QSound Labs to Acquire StreamMagic Inc.

$100 Million Acquisition to Form First Enhanced Audio and Video Broadband Streaming Media Company

CALGARY, Alberta --(March 22, 2000)--QSound Labs Inc. announced 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 at approximately US$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, end-user 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 news 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 StreamMagic 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 held a conference call discussing the acquisition yesterday at 4:30 Eastern time. 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 ISPs 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., INTERVU Inc. and Digital Island Inc. The company supports all major Internet audio and video formats including Microsoft Windows Media Player(TM), RealNetworks RealPlayer(TM), Apple QuickTime(TM), MPEG1 and streaming JPEG. For more information, visit the company's Web site at www.streammagic.com.

About QSound Labs Inc.

Since its inception in 1988, QSound Labs has evolved into one of the world's leading audio technology companies and an e-commerce solution provider. The company has developed proprietary, patent-protected audio solutions that include virtual surround sound, positional audio and stereo enhancement for the consumer electronics, multimedia PC, Internet and health-care markets.

The company's cutting-edge audio technologies create 3-D audio environments, allowing consumers to enjoy stereo surround sound from just two speakers. For more information, visit the company's Web site at www.qsound.com.