SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 1999
(September 1999)
TOUCHTUNES MUSIC CORPORATION
(Exact name of Registrant as specified in its charter)
NEVADA 33-7006 87-048534
(State or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification Number)
incorporation or
organization)
1800 E. Sahara, Suite 107, Las Vegas, Nevada 89104
(Address of principal executive offices)
Registrant's telephone number, including area code (702) 792-7405
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ITEM 1. Changes in Control of Registrant.
As previously reported on Registrant's Form 8-K for the month of
March 1997, on March 21, 1997, two independent Canadian Investors, Societe
Innovatech du Grand Montreal and Sofinov Societe Financiere D'Innovation Inc.
(the "Canadian Investors"), agreed to invest $4,000,000 Canadian Dollars (CDN)
for the development and promotion of the Registrant's Digital Jukebox, upon
certain terms and conditions. To accomplish this, the Canadian Investors
agreed to invest $4,000,000 CDN in TouchTunes Digital Jukebox Inc.
("TouchTunes"), a Canadian subsidiary which was organized by the Registrant
specifically for that purpose. The Registrant entered into an agreement by
which TouchTunes agreed to carry out the research and development work needed
for the Digital Jukeboxes and to provide all such additional services
reasonably requested by the Registrant in connection with the implementation of
the Digital Jukebox project.
The Canadian Investors initially purchased 100 Class B shares and 20
Class C shares of TouchTunes, at a price of $5,000 CDN per share, for an
immediate cash consideration of $600,000 CDN. They also subscribed to an
additional 680 Class C shares of TouchTunes, at a price of $5,000 CDN per
share, for a consideration of $3,400,000 CDN. Both the Class C shares and the
$3,400,000 CDN were deposited in escrow. The Class B and the Class C shares of
TouchTunes may be exchanged at the option of the Canadian Investors, into
2,000,000 shares of Series A Preferred Stock of the Registrant and then
converted share for share into Common Stock. Subsequently, on May 9, 1997, the
Canadian Investors released an additional $750,000 CDN against delivery of 150
Class C shares, leaving a balance of $2,650,000 CDN and 530 Class C shares in
escrow. On July 17, 1997, the Canadian Investors released the remaining
$2,650,000 CDN to TouchTunes against delivery to them of the remaining 530
Class C shares of TouchTunes. These funds have been used to implement the
start-up business activities of the Registrant.
The Registrant is the owner of 800 Class A shares of TouchTunes. As
a result of the foregoing transactions, the Canadian Investors own 100 Class B
shares and 700 Class C shares of TouchTunes. The Class A shares entitle the
holder to one vote per share. The Class B shares entitle the holder to eight
votes per share and the Class C shares are non-voting. Therefore, the
Registrant and the Canadian Investors have equal voting rights in TouchTunes.
On February 11, 1998, the Canadian Investors subscribed for an
aggregate principal amount of $4,000,000 (US) of debentures ("Debentures")
issued by TouchTunes. The Debentures are payable by TouchTunes on demand, only
after the occurrence of an event of default as defined by the subscription
agreement. Upon default, the Debentures would bear interest at the rate of 12%
per annum, payable in one single installment, concurrently with the payment of
the principal amount. At any time prior to February 11, 1999, TouchTunes had
the right to require the Canadian Investors to purchase additional Debentures,
up to an aggregate principal amount of $10,000,000 (US), bearing the same terms
and conditions, in six increments of $1,000,000 each.
On that same date, February 11, 1998, the Registrant entered into a
"Debenture Put Right Agreement" with the Canadian Investors, providing them
with the right and option to require the Registrant to purchase all or any part
of the principal amount of Debentures they have acquired (up to $10,000,000 in
principal amount), at an exchange rate of $2.00 per share, for the issuance by
the Registrant of up to 5,000,000 shares of Series A Preferred Stock,
convertible at the option of the holders, share for share, into an aggregate of
up to 5,000,000 shares of the Registrant's Common Stock.
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On February 11, 1998, the Registrant and the Canadian Investors
amended and restated their Shareholders' Agreement of March 21, 1997. Among
other things, the Amended and Restated Agreement provides that the Canadian
Investors collectively are entitled to two seats on the Registrant's Board of
Directors, which shall consist of at least six directors.
On August 5, 1998, TouchTunes required the Canadian Investors to
purchase an additional $2,000,000 (US) principal amount of Debentures with the
same terms as those previously issued on February 11, 1998.
On November 2, 1998, TouchTunes required the Canadian Investors to
purchase an additional $4,000,000 (US) principal amount of Debentures with the
same terms as those previously issued on February 11, 1998, bringing the total
amount of Debentures purchased to the agreed upon maximum of $10,000,000 (US).
On March 22, 1999, the Canadian Investors subscribed for additional
Debentures issued by TouchTunes for an aggregate principal amount of $830,579
U.S. with terms as those previously issued in 1998. Concurrently, on March 22,
1999, the Registrant entered into a "Debenture Put Right Agreement" with the
Canadian Investors, providing them with the right and option to require the
Registrant to purchase all or any part of the principal amount of the
Debentures aggregating $830,579 U.S., convertible into the Registrant's Series
A Preferred Stock, at an exchange rate of $2.00 US per share. Series A
preferred shares are convertible at the option of the holders, share for share,
into an aggregate of up to 415,289 shares of the Registrant's Common Stock.
On April 8, 1999, Sofinov Societe Financiere d'Innovation Inc.
subscribed for additional Debentures issued by TouchTunes for an aggregate
principal amount of $2,500,000 U.S. with the same terms as those previously
issued in 1998. Concurrently, on April 8, 1999, the Registrant entered into a
"Debenture Put Right Agreement" with Sofinov Societe Financiere d'Innovation
Inc., providing them with the right and option to require the Registrant to
purchase all, or any part of the principal amount of the Debentures aggregating
$2,500,000 U.S., convertible into the Registrant's Series A Preferred Stock, at
an exchange rate equal to the greater of $2.00 U.S. per share or 85% of the
price per share of other securities of the Registrant offered in a private
placement, closing no later than July 1, 1999. Series A preferred shares are
convertible at the option of the holders, share for share, into an aggregate of
up to 1,250,000 shares of the Registrant's Common Stock.
On July 14, 1999, the Canadian Investors subscribed for additional
Debentures issued by TouchTunes for an aggregate principal amount of $3,000,000
U.S. with the same terms as those previously issued in 1998. Concurrently, on
July 14, 1999, the Registrant entered into a "Debenture Put Right Agreement"
with the Canadian Investors providing them with the right and option to require
the Registrant to purchase all, or any part, of the principal amount of the
Debentures aggregating $3,000,000 U.S., convertible into the Registrant's
Series A Preferred Stock at an exchange rate equal to the lesser of $2.00 U.S.
per share or 93% of the price paid by a third party investor for any additional
securities of the Registrant. Series A preferred shares are convertible at the
option of the holders, share for share, into an aggregate of 1,500,000 shares
of the Registrant's Common Stock. At any time prior to December 31, 1999,
TouchTunes has the right to require the Canadian Investors to purchase an
additional $4,000,000 U.S. of Debentures bearing the same terms and conditions,
in two increments of $2,000,000 U.S. each.
Also on July 14, 1999, the Registrant entered into an "Addendum" with
the Canadian Investors which changed the rates at which all of the Debentures
previously issued would be converted as follows:
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- For all of the Debentures issued pursuant to the February 1998 and
March 1999 Debenture Put Right Agreements the Put Rate would be
equal to the lesser of $2.00 U.S. or the price paid by a third
party investor for any additional securities of the Registrant.
- For all of the Debentures issued pursuant to the April 1999
Debenture Put Right Agreement the Put Rate would be equal to the
lesser of $2.00 U.S. or 85% of the price paid by a third party
investor for any additional securities of the Registrant.
On September 23,1999, the Canadian Investors purchased an additional
$2,000,000 U.S. of Debentures, and on November 3, 1999, the Canadian Investors
purchased another $2,000,000 U.S. of Debentures. This completed the July 14,
1999 transaction.
Based on the present number of shares of the Registrant's Common
Stock issued and outstanding (14,658,644 shares), upon the exchange of their
TouchTunes Class B Shares for Series A Preferred shares of the Registrant and
the conversion of such Series A Preferred shares into 2,000,000 shares of the
Registrant's Common Stock, the Canadian Investors will own approximately 12% of
the Common Stock of the Registrant. Upon the exchange of their $20,330,579
principal amount of Debentures into an additional 10,165,289 shares of the
Registrant's Series A Preferred Stock (assuming a conversion price of $2.00
U.S. per share) and their conversion of such Series A Preferred shares into the
Registrant's Common Stock, the Canadian Investors will own approximately 45.35%
of the Registrant's Common Stock. If the conversion price is less than $2.00
U.S. per share, the Canadian Investors will own in excess of 45.35% of the
Registrant's Common Stock.
ITEM 5. Other Events.
On October 18, 1999, the lawsuit brought by Arachnid, Inc. in the
United States District Court for the Northern District of Illinois Eastern
Division, claiming patent infringement by the Registrant and TouchTunes, was
dismissed with prejudice without any payment being made by the Registrant or by
TouchTunes to the plaintiff. This lawsuit was previously reported on the
Registrant's Form 8-K for the month of July 1998.
ITEM 7. Financial Statements and Exhibits.
Exhibits:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TOUCHTUNES MUSIC CORPORATION
Date: November 25, 1999 Per: /s/Tony Mastronardi
----------------------
Tony Mastronardi,
President and Director
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