Press Release
QSound Labs to Acquire StremMagic, Inc.
$100 Million Acquisition to Form First Enhanced Audio And Video Broadband Streaming Media Company
Calgary, Alberta - March 21, 2000 -- QSound Labs, Inc.
(NASDAQ: QSND), the leading provider of enhanced Internet audio solutions
announced today that it has signed a letter of agreement to acquire 100%
of Los Angeles based StreamMagic, Inc., a leading provider of Internet
video streaming, in a stock-for-stock transaction valued today at
approximately $100 million.
The combination of QSound's enhanced audio and StreamMagic's broadband
video delivery solutions will enable content publishers to deliver rich
media via the Internet in a cost effective manner.
With access to high speed Internet connectivity on the rise - T1 lines and
home-based DSL - end users are being drawn to sites that offer high
quality audio and video streaming on a full time basis. QSound will
empower clients to capitalize on the "impulsive" nature of the Internet by
providing "on demand" enhanced audio and video, live Webcasts and high end
interactive advertising - leading to increased site traffic, enduser
satisfaction and increased revenue.
"The formation of this merger could not be more timely," stated Nolan Quan,
President of StreamMagic. "Content providers are constantly seeking better
ways to present their media rich content on the Web. When we first met
with QSound, we were amazed by the high quality sound they could generate
from two computer speakers. With demand for audio and video content on the
Internet increasing daily we knew immediately this was the perfect match
for our world class video and content delivery service."
Immediately prior to this transaction, the Company plans to spin off its
non-Internet audio business segment and its e-commerce business segment to
QSound shareholders in a new company that QSound intends to list publicly.
More information regarding the spin-off will be forthcoming in a future
press release.
"This is the first step in QSound's previously announced plan to unlock
shareholder value by monetizing our intellectual property assets through
corporate reorganization and strategic alliances," stated David Gallagher,
President and Chief Executive Officer. "We believe the combination of the
two companies will have much more leverage than the sum of the two
operating independently. By combining with StreamMagic we will capitalize
on StreamMagic's high performance Internet server management solutions and
QSound's leading edge enhanced Internet audio to create a new generation
of streaming content."
Under the terms of the letter of agreement, QSound will acquire Stream
Magic, Inc. 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. In
addition, QSound will convert outstanding StreamMagic options into
approximately 5 million QSound options. The acquisition, which will be
accounted for as a purchase, is subject to certain closing conditions
including satisfactory completion of due diligence by each party,
satisfaction with the tax consequences of the transaction, approval of
each party's Board of Directors, approval of QSound's shareholders, any
necessary government approvals and execution of the Definitive Agreement.
The acquisition is expected to close in the second quarter of 2000.
QSound will hold a conference call today at 4:30 Eastern time to discuss
the acquisition. Investors may participate in the conference call by
phoning (904) 779-4748, password "QSound". The conference call will be
available in streaming audio from www.qsound.com and www.streammagic.com
starting March 23, 2000.
About StreamMagic, Inc. :
StreamMagic uses proprietary streaming and monitoring technology to
provide "on demand" and live streaming services to content owners for
delivery of entertainment, sports, news, corporate communications and
distance educational services over the Internet. StreamMagic utilizes a
nationwide network of ISP's to route bandwidth intensive content "on
demand". In addition, StreamMagic is a major participant in streaming live
events in conjunction with companies such as Akamai Technologies, Inc.
(NASDAQ: AKAM), INTERVU, Inc. (NASDAQ: ITVU) and Digital Island, Inc.
(NASDAQ: ISLD). The Company supports all major Internet audio and video
formats including Microsoft (NASDAQ: MSFT) Windows Media Player™,
RealNetworks (NASDAQ: RNWK) RealPlayer™, Apple (NASDAQ: AAPL) QuickTime™,
MPEG1 and streaming JPEG. For more information, visit our Web site at
www.streammagic.com.
This release contains
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995 concerning, among other things, the anticipated
acquisition of StreamMagic, QSound's proposed reorganization, and future
expectations, plans and prospects of QSound Labs and the anticipated
benefit of the proposed transactions for QSound and its shareholders.
Investors are cautioned that such forward-looking statements involve risk
and uncertainties, which could cause actual results, performance or
achievements of QSound, or industry results, to differ materially from
those reflected in the forward-looking statements. Such risks and
uncertainties include, but are not limited to, the following: risks
associated with the completion of the transaction, such as the possibility
that shareholder or regulatory approvals will not be obtained in a timely
manner or at all, risk that a party will not be satisfied with its due
diligence investigation, or that the transaction cannot be structured in a
way that is satisfactory from the point of view of tax consequences, and
risks associated with the carrying out of business plans and strategies,
including availability of funds to do so timely and cost effectively,
market acceptance for StreamMagic's specialized services, rapid
technological change, intense competition, system failures, virus and
security vulnerability, continued growth of the Internet, dependence upon
intellectual property, general economic and business conditions and other
risks which may be detailed from time to time in the Company's periodic
reports filed with the Securities and Exchange Commission. Forward-looking
statements are based on the current expectations, projections and opinions
of the Company's management, and the Company undertakes no obligation to
publicly release the results of any revisions to such forward-looking
statements which may be made, for example to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.