<Page>


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

                                    FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
                         For the quarterly period ended September 30, 2005

[  ]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 registrant as specified in its charter)


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


                                3, COMMERCE PLACE
                                    4TH FLOOR
                                MONTREAL, QUEBEC
                                 CANADA, H3E 1H7
                    (Address of principal executive offices)

                                (514) 762 -6244
                                ---------------
                         (Registrant's telephone number)


Indicate by a check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ___

Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes__ No _X_.



State the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: As of November 14, 2005,
14,827,394 shares of Class A voting common stock were outstanding.







<Page>



                          TOUCHTUNES MUSIC CORPORATION

                                      INDEX


<Table>
<Caption>

                                                                                                           Page
                                                                                                           ----
<S>      <C>                                                                                               <C>
PART I - FINANCIAL INFORMATION:

Item 1.  Consolidated Balance Sheets (unaudited) as at September 30, 2005
         and December 31, 2004.......................................................................        1

         Consolidated Statements of Operations and Comprehensive Income (loss) (unaudited)
         for the three-month and the nine-month periods ended September 30, 2005 and 2004............        3

         Consolidated Statements of Cash Flows (unaudited) for the three-month and the nine-month
         periods ended September 30, 2005 and 2004...................................................        4

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................................................       11

Item 3.  Quantitative and Qualitative Disclosures About Market Risk and Supplementary Data...........       20


Item 4.  Controls and Procedures ....................................................................       21



PART II - OTHER INFORMATION:


Item 6.  Exhibits and Reports on Form 8-K............................................................       21

Signatures...........................................................................................       22

Certifications.......................................................................................       25
</Table>



<Page>

                         PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

The accompanying unaudited financial statements for the quarter ended September
30, 2005 have been prepared in accordance with the instructions to Form 10-Q
and, therefore, do not include all information and notes 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 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
ended September 30, 2005 are not necessarily indicative of the results that can
be expected for the fiscal year ending December 31, 2005. 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-K/A, for the fiscal year ended December 31, 2004. Note that all dollar
amounts set forth in this quarterly report on Form 10-Q are in United States
dollars, except where otherwise indicated, and references herein to "dollars" or
"$" are to United States dollars and references to "CDN" are to Canadian
dollars.


                          TOUCHTUNES MUSIC CORPORATION
                              FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005

                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
      [In U.S. dollars]                                                                AS AT                    AS AT
                                                                          SEPTEMBER 30, 2005        DECEMBER 31, 2004
                                                                                           $                        $
      ---------------------------------------------------------------------------------------------------------------
      <S>                                                                 <C>                      <C>
                                                                                                              (Note*)
      ASSETS (note 5)
      CURRENT
      Cash and cash equivalents                                                      159,156                  780,897
      Trade accounts receivable, net of provision for
      doubtful accounts of $1,201,623 (2004-$1,095,076)                            7,551,776                6,597,194
      Other receivables                                                              363,946                  415,656
      Income taxes receivable                                                         84,505                       --
      Prepaid expenses and deposits                                                1,749,602                1,166,821
      Inventory                                                                    6,006,509                4,284,416
      Investment in sales-type leases                                                 27,916                  619,806
      Derivative asset (note 8)                                                      183,451                       --
      Current discounted receivable                                                  184,128                  125,546
      ---------------------------------------------------------------------------------------------------------------
      TOTAL CURRENT ASSETS                                                        16,310,989               13,990,336
      ---------------------------------------------------------------------------------------------------------------

      Discounted receivable                                                        1,742,238                1,749,784
      Property, plant and equipment, net                                           1,958,092                2,021,679
      Intangibles                                                                    128,458                  221,669
      Other assets                                                                   637,938                  579,417
      ---------------------------------------------------------------------------------------------------------------
                                                                                  20,777,715               18,562,885
      ===============================================================================================================
</Table>


                                       1

<Page>




                          TOUCHTUNES MUSIC CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                                    [CONT'D]

<Table>
<Caption>
                                                                            AS AT                  As at
                                                               SEPTEMBER 30, 2005      December 31, 2004
                                                                                $                      $
     ---------------------------------------------------------------------------------------------------
     <S>                                                   <C>                       <C>
                                                                                                 (Note*)
     LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES
     Bank indebtedness                                                  2,534,771                     --
     Accounts payable and accrued liabilities                           8,340,565              6,236,795
     Income taxes payable                                                      --                200,000
     Current portion of long-term debt (note 5)                         1,461,722                849,228
     Notes payable (note 6)                                                    --                482,714
     ---------------------------------------------------------------------------------------------------
     TOTAL CURRENT LIABILITIES                                         12,337,058              7,768,737
     ---------------------------------------------------------------------------------------------------

     Long-term debt (note 5)                                              106,367                344,693
     ---------------------------------------------------------------------------------------------------
                                                                       12,443,425              8,113,430
     ---------------------------------------------------------------------------------------------------


     STOCKHOLDERS' EQUITY
     Series A preferred stock, voting and
     participating, $0.001 par value
       Authorized: 15,000,000 shares
       Issued and outstanding: 12,843,960 shares                           12,844                 12,844
     Series B preferred stock, voting and
     participating, $0.001 par value
       Authorized: 10,000,000 shares
       Issued and outstanding: 8,888,889 shares                             8,889                  8,889
     Series C preferred stock, $0.001 par value
       Authorized: 30,000,000 shares
       Issued and outstanding: 25,000,000 shares                           25,000                 25,000
     Class A voting common stock, $0.001 par value
       Authorized: 100,000,000 shares
       Issued and outstanding:  14,827,394 shares                          14,828                 14,828
     Additional paid-in capital                                         9,306,910              9,306,910
     Retained earnings (deficit)
        Net of elimination totaling $82,667,696                        (1,167,632)             1,080,984
     Other comprehensive income                                           133,451                     --
     ---------------------------------------------------------------------------------------------------
     TOTAL STOCKHOLDERS' EQUITY                                         8,334,290             10,449,455
     ---------------------------------------------------------------------------------------------------
                                                                       20,777,715             18,562,885
     ===================================================================================================
</Table>


     SEE ACCOMPANYING NOTES.

     * Note: The balance sheet as at December 31, 2004 has been derived from the
     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.



                                       2


<Page>


                          TOUCHTUNES MUSIC CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)

<Table>
<Caption>
[IN U.S. DOLLARS]                                      THREE-MONTH        NINE-MONTH      Three-month        Nine-month
                                                      PERIOD ENDED      PERIOD ENDED     period ended      period ended
                                                    SEPTEMBER  30,     SEPTEMBER 30,    September 30,     September 30,
                                                              2005              2005             2004              2004
                                                                 $                 $                $                 $
-----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                <C>              <C>               <C>
REVENUES
Jukebox sales revenues                                   6,776,123        20,303,828        6,079,523        15,616,019
Music service revenues                                   6,271,739        17,146,767        4,410,302        11,872,057
Jukebox leasing and financing revenues                     183,599           800,386          407,767         1,181,181
Gain (loss) on disposal of assets                          (11,713)          (25,244)              --             2,469
Other income                                                    --                --               --         2,431,502
-----------------------------------------------------------------------------------------------------------------------
                                                        13,219,748        38,225,737       10,897,592        31,103,228
-----------------------------------------------------------------------------------------------------------------------
EXPENSES
Cost of jukebox sales revenues                           8,345,864        21,788,791        5,105,536        11,988,482
Cost of music  service  revenues  (exclusive  of
amortization  of $65,320  and  $193,728,  2004 -
$59,751 and $177,309)                                    1,720,314         4,749,015        1,299,282         3,694,915
Sales and marketing                                      1,280,302         5,401,157        1,498,465         3,926,286
Research and development                                   899,457         3,048,977          846,167         2,683,506
Investment tax credits                                          --                --               --           (65,144)
General and administrative                               1,083,375         3,853,934        1,175,441         5,024,478
Financial expenses                                          94,584           188,484           97,887           302,654
Depreciation of property, plant and equipment              340,193           982,967          358,132           970,773
Amortization of intangibles                                 67,015           206,767           97,585           286,562
Foreign exchange losses (gains)                            118,862           254,261          (52,774)           81,267
-----------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS) BEFORE INCOME TAXES                     (730,218)       (2,248,616)         471,871         2,209,449
-----------------------------------------------------------------------------------------------------------------------
Income taxes                                                    --                --          188,750           887,750
-----------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                         (730,218)       (2,248,616)         283,121         1,321,699
-----------------------------------------------------------------------------------------------------------------------
Unrealized foreign exchange gain on derivative              36,032           133,451               --                --
-----------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE  INCOME (LOSS)                              (694,186)       (2,115,165)         283,121         1,321,699
=======================================================================================================================

PER COMMON STOCK AND COMMON STOCK EQUIVALENTS
Basic and  diluted  net income  (loss) per share
  (note 4)                                                   (0.01)            (0.02)            0.00              0.01
=======================================================================================================================

WEIGHTED  AVERAGE  NUMBER  OF  COMMON  STOCK AND
  COMMON STOCK EQUIVALENTS                              93,359,274        93,359,274       93,359,274        93,359,274
=======================================================================================================================
</Table>

     SEE ACCOMPANYING NOTES.


                                       3


<Page>



                          TOUCHTUNES MUSIC CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<Table>
<Caption>
[In U.S. dollars]                              THREE-MONTH       NINE-MONTH         Three-month           Nine-month
                                              PERIOD ENDED     PERIOD ENDED        period ended         period ended
                                            SEPTEMBER  30,    SEPTEMBER 30,       September 30,        September 30,
                                                      2005             2005                2004                 2004
                                                         $                $                   $                    $
--------------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>                 <C>                  <C>
OPERATING ACTIVITIES

Net income (loss)                                $(730,218)     $(2,248,616)           $283,121           $1,321,699

ADJUSTMENTS TO RECONCILE NET INCOME
  (LOSS) TO NET CASH USED IN
  OPERATING ACTIVITIES:
Income taxes                                            --             (683)            188,750              887,750
Non-cash portion of cost of
     music service revenues                          4,214           40,863              35,735              107,205
Depreciation and amortization                      407,207        1,189,734             455,717            1,257,335
Loss on disposal of investment in
sales-type lease                                       384           (7,387)              1,599                2,868
Loss (gain) on disposal of assets                   11,713           31,800                  --               (2,469)

CHANGES IN OPERATING ASSETS AND
  LIABILITIES:
Accounts and other receivables                    (964,357)      (1,086,323)           (546,170)            (804,708)
Discounted receivables                            (116,420)         (51,036)             27,568           (1,903,934)
Prepaid expenses and deposits                     (141,788)        (582,781)             72,639               87,902
Inventory                                       (1,644,207)      (1,722,093)           (957,922)            (994,769)
Accounts payable and accrued
  liabilities                                    1,146,202        2,237,210           1,052,267              985,092
Other assets                                            --              619              22,106               77,949
Proceeds from disposal of investment
  in sales-type leases                               2,729           43,028               8,524               37,998
Investment in sales-type leases                    169,104          556,932             184,471              601,558
Income taxes receivable                            (37,500)        (284,505)                 --                   --
--------------------------------------------------------------------------------------------------------------------
CASH PROVIDED (USED IN) BY OPERATING
ACTIVITIES                                      (1,892,937)      (1,883,238)            828,405            1,661,476
--------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Proceeds from disposition of
  property, plant and equipment                        100            3,600                  --                4,132
Addition to intangibles                            (21,062)        (113,557)            (79,787)            (157,946)
Purchase of property, plant, and
  equipment                                       (413,058)        (791,552)           (157,643)          (1,233,455)
Increase (decrease) in deferred
  charges                                               --         (100,000)                 --                   --
--------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES                 (434,020)      (1,001,509)           (237,430)          (1,387,269)
--------------------------------------------------------------------------------------------------------------------
</Table>

                                       4

<Page>




<Table>
<Caption>
[In U.S. dollars]                              THREE-MONTH       NINE-MONTH         Three-month           Nine-month
                                              PERIOD ENDED     PERIOD ENDED        period ended         period ended
                                            SEPTEMBER  30,    SEPTEMBER 30,       September 30,        September 30,
                                                      2005             2005                2004                 2004
                                                         $                $                   $                    $
--------------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>                 <C>                  <C>
FINANCING ACTIVITIES
Increase (decrease) in bank
  indebtedness                                   2,534,771        2,534,771            (750,000)          (1,000,000)
Proceeds of long-term debt                              --          938,250                                2,000,000
Repayment of long-term debt                       (262,805)        (726,626)           (264,159)          (1,300,044)
Proceeds from notes payable                             --               --             337,276            1,860,195
Repayment of notes payable                              --         (482,714)           (638,812)          (1,511,153)
--------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) FINANCING
  ACTIVITIES                                     2,271,966        2,256,746          (1,315,695)              48,998
--------------------------------------------------------------------------------------------------------------------

NET CHANGE IN CASH AND CASH
  EQUIVALENTS                                      (54,983)        (621,741)           (724,720)             323,205
Cash and cash equivalents, beginning
  of period                                        214,139          780,897           1,386,539              338,614
--------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF
  PERIOD                                           159,156          159,156             661,819              661,819
====================================================================================================================


SUPPLEMENTARY INFORMATION
Interest paid                                       90,066          157,512             201,823             399,174
Income taxes paid                                   37,500          284,505                  --                  --
--------------------------------------------------------------------------------------------------------------------
</Table>

                                       5

SEE ACCOMPANYING NOTES.


<Page>



TOUCHTUNES MUSIC CORPORATION


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

September 30, 2005
[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 were its digital
jukeboxes (the "Digital Jukeboxes"), which utilize digitally compressed audio
technology to distribute music titles through a proprietary distribution
network. The Company is also developing its technology for other music-on-demand
applications.

2.   BASIS OF FINANCIAL STATEMENT PRESENTATION

The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States.

The consolidated financial statements at September 30, 2005 and for the
three-month and nine-month periods ended September 30, 2005 and 2004, 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 in accordance with accounting principles generally accepted in
the U.S. for interim financial statements. Accordingly, these interim
consolidated financial statements do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements.

These consolidated financial statements should be read in conjunction with the
consolidated financial statements and the 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-K/A, for the
fiscal year ended December 31, 2004. The results of operations for the
three-month and nine-month periods ended September 30, 2005 are not necessarily
indicative of the results for the fiscal year ending December 31, 2005 or any
other future periods.

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary TouchTunes Digital Jukebox, Inc. ("TouchTunes
Digital"). All significant inter-company balances and transactions since
acquisition of control have been eliminated on consolidation.


                                       6

<Page>



3.   WARRANTY PROVISION

The change in the warranty provision recorded in the Company's balance sheet for
the relevant periods was as follows:

<Table>
<Caption>
                                          THREE-MONTH      NINE-MONTH      Three-month         Nine-month
                                         PERIOD ENDED    PERIOD ENDED     period ended       period ended
                                       SEPTEMBER  30,   SEPTEMBER 30,    September 30,      September 30,
                                                 2005            2005             2004               2004
                                                    $               $                $                  $
----------------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>              <C>                <C>

Balance at the beginning of the
  period                                      820,709         802,489          643,156            696,784
Charged to cost of jukeboxes                  220,651         503,585          125,444            376,330
Use of provision                             (382,781)       (647,495)        (198,607)          (503,121)
----------------------------------------------------------------------------------------------------------
BALANCE AT THE END OF THE PERIOD              658,579         658,579          569,993            569,993
==========================================================================================================
</Table>



4.   BASIC AND DILUTED NET LOSS PER SHARE

The calculation of basic and diluted net loss per share for the periods ended
September 30 are as follows:


<Table>
<Caption>
                                         THREE-MONTH        NINE-MONTH       Three-month        Nine-month
                                        PERIOD ENDED      PERIOD ENDED      period ended      period ended
                                      SEPTEMBER  30,     SEPTEMBER 30,     September 30,     September 30,
                                                2005              2005              2004              2004
                                                   $                 $                 $                 $
----------------------------------------------------------------------------------------------------------
<S>                                   <C>                <C>               <C>               <C>
Net income (loss)                           (730,218)       (2,248,616)          283,121         1,321,699
----------------------------------------------------------------------------------------------------------
Weighted average common shares and
 common share equivalents outstanding
 used to compute basic and diluted net
 income (loss) per common share           93,359,274        93,359,274        93,359,274        93,359,274
----------------------------------------------------------------------------------------------------------
Basic and diluted net income
  (loss) per common share                      (0.01)            (0.02)             0.00              0.01
----------------------------------------------------------------------------------------------------------
</Table>

The impact of the conversion of 12,843,960 shares of Series A preferred stock,
voting and participating ("Series A Preferred Stock"), into 38,531,880 shares of
Class A voting common stock ("Common Stock") and 8,888,889 shares of Series B
preferred stock, voting and participating ("Series B Preferred Stock"), into
40,000,000 shares of Common Stock are included in the weighted average common
shares outstanding, using the as-if-converted method, to compute the basic and
diluted net loss per share because they have characteristics similar to the
Common Stock.

The options and warrants to purchase the Company's Common Stock, were not
included in the computation of the diluted net loss per share for 2005, as the
effect would be anti-dilutive. For 2004, the strike price for outstanding
options is above market price and accordingly, was not considered in the
calculation of diluted net income per share.


                                       7

<Page>

5.   BANK INDEBTEDNESS AND LONG-TERM DEBT

The Company's bank indebtedness consists of an operating line of credit (the
"Line of Credit") of $4,000,000 provided by National Bank of Canada ("the
Bank"). The collateralization provided to the Bank by the Company on the Line of
Credit and the loans described below is in the form of charges on past, present
and future assets of the Company. The Line of Credit bears interest at the U.S.
base rate of the Bank plus 1.50%, representing a rate of 8.75% as at September
30, 2005 (December 31, 2004 - 7.25%). The Line of Credit is also collateralized
by a first charge on moveable property in the amount of $5,400,000 and by a
certificate of guarantee issued by Export Development Canada covering 50 percent
of the net loss risk. The Company has obtained an extension of the Line of
Credit to April 30, 2006.



Long-term debt consists of the following:

<Table>
<Caption>
                                                  MATURITY PRIOR TO    SEPTEMBER 30, 2005     December 31, 2004
                                                 COVENANT VIOLATION                     $                     $
                                                 --------------------------------------------------------------
<S>                                              <C>                   <C>                    <C>
Music Advance Term Loans                                  2005-2007             1,421,678             1,193,921
Vehicle loans                                                  2009               146,411                    --
                                                                       ----------------------------------------
Total                                                                           1,568,089             1,193,921
Less:  Current portion                                                          1,461,722               849,228
                                                                       ----------------------------------------
Total                                                                             106,367               344,693
                                                                       ========================================
</Table>

Long-term debt as at September 30, 2005 consists of two music advance term loan
facilities (the "Music Advance Term Loans") with the Bank. The Music Advance
Term Loans represent, in aggregate, $4,500,000 ($2,000,000 entered into in
January 2004 and $2,500,000 entered into in June 2005) and were obtained for
purposes of financing the recoupable advances made to certain music providers.
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 $2,000,000 Music Advance
Term Loan bears interest at the U.S. base rate of the Bank plus 2%, representing
a rate of 9.25% as at September 30, 2005 (December 31, 2004 - 7.75%). The
$2,000,000 Music Advance Term Loan is also collateralized by a certificate of
guarantee issued by La Financiere du Quebec covering 50% of the net loss risk
and a charge on moveable property in the amount of $ 2,400,000. The $2,000,000
Music Advance Term Loan is repayable over the term of the respective music
agreements financed, ranging from one year to five years.

The $2,500 000 Music Advance Term Loan bears interest at the U.S. base rate of
the Bank plus 1.50%, representing a rate of 8.75% as at September 30, 2005. The
$2,500 000 Music Advance Term Loan is collateralized by a second charge on
movable property in the amount of $3,000,000 and a certificate of guarantee
issued by Export Development Canada covering 50% of the net loss risk. The
$2,500,000 Music Advance Loan is repayable over the term of the respective music
agreements financed to a maximum of five years.

The agreement between the Bank and the Company governing the Line of Credit and
the Music Advance Loans contain covenants, of which two were not satisfied as at
September 30, 2005.

These covenants include a requirement that the Company maintain a minimum net
shareholders' equity of $7,500,000, another requiring a maximum debt to
equity ratio of 1.50:1.00 ("Debt to Equity Ratio") and a Fixed Charge
Coverage Ratio (as defined in the agreement) exceeding 1.00:1.00 to be tested
on a quarterly basis as calculated in the Company's last four quarterly
cumulative financial statements ("Fixed Charge Coverage Ratio"). As at
September 30, 2005 the Company was in violation of the Debt to Equity Ratio
and the Fixed Charge Coverage Ratio. Under the agreement with the Bank, the
Bank has the right to demand full repayment of the Music Advance Term Loans
as well as any funds drawn down on the Line of Credit.

                                       8

<Page>

Due to the defaults as at September 30, 2005 the Company has classified
approximately $671,000 of long-term debt as current. In November 2005 the
Company obtained amendments to certain of the ratios related to the Line of
Credit and the Music Advance Term Loans for the December 31, 2005, March 31,
2006 and June 30, 2006 periods. The Company does not expect to meet certain
of these covenants, however it expects to successfully obtain waivers at
those points in time. In the event that the Company is not able to obtain
satisfactory waivers, the Company believes that it would have sufficient
resources to repay any amounts demanded by the lenders (see note 11).

In addition the Company has vehicle loans bearing interest between 0% and 2.9%,
maturing in 2009, collateralized by the related property.

The principal payments of long-term debt are as follows:


<Table>
<Caption>
                                                                  $
                                           ------------------------
     <S>                                   <C>

     2006                                                 1,461,722
     2007                                                    40,810
     2008                                                    41,598
     2009                                                    23,959
                                           ------------------------
     Total                                                1,568,089
                                           ========================
</Table>


6.   NOTES PAYABLE

In October 2003, the Company entered into a loan facility with a lender under
which the Company could borrow up to a maximum of $1,500,000 for purposes of
financing the sale of one of the Company's products, Tune Central. These notes
were repaid in full during the second quarter of 2005.

7.   STOCK OPTIONS

Options granted under the Plan are exercisable for a period of ten years, except
for options granted to stockholders beneficially owning 5% or more of the
Company's Common Stock, which are exercisable over a period of five years. On
September 30, 2005, an aggregate of 1,988,606 shares of Common Stock were
reserved for future issuance under the Plan. The Plan was approved by
stockholders on February 8, 2001. On September 17, 2004, the Board of Directors
voted unanimously to amend the exercise price on all outstanding stock options
issued under the Plan to $0.40 therefore these stock options issued under the
Plan will be subject to variable stock option plan accounting.


The Company accounts for options granted to employees and directors under the
Plan using APB No.25, under which no compensation cost has been recognized for
stock options granted. Had compensation cost for these stock options been
determined consistent with SFAS No. 123, the Company's pro forma income (loss)
per common share would have been as follows:



                                       9


<Page>

<Table>
<Caption>
                                          THREE-MONTH     NINE-MONTH         Three-month      Nine-month
                                         PERIOD ENDED   PERIOD ENDED        period ended    period ended
                                       SEPTEMBER  30,  SEPTEMBER 30,       September 30,   September 30,
                                                 2005           2005                2004            2004
                                                    $              $                   $               $
                                   --------------------------------------------------------------------------
<S>                                    <C>             <C>                 <C>            <C>
Net income (loss)                           (730,218)         (2,248,616)            283,121       1,321,699
Pro Forma income (loss)                     (775,753)         (2,406,598)            156,380       1,048,262
Basic and diluted income (loss)
  per share of Common Stock                    (0.01)              (0.02)               0.00            0.01
Pro Forma basic and diluted
  income (loss) per share of
  Common Stock                                 (0.01)              (0.03)               0.00            0.01
</Table>


The fair value of options at the date of grant was estimated using the
Black-Scholes pricing model with the following weighted average assumptions.


<Table>
<Caption>
                                             SEPTEMBER 30, 2005      SEPTEMBER 30, 2004
                                         -----------------------------------------------
<S>                                          <C>                     <C>

      Average expected life (years)                        8.00                    8.00
      Risk-free interest rate                              3.83                    4.30
      Volatility                                           96.8                    96.8
      Dividend yield                                       0.00                    0.00

</Table>



8.   DERIVATE INSTRUMENTS AND CURRENCY RISK

As at September 30, 2005 derivative assets of $183,451 represents the fair
market value related to forward foreign exchange contracts maturing at
various dates until February 28, 2006 for an amount of $4,500,000 US
translated into Canadian dollars at a weighted average rate of 1.21. These
instruments were designated as cash flow hedges which were documented as such
at their inception in June and August 2005. As at September 30, 2005 $133,000
has been included in other comprehensive income and will be recognized as an
adjustment of the hedged expense when the related expense will be recorded.

9.   PROPOSED TRANSACTION

On October 31, 2005, the Company filed with the Securities and Exchange
Commission a Schedule 13E-3 Transaction Statement with respect to a going
private transaction (the "Proposed Transaction") and a Schedule 14A Proxy
Statement soliciting a stockholders vote on the Proposed Transaction. In
connection with the Proposed Transaction, the Company intends to effect a
reverse stock split of Common Stock at a ratio of one to 2,000. In addition,
on October 31, 2005, the Company mailed copies of such proxy statement to all
of its stockholders, describing all of the material terms of the Proposed
Transaction. The Company has scheduled its Annual General Meeting of
stockholders for the years 2003 and 2004 for December 1, 2005 and currently
intends to effect the Proposed Transaction as soon as possible thereafter.

10.  LITIGATION

On September 22, 2005 the Company entered into an agreement with SESAC, Inc., an
organization representing performance rights for musical composers and authors
for the period January 1, 2005 through December 31, 2006.

11. SUBSEQUENT EVENTS


                                       10

<Page>

     a)   On October 21, 2005 the Company was served with a complaint filed in
          the United States District Court of Nevada alleging that the Company
          has infringed a patent. The Company believes it has meritorious
          defenses against the suit and requesting an award of unspecified
          damages and an injunction prohibiting further infringements. An
          estimate of the possible loss, or range of loss, if any, cannot be
          determined at this time.

     b)   In addition to obbtaining amendments to certain debt covenants
          which were violated as at September 30, 2005, as described in note 5,
          the Bank has agreed to provide the Company with an increase in the
          Line of Credit from $4 million to $5.5 million. This increase is
          subject to final documentation which is currently in process.

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 (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 COMPANY'S CONTROL.

The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements, including the notes thereto,
contained in the Company's Annual Report on Form 10K/A for the fiscal year ended
December 31, 2004. Note that all dollar amounts set forth in this quarterly
report on Form 10-Q are in United States dollars, except where otherwise
indicated, and references herein to "dollars" or "$" are to United States
dollars and references to "CDN" are to Canadian dollars.


BACKGROUND AND 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 jukeboxes (the "Digital Jukeboxes"), which utilize
digitally compressed audio technology to distribute music titles securely
through a proprietary distribution network. Revenues since September 1998 have
been generated from sales and leases of the Digital Jukeboxes to jukebox
operators in the United States, as well as from the music service contracts
associated with such sales and leases of the Digital Jukeboxes. As at September
30, 2005, the Company had delivered a total of 13,920 Digital Jukeboxes as
compared with 9,745 Digital Jukeboxes delivered as at September 30, 2004.
Management intends to continue its development activities in applying its
technologies to other music-on-demand products and applications to other
industries.

         On November 10, 2005, the Company signed a new agreement with Warner
Music Group through December 31, 2007.

         The Company plays over 30 million songs to an estimated audience of
approximately 5 million people each month. Management expects the base of
installed Digital Jukeboxes to continue to grow, thereby increasing the number
of plays and the audience exposure. This growth is expected to establish the
Digital Jukeboxes as a significant promotional medium for record labels and
their artists.

         Total assets of the Company were approximately $20,778,000 at September
30, 2005, an increase of approximately $2,215,000 from December 31, 2004. This
increase was primarily due to an increase in trade receivables of approximately
$955,000 due to an overall increase in revenues and specifically the shipment of
650 jukeboxes in September, an increase in inventory of approximately $1,722,000
and an increase in prepaid expenses and deposits of approximately $583,000. The
increase in inventories was necessitated by the significant volume growth
experienced by the Company. These increases, were in part, offset by a decrease
in cash and cash equivalents of $622,000 and a decrease of approximately
$592,000 in investment in sales type leases due to collections thereon. Total
liabilities of the Company also increased as compared to December 31, 2004, from
approximately $8,113,000 to approximately $12,443,000 at September 30, 2005.
This is primarily due to an increase in current payables of approximately
$2,104,000, borrowings on the Company's new Music Advance Term Loan totaling
approximately $938,000 and a new


                                       11

<Page>

loan for the acquisition of vehicles for an amount of approximately $141,000 as
well as an increase in bank indebtedness of $2,535,000 mainly due to increased
working capital requirements. This increase is offset by repayments on the
Company's Music Advance Term Loans and notes payable totaling approximately
$1,225,000.


RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2005
COMPARED TO THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2004

The Company recorded a net loss of approximately $730,000 for the three-month
("third quarter 2005") period ended September 30, 2005 as compared to a net
profit of approximately $283,000 for the corresponding three-month period ended
September 30, 2004 ("third quarter 2004").

For the third quarter 2005 comprehensive loss was approximately $694,000, the
difference between the net loss and the comprehensive loss was attributable to
a foreign exchange gain on a derivative of approximately $36,000.


         Revenues
         --------

         Revenues from the sale of Digital Jukeboxes increased by approximately
$696,000 from approximately $6,080,000 for the third quarter 2004 to
approximately $6,776,000 for the third quarter 2005. For competitive purposes
the Company has significantly reduced the retail selling price of its Digital
Jukeboxes, including Tune Central, to an average of $4,995 as compared to the
comparative 2004 retail selling price of $7,990 for a Rhapsody model and $7,685
for a Maestro model, including Tune Central. As a result of this, the Company
has incurred negative margins of the sales of Digital Jukeboxes. The Company
shipped 1,450 Digital Jukeboxes in the third quarter of 2005 as compared to
846 for the third quarter of 2004. The increase in revenues from the sale of
Digital Jukeboxes is attributable to the increased unit sales offset by the
impact of the aforementioned retail price reduction.

         Music service revenues grew to approximately $6,272,000 for the third
quarter 2005 as compared with approximately $4,410,000 for the second quarter
2004. This increase in music service revenues resulted from an increase in the
total number of Digital Jukeboxes and the installation of Tune Centrals on the
Company's network, which generates recurring music service revenues.

         Digital Jukebox leasing and financing revenues decreased to
approximately $184,000 for the third quarter 2005 as compared to $408,000 for
the third quarter 2004. This decrease is attributable to a reduction in leasing
and financing revenues on Digital Jukeboxes and Tune Centrals as many of the
Digital Jukeboxes leases reach the expiration of their term and Tune Central
leases are bought out by customers.


         Cost of Jukebox Sales Revenues
         ------------------------------

         The cost of jukebox sales revenues increased by approximately
$3,240,000, or 61%, from approximately $5,106,000 in the third quarter 2004 to
approximately $8,346,000 during the third quarter 2005. The increase in cost of
jukebox sales revenues is due to an increase in the number of Digital Jukeboxes
and Tune Centrals sold in the period as compared to the third quarter 2004.


         Cost of Music Service Revenues
         ------------------------------

         The cost of music service revenues increased by approximately $421,000
or 32%, from approximately $1,299,000 for the three-month period ended September
30, 2004 to approximately $1,720,000 for the three-month period ended September
30, 2005. The increase in the number of Digital Jukeboxes and Tune Centrals sold
has resulted in an increase in the number of plays on the Company's network,
thereby resulting in an increase in the royalties paid to music labels and
publishers.


         General and Administrative Expenses
         -----------------------------------


                                       12

<Page>


         General and administrative expenses decreased by approximately $92,000
or 8%, from approximately $1,175,000 in the third quarter 2004 to approximately
$1,083,000 in the third quarter 2005. This decrease is principally attributable
to a reduction of bad debt expenses attributable to improved collections on
accounts receivable and an increase in the recording of interest revenue on
the amount receivable from Ecast Inc.. These decreases were in part offset by
higher staff related costs to support increased sales growth.

         Research and Development Expenses
         ---------------------------------

         Research and development expenses increased by approximately $55,000,
or 6%, from approximately $846,000 in the third quarter 2004 to approximately
$899,000 in the third quarter 2005. This increase in research and development
expenses is due to higher staff-related costs and related expenditures in
connection with the ongoing development and design of new products.


         Sales and Marketing Expenses
         ----------------------------

         Sales and marketing expenses decreased by approximately $218,000, or
15%, from approximately $1,498,000 in the third quarter 2004 to approximately
$1,280,000 in the third quarter 2005. This decrease is mainly due to a decrease
of approximately $640,000 in commissions paid by the Company as a result of the
retail price reductions implemented in the third quarter of 2005 and is in part
offset by higher staff related costs and commissions paid to the Company's sales
personnel of approximately $209,000 and higher sales personnel expenses of
approximately $224,000.


         Financial Expense
         -----------------

         Financial expense decreased by approximately $3,000, or 2%, from
approximately $98,000 in the third quarter 2004 to approximately $95,000 in the
third quarter 2005. This decrease is primarily due to the elimination of
interest expense on the Company's Tune Central Financing Loan which was repaid
in June 2005 offset by an increase in interest paid on the Company's Line of
Credit.


         Depreciation and Amortization Expense
         -------------------------------------

         Depreciation and amortization expense decreased by approximately
$49,000, or 11%, from approximately $456,000 in the third quarter 2004 to
approximately $407,000 in the third quarter 2005.

         Foreign Exchange Losses
         -----------------------

         The Company experienced a foreign exchange loss of approximately
$119,000 during the third quarter 2005 as compared to a foreign exchange gain of
approximately $53,000 during the third quarter of 2004. 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 Jukebox, Inc., transacts
is the Canadian dollar.


RESULTS OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2005
COMPARED TO THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004

The Company recorded a net loss of approximately $2,249,000 for the nine-month
period ended September 30, 2005 as compared to a net profit of approximately
$2,209,000 for the corresponding nine-month period ended September 30, 2004 .

For the nine-month period ended September 30, 2005 comprehensive loss was
approximately $2,215,000 which was attributable to a foreign exchange gain on a
derivative of approximately $133,000.


                                       13

<Page>

         Revenues
         --------

         Revenues from the sale of Digital Jukeboxes increased by approximately
$4,688,000 from approximately $15,616,000 for the nine month period ended
September 30, 2004 to approximately $20,304,000 for the corresponding nine-month
period ended September 30, 2005. For competitive purposes the Company has
reduced the retail selling price of its Digital Jukeboxes, including Tune
Central, to an average of $4,995 as compared to the comparative 2004 retail
selling price of $7,990 for a Rhapsody model and $7,685 for a Maestro model,
including Tune Central. As a result of this, the Company has incurred
negative margins on the sale of Digital Jukeboxes. The Company shipped 3,802
Digital Jukeboxes in the nine-month period ended September 30, 2005 as
compared to 2,101 for the nine-month period ended June 30, 2004. The increase
in revenues from the sale of Digital Jukeboxes is attributable to the
increased unit sales offset by the impact of the aforementioned retail price
reduction.

         Music service revenues grew to approximately $17,147,000 for the
nine-month period ended September 30, 2005 as compared with approximately
$11,872,000 for the nine-month period ended September 30, 2004. This increase in
music service revenues resulted from an increase in the total number of Digital
Jukeboxes and the installation of Tune Centrals on the Company's network, which
generate recurring music service revenues.

         Digital Jukebox leasing and financing revenues decreased to
approximately $800,000 for the nine-month period ended September 30, 2005 as
compared to $1,181,000 for the nine-month period ended September 30, 2004. This
decrease is attributable to a reduction in leasing and financing revenues on
Digital Jukeboxes and Tune Centrals as many of the Digital Jukebox leases reach
the expiration of their term and Tune Central leases are bought out by
customers.


         Cost of Jukebox Sales Revenues
         ------------------------------

         The cost of jukebox sales revenues increased by approximately
$9,800,000, or 82%, from approximately $11,989,000 in the nine-month period
ended September 30, 2004 to approximately $21,789,000 during the nine-month
period ended September 30, 2005. The increase in cost of jukebox sales revenues
is due to an increase in the number of Digital Jukeboxes and Tune Centrals sold
in the period as compared to the nine-month period ended September 30, 2004.


         Cost of Music Service Revenues
         ------------------------------

         The cost of music service revenues increased by approximately
$1,054,000 or 29%, from approximately $3,695,000 for the nine-month period ended
September 30, 2004 to approximately $4,749,000 for the nine-month period ended
September 30, 2005. The increase in the number of Digital Jukeboxes and Tune
Centrals sold has resulted in an increase in the number of plays on the
Company's network, thereby resulting in an increase in the royalties paid to
music labels and publishers.


         General and Administrative Expenses
         -----------------------------------

         General and administrative expenses decreased by approximately
$1,170,000 or 23%, from approximately $5,024,000 in the nine-month period ended
September 30, 2004 to approximately $3,854,000 in the nine-month period ended
September 30, 2005. This decrease is principally attributable to legal costs of
$705,000 charged in the second quarter 2004 relating to the settlement in April
2004 of litigation with Ecast, Inc.. In addition, there has been a decrease in
professional fees and the recording of interest revenue on the amount receivable
from Ecast, Inc. . These decreases were in part offset by higher staff-related
costs to support increased sales growth and higher costs relating to the
Company's privatization bid.

         Research and Development Expenses
         ---------------------------------

         Research and development expenses increased by approximately $365,000,
or 14%, from approximately $2,684,000 in the nine-month period ended September
30, 2004 to approximately


                                       14

<Page>


$3,049,000 in the nine-month period ended September 30, 2005. This increase in
research and development expenses is due to higher staff-related costs and
related expenditures in connection with the ongoing development and design of
new products.


         Sales and Marketing Expenses
         ----------------------------

         Sales and marketing expenses increased by approximately $1,475,000, or
38%, from approximately $3,926,000 in the nine-month period ended September 30,
2004 to approximately $5,401,000 in the nine-month period ended September 30,
2005. This increase is mainly due an increase in commissions paid to the
Company's salespeople as a result of the overall increase in unit sales of
Digital Jukeboxes and Tune Centrals as well as increases in marketing and
promotional costs in the nine-month period ended September 30, 2005 as compared
to the nine-month period ended September 30, 2004 to support its sales growth.


         Financial Expense
         -----------------

         Financial expense decreased by approximately $115,000, or 38%, from
approximately $303,000 in the nine-month period ended September 30, 2004 to
approximately $188,000 in the nine-month period ended September 30, 2005. This
decrease is primarily due to the elimination of interest expense on the
Company's Jukebox Term Loan which was repaid in March 2004 and the reduction in
use of the Company's Line of Credit, offset by interest incurred on the
Company's Music Advance Term Loans.


         Depreciation and Amortization Expense
         -------------------------------------

         Depreciation and amortization expense decreased by approximately
$67,000, or 5%, from approximately $1,257,000 in the nine-month period ended
September 30, 2004 to approximately $1,190,000 in the nine-month period ended
September 30, 2005.

         Foreign Exchange Losses
         -----------------------

         The Company experienced a foreign exchange loss of approximately
$254,000 during the nine-month period ended September 30, 2005 as compared to a
foreign exchange loss of approximately $81,000 during the nine-month period
ended September 30, 2004. 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 Jukebox, Inc., transacts is the Canadian dollar.

         Seasonality
         -----------

         The Company has experienced lower sales volume during the summer
vacation period 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 have material adverse effects on its
financial condition.


                                       15


<Page>



         Liquidity and Capital Resources
         -------------------------------

         The following table summarizes selected financial data (amounts in
thousands):

<Table>
<Caption>
                                             SEPTEMBER 30, 2005       December 31, 2004
                                         -----------------------------------------------
<S>                                          <C>                      <C>

Cash and cash equivalents                                   159                     781
Total assets                                             20,778                  18,563
Total current and non-current
      interest-bearing debt                               4,103                   1,677
Stockholders' equity                                      8,334                  10,449
</Table>



The Company believes that existing funds, cash generated from operations and
existing sources of and access to financing are adequate to satisfy its working
capital, capital expenditure and debt service requirements for the foreseeable
future.

         The Company's funding has come principally from a group of three
investors: Societe Innovatech du Grand Montreal, CDP Capital Technologies
(formerly known as CDP Sofinov) and CDP Capital Communications (formerly known
as Capital Communications CDPQ Inc.). To date, they have collectively invested
approximately $43,000,000 in the Company, which has provided the Company with
sufficient capital resources to finance its start-up activities and to commence
commercial operations. Financing arrangements with the National Bank of Canada
(the "Bank") are another significant source of funding for the Company's
operations.

         The Company has a Line of Credit available from the Bank of $4,000,000.
The interest rate on the Line of Credit is the Bank's U.S. base rate plus 1.5%.
The Line of Credit is secured by a first charge on the past, present and future
assets of the Company and is collateralized by a certificate of guarantee issued
by Export Development Canada covering 50% of the net loss risk and a charge on
moveable property in the amount of $ 5,400,000. The Company has negotiated an
extension of the Line of Credit to April 30, 2006. In addition, the Bank has
agreed to provide the Company with an increase in the Line of Credit from $4
million to $5.5 million. This increase is subject to final documentation
which is currently in process.

         In January 2004, the Company entered into a Music Advance Term Loan
with the Bank for an aggregate $2,000,000 for purposes of financing the
recoupable advances made to certain music providers. The Term Loan bears
interest at the Bank's U.S. base rate of the Bank plus 2.00%, representing a
rate of 9.25% as at September 30, 2005. The Music Advance Term Loan is also
collateralized by a certificate of guarantee issued by La Financiere du Quebec
covering 50% of the net loss risk and a charge on moveable property in the
amount of $ 2,400,000. The Music Advance Term Loan is repayable over the term of
the respective music agreements financed, ranging from one to five years.

         During 2005, the Company obtained a second Music Advance Term Loan for
an amount of $2,500,000 for purposes of financing the recoupable advances made
to certain music providers for 2005 and 2006. The new Music Advance Term Loan
bears interest at the U.S. base rate of the Bank plus 1.50%, representing a rate
of 8.75% as at September 30, 2005. This Music Advance Term Loan is
collateralized by a second charge on movable property in the amount of
$3,000,000 and a certificate of guarantee issued by Export Development Canada
covering 50% of the net loss risk.

         The Music Advance Term Loans are secured by a lien on the past, present
and future assets of the Company.


         The agreements between the Company and the National Bank of Canada
governing the Music Advance Term Loans and the Line of Credit contain
financial covenants including requirements that the Company maintains a
minimum net stockholders' equity, as defined in the agreement, of $7,500,000,
a maximum debt to equity ratio of 1.5 to 1 ("Debt to Equity Ratio") and a
Fixed Charge Coverage Ratio (as defined in the agreement) exceeding 1:00:1.00
to be tested on a quarterly basis as calculated in the Company last four
cumulative financial statements ("Fixed Charge Coverage Ratio"). As at
September 30, 2005, the Company was in violation of the Debt to Equity Ratio
and the Fixed Charge Coverage Ratio.

                                       16

<Page>

Under the agreement with the Bank, the Bank has the right to demand full
repayment of the Music Advance Term Loans as well as any funds drawn down on
the Line of Credit. In November 2005 the Company obtained amendments to
certain of the ratios related to the Line of Credit and the Music Advance
Term Loans for the December 31, 2005, March 31, 2006 and June 30, 2006
periods. The Company does not expect to meet certain of these covenants,
however it expects to successfully obtain waivers at those points in time. In
the event that the Company is not able to obtain satisfactory waivers, the
Company believes that it would have sufficient resources to repay any amounts
demanded by the lenders. In November 2005 the Bank agreed to increase the
Line of Credit from $4,000,000 to $5,500,000. Due to the defaults as at
September 30, 2005 the Company has classified approximately $671,000 of
long-term debt as current.

         During the second quarter of 2005, the Company entered into loans to
finance the acquisition of vehicles. These loans bear interest at rates between
0% and 2.9%, mature in 2009, and are collaterized by the related property.

         The Company has contractual obligations totaling approximately
$2,400,000 These relate to payments due under the Company's long-term debt
obligations described above and operating leases. The operating leases are
primarily related to office space.


<Table>
<Caption>
      -----------------------------------------------------------------------------------------------------------
                                                            PAYMENTS DUE BY PERIOD
      -----------------------------------------------------------------------------------------------------------
      CONTRACTUAL OBLIGATIONS                  TOTAL             LESS THAN 1 YEAR(1)         MORE THAN 1 YEAR(2)
      -----------------------------------------------------------------------------------------------------------
      <S>                                  <C>               <C>                         <C>                          <C>
      LONG TERM DEBT(3)                        1,568,000                  1,462,000                      106,000
      -----------------------------------------------------------------------------------------------------------
      OPERATING LEASES                           832,000                    331,000                      501,000
      -----------------------------------------------------------------------------------------------------------
      TOTAL CONTRACTUAL CASH
      OBLIGATIONS                              2,400,000                  1,793,000                      607,000
      ===========================================================================================================
</Table>

      (1) Refers to "less than 1 year" from October 1, 2005.
      (2) Refers to "more than 1 year" from October 1, 2005.
      (3) Refers to the two Music Advance Term Loans



         Cash Flows

         The following table summarizes the Company's cash flow activity
(amounts in thousands):


<Table>
<Caption>
                                                         THREE-MONTH    NINE-MONTH    Three-month     Nine-month
                                                        PERIOD ENDED  PERIOD ENDED   period ended   period ended
                                                       SEPTEMBER 30, SEPTEMBER 30,  September 30,  September 30,
                                                                2005          2005           2004           2004
                                                                   $             $              $              $
                                                       ---------------------------------------------------------
<S>                                                      <C>            <C>         <C>            <C>

Net cash provided by  (used in) operating activities           (1,893)      (1,883)           828         1,661
Net cash used in investing activities                            (419)        (987)          (237)       (1,387)
Net cash provided by  (used in) financing activities            2,257        2,248         (1,316)           49

</Table>


         Operating
         ---------

                                       17

<Page>


Cash flow from operations has been and is expected to be the Company's primary
recurring source of funds. The primary reason for the decrease in cash flow from
operations is due to losses incurred during the first nine months of 2005 and an
increase required in working capital to support the Company's sales growth. The
Company's revenues consist of jukebox sales revenues, music service revenues and
jukebox leasing and financing revenues. The Company expects that there will be
competitive pressures on the unit pricing of jukeboxes and has reacted to this
by reducing the retail sales price of its jukeboxes, including Tune Central in
2005 to an average of $4,995.00 as compared to the comparative 2004 retail price
of $7,990 for a Rhapsody model and $7,685 for a Maestro model, including Tune
Central. Music service revenues have demonstrated consistent growth due to the
increase in the Company's installed base of jukeboxes. The Company expects that
revenue from jukebox leasing and financing will continue to reduce in 2005 and
2006 as the leases which generate this revenue expire and are not replaced with
new leases.

         Investing
         ---------

         The purchase of property, plant and equipment during the quarter ended
September 30, 2005 decreased from approximately $237,000 in 2004 to
approximately $419,000 in 2005.


         Financing
         ---------

         For the nine-month period ended September 30, 2005 and 2004 the Company
repaid long-term debt and notes payable totaling approximately $742,000 and
$1,300,000 respectively. Proceeds from long-term debt and notes payable for the
nine-month period ended September 30, 2005 and September 30, 2004 totaled
approximately $938,000 and $3,860,000 respectively.

The Company has available a Line of Credit of up to $5,500,000 upon which it had
drawn approximately 2,535,000.

On October 31, 2005 the Company filed with the Securities and Exchange
Commission a Schedule 13E-3 Transaction Statement with respect to a going
private transaction (the "Proposed Transaction") and a Schedule 14A Proxy
Statement soliciting a stockholders vote on the Proposed Transaction. In
connection with the Proposed Transaction, the Company intends to effect a
reverse stock split of Common Stock at a ratio of one to 2,000. In addition, on
October 31, 2005 the Company mailed copies of such proxy statement to all of its
stockholders, describing all of the material terms of the Proposed Transaction,
and currently intends to effect the Proposed Transaction. The Company has
scheduled its Annual General meeting of Stockholders for December 1, 2005 and
currently intends to effect the Proposed Transactions as soon as possible
thereafter. The Company expects the cost of acquiring the fractional shares
resulting from the reverse stock split contemplated by the Proposed Transaction,
to be approximately $400,000. The Company expects to finance this from its
existing financial resources.


SUMMARY OF CRITICAL ACCOUNTING POLICIES

         Allowance for Doubtful Accounts - Methodology
         ---------------------------------------------

         The Company evaluates the collectability of accounts receivable based
on a combination of factors. In circumstances where the Company is aware of a
specific customer's inability to meet its financial obligations (e.g.,
bankruptcy filings, substantial downgrading of credit scores), the Company
records a specific reserve for bad debts against amounts due to reduce the net
recognized receivable to the amount the Company reasonably believes will be
collected. For all other customers, the Company recognizes reserves for bad
debts based on the length of time the receivables are past due based on the
Company's historical experience and the Company's specific experience with that
customer. If circumstances change (i.e., higher than expected defaults or an
unexpected material adverse change in a major customer's ability to meet its
financial obligations to the Company), the Company's estimates of the
recoverability of amounts due could be reduced by a material amount.


                                       18

<Page>

         Warranty Provision - Methodology
         --------------------------------

         The Company provides warranties on all jukeboxes sold or leased for a
period of 2 to 5 years. Estimated costs for warranties are provided based upon
management's best estimate. The adequacy of the warranty provision is reviewed
regularly in light of the Company's past experience and expectation of costs to
be incurred and adjusted accordingly.

         Revenue Recognition
         -------------------

         Jukebox sales are recognized when the jukebox is shipped to the
customers. The Company further provides for the estimated cost of product
warranties as described above. Shipping and handling costs are included in the
cost of jukebox revenues and direct operating costs. Revenues generated from
music service contracts and operating leases are recognized as the services are
performed.


         Risk Factors
         ------------

         The following items are representative of the risks, uncertainties and
assumptions that could affect the outcome of the forward looking statements. The
risks described below are not the only ones facing the Company. Additional risks
we are not presently aware of or that we currently believe are immaterial may
also impair our business operations.


WE HAVE HAD LOSSES, AND WE CANNOT ASSURE FUTURE PROFITABILITY.

         We reported net income for fiscal year 2004 and operating losses for
fiscal years 2000, 2001, 2002 and 2003 and for the nine-month period ended
September 30, 2005. We cannot be assured that we will operate profitably, and if
we do not, we may not be able to meet our debt service requirements, working
capital requirements, capital expenditure plans, acquisition or other cash
needs. Our inability to meet those needs could have a material adverse effect on
our business, results of operations and financial condition.

         Our credit facilities contain certain covenants and financial tests
that limit the way we conduct business. Our credit facilities also contain
various covenants limiting our ability to incur or guarantee additional
indebtedness, pay dividends and make other distributions, make investments
and other restricted payments, make capital expenditures and sell assets.
These covenants may prevent us from raising additional financing, competing
effectively or taking advantage of new business opportunities. Under our
credit facilities, we are also required to maintain specified financial
ratios and satisfy certain financial tests. If we cannot comply with these
covenants or meet these ratios and other tests, it could result in a default
under our credit facility, and unless we are able to negotiate an amendment,
forbearance or waiver, we could be required to repay all amounts then
outstanding, which could have a material adverse effect on our business,
results of operations and financial condition. As at September 30, 2005 the
Company was in violation of the Debt to Equity Ratio and the Fixed Charge
Coverage Ratio as disclosed in notes 5 and 11 of the unaudited interim
consolidated financial statements.

         Borrowings under our credit facilities also are secured by liens on
substantially all of our assets and the assets of our subsidiary. If we are in
default under one of these credit facilities, the lender could foreclose upon
all or substantially all of our assets and the assets of our subsidiary. We
cannot assure you that we will generate sufficient cash flow to repay our
indebtedness, and we further cannot assure you that, if the need arises, we will
be able to obtain additional financing or to refinance our indebtedness on terms
acceptable to us, if at all. Any such failure to obtain financing could have a
material adverse effect on our business, results of operations and financial
condition.

         We do not own the rights to the music we offer under our music and
service agreements. These rights are obtained through license agreements with
music label companies, music publishing companies and performing rights
societies. There can be no assurances that the Company will be able to renew
existing arrangements with record label companies and publishing companies for
the use of their music. If we are unable to renew these agreements, it could
have a material adverse effect on our business results of operations and
financial condition.


                                       19

<Page>

         We rely on a few major distributors. A small number of distributors
account for a significant percentage of our jukebox sales revenues. We do not
have long-term agreements with any of these distributors. We cannot be assured
that we will continue to maintain favorable relationships with these
distributors or that they will not be adversely affected by economic conditions.
If any of these distributors reduces or cancels a significant order, it could
have a material adverse effect on our business, results of operations and
financial condition.

         Our revenues and results of operations are vulnerable to currency
fluctuations. We report our revenues and results of operations in US dollars,
but a significant portion of our expenses is incurred outside of the United
States. Our principal currency exposure is between Canadian and US dollars,
although this exposure is partially mitigated through the entering into forward
foreign exchange contracts. The Company has designated its forward exchange
contracts as a hedge and accordingly records the derivatives at their fair value
on the consolidated balance sheet with the corresponding credit included in
other comprehensive income and will be recognized as an adjustment of the hedged
expense when the expense will be recorded. We cannot accurately predict the
impact of future exchange rate fluctuations between the Canadian dollar and the
US dollar or other foreign currencies on revenues and operating margins, and
fluctuations could have a material adverse effect on our business, results of
operations and financial condition.

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS OR FAIL TO
IMPLEMENT CHANGES TO ADDRESS REPORTABLE CONDITIONS WE MAY NOT BE ABLE TO REPORT
OUR FINANCIAL RESULTS ACCURATELY.

         Effective internal controls are necessary for us to provide reliable
financial reports. We may in the future discover, areas of our internal controls
that need improvement.

PROTECTING AND DEFENDING AGAINST INTELLECTUAL PROPERTY CLAIMS MAY HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

         Our ability to compete depends, in part, upon successful protection of
our intellectual property. We attempt to protect proprietary and intellectual
property rights through available patent and trademark laws. Despite these
precautions, existing patent and trademark laws afford only limited practical
protection in certain countries. As a result, it may be possible for
unauthorized third parties to copy our applications which could have a material
adverse effect on our business, results of operations and financial condition.

         Litigation may also be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets, or to determine the
validity and scope of the proprietary rights of others or to defend against
claims or infringement or invalidity. As such, litigation could result in
substantial costs and the diversion of resources and could have a material
adverse effect on our business, results of operations and financial condition.
We cannot assure you that infringement or invalidity claims will not materially
adversely affect our business, results of operations and financial condition.
Regardless of the validity or the success of the assertion of these claims, we
could incur significant costs and diversion of resources in enforcing our
intellectual property rights or in defending against such claims, which could
have a material adverse effect on our business, results of operations and
financial condition.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND
SUPPLEMENTARY DATA

Currency Rate Risk Management
-----------------------------

         Market risks relating to our operations result primarily from changes
in foreign currency exchange rates. As part of our overall risk management
program, we evaluate and manage our exposure to changes in currency exchange
risks on an ongoing basis. Hedges and derivative financial instruments will be
used in the future, within guidelines approved or to be approved by the Board of
Directors for counterpart exposure, limits and hedging practices, in order to
manage our currency exposure. We have no intention of entering into financial
derivative contracts, other than to hedge a specific financial risk.

Currency Rate Risk


                                       20

<Page>

         We incur certain operating and manufacturing costs in Canada and are
subject to market risks resulting from fluctuations in foreign currency exchange
rates. Our principal currency exposure is between Canadian and US dollars. We
also enter into forward foreign exchange contracts. The Company began to
designate its forward foreign exchange contracts as a hedge. These forward
exchange contracts do not subject us to risks from exchange rate movements
because gains and losses on the contracts offset losses and gains on the
transactions being hedged. As at September 30, 2005, the Company had contracted
to sell US $2.5 million in exchange for CDN dollars over a period to November
30, 2005 at a weighted average exchange rate of CDN $1.247 and another US $2
million to sell in exchange for Canadian dollars for the period December 7, 2005
to February 28, 2006 at a weighted average exchange rate of CDN $1.1668. The
Company has recorded a foreign currency gain of approximately $183,000 in
respect of these contracts in its financial results for the three-month period
ended September 30, 2005. These contracts are entered into with a major
financial institution as counterparty. The Company is exposed to credit loss in
the event of nonperformance by the counterparty, which is limited to the cost of
replacing the contracts, at current market rates. The company does not require
collateral or other security to support these contracts. We currently intend to
continue to enter into such contracts to hedge against future material foreign
currency exchange rate risks.

ITEM 4.  CONTROLS AND PROCEDURES

         The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation as of September 30, 2005 that the Company's
disclosure controls and procedures (as defined in Rule 13a-15 of the Exchange
Act) are effective in ensuring that all material information required to be
disclosed in this quarterly report has been made known to them in a timely
fashion. There have been no significant changes in the Company's internal
controls or in other factors, or any corrective actions with regard to
significant deficiencies and weaknesses that could significantly affect these
controls subsequent to the date of their evaluation.



                           PART II - OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

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

     b.   The Company did not file any reports on Form 8-K for the three month
          period ended September 30, 2005.


                                       21


<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, 2005       By: /s/ John Perrachon
                                    --------------------
                                 John Perrachon
                                 Chief Executive Officer, President and Director


Dated:   November 14, 2005       By: /s/ Matthew Carson
                                    --------------------
                                 Matthew Carson
                                 Vice President Finance and
                                 Chief Financial Officer
                                 (Principal Financial Officer)




                                       22


<Page>

                                  EXHIBIT INDEX



<Table>
<Caption>
EXHIBIT     DESCRIPTION
NUMBER
--------    -----------
<S>         <C>

       2    Going Private Transaction Statement filed as an exhibit to 99.1 of
            the Company's Report on Form 13E-3 filed on February 12, 2004, which
            Exhibit is incorporated herein by reference.
 3.1 (1)    Second Amended and Restated Articles of Incorporation. Reference
            is made to Exhibit 3.1 of 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.
 3.1 (2)    Third Amended and Restated Articles of Incorporation, Reference
            is made to Exhibit 4.1 of the Company's Report Form 8-K filed on
            June 13, 2003, which Exhibit is incorporated herein by reference.
 3.2 (1)    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.
 3.2 (2)    Amended and Restated Bylaws. Reference is made to Exhibit 3.1 of
            the Company's Annual Report on Form 10-K (Amendment No. 1) for the
            fiscal year ending December 31, 2001, filed on April 16, 2002, which
            Exhibit is incorporated herein by reference.
 4.1 (1)    Terms of Class A Voting Common Stock, included as part of
            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.
 4.1 (2)    Terms of Class A Voting Common Stock, included as part of
            Exhibit 4.1 of the Company's Report on Form 8-K filed on June 13,
            2003, which Exhibit is incorporated herein by reference.
 4.2 (1)    Terms of Series A Preferred Stock, included as part of 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.
 4.2 (2)    Voting Trust and Limited Stockholders Agreement dated June 9,
            2003, included as part of Exhibit 4.1 of the Company's Report on
            Form 8-K filed on June 13, 2003, which Exhibit is incorporated
            herein by reference. Terms of Series A Preferred Stock, included as
            part of Exhibit 4.1 of the Company's Report on Form 8-K filed on
            June 13, 2003, which Exhibit is incorporated herein by reference.
 4.3 (1)    Terms of Series B Preferred Stock, included as part 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.
 4.3 (2)    Terms of Series B Preferred Stock, included as part of Exhibit
            4.1 of the Company's Report on Form 8-K filed on June 13, 2003,
            which Exhibit is incorporated herein by reference.
    4.4     Terms of Series C Preferred Stock, included as part of Exhibit 4.1
            of the Company's Report on Form 8-K filed on June 13, 2003, which
            Exhibit is incorporated herein by reference.
    9.1     Voting Trust and Limited Stockholders Agreement, dated May 18, 2000,
            among CDP Capital Communications, Sofinov and TouchTunes Digital
            Jukebox, Inc. Reference is made to Exhibit 3 of the Company's Form
            8-K, filed on June 2, 2000, which Exhibit is incorporated herein by
            reference.
     10     Settlement agreement between the Company and Ecast, Inc. dated
            April 23, 2004, which Exhibit is incorporated herein by reference.
   10.2     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 10.18 of Company's
            Registration Statement on Form SB-2, File No. 333-7006, which
            Exhibit is incorporated herein by reference.
   10.3     Subscription Agreement for the purchase of 100 Series A Preferred
            Shares of the Company by the selling Stockholders. Reference is made
            to Exhibit 6 of Company's Form 8-K for the month of March 1997,
            which Exhibit is incorporated herein by reference.
   10.4     Company's 2000 Long-Term Incentive Plan. Reference is made to
            Exhibit 4.3 of the Company's Form S-8 filing, filed on July 17,
            2000, which Exhibit is incorporated herein by reference.
</Table>


                                       23

<Page>

<Table>
<Caption>
EXHIBIT     DESCRIPTION
NUMBER
--------    -----------
<S>         <C>

 10.5       Subscription Agreement, dated May 18, 2000, among CDP Capital
            Communications, Sofinov and TouchTunes Digital Jukebox, Inc.
            Reference is made to Exhibit 1 of the Company's From 8-K, filed on
            June 2, 2000, which Exhibit is incorporated herein by reference.
 10.6       Registration Rights Agreement, dated May 18, 2000, among CDP Capital
            Communications, Sofinov and TouchTunes Digital Jukebox, Inc.
            Reference is made to Exhibit 2 of the Company's Form 8-K, filed on
            June 2, 2000, which Exhibit is incorporated herein by reference.
 31.1       Rule 13a-14(a)/15d-14(a) CEO Certification
 31.2       Rule 13a-14(a)/15d-14(a) CFO Certification
 32.1       CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 32.2       CFO Certification pursuant to 18 U.S.C. Section 1350, as Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</Table>


                                       24