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SoftQuad Press Release


In Line with Company’s New Strategic Focus on Family Software and Children’s Video Games, SoftQuad International Explores Strategic Alternatives for Web Tools Unit.

Burlington, MA (June 10, 1998) -- SoftQuad International Inc. (NASDAQ:SWEBF; TSE:SKI), announced today that it has finalized its joint venture with NewKidCo Holdings, LLC to create NewKidCo, LLC ("NewKidCo"). NewKidCo publishes children’s video games for "next generation" console systems. The companies announced a letter of intent to form the joint venture on April 21.

SoftQuad International Inc. owns 75% of NewKidCo and has an option to purchase, and under certain circumstances may be required to purchase, the remaining interest in NewKidCo. NewKidCo's first three titles are slated for shipment in the fourth quarter and are expected to be broadly distributed to toy super stores, mass merchandisers, computer-specialty retailers and other retail outlets nationwide. NewKidCo management expects NewKidCo's revenues to be in the range of $9 million (U.S.) in the fourth quarter based upon preliminary reactions from major retailers and the performance of other popular titles in the market.

In line with its new focus on family software and kids video games, SoftQuad International also announced today that it intends to retain an investment banker to explore the possible sale or spin-off of SoftQuad Inc., its structured document and web tools subsidiary. SoftQuad International has been in discussions with a number of companies that have expressed interest in SoftQuad Inc., particularly in its extensive expertise in the emerging XML (extensible markup language) field. The company is actively developing next generation XML based authoring and processing tools to complement its award-winning HoTMetaL and Panorama SGML product families.

In making today’s announcements, Richard Rabins, CEO, SoftQuad International Inc. cited the parent company's strategic focus on high-growth family software and children’s video game segments. "Moving forward, we are enthusiastic about the opportunity to build shareholder value by achieving our objective of leadership in children's video games through NewKidCo and by capitalizing on Alpha Software’s established position in the lifestyle, entertainment, flight simulation and utility categories for the PC platform."

The console video game business in the U.S. (defined as PlayStation, Nintendo, and Sega) has now reached nearly $6 billion (U.S.) in annual revenues. Industry analysts estimate that by the end of the year, there will be nearly 18 million PlayStation units in U.S. homes. Popular PlayStation titles have sold well over 200,000 units at retail price points of $39 (U.S.) or greater.

NewKidCo will manufacture, sell and distribute two Sesame Street titles for PlayStation. At the E3 show (Electronic Entertainment Expo) at the end of May, NewKidCo demonstrated the titles – Elmo's Magical Number Tour and Elmo's Magical Letter Tour. NewKidCo also announced and displayed a third PlayStation title - Buster and The Beanstalk, based on Warner Bros.' popular TINY TOONS Adventures® television show.

The Sesame Street television show is 30 years old this year and stronger than ever with over 12 million viewers per week. 94% of parents with 1 1/2 – 5 years olds report that their child watches Sesame Street. TINY TOONS Adventures, a Steven Speilberg production, skews to a slightly older audience of 5 to 9 year olds and is one of the top 3 shows on Nickelodeon. TINY TOONS is viewed by 6 million children every week.

NewKidCo will seek to develop and market young children’s video games by bringing high quality products to children worldwide. "Since announcing our fall product line up, we’ve been gratified by the reception we’ve received," said NewKidCo’s President, Hank Kaplan. "More than ever, the time is right for high-quality titles for young children on next generation, affordable platforms."

Joint Venture Transaction Details

Under the transaction, NewKidCo Holdings LLC has transferred its assets and business to the joint venture. In exchange for a $500,000 (U.S.) cash payment, SoftQuad's subsidiary, Alpha Software Corporation, now owns a 75% interest in the joint venture and beginning in June 1999 will have an option to acquire, or under certain circumstances be required by NewKidCo Holdings LLC to acquire, NewKidCo Holdings LLC’s 25% interest in the joint venture for 975,000 shares of SoftQuad stock and cash payments based upon the joint venture’s profits for the first three years from its formation. If prior to Alpha’s acquisition of NewKidCo Holdings LLC interest, the joint venture has achieved specified revenue and profit goals, NewKidCo Holdings LLC will also receive warrants to acquire up to 4,000,000 shares of SoftQuad stock at prices ranging from $1.50 (U.S.) to $4.00 (U.S.) and may elect to receive, in lieu of the 975,000 shares of SoftQuad stock, a cash payment of $1,462,500 (U.S.).

About SoftQuad International Inc, Alpha Software and SoftQuad Inc

Alpha Software Corporation (Alpha, Alpha Software), based in Burlington, Mass., and SoftQuad Inc. (SoftQuad), based in Toronto, Canada, are wholly-owned operating companies of SoftQuad International Inc. Expanding on its tradition of providing solution-based software, Alpha Software Corporation publishes a diverse array of leading products in the lifestyles, entertainment, flight simulation and utility software categories. These products are sold nationwide through the retail channel. SoftQuad Inc. provides a broad range of multi-platform, standards-based software tools that help information creators, gatherers and providers create and publish information. SoftQuad is a founding member and active participant in the World Wide Web Consortium, the Internet Engineering Task Force and Editorial Review Boards. SoftQuad International’s press material can be accessed at http://www.softquadintl.com.

About NewKidCo LLC

NewKidCo LLC, a joint venture majority owned by SoftQuad International Inc., is a New York-based children’s interactive video game company developing software titles for young children on "next generation" video game consoles. The company seeks to secure top licenses and to create products with the exciting look and feel of popular video game titles for older children.

Sesame Street is a registered trademark of Children's Television Workshop. PlayStation is a registered trademark of the Sony Computer Entertainment Inc. TINY TOON Adventures is a registered trademark of Warner Bros. Nickelodeon is a registered trademark of Viacom International, Inc. All other names are trademarks or registered trademarks of their respective companies.

For more information:
Investor relations
inquiries: Steven H. Schneider
SoftQuad International Inc.
(781) 229-2924

Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risk and uncertainties, including without limitation risks of intellectual property rights and litigation, risks in technology development and commercialization, risks in product development and market acceptance of and demand for the Company's products, risks of downturns in economic conditions generally, risks associated with competition and competitive pricing pressures, risks associated with foreign sales, risks associates with the sell-through of products in the sales channels, risks associated with customer concentration and other risks detailed in the Company's filings with the Securities and Exchange Commission.

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