I'm sure all of you have read this before, but I think it might be worth a re-read.
Item 2. Acquisition or Disposition of Assets.
Acquisition of Assets - the Registrant, through a subsidiary
corporation, Compact Connection, Inc., a Delaware corporation, ("CCI"), acquired
substantially all of the assets of Compact Connection, Inc., an unaffiliated
Nevada corporation ("Seller"), effective at the close of business on April 30,
1998. The Registrant intends to utilize all such assets to operate the former
business of Seller as the business of CCI.
The assets of Seller consist primarily of equipment, distributor
contracts, tradenames and trademarks, and goodwill. The business involves the
direct-music marketing of compact disks and cassettes through the use of a
music card that allows purchasers of the card the ability to buy a specific
number of compact disks or cassettes from over 200,000 titles, including the
music industry's latest top releases, at "below-retail" prices. Orders are taken
over a toll-free number and are delivered via mail. Music cards can be purchased
directly from the business or from authorized distributors.
In exchange for the assets, the Registrant agreed to issue 6,000,000
shares of restricted common stock of the Registrant to the Seller upon
completion of the audit of the financial statements of Seller. An additional
number of shares of restricted common stock of the Registrant may be issued to
Seller if, as of April 30, 2000, the average of the daily closing price of the
Registrant's common stock for the fifteen (15) consecutive business days before
such date is below $2.50 per share (subject to adjustment for any stock splits
or stock dividends).
If, at any time after closing, Seller is unable to provide audited
financial statements, the Registrant shall be entitled to terminate and unwind
the transaction by way of rescission. The Registrant shall also be entitled to
terminate and unwind this transaction by way of rescission should the audited
financial statements of Seller vary materially from any unaudited financial
information previously provided by Seller.
Pursuant to an Addendum to the Agreement dated April 24, 1998, the
Registrant agreed to provide, or cause to be provided, $250,000 in working
capital, and up to $2,000,000 in additional funding for such specific purposes
as may be requested by the Board of Directors of CCI (the Registrant's
subsidiary).
From what I gather, it would seem that TSIG already has the most important part of the deal, the license agreement, and access to current cardholders etc. As far as distributers go, it appears TSIG has already put into place a new distributor (check their latest press release ie. Vally Media). At the time people were wondering why they did this, but now it becomes much clearer. They could potential acquire the CCI name, and card, have a distributer in place, and if the audit is not satisfactory can get out of the deal, only paying 1% of net profits for exclusive CCI rights. Not a bad deal if you ask me. I think this is a stellar move by management, and in my opinion represents the workings of seasoned veterans. The beauty of this story is that with everyone focusing on the cd internet site, nobody is paying attention to the teleservices part of this company. Although it may not be as flashy, it can still bring in big revenues. Only time will tell,but by the year 2000, I certainly expect the price of TSI to be above $2.50 (even if we do end up buying the assets of CCI).
ALl the best
Gennaro |
