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PROSPECTUS SUPPLEMENT Filed pursuant to Rule 424(b)(3)
(TO PROSPECTUS DATED SEPTEMBER 11, 1998) Registration No. 333-58451
2,036,730 Shares
CD WAREHOUSE, INC.
Common Stock
This Prospectus Supplement supplements our Prospectus dated September 11,
1998. You should read this Prospectus Supplement in conjunction with the
Prospectus, and this supplement supersedes the Selling Stockholders' table in
the Prospectus. Capitalized terms used in this Prospectus Supplement have the
meanings specified in the Prospectus.
The Selling Stockholders' table on page 10 of the Prospectus is being
amended so as to read, in its entirety, as follows:
SELLING STOCKHOLDERS
The Selling Stockholders are offering a total of 2,036,730 shares of Common
Stock. However, the Selling Stockholders are under no obligation to sell any of
the shares being offered. With the exception of Robert O. McDonald, who
currently serves as a director of the Company, none of the Selling Stockholders
has held any position, office or other material relationship with the Company or
any of its affiliates within the past three years other than as a result of his,
her or its ownership of shares of Common Stock (or securities convertible into
or exercisable for shares of Common Stock). The following table lists the names
and business addresses of each Selling Stockholder, the number of shares of
Common Stock beneficially owned by each Selling Stockholder as of (unless
otherwise noted) September 11, 1998, the date of the original Prospectus, and
the number of shares being offered by each Selling Stockholder:
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering (1)(2)
--------------------------------------------
Number Percent Number of Shares
Name and Address of Selling Stockholder Of Shares of Class (1) Offered Hereby
- ------------------------------------------------ ------------- --------------- --------------------
<S> <C> <C> <C>
Formula Growth Limited (3) 1,000,000 (4) 28.16% 1,000,000
1010 Sherbrook Street W., Suite 1409
Montreal, Quebec, Canada H3A 2R7
GBC Canadian Growth Fund 110,000 (4) 3.10% 110,000
1st Canadian Place, TSSC B1 Level
Toronto, Ontario, Canada M5X 1A1
Robert O. McDonald 89,565 (5) 2.47% 69,565
211 North Robinson
Oklahoma City, Oklahoma 73102
</TABLE>
(continued on following page)
____________________________________
Neither the Securities and Exchange Commission nor any state commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
____________________________________
The date of this Prospectus Supplement is February 22, 1999
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering (1)(2)
--------------------------------------------
Number Percent Number of Shares
Name and Address of Selling Stockholder Of Shares of Class (1) Offered Hereby
- ------------------------------------------------ ------------- --------------- --------------------
<S> <C> <C> <C>
Precept Capital Master Fund 75,000 (4) 2.11% 75,000
2305 Cedar Springs Road, Suite 415
Dallas, TX 75201
Andrew W. May 63,787 (6) 1.76% 63,787
8235 Douglas Avenue, Suite 525
Dallas, Texas 75225
GHS Partners LDC 50,000 (4) 1.41% 50,000
8235 Douglas Avenue, Suite 420
Dallas, TX 75225
Tomas Escamilla 46,428 (7) 1.30% 46,428
8235 Douglas Avenue, Suite 525
Dallas, TX 75225
Capital West Securities, Inc. (8) (8)
211 North Robinson
Oklahoma City, Oklahoma 73702
GBC North American Growth Fund 40,000 (4) 1.13% 40,000
200 Bay Street RBC Plaza
North Tower, Suite 1500
Toronto, Ontario, Canada M5J 2J5
Natico Interest, LP 33,340 (9) * 33,340
1001 Frost Hollow Dr.
Desoto, TX 75115
Michael Corboy 30,000 (4) * 30,000
8111 Preston Road, Suite 712
Dallas, TX 75225
Random Walk Trading, Inc. (10) 30,000 (4) * 30,000
1010 Sherbrook Street, W. Suite 1409
Montreal, Quebec, Canada H3A 2R7
John Liddy 26,000 (4) * 26,000
1010 Sherbrook Street, W. Suite 1409
Montreal, Quebec, Canada H3A 2R7
Air Canada 25,000 (4) * 25,000
Commerce Court West Securities Level
Toronto, Ontario, Canada M5L 1G9
The Combined Master Retirement Trust 25,000 (4) * 25,000
5430 LBJ Freeway, Suite 1700
Dallas, TX 75240
Terry Worrell 25,000 (4) * 25,000
6909 Vassar
Dallas, TX 75205
</TABLE>
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<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering (1)(2)
---------------------------------------------
Number Percent Number of Shares
Name and Address of Selling Stockholder Of Shares of Class (1) Offered Hereby
- --------------------------------------------------------- ------------- --------------- -----------------------
<S> <C> <C> <C>
Southwest Securities as IRA Custodian 25,000 (4) * 25,000
FBO Gerald D. Rogers
1201 Elm Street, Suite 4300
Dallas, TX 75270
Jo Syd Inc. 25,000 (4) * 25,000
1010 Sherbrook Street, W. Suite 1409
Montreal, Quebec, Canada H3A 2R7
Jaytor Investments (John Tory) 25,000 (4) * 25,000
1010 Sherbrook Street, W. Suite 1409
Montreal, Quebec, Canada H3A 2R7
Desmond Towey & Associates 25,000 (11) * 25,000
515 Madison Avenue
Suite 1909
New York City, NY 10022-5403
Berthel Fisher & Company Financial Services, Inc. 25,000 (12) * 25,000
100 Second St. SE
Cedar Rapids, Iowa 52407
Castlerock Consulting Group, Inc. 25,000 (13) * 25,000
5976 Edinburgh Dr.
Plano, TX 79503
Gregory M. Jones 24,200 (14) * 24,200
211 North Robinson
Oklahoma City, Oklahoma 73102
Rader Living Trust dated September 2, 1997 24,200 (14) * 24,200
Robert G. and Judith T. Rader, Trustees
211 North Robinson
Oklahoma City, Oklahoma 73102
John D. Lane 22,500 (12) * 22,500
315 Post RD West
Westport, Connecticut 06880
Tomima L. Edmark 20,000 (4) * 20,000
5335 S. Dentwood Drive
Dallas, TX 75220
Zack Miller 14,070 (9) * 14,070
10520 Gooding Dr.
Dallas, TX 75229
David J. Pulling 12,390 (9) * 12,390
1801 N. Hampton #200
Desoto, TX 75115
</TABLE>
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<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering (1)(2)
---------------------------------------------
Number Percent Number of Shares
Name and Address of Selling Stockholder Of Shares of Class (1) Offered Hereby
- --------------------------------------------------------- ------------- --------------- -----------------------
<S> <C> <C> <C>
Debra Pulling 12,060 (9) * 12,060
1801 N. Hampton #200
Desoto, TX 75115
R. Howard Webster Foundation 10,000 (4) * 10,000
P.O. Box 9, Commerce Court Postal Station
Toronto, Ontario, Canada M5L 1G9
The Freedom Trust 10,000 (4) * 10,000
Sterling House, City Hall Square
P.O. Box HM 1029
Hamilton, Bermuda HMEX
Ratous 10,000 (4) * 10,000
1010 Sherbrook Street, W. Suite 818
Montreal, Quebec, Canada H3A 2R7
Rogers Telecommunications 9,000 (4) * 9,000
P.O. Box 6007
Montreal, Quebec, Canada H3C 3B6
Donald A. Pape 8,000 (12) * 8,000
211 North Robinson
Oklahoma City, Oklahoma 73102
Don Black 7,950 (9) * 7,950
3917 Deepwood
Colleville, TX 76034
Amp Miller 6,940 (9) * 6,940
10431 Crestover
Dallas, TX 75229
Dascon Investments Limited 6,300 (4) * 6,300
P.O. Box 9, Commerce Court Postal Station
Toronto, Ontario, Canada M5L 1G9
John Adams 5,250 (12) * 5,250
211 North Robinson
Oklahoma City, Oklahoma 73102
Amp Miller III 5,050 (9) * 5,050
7224 Claybrook
Dallas, TX 75231
Taylor Assets Limited 5,000 (4) * 5,000
P.O. Box 9, Commerce Court Postal Station
Toronto, Ontario, Canada M5L 1G9
</TABLE>
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<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering (1)(2)
---------------------------------------------
Number Percent Number of Shares
Name and Address of Selling Stockholder Of Shares of Class (1) Offered Hereby
- --------------------------------------------------------- ----------------- --------------- -----------------------
<S> <C> <C> <C>
Kenneth W. Anderson 5,000 (4) * 5,000
P.O. Box 8189
Horseshoe Bay, TX 78657-9206
Founders Equity, Inc. 5,000 (9) * 5,000
2602 McKinney Ave., Ste. 220
Dallas, TX 75204
John S. Lemak 5,000 (4) * 5,000
5956 Sherry Lane, Suite 1900
Dallas, TX 75225
Royal Trust Corporation of Canada 4,000 (4) * 4,000
Royal Bank Plaza, South Tower,
2nd Floor, Service Level
200 Bay Street
Toronto, Ontario, Canada M5J 2J5
John Vaccaro 2,500 (12) * 2,500
315 Post RD West
Westport, Connecticut 06880
Mary Thrash 2,270 (9) * 2,270
2764 Hollandale
Dallas, TX 75234
Marilyn Hackler 930 (9) * 930
859 Twilight
Cedar Hill, TX 75104 --------- ----------
Total 2,056,730 2,036,730
========= ==========
</TABLE>
- ------------------
* Less than 1%.
(1) The applicable percentage of ownership is based on 3,550,550 shares of
Common Stock outstanding as of February 18, 1999 and includes, with respect
to each named stockholder, all options, warrants or other derivative
securities owned by such stockholder. Except as set forth in footnote (2)
below, beneficial ownership is determined in accordance with Rule 13d-3 of
the Exchange Act. The persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) In addition, the Registration Statement also covers Shares that are
issuable upon the exercise of stock options exercisable on dates, which are
more than 60 days from the effective date of the Registration Statement of
which this Prospectus is a part. Accordingly, the number of Shares set
forth in the table for a Selling Stockholder may exceed the number of
Shares that such Selling Stockholder could own beneficially at any given
time through such Selling Stockholder's ownership of the Common Stock and
stock options held by him. In that regard, beneficial ownership of such
Selling Stockholder set forth in the table is not determined in accordance
with Rule 13d-3 under the Exchange Act.
(3) Pursuant to separate Schedule 13D's filed on June 2, 1998, Formula Growth
Limited ("FGL") acquired 600,000 shares on behalf of Formula Unit Trust, a
Canadian commingled pension fund, and 400,000 shares on behalf of Formula
Growth Fund, a Canadian mutual fund.
(4) Represents shares acquired in connection with a private placement effected
by the Company in May 1998 pursuant to Regulation D and Regulation S of the
Securities Act, for a purchase price of $10.00 per share.
(5) Shares shown as beneficially owned by Mr. McDonald include: (i) 26,250
shares of Common Stock issuable upon the exercise of certain warrants
granted to the underwriters of the Company's initial public offering in
January 1997, at an
5
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exercise price of $7.50 per share; (ii) 43,315 shares of Common Stock
issuable upon the exercise of certain warrants granted to the placement
agents of the May 1998 private placements effected pursuant to Regulation D
and Regulation S of the Securities Act, at an exercise price of $10.00 per
share; (iv) 10,000 shares issuable upon the exercise of certain stock
options granted to Mr. McDonald in his capacity as a director of the
Company; (v) 5,000 shares owned directly by Mr. McDonald; and (vi) 5,000
shares owned by his IRA. Mr. McDonald is a majority stockholder of
Affinity Holding Corporation, the sole stockholder of Capital West
Securities, Inc., which holds 18,900 of the underwriters' warrants included
in (i) and 24,365 of the placement agents' warrants included in (ii).
(6) Represent shares of Common Stock issuable upon the exercise of certain
warrants granted to the placement agents of the May 1998 private placements
effected pursuant to Regulation D and Regulation S of the Securities Act,
at an exercise price of $10.00 per share.
(7) Shares shown as beneficially owned by Mr. Escamilla include: (i) 17,428
shares of Common Stock issuable upon the exercise of certain warrants
granted to the placement agents of the May 1998 private placements effected
pursuant to Regulation D and Regulation S of the Securities Act, at an
exercise price of $10.00 per share; and (ii) 29,000 shares acquired in
connection with a private placement effected by the Company in May 1998
pursuant to Regulation D and Regulation S of the Securities Act, for a
purchase price of $10.00 per share. Mr. Escamilla's IRA is the record
owner of 17,000 of the private placement shares included in (ii).
(8) Capital West Securities, Inc. is the record holder of 18,900 of the
underwriter's warrants shown as beneficially owned by Robert O. McDonald,
and is the record holder of 24,365 of the placement agent's warrants shown
as beneficially owned by such person.
(9) Represents shares acquired in January 1998 in connection with the Company's
acquisition of certain partnership interests owned by such holders.
(10) Pursuant to the Schedule 13D's referenced in footnote (3) above, Random
Walk Trading, Inc., a Canadian corporation, is 100% owned by Randall W.
Kelly, who is the president of FGL.
(11) Includes 6,250 shares issued, and 18,750 shares of Common Stock issuable,
pursuant to stock options granted by the Company in connection with a
professional services agreement. The options, which are for an exercise
price of $3.750 per share, vest in quarterly increments commencing on the
grant date, which was November 1, 1997.
(12) Represents shares of Common Stock issuable upon the exercise of certain
warrants granted to the underwriters of the Company's initial public
offering in January 1997.
(13) Represents shares issuable upon the exercise of certain options granted to
such holder on February 17, 1999, as partial consideration for services
rendered under a consulting agreement. The options, which have an exercise
price of $11.50, vest at the rate of 10 options for each hour of work
performed under the consulting agreement and are exercisable, to the extent
so vested, for a ten-year period commencing one year after the date of
grant.
(14) Shares shown as beneficially owned by the named individual include: (i)
5,250 shares of Common Stock issuable upon the exercise of certain warrants
granted to the underwriters of the Company's initial public offering in
January 1997, at an exercise price of $7.50 per share; and (ii) 18,950
shares of Common Stock issuable upon the exercise of certain warrants
granted to the placement agents of the May 1998 private placements effected
pursuant to Regulation D and Regulation S of the Securities Act, at an
exercise price of $10.00 per share.
The Selling Shareholders intend to offer and sell the Offered Shares as
described in the Prospectus under the caption "PLAN OF DISTRIBUTION."
6
