<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934  For the quarterly period ended September 30, 2001

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
    For the transition period from ________ to ___________


                        COMMISSION FILE NO.: 33-55254-447


                          TOUCHTUNES MUSIC CORPORATION
        (Exact name of small business issuer as specified in its charter)


              NEVADA                                     87-0485304
  (State or other jurisdiction of        (I.R.S. Employer Identification Number)
   inorporation or organization)


                              1800 E. SAHARA AVENUE
                                    SUITE 107
                             LAS VEGAS, NEVADA 89104
                    (Address of principal executive offices)

                                (702) 792-7405
                (Issuer's telephone number, including area code)

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.

Yes [X]   No [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: AS OF NOVEMBER 10, 2001, 14,658,644
SHARES OF CLASS A VOTING COMMON STOCK WERE OUTSTANDING.

Transition Small Business Disclosure Format (check one): Yes [ ]  No [X]


<PAGE>

                          TOUCHTUNES MUSIC CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                      PAGE
PART I - FINANCIAL INFORMATION:
<S>                                                                                                   <C>
Item 1. Consolidated Balance Sheets as at September 30, 2001 (unaudited)
        and December 31, 2000........................................................................   3

        Consolidated Statements of Operations for the quarters and the nine-month periods
        ended September 30, 2001 (unaudited) and 2000 (unaudited)....................................   5

        Consolidated Statements of Cash Flows for the  quarters and the nine-month periods
        ended September 30, 2001 (unaudited) and 2000 (unaudited)....................................   6

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations....................................................................  12

PART II - OTHER INFORMATION:

Item 1. Legal Proceedings............................................................................  16

Item 2. Change in Securities.........................................................................  16

Item 3. Defaults Upon Senior Securities..............................................................  16

Item 4. Submission of Matters to a Vote of Security Holders..........................................  16

Item 5. Other Information............................................................................  16

Item 6. Exhibits and Reports on Form 8-K.............................................................  16
</TABLE>


<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

The accompanying unaudited financial statements for the quarter ended September
30, 2001, have been prepared in accordance with the instructions to Form 10-QSB
and, therefore, do not include all information and notes necessary for a
complete presentation of financial position, results of operations, cash flows
and shareholders' equity for the quarter then ended, in conformity with
generally-accepted accounting principles in the United States. 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
and the nine-month period ended September 30, 2001, are not necessarily
indicative of the results that can be expected for the fiscal year ending
December 31, 2001. For further information, refer to the financial statements
and the notes thereto included in the Annual Report for TouchTunes Music
Corporation (the "Company") on Form 10-KSB for the fiscal year ended December
31, 2000.

                          TOUCHTUNES MUSIC CORPORATION
                              FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2001

                           CONSOLIDATED BALANCE SHEETS

[IN U.S. DOLLARS]

<TABLE>
<CAPTION>
                                                                            AS AT             As at
                                                                    SEPTEMBER 30,      December 31,
                                                                             2001              2000
                                                                                $                 $
      ----------------------------------------------------------------------------------------------
                                                                      (UNAUDITED)           (Note*)
      <S>                                                           <C>               <C>

      ASSETS
      CURRENT
      Cash and cash equivalents                                           127,075         4,369,256
      Trade accounts receivable                                         4,213,259         1,929,295
      Other receivables                                                   183,083           653,095
      Prepaid expenses and deposits                                       292,096           452,905
      Inventory                                                         1,474,613         3,961,592
      Current portion of investment in sales-type leases                  933,853         1,086,359
      ----------------------------------------------------------------------------------------------
      Total current assets                                              7,223,979        12,452,502
      ----------------------------------------------------------------------------------------------

      Investment in sales-type leases                                   6,072,363         8,079,415
      Property, plant and equipment, net                                5,588,762         5,665,911
      Intangibles, net                                                    732,331           775,121
      Other assets                                                        648,008           623,269
      ----------------------------------------------------------------------------------------------
                                                                       20,265,443        27,596,218
      ==============================================================================================
</TABLE>


     * Note: The balance sheet as at December 31, 2000, has been derived from
       the audited financial statements at that date but does not include all of
       the information and notes required by generally-accepted accounting
       principles in the United States for complete financial statements.


<PAGE>

     TOUCHTUNES MUSIC CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                                    [CONT'D]

<TABLE>
<CAPTION>
                                                                            AS AT           As at
                                                                    SEPTEMBER 30,    December 31,
                                                                             2001            2000
                                                                                $               $
     ---------------------------------------------------------------------------------------------
                                                                      (UNAUDITED)         (Note*)
     <S>                                                             <C>              <C>
     LIABILITIES AND SHAREHOLDERS' DEFICIENCY
     CURRENT LIABILITIES
     Bank indebtedness (note 5)                                           200,000               -
     Accounts payable and accrued liabilities                           4,663,994       3,843,803
     Income taxes payable                                                  58,886         144,071
     Other liabilities                                                    113,377          28,453
     Current portion of long-term debt (note 5)                         5,972,812       4,888,168
     Current portion of capital lease obligations                         119,138         191,978
     ---------------------------------------------------------------------------------------------
     TOTAL CURRENT LIABILITIES                                         11,128,207       9,096,473
     ---------------------------------------------------------------------------------------------

     Long-term debt (note 5)                                            1,034,795       3,611,653
     Capital lease obligations                                             72,533         164,443
     ---------------------------------------------------------------------------------------------
                                                                       12,235,535      12,872,569
     ---------------------------------------------------------------------------------------------

     Series B preferred stock, $0.001 par value
       Authorized: 10,000,000 shares
       Issued and outstanding: 8,888,889 shares
       Redeemable, retractable and convertible
       Redeemable at $34,487,671                                        25,315,355      22,323,575
     ----------------------------------------------------------------------------------------------

     SHAREHOLDERS' DEFICIENCY
     Series A preferred stock, $0.001 par value
       Authorized: 15,000,000 shares
       Issued and outstanding: 12,843,960 shares                            12,844          12,844
     Class A voting common stock, $0.001 par value
       Authorized: 50,000,000 shares
       Issued and outstanding: 14,658,644 shares                            14,659          14,659
     Additional paid-in capital                                         21,321,665      24,313,446
     Accumulated deficit                                              (38,634,615)    (31,940,875)
     ----------------------------------------------------------------------------------------------
     TOTAL SHAREHOLDERS' DEFICIENCY                                   (17,285,447)     (7,599,926)
     ----------------------------------------------------------------------------------------------
                                                                        20,265,443      27,596,218
     ==============================================================================================
</TABLE>

     SEE ACCOMPANYING NOTES.

     * Note: The balance sheet as at December 31, 2000, has been derived from
       the audited financial statements at that date but does not include all of
       the information and notes required by generally-accepted accounting
       principles in the United States for complete financial statements.


<PAGE>

     TOUCHTUNES MUSIC CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

[In U.S. dollars]

<TABLE>
<CAPTION>

                                                                    QUARTER       Nine-month         Quarter     Nine-month
                                                                      ENDED     period ended           ended   period ended
                                                               SEPTEMBER 30,    September 30,  September 30,  September 30,
                                                                       2001             2001            2000           2000
                                                                          $                $               $              $
   --------------------------------------------------- --------------------- ---------------- --------------- --------------
                                                                (UNAUDITED)      (unaudited)     (unaudited)    (unaudited)
   <S>                                                          <C>              <C>             <C>             <C>
   GROSS REVENUES                                                 4,615,991       14,647,273       4,783,424     12,417,292
   --------------------------------------------------- --------------------- ---------------- --------------- --------------

   EXPENSES
   Cost of jukebox revenues
     and direct operating costs                                   2,795,528        9,081,444       3,312,899      8,551,292
   Research and development                                         867,823        1,880,235         452,098      1,510,388
   General and administrative                                     1,359,892        4,045,308       1,107,525      3,050,233
   Sales and marketing                                            1,127,983        3,926,855       1,310,060      4,020,993
   Financial expenses                                               260,379          878,982          85,362        576,866
   Depreciation and amortization                                    533,103        1,502,356         534,970      1,677,511
   Foreign exchange losses (gains)                                   50,875           25,833          (7,342)         7,106
   --------------------------------------------------- --------------------- ---------------- --------------- --------------
                                                                  6,995,583       21,341,013       6,795,572     19,394,389
   --------------------------------------------------- --------------------- ---------------- --------------- --------------

   NET LOSS AND COMPREHENSIVE LOSS                                2,379,592        6,693,740       2,012,148      6,977,097
   Dividends and accretion of mandatorily
     redeemable Series B preferred stock                          1,008,219        2,991,781       1,008,219      1,479,452
   --------------------------------------------------- --------------------- ---------------- --------------- --------------
   NET LOSS ATTRIBUTABLE
     TO COMMON SHAREHOLDERS                                       3,387,811        9,685,521    3,020,367         8,456,549
   =================================================== ===================== ================ =============== ==============

   Per common share
   Basic and diluted net loss per share (note 4)                       0.23             0.66            0.21           0.58
   =================================================== ===================== ================ =============== ==============
</TABLE>

   SEE ACCOMPANYING NOTES.


<PAGE>

TOUCHTUNES MUSIC CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

[In U.S. dollars]

<TABLE>
<CAPTION>

                                                              QUARTER      Nine month         Quarter       Nine month
                                                                ENDED    period ended           ended     period ended
                                                        SEPTEMBER 30,   September 30,   September 30,    September 30,
                                                                 2001            2001            2000             2000
                                                                    $               $               $                $
----------------------------------------------------- ---------------- -------------- --------------- ---------------
                                                          (UNAUDITED)    (unaudited)     (unaudited)     (unaudited)
<S>                                                       <C>            <C>             <C>             <C>
OPERATING ACTIVITIES
Net loss and comprehensive loss                            (2,379,592)    (6,693,740)     (2,012,148)     (6,977,097)

Adjustments to reconcile net loss
to net cash used in operating activities:
  Depreciation and amortization                               533,103      1,502,356         534,970       1,677,511
  Gain on buyout of jukeboxes
    under operating leases                                    (41,964)       (87,128)             --              --

Changes in operating assets and liabilities:
  Accounts and other receivables                              362,455     (1,813,952)       (219,336)       (737,006)
  Inventory                                                 1,426,017      2,486,979        (449,804)     (1,701,739)
  Prepaid expenses and deposits                               (58,059)       160,809         (32,391)        (35,490)
  Other assets                                                   (275)       (24,739)       (101,260)         73,897
  Accounts payable and accrued liabilities                    (28,315)       820,191         116,611         150,778
  Income taxes payable                                         (4,298)       (85,185)             --              --
  Other liabilities                                           104,530         84,924              --              --
----------------------------------------------------- ---------------- -------------- --------------- ---------------
CASH USED IN OPERATING ACTIVITIES                             (86,398)    (3,649,485)     (2,163,358)     (7,549,146)
----------------------------------------------------- ---------------- -------------- --------------- ---------------

INVESTING ACTIVITIES
Disposal of (investment in) sales-type leases                 451,362      2,159,558      (2,244,440)     (6,717,588)
Purchase of intangibles                                      (112,256)      (239,733)       (156,599)       (208,857)
Purchase of other property, plant, and equipment             (523,691)    (1,091,621)        (82,270)       (486,975)
Disposal of (purchase of) jukeboxes as capital assets         (33,782)        36,064              --              --
Increase in other assets                                           --             --          29,906          91,434
----------------------------------------------------- ---------------- -------------- --------------- ---------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES              (218,367)       864,268      (2,453,403)     (7,321,986)
----------------------------------------------------- ---------------- -------------- --------------- ---------------

FINANCING ACTIVITIES
Advance from private placement                                     --             --              --       1,000,000
Proceeds from private placement                                    --             --              --      14,000,000
Share issue costs                                                  --             --              --        (164,097)
Decrease in other liabilities                                      --             --          86,219          60,311
Increase in advance from stockholder                               --             --              --       3,000,000
Increase in bank indebtedness                                      --        350,000              --              --
Repayment of bank indebtedness                               (150,000)      (150,000)             --              --
Increase in unsecured loan                                  1,034,795      1,034,795              --              --
Increase in long-term debt                                         --             --       2,664,000       6,044,000
Repayment of long-term debt                                  (638,489)    (2,527,009)       (591,135)     (1,309,756)
Increase (decrease) in capital lease obligations               17,719         17,719          35,814              --
Repayment of capital lease obligations                        (44,760)      (182,469)             --        (101,389)


<PAGE>

----------------------------------------------------- ---------------- -------------- --------------- ---------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES               219,265     (1,456,964)      2,194,897      22,529,069
----------------------------------------------------- ---------------- -------------- --------------- ---------------

NET INCREASE (DECREASE)
     IN CASH AND CASH EQUIVALENTS                            (85,500)    (4,242,181)     (2,421,864)       7,657,937
Cash and cash equivalents, beginning of period                212,575      4,369,256      10,799,703         719,902
----------------------------------------------------- ---------------- -------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                      127,075        127,075       8,377,839       8,377,839
===================================================== ================ ============== =============== ===============

SUPPLEMENTARY INFORMATION
Interest paid                                                 196,024        817,589          83,388         588,051

SEE ACCOMPANYING NOTES.

</TABLE>

<PAGE>

TOUCHTUNES MUSIC CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

September 30, 2001
[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 "Digital Jukebox"), which utilizes digitally-compressed audio technology to
distribute music titles securely 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.

As described in Note 5 below, since September 30, 2001, the Company has not
satisfied the terms of a covenant regarding net shareholders' equity set
forth in the agreements with the National Bank of Canada governing the
Company's term loan facilities and operating line of credit. More
specifically, this covenant requires the Company to maintain a net
shareholders' equity amount, as defined in the agreements, of at least
$10 million. The Company is currently negotiating with the National Bank of
Canada to amend the terms of this covenant. See also Part II, Item 3 of this
Quarterly Report on Form 10-QSB for further information regarding the
Company's failure to satisfy the terms of this covenant.

The Company has incurred operating losses and negative cash flows from
operations since the inception of operations. The Company's ability to continue
as a going concern is dependent principally upon its ability to achieve
profitable operations, generate positive cashflow from operations, repay the
current portion of long-term debt, be in compliance with its debt covenants and
obtain further financing. The outcome of these matters cannot be predicted at
this time.

The consolidated financial statements at September 30, 2001, and for the
quarters and the nine-month periods ended September 30, 2000 and 2001, 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, 2000.

The results of operations for the quarter and the nine-month period ended
September 30, 2001, are not necessarily indicative of the results for the fiscal
year ending December 31, 2001, or any other future periods.


<PAGE>

TOUCHTUNES MUSIC CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

September 30, 2001
[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.

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DERIVATIVES AND HEDGING ACTIVITIES

Effective January 1, 2001, the Company adopted the Financial Accounting
Standards Board SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, and SFAS No. 137, DEFERRAL OF EFFECTIVE DATE. These statements
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income.

If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of the derivative are either offset against the change in fair
value of assets, liabilities, or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value is immediately
recognized in earnings.

The adoption of this standard on January 1, 2001, did not have a material impact
on the Company's financial position or results of operations for the current
period.

The Company does not participate in any hedging activities.

GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
BUSINESS COMBINATIONS and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment testing in
accordance with the statements. Other intangible assets will continue to be
amortized over their useful lives.

The Company is studying the application of this standard but has not yet
determined its impact.

COMPARATIVE FIGURES

Certain figures in the 2000 financial statements have been reclassified to
conform with the presentation used in 2001.


<PAGE>

TOUCHTUNES MUSIC CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

September 30, 2001
[In U.S. dollars]

4.  BASIC AND DILUTED LOSS PER SHARE

The calculation of basic and diluted net loss per share for the quarters and the
nine-month periods ended September 30, is as follows:

<TABLE>
<CAPTION>

                                                    QUARTER      Nine-month          Quarter       Nine-month
                                                      ENDED    period ended            ended     period ended
                                              SEPTEMBER 30,   September 30,    September 30,    September 30,
                                                       2001            2001             2000             2000
                                                          $               $                $                $
------------------------------------------- ---------------- --------------- ---------------- ----------------
<S>                                           <C>              <C>              <C>              <C>
Loss to common shareholders                       3,387,811       9,685,521        3,020,367        8,456,549
=========================================== ================ =============== ================ ================
Weighted-average shares outstanding used
   to compute basic and diluted net loss
   per share                                     14,658,644      14,658,644       14,658,644       14,658,644
------------------------------------------- ---------------- --------------- ---------------- ----------------
Basic and diluted net loss per share                   0.23            0.66             0.21             0.58
=========================================== ================ =============== ================ ================
</TABLE>

The options to purchase the Company's Class A voting common stock were not
included in the computation of the diluted loss per share, as the effect would
be antidilutive.

The impact of the conversion of 12,843,960 shares of the Company's Series A
preferred stock and of 8,888,889 shares of the Company's Series B preferred
stock were not included in the computation of the diluted loss per share, as
the effect would be antidilutive.

5.  BANK INDEBTEDNESS AND LONG-TERM DEBT

The Company's long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                 SEPTEMBER 30, 2001                December 31, 2000
                                                                  $                                $
----------------------------------- -------------------------------- --------------------------------
<S>                                              <C>                               <C>
Small business loan                                              --                           44,459
Term loan                                                        --                           88,918
CED term loan (i) (iii)                                     255,164                          333,446
Jukebox term loan (i) (iv)                                5,717,648                        8,032,998
Unsecured loan (ii)                                       1,034,795                               --
----------------------------------- -------------------------------- --------------------------------
Total                                                     7,007,607                        8,499,821
Less: Current portion                                    (5,972,812)                      (4,888,168)
----------------------------------- -------------------------------- --------------------------------
Total                                                     1,034,795                        3,611,653
=================================== ================================ ================================
</TABLE>


<PAGE>

(i)      These term loan facilities are with the National Bank of Canada (the
         "Bank") and are collateralized by charges on present and future assets
         of the Company.

(ii)     On July 25, 2001, the Company's Board of Directors approved an
         unsecured back-up loan facility commitment (the "Facility") provided
         by two current shareholders of the Company, CDP Capital Communications
         and CDP Sofinov, up to a maximum of $5 million. CDP Capital
         Communications and CDP Sofinov, subsidiaries of the Caisse de depot et
         placement du Quebec, Canada's largest fund manager, provided $3 million
         and $2 million, respectively, to the Facility. The parties entered
         into a binding term sheet and expect to enter into a definitive
         agreement in the near future. Under the terms of the agreement, the
         Facility must be reimbursed within 18 months of an initial drawdown and
         all amounts drawn and outstanding on the Facility are subject to an
         interest rate of 20% per annum. After an initial $1.5 million has been
         drawn on the Facility, the rate at which all outstanding shares of
         Series B preferred stock of the Company held by CDP Capital
         Communications and CDP Sofinov, that may be converted into shares of
         Class A voting common stock of the Company, will be adjusted from $2.25
         per share of Series B preferred stock (based upon the original purchase
         price for shares of Series B preferred stock) for each share of Class A
         voting common stock to be issued to $1.50 per share of Series B
         preferred stock for each share of Class A voting common stock to be
         issued. In the event the Company defaults on repayment of the Facility,
         the amount of the Facility outstanding at the time of such default
         shall be convertible, at the option of CDP Capital Communications and
         CDP Sofinov, into shares of Class A voting common stock of the Company
         at a conversion rate of $0.50 per share.

(iii)    The CED term loan facility (the "CED Term Loan") is a term loan under
         the Loan Program for Technology Firms sponsored by Canada Economic
         Development. The CED term loan bears interest at the Canadian prime
         rate of the Bank plus 3.50%, representing a rate of 8.75% as at
         September 30, 2001. Principal repayment is over a thirty-six month
         period which commenced in February 2001 in equal monthly payments of
         $9,262. The CED Term Loan is collateralized by a certificate of
         guarantee issued by Canada Economic Development covering 80% of the net
         loss risk and by a charge in the amount of $333,444 on all moveable
         property. The CED Term Loan is collateralized by a guarantee in the
         amount of $1,167,056 in favour of the Bank, collateralized by a first
         charge on moveable property, both corporeal and non-corporeal.

(iv)     The Jukebox term loan facility (the "Jukebox Term Loan") represents, in
         the aggregate, $10,012,000 and was entered into for purposes of
         financing the cost of manufacturing Digital Jukeboxes. The security
         provided to the Bank by the Company was in the form of charges on past,
         present and future assets of the Company. The Jukebox Term Loan bears
         interest at the U.S. prime rate of the Bank plus 2.55%, representing
         a rate of 9.05% as at September 30, 2001. Additional compensation must
         be paid to the Bank each year equal to 0.5% of the Company's annual
         gross revenues. The Jukebox Term Loan is also collateralized by a
         certificate of guarantee issued jointly by Investissement Quebec and
         the Export Development Corporation covering 67% of the net loss risk
         and a charge on moveable property in the amount of $10,400,000. Each
         Jukebox Term Loan is granted for a maximum term of 48 months.

The Company's bank indebtedness consists of an operating line of credit (the
"Line of Credit") in the amount of $1 million. The security provided to the
Bank by the Company was in the form of charges on past, present and future
assets of the Company. The Line of Credit bears interest at the U.S. prime
rate of the Bank plus 1.25%, representing a rate of 7.75% as at September 30,
2001. The Line of Credit is collateralized by a charge on moveable property
in the amount of $2,250,000.

<PAGE>

On September 20, 2001, the Company obtained an increase in its Line of Credit
from $500,000 to $1 million.

The agreements between the Company and the Bank governing the CED Term Loan,
the Jukebox Term Loan, and the Line of Credit contain a covenant that
requires the Company to maintain a net shareholders' equity, as defined in
the agreement, of at least $10 million (the "Covenant"). If the Company fails
to comply with the Covenant, the Bank has the right to demand full repayment
of the loans outstanding under the CED Term Loan and Jukebox Term Loan, as
well as any funds drawn down on the Line of Credit. As at September 30, 2001,
the Company did not satisfy, and has not since complied with, the terms of
the Covenant.

The Company is currently negotiating with the Bank to amend, among other
things, the terms of the Covenant under the existing agreements for the CED
Term Loan, the Jukebox Term Loan, and the Line of Credit.

The Company anticipates executing revised agreements in the near future. The
Company cannot be certain, however, that the revised agreements will be executed
at all. Accordingly, in these financial statements, the aggregate amount of
the loans outstanding, as at September 30, 2001, under the CED Term Loan and
Jukebox Term Loan, and the amount drawn down on the Line of Credit as at
September 30, 2001, have been classified as current liabilities.

See also Part II, Item 3 of this Quarterly Report of Form 10-QSB for further
information regarding the Company's failure to satisfy the terms of the
Covenant.


6.  STOCK OPTIONS

On April 19, 2000, the Company's Board of Directors authorized a Long-Term
Incentive Plan (the "Plan"), which provides for the grant to employees,
officers, consultants, and outside contractors of various types of stock options
and common stock.

On April 19, 2000, September 12, 2000, December 12, 2000, March 16, 2001 and May
10, 2001, the Board of Directors granted stock options to purchase an aggregate
of 2,510,018 shares, 571,500 shares, 73,000 shares, 862,630 shares and 175,000
shares, respectively, of the Company's Class A voting common stock, with vesting
provisions ranging up to four years. Options granted under the Plan are
exercisable for a period of ten years, except for options granted to
shareholders beneficially owning 5% or more of the Company's common stock, which
are exercisable over a period of five years. On September 30, 2001, an aggregate
of 3,393,962 shares of Class A voting common stock were reserved for additional
future issuance under the Plan. The Plan was approved by shareholders on
February 8, 2001.


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 OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. 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 COMPANY'S CONTROL.

The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements, including the notes therein,
contained in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2000.


<PAGE>

BACKGROUND AND FINANCIAL OVERVIEW

         The Company was a development-stage company until September 1998. Prior
to September 1998, the Company's financial resources were used to finance the
development of its Digital Jukebox. Revenues, since September 1998, have been
generated from sales and leases of the Digital Jukebox to jukebox operators in
the United States, as well as from the music service contracts associated with
such sales and leases of the Digital Jukebox. As at September 30, 2001, the
Company had delivered a total of approximately 4,200 Digital Jukeboxes as
compared with 2,600 Digital Jukeboxes delivered as at September 30, 2000.
Management plans to devote significant resources to continue its aggressive
sales and marketing efforts within the jukebox industry. Management also intends
to continue its development activities in applying its technologies to other
music-on-demand products and applications to other industries.

         The Company plays approximately 8.5 million songs to an audience of
approximately three million people each month. Management expects the base of
installed Digital Jukeboxes to continue to grow, thereby increasing the number
of plays and audience exposure. This growth is expected to establish the
Digital Jukebox as a significant promotional medium for record-label companies
and their artists. These factors should assist the Company in obtaining and/or
renewing new agreements with various record companies.

         Effective April 1, 2001, the Company increased the selling price of its
Digital Jukebox to $6,695 from $5,995, to offset increases in costs related to
production and other direct and indirect costs.

         As part of its sales and market penetration strategy, the Company has
entered into Distributor Agency Agreements with ten key distributors throughout
the United States and has developed new sales programs. However, there can be no
assurances that the Company's sales and market penetration strategies will be
successful in increasing sales revenues.

RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 2001 COMPARED TO THE THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 2000

         The Company incurred a net loss of approximately $2,380,000 during the
three-month period ended September 30, 2001 ("the third quarter 2001"), as
compared to a net loss of approximately $2,012,000 for the corresponding
three-month period in 2000 ("the third quarter 2000").

         The net loss attributable to common shareholders was approximately
$3,388,000 for the third quarter 2001, as compared to approximately $3,020,000
for the third quarter 2000. The non-cash charge for dividends and accretion of
the mandatorily-redeemable Series B preferred stock of the Company that was
issued in May 2000, was approximately $1,008,000 for the third quarter 2001,
and was equal to the non-cash charge for the same item for the third quarter
2000.

         REVENUES

         Revenues from the Digital Jukebox decreased by approximately $167,000,
or 3%, from approximately $4,783,000 in the third quarter 2000 to approximately
$4,616,000 in the third quarter 2001. This decrease is partially due to the
decrease in the number of jukeboxes sold in the third quarter 2001, as compared
to the third quarter 2000. The decrease is offset by the increase in the number
of jukeboxes installed in the Company's Digital Jukebox network, thus generating
recurring music and service revenues. Additionally, there were no advertising
revenues earned in the third quarter 2001, as compared to approximately $76,000
in the third quarter 2000.



<PAGE>

         COST OF DIGITAL JUKEBOX REVENUES AND DIRECT OPERATING COSTS

         Cost of Digital Jukebox revenues and direct operating costs decreased
by approximately $517,000, or 16%, from approximately $3,313,000 in the third
quarter 2000 to approximately $2,796,000 during the third quarter 2001. This
decrease is consistent with the overall cost-savings approach adopted by the
Company in fiscal 2001. For the third quarter 2001, as compared to the third
quarter 2000, such cost savings include reduced communication expenses,
resulting from the increased transition by operators from the use of telephone
lines to the Internet.

         The decrease in the cost of Digital Jukebox revenues and direct
operating costs is offset by the increase in the number of songs played over the
Company's Digital Jukebox network, which resulted in the increased cost of
royalties paid to record labels and publishers.

         GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative costs increased by approximately $252,000,
or 23%, from approximately $1,108,000 in the third quarter 2000 to approximately
$1,360,000 in the third quarter 2001. This increase principally resulted from an
increase in the provisions for doubtful accounts and for discontinued
inventories and partially resulted from an increase in professional fees to
lawyers in respect of the Company's new operating line of credit and unsecured
back-up loan facility, which are described in Note 5 to the Company's financial
statements contained in Item 1 of this Quarterly Report on Form 10-QSB ("Form
10-QSB").

         RESEARCH AND DEVELOPMENT EXPENSES

         Research and development expenses increased by approximately $416,000,
or 92%, from approximately $452,000 in the third quarter 2000 to approximately
$868,000 in the third quarter 2001. The increase for research and development
expenses was principally due to a non-recurring fee in the amount of $525,000
for the development of the Company's new product, its wall-mounted Digital
Jukebox. This increase was partially offset by the capitalization of salaries
for certain projects and reductions in the technical and operational workforce.

         SALES AND MARKETING EXPENSES

         Sales and marketing costs decreased by approximately $182,000, or 14%,
from approximately $1,310,000 in the third quarter 2000 to approximately
$1,128,000 in the third quarter 2001. This decrease was principally due to
reductions in the sales force and in the related travel expenses in the third
quarter 2001, as compared to the third quarter 2000.

         FINANCIAL EXPENSES

         Financial expenses increased by approximately $175,000, or 206%, from
approximately $85,000 in the third quarter 2000 to approximately $260,000 in the
third quarter 2001. This increase in financial expenses was due primarily to
increased interest charges, resulting from higher outstanding balances in the
Company's long-term debt, and a 20% interest charge on the Company's back-up
line of credit, which amounted to approximately $45,000 for the third quarter
2001, as compared to nil for the third quarter 2000. This increase in the
Company's financial expenses was partially offset by the overall decline in
interest rates.

         DEPRECIATION AND AMORTIZATION EXPENSES

         Depreciation and amortization costs decreased marginally by
approximately $2,000, or 0.37%, from approximately $535,000 in the third quarter
2000 to approximately $533,000 in the third quarter 2001. This decrease in
depreciation and amortization costs resulted primarily from fewer Digital
Jukeboxes held by the Company as capital assets.



<PAGE>

         FOREIGN EXCHANGE LOSSES

         The Company experienced a foreign exchange loss of approximately
$50,000 during the third quarter 2001, as compared to a foreign exchange gain of
approximately $7,000 during the third quarter 2000. Foreign exchange gains or
losses result from the Company paying certain expenditures in currencies other
than the United States dollar. The main foreign currency in which the Company's
wholly-owned subsidiary, TouchTunes Digital, transacts is the Canadian dollar.

         SEASONALITY

         The Company has experienced lower sales volume during the summer
vacation period in the months of June, July and August, as well as during
national holiday periods. These seasonal fluctuations may result in significant
decreases in the Company's results of operations and may have material effects
on its financial condition.

         LIQUIDITY AND CAPITAL RESOURCES

         Cash used in operating activities was approximately $86,000 for the
third quarter 2001, as compared to approximately $2.2 million for the third
quarter 2000. The decrease in cash used of approximately $2 million was
attributable primarily to a significant reduction in the level of inventory
held by the Company combined with a reduction in accounts receivable.

         Cash used in investing activities was approximately $218,000 for the
third quarter 2001, as compared to approximately $2.5 million for the third
quarter 2000. The decrease in cash used of approximately $2.2 million was
attributable primarily to the reduction in the number of sales-type leases
issued by the Company during the third quarter 2001, as compared to the third
quarter 2000.

         Cash provided by financing activities for the third quarter 2001 was
approximately $219,000, as compared to approximately $2.2 million for the third
quarter 2000. During the third quarter of 2001, the Company drew down $1 million
on its unsecured back-up loan facility. During the third quarter of 2000, the
Company's long-term debt increased by approximately $2.7 million to fund Digital
Jukebox lease agreements.

         On September 20, 2001, the Company obtained an increase in its
operating line of credit from $500,000 to $1 million.

         See Part II, Item 3 below for a discussion regarding the Company's
failure to comply with the terms of a covenant regarding net shareholders'
equity set forth in the aggrements with the National Bank of Canada governing
the Company's term loan facilities and operating line of credit. More
specifically, this covenant requires the Company to maintain a net
shareholders' equity amount, as defined in the agreements, of at least $10
million. The Company is currently negotiating with the National Bank of
Canada to amend the terms of this covenant.

         The Company estimates that, during the next 12 months, it needs to
raise approximately $5 million in order to cover all of its projected operating
costs, to fund Digital Jukebox lease


<PAGE>

agreements and to expand its sales and marketing activities, as well as its
research and development activities. As described in Note 5 to the Company's
financial statements contained in Item 1 of this Form 10-QSB, the Company
obtained a $5 million unsecured back-up loan facility, which the Company
expects will provide it with sufficient funds to carry on the foregoing
activities over the next 12 months. See also Note 2 to the Company's
financial statements contained in Item 1 of this Form 10-QSB.

                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS  Not Applicable

ITEM 2.  CHANGE IN SECURITIES  Not Applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         The agreements between the Company and the National Bank of Canada
(the "Bank") governing the CED Term Loan, the Jukebox Term Loan, and the Line
of Credit, each as defined in Note 5 to the Company's financial statements
set forth in Item 1 of this Form 10-QSB, contain a covenant that requires the
Company to maintain a net shareholders' equity, as defined in the agreement,
of at least $10 million (the "Covenant"). If the Company fails to comply with
the Covenant, the Bank has the right to demand full repayment of the loans
outstanding under the CED Term Loan and the Jukebox Term Loan, as well as any
funds drawn down on the Line of Credit. As of November 14, 2001,
approximately $5,770,000 (in the aggregate) is outstanding under the CED Term
Loan and the Jukebox Term Loan and the Company has drawn down $500,000 on the
Line of Credit.

         Since September 30, 2001, the Company has not satisfied the terms of
the Covenant. The Company is currently negotiating with the Bank to amend,
among other things, the terms of the Covenant under the existing agreements
for the CED Term Loan, the Jukebox Term Loan, and the Line of Credit. The
Company anticipates executing revised agreements in the near future. The
Company cannot be certain, however, that the revised agreements will be
executed at all.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  Not Applicable

ITEM 5.  OTHER INFORMATION

         The Company was issued U.S. Patent No. 6,308,204 entitled "Method of
Communications for an Intelligent Audiovisual Playback System". This patent
broadly covers jukebox devices that can access remote servers through a
distribution network, in which the server is able to provide new operating
software to the jukebox device.

         The foregoing description is qualified in its entirety by reference to
the Company's press release dated November 9, 2001, regarding the issuance of
U.S. Patent No. 6,308,204, a copy of which is filed hereto as Exhibit 99.1.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  The exhibits listed on the Index of Exhibits of this quarterly
              report are filed herewith or incorporated herein by reference to
              other filings, as specified in the Index of Exhibits.

         (b)  The Company has not filed any reports on Form 8-K for the
              three-month period ended September 30, 2001.


<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      TOUCHTUNES MUSIC CORPORATION


Dated: November 14, 2001              Per: /s/ Tony Mastronardi
                                           -------------------------------------
                                           Tony Mastronardi
                                           Chief Executive Officer and Director


Dated: November 14, 2001              Per: /s/ Matthew Carson
                                           -------------------------------------
                                           Matthew Carson
                                           Vice President Finance and
                                           Chief Financial Officer


<PAGE>


                                INDEX OF EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                              DESCRIPTION
-------- ----------------------------------------------------------------------
<S>      <C>
3.1      Second Amended and Restated Articles of Incorporation. Reference is
         made to Exhibit 3.1 of the Company's Quarterly Report on Form 10-QSB,
         for the quarterly period ended September 30, 2000, filed on November
         20, 2000, which Exhibit is incorporated herein by reference.

3.2      Bylaws. Reference is made to Exhibit 3.1 of the Company's Registration
         Statement on Form SB-2, filed on June 19, 1997, which Exhibit is
         incorporated herein by reference.

99.1     The Company's press release dated November 9, 2001.
</TABLE>