UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Synthonics Technologies, Inc.
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(Name of Issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
8716Y107
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(CUSIP Number)
Alex Sandel
Argoquest 7, LLC
25136 Anza Drive
Valencia, CA 91355
With a copy to:
Murray Markiles, Esq.
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Century City, CA 90067
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
June 2, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13D to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13(e), 13d-1(f) or 13d-1(g), check the following box
[].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see Notes).
(Continued on following pages)
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SCHEDULE 13D
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PAGE 2 OF 8 PAGES
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CUSIP NO. 8716Y107
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1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Argoquest 7, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) []
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS* WC (See Response to Item 3).
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e)
[]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES 3,671,320 (See Response to Item 5).
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8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY -0-
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9 SOLE DISPOSITIVE POWER
EACH
REPORTING 3,671,320 (See Response to Item 5).
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10 SHARED DISPOSITIVE POWER
PERSON
WITH -0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,671,320 (See Response to Item 5.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10% (See Response to Item 5.)
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14 TYPE OF REPORTING PERSON* OO
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Page 2 of 8
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
Page 3 of 8
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ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D (this "Statement") relates to the common
stock, par value $0.01 per share (the "Common Stock"), of Synthonics
Technologies, Inc., a Utah corporation (the "Company" or the "Issuer"), and is
being filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The address of the principal executive offices of the Company is 31324 Via
Colinas, Suite 106, Westlake Village, California 91362.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) This Statement is hereby filed by Argoquest 7, LLC, a limited liability
company organized in Delaware (the "Reporting Person"). The business address of
the Reporting Person is Argoquest 7, LLC, 25136 Anza Drive, Valencia, CA 91355.
Argoquest 7, LLC is a private investment company. Alex Sandel is the manager of
Argoquest 7, LLC (the "Manager").
(d) During the last five years, neither the Reporting Person nor the Manager has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, neither the Reporting Person nor the Manager was
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
(f) The Manager is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to that certain Equity Agreement - Summary of Terms, dated as of
June 2, 1999 by and between the Issuer and Alex Sandel, and that certain
Assignment, dated as of June 2, 1999, by Alex Sandel for the benefit of
Argoquest 7, LLC (collectively, the "Agreement"), attached hereto as "Exhibit A"
and incorporated herein by reference as though fully set forth herein (all
capitalized terms not otherwise herein defined shall have the meaning ascribed
to them in the Agreement), the Issuer agreed to sell to the Reporting Person and
the Reporting Person agreed to purchase 2,300,000 shares of the common stock of
the Issuer at a purchase price of $.10 per share, for a total purchase price of
$230,000. The Reporting Person paid for such shares in cash from working capital
funds. In addition, pursuant to the terms of the Agreement, the Issuer issued to
the Reporting Person an option to acquire 1,371,320 shares of the Common Stock
at a purchase price of $.10 per share, for an aggregate purchase price of
$137,132 (the "Option"). The Option became fully vested upon the signing of the
Agreement and the purchase of the 2,300,000 shares of the Common Stock, as
described above. The Option is outstanding until the later of (1) 90 days from
the close of the Issuer's current stage of financing or (2) 150 days from the
date of the Agreement. In addition, the Reporting Person has the right to
purchase stock in the current stage of the Issuer's financing being raised
sufficient for the Reporting Person to maintain 10% of the outstanding Common
Stock (the "Purchase
Page 4 of 8
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Option"). The Purchase Option is at the same price or average price per share of
the Common Stock that is obtained in the Issuer's current stage of financing.
In addition, pursuant to the Agreement, the Issuer, among other things,
agreed to (1) give Future Media Productions, Inc., an affiliate of the Reporting
Person, the exclusive right to service the Issuer's CD-ROM replication needs,
based on prevailing market prices for such services, and (2) collaborate on a
joint marketing program and presentation with respect to the development and
positioning of certain programs. Any proceeds from the joint marketing program
and presentation are for the full benefit of the Issuer and will not be shared
with the Reporting Person or any affiliates of the Reporting Person, other than
through participation of the Reporting Person's share of the Common Stock.
No part of the purchase price for the Common Stock, Option and/or Purchase
Option issued to the Reporting Person pursuant to the Agreement has been
obtained or will be represented by funds or other consideration borrowed or
otherwise obtained for the purpose of acquiring, holding, trading or voting the
securities.
ITEM 4. PURPOSE OF THE TRANSACTION.
The Reporting Person acquired the Common Stock, Option and Purchase Option
pursuant to the Agreement for investment purposes. Pursuant to the Agreement,
the Reporting Person agreed that neither it nor any affiliate of the Reporting
Person would purchase any additional shares of the Common Stock, without the
permission of the Board of Directors of the Issuer, in the open market or other
transactions which would raise the Reporting Person's share of the Common Stock
in excess of 10% of the outstanding shares on a fully diluted basis of the
Issuer, at such time, PROVIDED, HOWEVER, that the Reporting Person may through
the open market or other private transactions acquire an additional 10% of the
outstanding shares of the Common Stock, PROVIDED, THAT, the Reporting Person (1)
gives advance notice of such purchases to the Board of Directors of the Issuer
and (2) executes a standstill agreement stating that such purchases are for
investment purposes only and neither the Reporting Person nor any of its
affiliates will take action to acquire control of the Issuer. In addition,
pursuant to the Agreement, the Chief Financial Officer of Future Media
Productions, Inc. will act as the principal financial officer of the Issuer for
twelve months following the date of the Agreement. This service will be provided
to the Issuer pursuant to the transactions contemplated in the Agreement with no
additional charge to the Issuer, until such time as the Issuer completes its
current stage of financing pursuant to the terms of the Agreement. Pursuant to
the Agreement, the Reporting Person also has the right to nominate one member to
the Board of Directors of the Issuer, PROVIDED, THAT, such nominee must be
approved by the Issuer, such approval which shall not be unreasonably withheld
by the Issuer.
The Reporting Person from time to time intends to review its investment in
the Issuer on the basis of various factors, including the Issuer's business,
financial condition, results of operations and prospects, general economic and
industry conditions, the securities markets in general and those for the
Issuer's securities in particular, as well as other developments and other
investment opportunities. Based upon such review and subject to the provisions
of the Agreement, the Reporting Person will take such actions in the future as
it may deem appropriate, consistent with the securities laws, in light of the
circumstances existing from time to time. If the Reporting Person
Page 5 of 8
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believes that further investment in the Issuer is attractive, whether because of
the market price of the Issuer's securities or otherwise, it may acquire Common
Stock, pursuant to the exercise of the Option and/or the Purchase Option.
The Reporting Person currently has no plans or proposals to dispose of the
Common Stock, the Option and/or the Purchase Option or some or all of the Common
Stock the Reporting Person may acquire by the exercise of the Option and/or the
Purchase Option, PROVIDED, HOWEVER, that depending on market and other factors,
in the future, the Reporting Person may determine to dispose of some or all of
the Common Stock acquired by exercise of the Option and/or Purchase Option in
privately negotiated transactions, subject to certain transfer restrictions and
rights of first refusal of the Issuer as set forth in the Agreement.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Pursuant to the Agreement, as of June 2, 1999, the Reporting Person is the
beneficial owner of 3,671,320 shares of the Common Stock, or approximately 10%
of the Common Stock based on a total of 36,713,182 shares of the Common Stock
outstanding on a fully diluted basis (including shares of the Common Stock and
the Common Stock issuable upon exercise of the Option issued to the Reporting
Person pursuant to the Agreement) as of June 2, 1999. Such ownership includes
the Option to acquire up to 1,371,320 shares of the Common Stock. Pursuant to
the Agreement, as described in Item 3 of this Statement, the Reporting Person
also beneficially owns the Purchase Option to acquire such number of shares of
the Common Stock in the Issuer's current stage of financing sufficient to
maintain 10% of the shares of the outstanding Common Stock.
(b) The Reporting Person has the sole power to vote or direct the vote and
dispose or direct the disposition of 3,671,320 shares of the Common Stock and
such shares that the Reporting Person purchases pursuant to the Purchase Option.
(c) Except as set forth herein, the Reporting Person has not engaged in any
transactions in the Common Stock during the past sixty (60) days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The terms of the Agreement, attached as "Exhibit A" to this Schedule 13D,
are hereby incorporated herein by reference as though fully set forth herein.
Page 6 of 8
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. "Exhibit A" is the Equity Agreement - Summary of Terms, dated June 2, 1999,
by and between Synthonics Technologies, Inc. and Alex Sandel, and the
related Assignment, dated June 2, 1999, by Alex Sandel for the benefit of
Argoquest 7, LLC.
Page 7 of 8
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 11, 1999
ARGOQUEST 7, LLC
/s/ ALEX SANDEL
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By: Alex Sandel
Its: Manager
The original statement shall be signed by each person on whose behalf the
statement is filed or his authorized representative. If the statement is signed
on behalf of a person by his authorized representative (other than an executive
officer or general partner of this filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statements, provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name any title of each person who signs the statement shall be typed or
printed beneath his signature.
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE
FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
Page 8 of 8
EXHIBIT A
SYNTHONICS
EQUITY AGREEMENT - SUMMARY OF TERMS
o PRICE
1/ Alex Sandel (the "Investor") to purchase 2,300,000 shares of
Synthonics ("the Company") common stock at $ .10 per share, for a
total purchase price of $230,000, payable in cash at time of closing.
Prior to the issuance of this 2.3 million shares, the Company
represents there are 33,041,862 fully diluted shares outstanding.
2/ These shares are fully vested to Investor, and will be issued as
unregistered shares but will otherwise have all rights and privileges
associated with such common stock. The Investor will be restricted
from transferring these shares for a period of twelve months from the
date herein; provided, however, the Investor may transfer these shares
to his affiliates or affiliated companies provided such affiliates
adhere to the provisions of this term sheet; after twelve months from
the date hereof, the Investor shall have the right to sell its shares,
however, the Company will have the right of first refusal to purchase
such shares at the price and on the same terms and conditions obtained
by the Investor.
o USE OF PROCEEDS
1/ The proceeds will be used primarily for the development of, and
infrastructure to support, the Digital Mannequin program, including
the hiring of certain programmers and the development of the Digital
Mannequin marketing program. However, some funds will be used for the
purchasing of industry research and other working capital
requirements.
o RELATED STRATEGIC AGREEMENTS
1/ As part of this relationship, the Company agrees that it will give
Future Media the exclusive right, based on prevailing market prices,
with respect to the Company's CD-ROM replication needs where the
Company controls the choice of such vendor. This includes any
replication business arising from its licensing, niche business
segments or Internet platform business. This business will be Future
Media's option and in line with customary competitive market pricing.
The Company will negotiate a separate agreement with Future Media
regarding this replication business, such agreement in the form
utilized by Future Media with its other customers.
2/ As part of this share purchase, Future Media and the Company will
collaborate on a joint marketing program and presentation targeted at
the direct mail apparel companies. This program will include
development and positioning of the Digital Mannequin, development and
positioning of a digital catalog program (to be distributed on CD-ROM)
and the development
<PAGE>
and positioning of a program that "links" the digital mannequin and
digital catalog programs for the direct mail manufacturer.
As part of this program, the Company and Future Media will develop a
joint calling effort targeting the direct mail industry. The aim will
be for the digital mannequin and marketing programs to be developed
within the next thirty days, for presentation to the industry
thereafter. The costs incurred directly associated with this marketing
program will be paid for by the Company; however, the Company will not
be responsible for covering expenses of Future Media or its personnel
with respect to the development, marketing or retention of the
replication business.
3/ Any proceeds from the Digital Mannequin/Digital Catalog program are
for the full benefit of the Company and not to be shared with Investor
or any affiliates of Investor, other than through participation of its
equity stake. Any proceeds from the replication associated with such
programs will be for the full benefit of Future Media.
o OTHER AGREEMENTS
1/ Future Media will provide the services of its chief financial officer,
Lou Weiss, to act as the Company's principal financial officer for the
next twelve months; Mr. Weiss will devote up to two days per week at
or on behalf of the Company, in order to establish the Company's
internal financial operations, oversee the audit process with the
Company's outside auditors and provide general financial advice when
required. This service will be provided as part of the equity
investment with no additional charge to the Company until such time as
the Company completes its current round of private financing in which
the Company plans to raise an additional $3-5 million in equity.
Subsequent to the earlier of (1) raising of this equity or (2) 150
days from the date of this agreement, the Company will reimburse
Future Media on a monthly basis for Mr. Weiss' actual time spent at or
on behalf of the Company. These charges will not be retroactive and
will be billed at Future Media's actual cost.
2/ The Investor will have the option to purchase an additional 1,371,320
shares at a purchase price of $137,132 (per share purchase price of
$.10). This option is fully vested upon the signing of this agreement
and the purchase of the 2,300,000 common shares discussed above. The
option will be outstanding for the later of (1) 90 days from the close
of the current round of equity being raised or (2) 150 days from the
date of this agreement. In addition the Investor will have the right
to purchase stock in the current round of financing being raised
sufficient to maintain the Investor's 10% share of outstanding common
stock in the Company. This purchase option will be at the same price
or average price per common share that is obtained in that round of
financing.
Page 2
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3/ The Company will have the right to disclose this term sheet and its
provisions to potential investors currently being contacted with
respect to the current round of financing, or as otherwise required by
law.
4/ The Investor, or any person or entity controlled by the Investor,
agrees not to purchase any additional shares of common stock, without
the permission of the Board of Directors of the Company, in open
market or other transactions which would raise the Investor's share of
the common stock in excess of 10% of the outstanding shares, on a
fully diluted basis, at the time, provided, however, the Investor will
be allowed through open market or other private transactions to
acquire an additional 10% of the outstanding shares provided the
Investor (1) gives advance notice of such purchases to the Company's
Board of Directors and (2) executes an agreement stating such
purchases are for investment purposes only and the Investor will take
no action to acquire control of the Company.
5/ The Investor will have the right to nominate one member to the
Company's Board of Directors. However, such nominee must be approved
by the Company, such approval not being unreasonably withheld. The
Investor will have information rights equivalent to that of a board
member of the Company. All information must be kept confidential.
6/ The Company will provide the Investor with a complete list of patents
obtained and patents pending. The Company represents there are no
outside claims against the Company with regard to the patents issued.
The Company also represents there is no outstanding litigation against
the Company as of the date herein.
7/ The Investor will be granted "piggy-back" rights on shares issued by
the Company provided that such rights will be subject to any
underwriter cutbacks or holdbacks and will be granted pro rata along
with any other selling shareholders.
8/ The Company will provide the Investor with an opinion of counsel that
the shares of the Company are validly issued and what the
capitalization is as of the date of the last financial statements.
Page 3
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o CLOSING
1/ The closing to be completed on or before Wednesday, June 2, 1999.
ACCEPTED AND AGREED TO:
/s/ ALEX SANDEL
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Alex Sandel
/s/ F. MICHAEL BUDD
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Synthonics Technologies
6/2/99
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Date
<PAGE>
ASSIGNMENT
This ASSIGNMENT, dated as of June 2, 1999 (this "Assignment"), is entered
into by Alex Sandel ("Sandel") for the benefit of Argoquest 7, LLC, a Delaware
limited liability company ("LLC").
WHEREAS, pursuant to that certain equity agreement summary of terms, dated
as of June 2, 1999 (the "Term Sheet"), between Sandel and Synthonics
Technologies, Inc., a Utah corporation ("Synthonics"), Sandel has acquired the
right to obtain certain equity interests in Synthonics, together with certain
other rights as set forth therein.
WHEREAS, Sandel desires to assign all of his rights under the Term
Sheet to LLC;
NOW, THEREFORE, Sandel hereby assigns all rights, title and interest in
and to the Term Sheet to LLC.
IN WITNESS WHEREOF, Sandel has caused this Assignment to be executed as of
this 2nd day of June, 1999.
/s/ ALEX SANDEL
----------------------
Alex Sandel
Acknowledged and Accepted:
ARGOQUEST 7, LLC
/s/ ALEX SANDEL
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By: Alex Sandel
Title: Manager
