8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 22, 2011

SRS LABS, INC.

(Exact Name of registrant as specified in its charter)

Delaware	0-21123	33-0714264
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2909 Daimler Street Santa Ana, California	92705
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 442-1070

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.              Results of Operation and Financial Condition.

The information being furnished in this Item 2.02 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

On February 22, 2011, SRS Labs, Inc. issued a press release announcing its operating results for the three and twelve months ended December 31, 2010.  A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

Item 9.01.              Financial Statements and Exhibits.

Exhibit No.	Description
99.1	Press Release dated February 22, 2011.

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: February 22, 2011
	By:	/S/ THOMAS C.K. YUEN
		Thomas C.K. Yuen
		Chairman of the Board and Chief Executive Officer

2

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

SRS Labs Reports Fourth Quarter and Full Year 2010 Results

Santa Ana, Calif., February 22, 2011 - SRS Labs, Inc. (NASDAQ: SRSL), officially recognized as one of America’s Greatest Brands and the industry leader in surround sound, audio and voice technologies reported financial results for the fourth quarter and fiscal year ended December 31, 2010.

Revenues in the fourth quarter 2010 increased 1% to $7.1 million from $7.0 million in the same period a year ago. For the full year 2010, revenues increased 25% to a record $31.2 million from $25.0 million in 2009. The annual increase in revenue was primarily attributable to increased revenues in the home entertainment, personal telecommunications, automotive and personal computer markets.

Operating expenses in the fourth quarter 2010 increased 16% to $7.5 million from $6.4 million in the same quarter a year ago. For the full year 2010, operating expenses increased 23% to $28.1 million from $22.8 million in 2009. Investments over the past two years in key hires have paid dividends with our top line performance.  Other than continuing to hire for key open or newly created positions to take advantage of market opportunities, we believe that we are staffed at an appropriate level to accommodate forecasted growth for 2011.

Net loss in the fourth quarter 2010 was $431,000 or $(0.03) per diluted share compared to net income of $473,000 or $0.03 per diluted share in the fourth quarter of 2009. For the full year 2010, net income increased 41% to $3.0 million or $0.19 per diluted share, from $2.1 million or $0.14 per diluted share in 2009.

Quarter-end cash and cash equivalents, and short and long-term investments totaled $43.1 million as of December 31, 2010, as compared to $42.8 million at the end of the prior quarter.

Management Commentary

“2010 was another milestone year for SRS as we successfully delivered upon our initial 25% growth target for the year. I am, nevertheless, disappointed for not achieving our more optimistic mid- year guidance, which raised our estimate from the initial 25% to 30% based on our momentum and the sales forecast of our key customers,” said Thomas C.K. Yuen, SRS Lab’s Chairman and CEO. “In the 2nd half of 2010, some of our customers experienced a slowdown in sales and that, in addition to some royalty reporting discrepancies, impacted our revenues in the fourth quarter. Our record results for the year, however, reflect solid execution of our strategic plans to drive top-line growth and diversify our revenue streams while successfully retaining our customer base, penetrat ing deeper within our key accounts, and adding new customers to our portfolio.”

“With an exciting, highly successful CES just behind us, we believe our basic IP licensing business outlook remains strong and should continue to grow organically in 2011. During more than 120 customer meetings conducted at the show, we experienced a significant level of interest in our technologies and services by both existing and prospect accounts. We also generated quite a bit of excitement among our partners, members of the press and industry experts for our vision related to the future of audio where our revolutionary Multi-Dimensional Audio concept was labeled as a game-changer and SRS referred to as a thought-leader.”

“Our expectations for 2011 remain strong as we build on the operational and financial momentum we achieved in 2010. Based on our robust pipeline of new opportunities, design wins in progress, and contracts signed, we expect revenues for fiscal 2011 to grow by 25% compared to 2010 and deliver improved profit margins.”

Conference Call

SRS Labs will hold a conference call later today (February 22, 2011) to discuss the results for the fourth quarter and year ended December 31, 2010. Chairman and CEO Thomas C.K. Yuen, CFO Ulrich Gottschlingand CTO Alan Kraemerwill host the call starting at 5:00 p.m. Eastern time. A question and answer session will follow management’s presentation.

Dial-In Number: 1-877-353-2262

Conference ID#: 40289846

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and instruct you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.  Investors may also listen to the conference call live online via a link available on the SRS Labs investor relations home page at www.srslabs.com. The website will host a replay of the call available after 6:00 p.m. Eastern time. Investors may also listen to the replay by dialing 1-800-642-1687 and entering conference ID#:40289846, available until March 8, 2011.

About SRS Labs, Inc.

Founded in 1993, SRS Labs is the industry leader in audio signal processing for consumer electronics across the four screens: TV; PC; Mobile Phones; and Automotive Entertainment Systems. Beginning with the audio technologies originally developed at Hughes Aircraft, SRS Labs holds over 150 worldwide patents and is recognized by the industry as the foremost authority in research and application of audio post processing technologies based on the human auditory principles. Through partnerships with leading global CE companies, semiconductor manufacturers, software developers, and content aggregators, SRS is recognized as the de facto standard in audio enhancement, surround sound, volume leveling, audio streaming, and voice processing technologies. SRS solutions have been included in over two billion electronic products sold worldwide including flat panel HDTVs, AV products, STBs, PCs, mobile phones, and automotive entertainment and telematics systems. For more information, visit www.srslabs.com.

Safe Harbor Statement

This press release includes forward-looking statements that are based on our current expectations, estimates and projections about SRS Labs, Inc., management’s beliefs and certain assumptions made by us, and events beyond our control, all of which are subject to change. Such forward-looking statements include, but are not limited to, statements relating to our future growth opportunities, our expansion, investment and diversification plans, and our future operating results and profitability. Forward-looking statements can often be identified by words such as “expects,” “anticipates,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “likely,” “potential,” “continue,” similar expressions , and variations or negatives of these words. These forward-looking statements are not guarantees of future results or the commitments made by us herein, and they are subject to risks, uncertainties and assumptions that could cause actual results to differ materially and adversely from those expressed in any forward-looking statement. The risks and uncertainties referred to above include, but are not limited to, our ability to enter into new or expanded license arrangements and increase our brand awareness; the loss of any significant customer; the acceptance of our products and technologies, and the acceptance of our customer’s products that incorporate our technologies; the impact of competitive products and pricing; the impact of emerging industry standards on our technolgies; our ability to control our expenses, and the general economic and business conditions that may adversely impact sales of consumer electronics products general; and such other factors described in our filings with the Securities and Exchange Commission. The forward-looking statements in this press release speak only as of the date they are made. We do not undertake any obligation to revise or update publicly any forward-looking statement for any reason.

SRS LABS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2010			December 31, 2009
ASSETS
Current Assets
Cash and cash equivalents	$	10,697,827		$	27,988,164
Accounts receivable, net	1,191,847			179,114
Prepaid expenses and other current assets	1,069,900			1,147,151
Short-term investments	19,033,000			12,963,000
Total Current Assets	31,992,574			42,277,429
Long-term investments	13,323,000			538,000
Property and equipment, net	672,220			599,794
Intangible assets, net	2,761,432			2,702,160
Deferred income taxes, net	8,576,619			5,631,442
Total Assets	$	57,346,845		$	51,748,825
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	516,470		$	583,157
Accrued liabilities	1,434,970			1,577,891
Deferred revenue	601,825			1,193,454
Total Current Liabilities	2,553,265			3,354,502
Commitments and contingencies
Stockholders’ Equity
Preferred stock—$0.001 par value; 2,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock—$0.001 par value; 56,000,000 shares authorized; 14,807,070 and 14,563,715 shares issued and outstanding at December 31, 2010 and 2009, respectively	14,808			14,565
Additional paid-in capital	68,520,878			65,128,337
Accumulated deficit	(13,742,106		)	(16,748,579		)
Total Stockholders’ Equity	54,793,580			48,394,323
Total Liabilities and Stockholders’ Equity	$	57,346,845		$	51,748,825

SRS LABS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
	2010			2009		2010		2009
Revenues	$	7,064,827		$	6,974,921	$	31,220,389	$	24,964,577
Cost of sales	121,302			83,512		349,621		285,543
Gross profit	6,943,525			6,891,409		30,870,768		24,679,034
Operating expenses (i):
Sales and marketing	3,441,384			3,325,852		13,470,852		11,415,115
Research and development	2,312,623			1,662,063		8,060,246		5,721,195
General and administrative	1,728,416			1,439,570		6,526,171		5,656,616
Total operating expenses	7,482,423			6,427,485		28,057,269		22,792,926
Operating income (loss)	(538,898		)	463,924		2,813,499		1,886,108
Other income, net	65,585			67,985		245,127		347,528
Income (loss) before income taxes	(473,313		)	531,909		3,058,626		2,233,636
Income taxes (benefit)	(42,275		)	58,843		52,153		98,006
Net income (loss)	$	(431,038	)	473,066		$	3,006,473	$	2,135,630
Net income per common share:
Basic	$	(0.03	)	$	0.03	$	0.20	$	0.15
Diluted	$	(0.03	)	$	0.03	$	0.19	$	0.14
Weighted average common shares used in the per share calculations:
Basic	14,765,715			14,683,587		14,670,751		14,460,490
Diluted	14,765,715			15,239,624		15,602,051		14,813,372

(i)  Includes share-based compensation expense as follows:

	Three Months Ended		Twelve Months Ended
	December 31,		December 31,
	2010	2009	2010	2009
Sales and marketing	191,018	129,580	703,876	511,301
Research and development	135,023	123,696	551,934	457,464
General and administrative	253,531	272,441	997,920	987,292
Total share-based compensation expense	579,572	525,717	2,253,730	1,956,057