UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File No.: 333-7006
TOUCHTUNES MUSIC CORPORATION
-------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 87-0485304
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
1800 E. Sahara, Suite 107
Las Vegas, Nevada 89104
- -------------------------------------------------------------
(Address of principal executive offices, including zip code)
Issuer's telephone number, including area code (702)-792-7405
Issuer's facsimile number, including area code (702)-734-7500
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. (x) Yes ( ) No
The total number of shares of Class A Common Stock outstanding on March 31,
2000 was 14,658,644.
0
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements for the quarter ended March 31,
2000, have been prepared in accordance with the instructions to Form 10-QSB
and, therefore, do not include all information and footnotes necessary for a
complete presentation of financial position, results of operations, cash flows
and stockholders' equity for the quarter then ended, in conformity with
generally accepted accounting principles. In the opinion of management, all
adjustments considered necessary for a fair presentation of the results of
operations and financial position have been included and all such adjustments
are of a normal recurring nature. Operating results for the quarter ended
March 31, 2000, are not necessarily indicative of the results that can be
expected for the year ending December 31, 2000. For further information, refer
to the financial statements and footnotes thereto included in the Registrants
Annual Report on Form 10-KSB for the year ended December 31, 1999.
FINANCIAL STATEMENTS
(UNAUDITED)
TOUCHTUNES MUSIC CORPORATION
March 31, 2000
Index
Page
Balance Sheets..............................2
Statements of Operations....................4
Statements of Cash Flows....................5
Notes to Financial Statements...............6
1
TouchTunes Music Corporation
CONSOLIDATED BALANCE SHEETS
[In U.S. dollars]
March 31, 2000 December 31, 1999
$
(unaudited) (Note*)
------------- ---------------
ASSETS
Current
Cash and cash equivalents 644,816 719,902
Trade accounts receivable 1,108,910 621,841
Other receivables 55,028 291,262
Investment tax credits receivable 56,788 57,174
Prepaid expenses and deposits 716,489 644,997
Inventory 1,846,684 1,736,314
Other current assets 160,264 305,930
Current portion of investment in 469,638 617,760
sales-type leases
------------- ---------------
Total current assets 5,058,617 4,995,180
------------- ---------------
Investment in sales-type leases 3,465,393 1,146,668
Property, plant and equipment, net 7,211,358 7,311,058
Intangibles 755,632 829,443
Other assets 202,244 228,976
------------- ---------------
16,693,244 14,511,325
------------- ---------------
See accompanying notes.
* Note: The balance sheet as at December 31, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
2
TouchTunes Music Corporation
CONSOLIDATED BALANCE SHEETS
[Cont'd]
March 31, December 31,
2000 1999
$
------------ ------------
(unaudited) (Note*)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 2,303,036 2,479,331
Other liabilities 44,707 101,678
Income taxes payable 25,285 25,457
Current portion of long-term debt 3,178,356 1,641,423
Current portion of capital lease obligations 249,946 252,589
------------ ------------
Total current liabilities 5,801,330 4,500,478
------------ ------------
Other liabilities 60,625 73,256
Long-term debt (note 3) 3,207,075 2,451,098
Capital lease obligations 208,237 271,969
Deferred tax liability 130,569 130,569
Advance from stockholder (note 4) 5,000,000 2,000,000
------------ ------------
14,407,836 9,427,370
------------ ------------
Stockholders' equity
Series A preferred stock, $.001 par value
Authorized: 15,000,000 shares
Issued & outstanding: 12,843,960 [1999:
12,843,960] 12,844 12,844
Class A common stock, $.001 par value
Authorized: 50,000,000 shares
Issued & outstanding: 14,658,644 [1999:
14,658,644] 14,659 14,659
Additional paid-in capital 26,801,118 26,801,118
Accumulated deficit (24,543,213) (21,744,666)
------------ ------------
Total stockholders' equity 2,285,408 5,083,955
------------ ------------
16,693,244 14,511,325
------------ ------------
Contingent Liabilities (note 6).
Subsequent Events (note 7).
See accompanying notes.
* Note: The balance sheet as at December 31, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
3
TouchTunes Music Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31
[In U.S. dollars]
2000 1999
$ $
-------------- ------------
(unaudited) (unaudited)
Revenues
Jukebox revenues 3,608,487 207,890
Advertising revenues 56,000 -
-------------- ------------
3,664,487 207,890
-------------- ------------
Expenses
Cost of jukebox revenues and direct
operating costs 2,546,152 289,796
Research and development services 518,384 256,470
General and administrative 1,377,979 851,431
Sales and marketing 1,275,950 584,948
Financial expenses 231,558 242,588
Depreciation and amortization 536,413 223,521
Foreign exchange (gain) losses (23,402) 62,760
-------------- ------------
6,463,034 2,511,514
-------------- ------------
Net loss before share of net loss in
jointly controlled company 2,798,547 2,303,624
Share of net earnings in jointly - 9,389
controlled company
-------------- ------------
Net loss and comprehensive loss 2,798,547 2,294,235
-------------- ------------
Per Common share (note 5)
Basic and diluted net loss per share .19 .16
See accompanying notes.
4
TouchTunes Music Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31
[In U.S. dollars]
2000 1999
$ $
------------- ------------
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net loss (2,798,547) (2,294,235)
Adjustments to reconcile net loss to net
cash used in operating activities:
Share of net income from jointly
controlled company - (9,389)
Depreciation and amortization 536,413 223,521
Changes in operating assets and liabilities:
Accounts and other receivables (250,449) (73,060)
Inventory (110,370) -
Prepaid expenses (71,492) (71,977)
Accounts payable and accrued 67,837
liabilities (176,467)
Decrease of other current assets 145,666 -
------------- ------------
Cash used in operating activities (2,725,246) (2,157,303)
------------- ------------
INVESTING ACTIVITIES
Investment in sales-type leases (2,170,603) -
Increase in costs of intangibles (3,543) (124,516)
Purchase of other capital assets (359,359) (105,020)
Decrease in other assets 26,733 -
------------- ------------
Cash used in investing activities (2,506,772) (229,536)
------------- ------------
FINANCING ACTIVITIES
Increase in amounts due to jointly-
controlled company - 1,102,671
Increase in bank overdraft - 73,116
Decrease in other liabilities (69,602) -
Increase in advance from stockholder 3,000,000 -
Decrease in capital lease obligations (66,375) -
Increase in long-term debt 2,292,909 -
------------- ------------
Cash provided by financing activities 5,156,932 1,175,787
------------- ------------
Net decrease in cash (75,086) (1,211,052)
Cash, beginning of year 719,902 1,211,052
------------- ------------
Cash, end of year 644,816 -
------------- ------------
See accompanying notes.
5
TouchTunes Music Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2000
[In U.S. dollars]
1. ORGANIZATION AND OPERATIONS OF THE COMPANY
TouchTunes Music Corporation (the "Company") is involved in the digital
distribution of interactive music to music-on-demand applications. The first
such music-on-demand application developed by the Company is its digital
jukebox. The Company is presently commercializing its digital jukebox, which
utilizes digitally compressed audio technology to securely distribute music
titles through a proprietary distribution network. Revenues are derived from
selling and leasing the digital jukebox units, as well as providing music
services and advertising through its digital jukebox network. The Company is
also developing its technology for other music-on-demand applications.
2. BASIS OF FINANCIAL STATEMENT PRESENTATION AND GOING CONCERN ASSUMPTION
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
on a going concern basis which presumes the realization of assets and the
discharge of liabilities in the normal course of business for the foreseeable
future. Accordingly, these financial statements do not include any adjustments
to amounts and classifications of assets and liabilities that might be
necessary should the Company be unable to continue its business in the normal
course.
The Company has incurred operating losses since the inception of operations.
The Company's ability to continue as a going concern is dependent principally
upon its ability to obtain further financing, as well as achieving profitable
operations and generating positive cash flow from operations.
Management is currently negotiating further financing which, if successfully
completed, management believes will be sufficient to allow the Company to
operate into the foreseeable future. The outcome of these negotiations cannot
be predicted at this time.
The consolidated financial statements at March 31, 2000 and for the three
months ended March 31, 1999 and 2000 are unaudited and reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the Company's financial
position and operating results for the interim periods.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's annual report on Form 10-KSB for the fiscal year
ended December 31, 1999.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results for the fiscal year ending December 31,
2000 or any other future periods.
6
TouchTunes Music Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2000
[In U.S. dollars]
2. BASIS OF FINANCIAL STATEMENT PRESENTATION AND GOING CONCERN ASSUMPTION
[Cont'd]
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary TouchTunes Digital Jukebox, Inc. ("TouchTunes
Digital"). All significant intercompany balances and transactions since
acquisition of control have been eliminated on consolidation.
On December 30, 1999, the Company acquired the remaining 50% interest of
TouchTunes Digital held by others. The purchase method of accounting has been
followed. Intercompany operating transactions before the acquisition of
control remain non-consolidated. Prior to December 30, 1999, the Company had
joint control of TouchTunes Digital and accounted for its investment using the
equity method, recording only the Company's share of net income or loss.
3. LONG TERM DEBT
During the quarter ended March 31, 2000, the Company, through its subsidiary,
utilized $2,544,000 from its bank term loan facility to pay for jukeboxes
manufactured and delivered to jukebox operators. The total proceeds received
under its jukebox loan facility aggregate to $5,944,000 as at March 31, 2000.
The remaining funds available from its jukebox loan facility was $4,456,000 as
at March 31, 2000 (see note 7).
4. ADVANCE FROM STOCKHOLDER
During the quarter, one of the Company's stockholders, Sofinov Societe
Financiere d'Innovation advanced additional amounts aggregating $3,000,000 to
the company.
5. BASIC LOSS PER SHARE
The calculation of basic and diluted net loss per share for the three month
periods end March 31, is as follows:
2000 1999
$ $
-------------- ------------
Loss to common shareholder 2,798,547 2,294,235
-------------- ------------
Weighted average shares 14,658,644 14,658,644
outstanding used to compute
basic and diluted net loss per
share
-------------- ------------
Basic and diluted net loss per .19 .16
share
-------------- ------------
7
The options to purchase Class A common stock and Series A preferred stock were
not included in the computation of the diluted loss per share because the
effect would be antidilutive.
TouchTunes Music Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2000
[In U.S. dollars]
6. CONTINGENT LIABILITIES
During 1999, the Company received a letter claiming certain prior rights to the
Company's trade name. Based on information presently available, management
does not expect any material adverse result and believes the claim is without
merit. Included in accounts payable and accrued liabilities is management's
best estimate of the legal costs to defend this claim.
7. SUBSEQUENT EVENTS
Change to Authorized Stockholders' Capital
On April 19, 2000, the Board of Directors approved the amendment to the
Company's Amended and Restated Articles of Incorporation authorizing the
issuance of up to 10,000,000 Series B redeemable, retractable, convertible
$0.001 Preferred Shares. Each Series B Preferred Share has equal voting rights
to each Common share. Cumulative dividends at a rate of 9% accrue from the
date of issuance, but are not payable until after June 2002.
Loan Facilities
In April 2000, the Company received an additional $836,000 in jukebox financing
from its bank, bringing the aggregate jukebox financing proceeds received by
the Company to $6,780,000.
Advances Received
On May 5, 2000, the Company received an advance of $1,000,000 from a third
party investor (the "Investor") as part of a $15,000,000 future equity
investment being negotiated between the Company and the Investor. The outcome
of these negotiations cannot yet be determined. The advance is payable on
demand.
Stock Option Plan
On April 19, 2000, the Board of Directors authorized a Long-Term Incentive Plan
(the "Plan"), which provides for the grant to employees, directors, officers,
consultants and outside contractors, various types of stock options and stock.
Concurrently, the Board of Directors approved the cancellation of the previous
Stock Option Plan approved on August 31, 1998. Stock options under the
previous plan were cancelled and new options were issued.
On April 19, 2000, the Board of Directors granted incentive and non-statutory
stock options to purchase an aggregate of 2,510,018 shares of Class A common
stock, with vesting provisions ranging up to four years. Options granted under
the plan are exercisable for a period of ten years. On April 19, 2000 an
aggregate of 4,489,982 shares of Class A common stock were reserved for future
issuance under the Plan. The exercise price of these options range from
$2.0625 per share to $5.98 per share. The plan is subject to shareholder
approval.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Words such as "anticipates",
"expects", "intends", "plans", "believes", "seeks", "estimates", variations of
such words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future performance
and are subject to certain risks, uncertainties and assumptions that are
difficult to predict. Therefore, actual results could differ materially from
those expressed or forecasted in any such forward-looking statements as a
result of a number of factors, which are not within the Registrant's control.
Operating Results
The Registrant is involved in the digital distribution of music to
interactive music-on-demand applications. The first such application developed
and commercialized by the Registrant is its Digital Jukebox. The Registrant
currently generates revenues from the U.S. jukebox market.
The Registrant incurred a net loss of $2,798,547 during the quarter ended
March 31, 2000 ("the first quarter"), compared to a net loss of $2,294,235 for
the same period in 1999. The increases in expenses were partially offset by the
increase in revenues, resulting in an overall 22% increase in net loss.
Revenues
The Registrant generated revenues of $3,608,487 from sales, leases and
music services with respect to its Digital Jukebox during the first quarter of
2000, compared to revenue of $207,890 for the same period in 1999. The
increase in revenues was due to significant increases in demand for the Digital
Jukebox during the first quarter of 2000. In addition the Registrant sold units
during the first quarter and accounted for all new lease transactions as
capital leases, resulting in revenues of $5,995 to be recognized upon the
delivery of each Digital Jukebox to the jukebox operators. The Registrant did
not sell any jukeboxes during the quarter ended March 31, 1999, and all its
leases during the quarter were accounted for as operating leases, recognizing
revenue as the lease payments came due.
As at March 31, 2000, the Registrant had delivered a total of
approximately 1700 Digital Jukebox units as compared to a total of
approximately 345 units as at March 31, 1999.
The Registrant also had advertising revenues of $56,000 during the first
quarter of 2000. No advertising revenue was generated during the quarter ended
March 31, 1999.
Cost of Jukebox Revenues and Direct Operating Costs
Cost of jukebox revenues and direct operating costs have increased by
$2,256,356, from $289,796 in the first quarter of 1999, to $2,546,152 in the
first quarter 2000.
This increase was primarily a result of the associated costs of all
jukeboxes sold and leased under sales-type bases. For the first quarter of
1999, all jukeboxes were accounted for as operating leases, therefore no
related cost of sales was applicable and recorded.
9
Research and Development Services
Research and development services increased by $261,914 from $256,470 in
the first quarter of 1999, to $518,384 in the first quarter 2000. The increase
was primarily due to headcount growth and the resulting increases in
compensation, benefits and infrastructure costs to support the larger network
of Digital Jukeboxes.
General and Administrative
General and administrative costs increased by $526,548, from $851,431 in
the first quarter 1999, to $1,377,979 in the first quarter 2000. The increase
was primarily due to headcount growth and the resulting increases in
compensation, benefits and infrastructure cost to support the higher levels of
business activity.
Sales and Marketing
Sales and marketing costs increased $691,002 from $584,948 in the first
quarter of 1999, to $1,275,950 in 2000. The increase was primarily due to
expenses related to headcount growth and infrastructure costs in support of
increased revenue.
Financial Expenses
Financial expenses decreased by $11,030 from $242,588 in the first quarter
of 1999 to $231,558 in the first quarter of 2000. The decrease is due to the
first quarter of 1999 included interest charges charged by the Registrant's
subsidiary, TouchTunes Digital Jukebox Inc. ("TouchTunes Digital") which became
a subsidiary on December 31, 1999. In the first quarter 2000, intercompany
interest charges were eliminated upon consolidation. The financial expenses in
the first quarter 2000 relate to interest on long-term debt obligations by the
Registrant and its subsidiary.
Depreciation and Amortization
Depreciation and amortization costs increased by $312,892, from $223,521
in the first quarter of 1999, to $536,413 in the first quarter of 2000. The
increase is primarily due to the growth in the number of jukeboxes under
operating leases, as well as the addition of other fixed assets.
Foreign Exchange Losses
The Registrant experienced a foreign exchange gain of $23,402 during the first
quarter 2000, compared to a foreign exchange loss of $62,760 during the first
quarter 1999. Foreign exchange gains/losses result from the company paying
certain expenditures in currencies other than the United States dollar. The
main foreign currency in which the Registrant's subsidiary transacts is the
Canadian dollar.
Share of Net Loss in Jointly Controlled Company
On December 30, 1999, the Company acquired the remaining 50% interest of
TouchTunes Digital held by others. Intercompany operating transactions before
the acquisition of control remain non-consolidated. Prior to December 30,
1999, the Company had joint control of TouchTunes Digital and accounted for its
investment using the equity method, recording only the Company's share of net
income or loss.
10
Seasonality
The Registrant has experienced lower sales volume during the summer
vacation period, between the months of July and August, as well as during
national holiday periods. These seasonal fluctuations may result in
significant decreases in the Registrant's results of operations and have
material effects on its financial condition.
Liquidity and Capital Resources
At March 31, 2000 the Registrant had cash and cash equivalents of
$644,816. Cash used from operating activities was $2,725,246, which was mainly
attributed to the net loss from operations. Cash used by investing activities
of $2,506,772 was primarily for the investment in jukebox sales type leases and
the purchase of other capital assets. Cash provided by financing activities of
$5,156,932 was primarily from advances from the Registrant's stockholder as
well as long-term jukebox bank financing. The Registrant estimates its capital
expenditures for the remainder of fiscal year 2000 will amount to approximately
$15,000,000. A portion of the funds required for capital expenditures will be
obtained from available bank financing facilities, however there can be no
assurances that the Registrant or its subsidiary will be able to satisfy all
terms and conditions specified by the bank for the full or any use of the bank
funds.
As disclosed in Note 7 to the March 31, 2000 financial statements herein, the
Registrant received an advance of $1,000,000 from a third party investor (the
"Investor") as part of a $15,000,000 future equity investment being negotiated
between the Registrant and the Investor. The advance is payable on demand.
There can be no assurances that the Registrant will be successful in
negotiating a private equity investment with the Investor, or any other party
to satisfy the Registrant's funding requirements.
Long Term Incentive Plan
As disclosed in Note 7 to the financial statements herein, on April 19, 2000,
the Board of Directors authorized a Long-Term Incentive Plan (the "Plan"),
which provides for the grant to employees, directors, officers, consultants and
outside contractors, various types of stock options and stock. Concurrently,
the Board of Directors approved the cancellation of the previous Stock Option
Plan approved on August 31, 1998. Stock options under the previous plan were
cancelled and new options were issued.
On April 19, 2000, the Board of Directors granted incentive and non-statutory
stock options to purchase an aggregate of 2,510,018 shares of Class A common
stock, with vesting provisions ranging up to four years. Options granted under
the plan are exercisable for a period of ten years. On April 19, 2000 an
aggregate of 4,489,982 shares of Class A common stock were reserved for future
issuance under the Plan. The exercise price of these options range from
$2.0625 per share to $5.98 per share. The plan is subject to shareholder
approval.
Change to Authorized Stockholders' Capital
On April 19, 2000, the Board of Directors approved the amendment to the
Registrant's Amended and Restated Articles of Incorporation authorizing the
issuance of up to 10,000,000 Series B redeemable, retractable, convertible
$0.001 Preferred Shares. Each Series B Preferred Share has equal voting rights
to each Common share. Cumulative dividends at a rate of 9% accrue from the
date of issuance, but are not payable until after June 2002.
11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Index To Exhibits
Exhibit
Number Description
3. (i) Registrant's Amended and Restated Articles of Incorporation.
Reference is made to Exhibit 8 of Registrant's Form 8-K for the month
of March 1997, which Exhibit is incorporated herein by reference.
3. (ii) Registrant's Bylaws. Reference is made to Exhibit 3 (i) of
Registrant's Registration Statement on Form SB-2, File No. 33-7006,
which Exhibit is incorporated herein by reference.
3.(iii) Certificate of Amendment to Articles of Incorporation.
4. Form of Registrant's Common Stock certificates. Reference is made to
Exhibit 3 (ii) of Registrant's Registration Statement on Form SB-2,
File No. 33-7006, which Exhibit is incorporated herein by reference.
9. Shareholder Agreement between Techno Expres S.A. the majority
shareholder of Registrant and the Selling Shareholders dated March
21, 1997, relative to their shares of Registrant. Reference is made
to Exhibit 7 of Registrant's Form 8-K for the month of March 1997,
which Exhibit is incorporated herein by reference.
10. (i) Agreement of Sale between Touchtunes Jukebox Joint Venture and
Registrant, dated December 9, 1994, relative to transfer of patent
rights in exchange for 1,000,000 shares of Common Stock of
Registrant. Reference is made to Exhibit A of Registrant's Form 10-K
for the fiscal year ended December 31, 1994, which Exhibit is
incorporated herein by reference.
10. (ii) Summary of International Patent Application for the Digital Jukebox.
Reference is made to Exhibit B of Registrant's Form 10-K for the
fiscal year ended December 31, 1994, which Exhibit is incorporated
herein by reference.
10. (iii) Development Agreement between Touchtunes Jukebox Inc. and Registrant,
dated March 8, 1995. Reference is made to Exhibit C of Registrant's
Form 10-K for the fiscal year ended December 31, 1994, which Exhibit
is incorporated herein by reference.
10. (iv) Agreement between Oraxium International, Inc. and Registrant, dated
January 30, 1995, relative to the acquisition of a computer operating
system. Reference is made to Exhibit A of Registrant's Form 8-K for
the month of March 1995, which Exhibit is incorporated herein by
reference.
10. (v) Agreement between S.G.R.M. Inc. and Registrant, dated March 6, 1995,
relative to the acquisition of patent rights in exchange for
10,000,000 shares of Common Stock. Reference is made to Exhibit B of
Registrant's Form 10-K for the fiscal year ended December 31, 1994,
which Exhibit is incorporated herein by reference.
12
10. (vi) Amended Agreement between S.G.R.M. Inc., Techno Expres, S.A. and
Registrant, dated November 30, 1995, relative to the acquisition of
patent rights in exchange for 10,000,000 shares of Common Stock.
Reference is made to Exhibit C annexed to Registrant's Form 8-K for
the month of November 1995, which Exhibit is incorporated herein by
reference.
10. (vii) Subscription Agreement for the purchase of 100 Class B shares and 20
Class C shares of TouchTunes Digital Jukeboxes Inc., dated March 21,
1997. Reference is made to Exhibit 1 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10.(viii) Escrow Agreement for the deposit of $3,400,000 CDN and 680 Class C
shares of TouchTunes by the Selling Shareholders, dated March 21,
1997. Reference is made to Exhibit 2 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (ix) Agreement between TouchTunes and Registrant, relative to work to be
rendered in connection with Registrant's Digital Jukebox project.
Reference is made to Exhibit 4 of Registrant's Form 8-K for the month
of March 1997, which Exhibit is incorporated herein by reference.
10. (x) Stock Exchange Agreement between Registrant and Selling Shareholders
for the exchange by the Selling Shareholders of their Class B and
Class C shares of TouchTunes for Series A Preferred shares of Regis-
trant. Reference is made to Exhibit 5 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (xi) Subscription Agreement for the purchase of 100 Series A Preferred
shares of Registrant by the Selling Shareholders. Reference is made
to Exhibit 6 of Registrant's Form 8-K for the month of March 1997,
which Exhibit is incorporated herein by reference.
10. (xii) Shareholder Agreement between Techno Expres S.A., the majority
shareholder of Registrant and the Selling Shareholders, relative to
their shares of Common Stock of Registrant. Reference is made to
Exhibit 7 of Registrant's Form 8-K for the month of March 1997, which
Exhibit is incorporated herein by reference.
10.(xiii) Employment and Non-Competition Agreement between Registrant and Tony
Mastronardi. Reference is made to Exhibit 9 of Registrant's Form 8-K
for the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (xiv) Employment and Non-Competition Agreement between Registrant and Guy
Nathan. Reference is made to Exhibit 10 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (xv) Lease for premises at One Commerce Place, Nun's Island, Verdun
(Quebec), Canada, H3E 1A2 between TouchTunes Digital Jukebox Inc. and
landlord of said premises. Reference is made to Exhibit 10(xv) of
Registrant's Registration Statement on form SB-2, File No. 33-7006,
which Exhibit is incorporated herein by reference.
10. (xvi) OEM Purchase and Development Agreement with Bose Corporation, dated
March 1997. Reference is made to Exhibit 10(xvi) of Registrant's
13
Registration Statement on Form SB-2, File No. 33-7006, which Exhibit
is incorporated herein by reference.
10.(xvii) Jukebox License Office Certificate, dated March 11, 1997. Reference
is made to Exhibit 10(xvii) of Registrant's Registration Statement on
Form SB-2, File No. 33-7006, which Exhibit is incorporated herein by
reference.
10.(xviii)Jukebox License Agreement with the American Society of Composers
Authors and Publishers, Broadcast Music Inc. and SESAC, Inc., dated
March 11, 1997. Reference is made to Exhibit 10(xviii) of
Registrant's Registration Statement on Form SB-2, File No. 33-7006,
which Exhibit is incorporated herein by reference.
10. (xix) Subscription Agreement dated February 11, 1998, by and among Societe
Innovatech du Grand Montreal, Sofinov Societe Financiere d'Innovation
Inc. and TouchTunes Digital Jukebox Inc. for the purchase of up to an
aggregate of $10,000,000 (US) Debentures. Reference is made to
Exhibit 2 of Registrant's Form 8-K for the month of February 1998,
which Exhibit is incorporated herein by reference.
10. (xx) Debenture Put Right Agreement dated February 11, 1998, by and among
Societe Innovatech du Grand Montreal, Sofinov Societe Financiere
d'Innovation Inc. and Technical Maintenance Corporation. Reference
is made to Exhibit 3 of Registrant's Form 8-K for the month of
February 1998, which Exhibit is incorporated herein by reference.
10. (xxi) Amended and Restated Shareholders' Agreement dated February 11, 1998,
by and among Techno Expres S.A., Societe Innovatech du Grand
Montreal, Sofinov Societe Financiere d'Innovation Inc. and Technical
Maintenance Corporation. Reference is made to Exhibit 4 of
Registrant's Form 8-K for the month of February 1998, which Exhibit
is incorporated herein by reference.
10.(xxii) Debenture dated August 5, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of
$700,000.
10.(xxiii)Debenture dated August 5, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of
$700,000.
10.(xxiv) Debenture dated August 5, 1998, registered in the name of Societe
Innovatech du Grand Montreal in the principal amount of $300,000.
10. (xxv) Debenture dated August 5, 1998, registered in the name of Societe
Innovatech du Grand Montreal in the principal amount of $300,000.
10.(xxii) Debenture dated November 2, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of
$700,000.
10.(xxiii)Debenture dated November 2, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of
$700,000.
10.(xxiv) Debenture dated November 2, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of
$700,000.
14
10.(xxv) Debenture dated November 2, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of
$700,000.
10.(xxvi) Debenture dated November 2, 1998, registered in the name of Societe
Innovatech du Grand Montreal in the principal amount of $300,000.
10.(xxv) Debenture dated November 2, 1998, registered in the name of Societe
Innovatech du Grand Montreal in the principal amount of $300,000.
10.(xxviii)Debenture dated November 2, 1998, registered in the name of Societe
Innovatech du Grand Montreal in the principal amount of $300,000.
10.(xxix) Debenture dated November 2, 1998, registered in the name of Societe
Innovatech du Grand Montreal in the principal amount of $300,000.
16. Letter from prior auditor, Armstrong Gilmour Accountancy Corporation,
relative to the information set forth in Item 4 of Registrant's Form
8-K/A for the month of February 1998, which Exhibit is incorporated
herein by reference.
27. Financial Data Schedule.
(b) Reports on Form 8-K
Registrant filed a Form 8-K dated January 12, 2000, reporting on Item 1
during the first quarter of 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TOUCHTUNES MUSIC CORPORATION
Dated: May 12, 2000 Per: /s/ Tony Mastronardi
-----------------------------
Tony Mastronardi
President and Director
Dated: May 12, 2000 Per: /s/ Guy Nathan
-----------------------------
Guy Nathan
Secretary and Director
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 644816
<SECURITIES> 0
<RECEIVABLES> 1108910<F1>
<ALLOWANCES> 100000
<INVENTORY> 1846684
<CURRENT-ASSETS> 5058617
<PP&E> 7211358<F2>
<DEPRECIATION> 2772338
<TOTAL-ASSETS> 16693244
<CURRENT-LIABILITIES> 5801330
<BONDS> 6843614
0
12844
<COMMON> 14659
<OTHER-SE> 2257905
<TOTAL-LIABILITY-AND-EQUITY> 16693244
<SALES> 3608487<F3>
<TOTAL-REVENUES> 3664487<F4>
<CGS> 2546152<F5>
<TOTAL-COSTS> 3822102<F5>
<OTHER-EXPENSES> 2640932
<LOSS-PROVISION> 20000
<INTEREST-EXPENSE> 231558
<INCOME-PRETAX> (2798547)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2798547)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2798547)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.19)
<FN>
<F1>Net of allowance for doubtful accounts
<F2>Net of accumulated depreciation
<F3>Includes jukebox sales, leasing, interest and music service revenue.
<F4>Includes $56,000 of advertising revenue
<F5>Includes cost of revenue and direct operating costs.
</FN>
</TABLE>
