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QSound Acquires StreamMagic for $100 Million

Audio software company QSound Labs (http://www.qsound.com) said it was acquiring Los Angeles based StreamMagic ( http://www.streammagic.com) a streaming video provider in a stock transaction valued at approximately $100 million.

This allows QSound to implement its audio-enhancing software directly to live webcasts and other streaming media.

"The formation of this merger could not be more timely," stated Nolan Quan, President of StreamMagic. "Content providersare constantly seeking better ways to present their media rich content on the Web. When we first met with QSound, we wereamazed by the high quality sound they could generate from two computer speakers. With demand for audio and video contenton the Internet increasing daily we knew immediately this was the perfect match for our world class video and content deliveryservice."

QSound also revealed that it would spin off its non-Internet audio business segment into a new company . More details about the spin off will be revealed later, said the company.

"We believe the combination of the two companies will have much more leverage than the sum of the two operatingindependently." stated David Gallagher, President and Chief ExecutiveOfficer. "By combining with StreamMagic we will capitalize on StreamMagic's high performance Internet servermanagement solutions and QSound's leading edge enhanced Internet audio to create a new generation of streaming content."

QSound will acquire Stream Magic by issuing 26.5 million preferred shares for all of the outstanding stock of StreamMagic. Each preferred share is convertible into one common share of QSound. Forty percent of the preferred shares will be convertible to QSound common shares on the effective date of the transaction and, subject to certain QSound share price commitments, the remaining 60% will become convertible over the following 270 days.

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