agreement.

3.

(a)  In consideration of becoming eligible to receive the benefits provided under the terms and conditions of the Plan, the Officer hereby waives any and all rights, benefits, and privileges (other than the Contract Benefits defined in Section 2 above) to which the Officer is or would otherwise be entitled to receive under any plan, program, or arrangement under which the Company or any of its affiliates provides severance benefits (excluding any retirement plan, stock option or other equity-based plan or agreement, or other plan that is not a “welfare plan” within the meaning of ERISA).

(b)  Subject to Section 2 of this Participation Agreement, the Officer’s collection of the Change in Control Benefits pursuant to this Participation Agreement shall be absolutely contingent on the Officer’s agreement in the Release (i) to waive any and all rights (including, but not limited to, any Contract Benefits) under any employment agreement or severance agreement that the Officer has entered into with the Company or any of its affiliates, and (ii) that all such agreements shall be terminated and become null and void upon the Officer’s collection of any portion of the Change in Control Benefits.  The terms of the Release will be open for acceptance for a period of 21 days, during which time you may consider whether or not to accept the Release.

4.The Officer understands that the waiver set forth in Section 3(a) above is irrevocable for so long as this Participation Agreement is in effect.  The Officer further understands that this Participation Agreement and the Plan set forth the entire agreement between the parties with respect to any subject matter covered herein.

5.This Participation Agreement shall terminate, and the Officer’s status as a “Participant” in the Plan shall end, on the first to occur of (i) if before a Change in Control occurs, the Officer’s termination of employment with the Company and its affiliates, (ii) if

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after a Change in Control occurs, the Officer’s termination of employment for a reason other than a “Covered Termination” as defined in Section 3(b)(i) of the Plan, (iii) the date two years after a Change in Control, and (iv) if before a Change in Control occurs, the date twelve (12) months after the Company provides the Officer with written notice that this Participation Agreement is being terminated by the Company in its discretion as employer and Sponsor.

6.The Officer agrees that this Participation Agreement shall supersede in its entirety any prior Participation Agreement executed by the Officer under the Plan.  The Officer hereby consents to the amendment and restatement of the Plan in August 2009, and agrees to be bound by all of the terms and conditions of the Plan, as amended and restated.

7.The Officer recognizes and agrees that execution of this Participation Agreement results in enrollment and participation in the Plan, agrees to be bound by the terms and conditions of the Plan and this Participation Agreement, and understands that this Participation Agreement may not be amended or modified except pursuant to Section 10 of the Plan.  The Officer further agrees that to the extent there is any conflict or ambiguity between the Plan and the Participation Agreement, the Plan prevails.

ACCEPTED AND AGREED TO this                  day of                             , 20      .

The “Officer”:	The “Company”:
	By
		A Duly Authorized Officer

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Exhibit A/Version 2

(Persons without severance

Agreements)

SRS LABS, INC.

AMENDED AND RESTATED

CHANGE IN CONTROL PROTECTION PLAN

Participation Agreement

WHEREAS, SRS Labs, Inc. (the “Company”) sponsors and maintains the SRS Labs, Inc. Amended and Restated Change in Control Protection Plan (the “Plan”), and has executed this agreement (the “Participation Agreement”) in order to offer                                (the “Employee”) the opportunity to participate in the Plan;

WHEREAS, the Employee has received a copy of the Plan (which also serves as its summary plan description); and

WHEREAS, the parties acknowledge that capitalized terms not defined in this Participation Agreement shall have the meaning assigned to them in the Plan; and

WHEREAS, the Employee understands that participation in the Plan requires that the Employee agree irrevocably to the terms of the Plan and the terms set forth below; and

WHEREAS, the Employee has had the opportunity to carefully evaluate this opportunity, and desires to become a “Participant” in the Plan under the conditions set forth herein.

NOW, THEREFORE, the parties hereby AGREE as follows:

1.If the Employee incurs a Covered Termination while the Plan is in effect, the Employee shall within sixty (60) days thereafter (but subject to Section 5 of the Plan) receive a lump sum payment in cash (the “Change in Control Benefits”) equal to          times the Employee’s “base amount” as determined by the Administrator, subject to any reduction or withholding required or permitted under the Plan.  The term “base amount” refers to (A) the Employee’s base salary in effect immediately preceding the Change in Control; plus (B) the Employee’s cash bonus and cash commissions paid by the Company (before deductions for taxes and other withholdings) during the last completed calendar year immediately preceding the year in which a Change in Control occurred.  The base amount shall not include perquisites, allowances, per diem payments, stock options or other equity compensation or fringe benefits.  In addition, in the event Employee elects COBRA continuation coverage on a timely basis, and makes the premium payments therefor, the Company shall reimburse Employee’s premiums payable for such COBRA coverage for a period of                (    ) months following the Employee’s Covered Termination.  All of the Employee’s benefits provided under this Section shall be subject to any reduction or withholding that is required or permitted under the Plan.

2.In consideration of becoming eligible to receive the benefits provided under the terms and conditions of the Plan, the Employee hereby waives any and all rights, benefits, and privileges to which the Employee is or would otherwise be entitled to receive under —

(a)any employment agreement or severance agreement that the Employee has entered into with the Company or any of its affiliates; and

(b)any plan, program, or arrangement under which the Company or any of its affiliates provides severance benefits (excluding any retirement plan, stock option or other equity-based plan or agreement, or other plan that is not a “welfare plan” within the meaning of ERISA).

3.The Employee understands that the waiver set forth in Section 2 above is irrevocable for so long as this Participation Agreement is in effect, and that this Participation Agreement and the Plan set forth the entire agreement between the parties with respect to any subject matter covered herein.

4.This Participation Agreement shall terminate, and the Employee’s status as a “Participant” in the Plan shall end, on the first to occur of (i) if before a Change in Control occurs, the Employee’s termination of employment with the Company and its affiliates, (ii) if after a Change in Control occurs, the Employee’s termination of employment for a reason other than a “Covered Termination” as defined in Section 3(b)(i) of the Plan, (iii) the date two years after a Change in Control, and (iv) if before a Change in Control occurs, the date twelve (12) months after the Company provides the Employee with written notice that this Participation Agreement is being terminated by the Company in its discretion as employer and Sponsor.

5.The Employee agrees that this Participation Agreement shall supersede in its entirety any prior Participation Agreement executed by Employee under the Plan.  The Employee hereby consents to the amendment and restatement of the Plan in August 2009, and agrees to be bound by all of the terms and conditions of the Plan, as amended and restated.

6.The Employee recognizes and agrees that execution of this Participation Agreement results in enrollment and participation in the Plan, agrees to be bound by the terms and conditions of the Plan and this Participation Agreement, and understands that this Participation Agreement may not be amended or modified except pursuant to Section 10 of the Plan.  The Employee further agrees that to the extent there is any conflict or ambiguity between the Plan and the Participation Agreement, the Plan prevails.

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ACCEPTED AND AGREED TO this                  day of                             , 20      .

The “Employee”:	The “Company”:
	By
		A Duly Authorized Officer

3

Exhibit B

SRS LABS, INC.

GRANTOR TRUST AGREEMENT

PREAMBLE.  This Grantor Trust Agreement (the “Trust Agreement”) made this            day of                       , 20        (the “Effective Date”), by and between SRS Labs, Inc. and any successor to its interest (the “Company”) as creator and grantor, and                                      as trust (the “Trustee”).

WHEREAS, the Company has adopted the SRS Labs, Inc. Amended and Restated Change in Control Protection Plan attached as Exhibit A (the “Plan”) under which the Company has current or potential liability to individuals (the “Beneficiaries”) who are either Participants in the Plan or are the designated beneficiary for any benefits payable under the Plan in the event of the death of an individual who is a participant in the Plan;

WHEREAS, it is the intention of the Company to establish, upon a Change in Control as defined in Section 1(c) of the Plan (a “Change in Control”), this trust (the “Trust”) and to contribute assets to the Trust that shall be held therein, subject to the claims of the Company’s general creditors in the event of the Company’s Insolvency, as defined in Section 3(a) hereof, until paid to Beneficiaries of this Trust in such manner and at such times as specified in the Plan;

WHEREAS, it is the intention of the parties hereto that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as being unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974; and

WHEREAS, it is the intention of the Company to make contributions to the Trust following a Change in Control to enable the Trust to fully fund its liabilities under the Plan.

NOW, THEREFORE, the parties do hereby establish this Trust and agree that the Trust shall be established and administered as set forth herein:

15.Establishment of Trust

(a)Upon a Change in Control, the Company shall, as soon as possible but in no event later than ten business days after the Change in Control, make an irrevocable contribution to this Trust in an amount that is projected to provide the Trust with sufficient liquid assets (meaning assets readily convertible into cash) to pay (i) each Beneficiary the benefits to which he or she is entitled pursuant to the Plan as in effect on the date of the Change in Control, and (ii) all fees associated with maintaining the Trust for the maximum period over which Beneficiaries are reasonably expected to be receiving payments from the Trust.  Any amendment to the Plan’s definition of Change in Control shall be deemed to apply with equal force, effect, and timing to the definition of Change in Control for purposes of this Trust, except that a modification that does or may adversely affect a Beneficiary shall be ineffectual as to the Beneficiary unless he or she consents in writing to be bound by the modification.

(b)Within 75 days following each December 31st after a Change in Control occurs, the Company shall, if the Trustee deems necessary, be required to irrevocably deposit additional cash or other liquid assets to the Trust in an amount sufficient to pay each Beneficiary the benefits to which he or she is entitled pursuant to the Plan.  The Trustee shall have the right to monitor, enforce and/or collect any amounts due and owing from the Company or to give notice of any default in the payment of benefits to Participants.

(c)The Trust hereby established shall be irrevocable.

(d)The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the “Code”), and shall be construed accordingly.

(e)The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of the Company, and shall be used exclusively for the uses and purposes of Beneficiaries and general creditors as herein set forth.  Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any Trust assets.  Any rights created under the Plan and this Trust Agreement shall be unsecured contractual rights of the Beneficiaries, as provided for in this Trust Agreement.  Any assets held by the Trust will be subject to the claims of the Company’s general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein.

16.Payments to Beneficiaries

(a)Upon a Change in Control, the Company shall, as soon as possible but in no event later than ten business days after the Change in Control, deliver to the Trustee a schedule (the “Payment Schedule”) which reflects the benefits payable with respect to each Beneficiary on account of the Change in Control.  Except as otherwise provided herein, the Trustee shall make payments to Beneficiaries in accordance with such Payment Schedule.  The Trustee shall make provisions for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld, and paid by the Company.

(b)The entitlement of a Beneficiary to benefits under the Plan shall be determined by the Company or such party as may be designated under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set forth in the Plan.

(c)The Company may make payment of benefits directly to Beneficiaries as such benefits become due under the terms of the Plan.  The Company shall notify the Trustee of its decision to make such payment of benefits prior to the time benefits are payable to Beneficiaries.  In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, the Company shall make the balance of each such payment as due.  The Trustee shall notify the Company when existing principal and earnings are insufficient under the Payment Schedule.

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(d)The Trustee shall make distributions from the Trust in a manner reasonably intended to provide each Beneficiary with all of his or her benefits payable under the Plan.

17.Trustee Responsibility Regarding Payments to Trust Beneficiary When the Company Is Insolvent

(a)The Trustee shall cease payment of benefits to Beneficiaries if the Company is Insolvent.  The Company shall be considered “Insolvent” for purposes of this Trust Agreement if (i) the Company is unable to pay its debts when the same become due, or (ii) the Company files a voluntary petition under Chapter 11 of the Federal Bankruptcy Code, or (iii) an involuntary petition under Chapter 11 of the Federal Bankruptcy Code is filed with respect to the Company.

(b)At all times during the existence of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below.

(c)The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company’s Insolvency.  If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Beneficiaries.

(i)Unless the Trustee has actual knowledge of the Company’s Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent.  The Trustee may in all events rely on such evidence concerning the Company’s solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company’s solvency.

(ii)If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Beneficiaries, shall liquidate the Trust’s investment, if any, in common stock (“Common Stock”) of the Company, and shall hold the assets of the Trust for the benefit of the Company’s general creditors.  Nothing in this Trust Agreement shall in any way diminish any rights of Beneficiaries as general creditors of the Company with respect to benefits due under the Plan or otherwise.

(iii)The Trustee shall resume the payment of benefits to Beneficiaries in accordance with Section 2 of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent or is no longer Insolvent.

(d)If the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(a) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Beneficiaries under the terms of the Plan for the period of such discontinuance, provided that there are sufficient assets to make such payments.  The aggregate amount of any payments to Beneficiaries by the Company, in lieu of the payments provided for hereunder during any such period of discontinuance, shall be deducted from any payments made by the Trustee hereunder.

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18.Payments to the Company

After the Trust has become irrevocable, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payment of benefits have been made to Beneficiaries pursuant to the terms of the Plan, except as provided for in Section 3 hereof.

19.Investment Authority

(a)The Trustee shall have the sole discretion as to the investment of Trust assets, provided that the Trustee shall invest Trust assets in a manner reasonably anticipated to provide the Trust with assets sufficient to fund the Company’s obligations under the Plan.

(b)All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or through Beneficiaries.  The Company shall have the continuing obligation to substitute liquid assets of equal fair market value for any illiquid assets held by the Trust, and the Trustee shall have full authority to convert any illiquid assets into liquid assets.

20.Disposition of Income

During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be reinvested.

21.Accounting by Trustee

The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements of all transactions, including such specific records as shall be agreed upon in writing between the Company and the Trustee.  Within 75 days following each December 31 after the execution of this Agreement, and within 20 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, reflecting all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable recorded separately), and reflecting all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as applicable.

22.Responsibility of Trustee

(a)The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like objectives,

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provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of the Plan or this Trust Agreement and is given in writing by the Company.  In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute.

(b)If the Trustee undertakes or defends any litigation arising in connection with this Trust, the Company agrees to indemnify the Trustee against Trustee’s costs, expense and liabilities (including, without limitation, attorneys’ fees and expenses) relating thereto and to be primarily liable for such payments, except in those cases where the Trustee shall have been found by a court of competent jurisdiction to have acted with negligence or willful misconduct.  If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust.

(c)The Trustee may consult with legal counsel with respect to any of its duties or obligations hereunder.

(d)The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder.

(e)The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy.

(f)Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that may accord the Trust the authority to engage in a business and to receive the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code.

23.Compensation and Expenses of Trustee

The Company shall pay all administrative expenses and the Trustee’s fees and expenses relating to the Plan and this Trust.  If not so paid, the fees and expenses shall be paid from the Trust.

24.Resignation and Removal of Trustee

The Trustee may resign at any time by written notice to the Company, which resignation shall be effective 30 days after the Company receives such notice (unless the Company and the Trustee agree otherwise).  The Trustee may be removed by the Company on 30 days notice, or upon shorter notice accepted by the Trustee; provided that if such removal occurs on or after a Change in Control, or within 90 days beforehand, the removal will be ineffective unless it is done with the written consent of Beneficiaries who are entitled to at least 75% of the Trust’s assets.

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If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date or resignation or removal under this section.  If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions.  All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.  Upon resignation or removal of the Trustee and appointment of a Successor Trustee, all assets shall subsequently be transferred to the Successor Trustee.  The transfer shall be completed within 60 days after receipt of a notice of resignation, removal or transfer, unless the Company extends the time for such transfer.

25.Appointment of Successor

If the Trustee resigns or is removed in accordance with Section 10 hereof, the Company may appoint any other party as a successor to replace the Trustee upon such resignation or removal.  The appointment shall be effective when accepted in writing by the new trustee, who shall have all of the rights and powers of the former trustee, including ownership rights in the Trust assets.  The former trustee shall execute any instrument necessary or reasonably requested by the Company or the Successor Trustee to evidence the transfer.  Notwithstanding the foregoing, if the Trustee resigns or is removed in connection with or following a Change in Control, the Trustee that has resigned or is being removed shall appoint as its successor a third party financial institution that has trust powers, is independent of and unrelated to the Company, its affiliates, or their successors, and is agreed to in writing by Beneficiaries who are entitled to at least 75% of the Trust’s assets.

A Successor Trustee need not examine the records and acts of any prior trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof.  The Successor Trustee shall not be responsible for, and the Company shall indemnify and defend the Successor Trustee from, any claim or liability resulting from any action or inaction of any prior trustee or from any other past event, or any condition existing at the time it becomes Successor Trustee.

26.Amendment or Termination

(a)This Trust Agreement may be amended by a written instrument executed by the Trustee and the Company, provided that no such amendment shall either conflict with the terms of the Plan.

(b)Notwithstanding subsection (a) hereof, the provisions of this Trust Agreement and the Trust created thereby may not be amended, within six months before or at any time on or after a Change in Control occurs, without the written consent of Beneficiaries who are entitled to at least 75% of the Trust’s assets.

(c)The Trust shall not terminate until the date on which no Beneficiary is entitled to benefits pursuant to the terms hereof or of the Plan.  Upon termination of the Trust, the Trustee shall return any assets remaining in the Trust to the Company.

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(d)The Company may terminate this Trust prior to the payment of all benefits under the Plan only upon written approval of all Beneficiaries entitled to payment of such benefits.

27.Miscellaneous

(a)Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

(b)Benefits payable to Beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process, except pursuant to the terms of the Plan and this Trust Agreement.

(c)This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the principles of conflicts of laws.

(d)The Trustee agrees to be bound by the terms of the Plan, as in effect from time to time.

28.Effective Date

The Effective Date of this Trust Agreement shall be the date referenced in the Preamble.

IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused this Trust Agreement to be executed, and its corporate seal affixed, and the Trustee has executed this Trust Agreement, on the date referenced in the Preamble.

Witnessed by:	SRS LABS, INC.
	By
		Its
Witnessed by:	TRUSTEE

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas C.K. Yuen, certify that:

1.I have reviewed this quarterly report on Form 10-Q of SRS Labs, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: August 6, 2009
	/s/ Thomas C.K. Yuen
	Thomas C.K. Yuen
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Ulrich Gottschling, certify that:

1.I have reviewed this quarterly report on Form 10-Q of SRS Labs, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: August 6, 2009
	/s/ Ulrich Gottschling
	Ulrich Gottschling
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SRS Labs, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Thomas C.K. Yuen, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2009
	By:	/s/ Thomas C.K. Yuen
	Thomas C.K. Yuen
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SRS Labs, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Ulrich Gottschling, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2009
	By:	/s/ Ulrich Gottschling
	Ulrich Gottschling
	Chief Financial Officer