As filed with the Securities and Exchange Commission on November 5, 1997
File No. 333-7006
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TECHNICAL MAINTENANCE CORPORATION
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 3670 87-0485304
- ---------------- ---------------------------- ------------------
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification
incorporation or Number)
organization)
TECHNICAL MAINTENANCE CORPORATION
One Commerce Place - Suite 330
Montreal (Nun's Island)
Quebec, Canada H3E 1A2
(514) 762-6244
---------------------------------------------------
(Address, including zip code, and telephone
number of registrant's principal executive offices)
Tony Mastronardi, President
TECHNICAL MAINTENANCE CORPORATION
c/o Touchtunes Digital Jukebox Inc.
One Commerce Place - Suite 330
Montreal (Nun's Island)
Quebec, Canada H3E 1A2
(514) 762-6244
---------------------------------------------------
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Jacques Bourque, Esq. Aaron Karp, Esq.
Guy & Gilbert Karp and Sommers
770 Sherebrooke Street West 950 Third Avenue
Suite 2200 9th Floor
Montreal (Quebec) H3A 1A2 New York, NY
10022
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this Registration Statement
____________________________________________________
i<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the box. [X]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------
Title of Each Amount to Proposed Proposed Amount of
Class of be Maximum Maximum Registration
Securities to Registered Offering Aggregate Fee
be Registered Price Per Offering
Share Price
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Class A Common 2,000,000 $3.00 $6,000,000 $1,818.18
Stock
($.001 par
value)
- --------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a) may determine.
ii<PAGE>
TECHNICAL MAINTENANCE CORPORATION
Cross Reference Sheet
Pursuant to Rule 404(a)
Item Number of Form SB-2 Location or Caption in Prospectus
1. Front of Registration Statement and Outside Front Cover Page
Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus Cover Pages
3. Summary Information and Risk Factors Prospectus Summary and Risk
Factors
4. Use of Proceeds Prospectus Summary; Use of
Proceeds and Business
5. Determination of Offering Price Outside Front Cover Page
6. Dilution Not Applicable
7. Selling Security Holders Principal Shareholders and Selling
Shareholders
8. Plan of Distribution Outside Front Cover Page
9. Legal Proceedings Business - Legal Proceedings
10.Directors, Executive Officers, Management - Directors and
Promoters and Control Persons Executive Officers
11.Security Ownership of Certain Principal Shareholders and Selling
Beneficial Owners and Management Shareholders
12.Description of Securities Outside Front Cover Page;
Description of Capital Stock
13.Interest of Named Experts Legal Matters; Experts
14.Disclosure of Commission Position on Part II
Indemnification for Securities Act
Liabilities
15.Organization Within Last Five Years Prospectus Summary; Business and
Management's Discussion and
Analysis of Financial Conditions
and Results of Operations
16.Description of Business Prospectus Summary; Business
17.Management's Discussion and Analysis Prospectus Summary; Business;
or Plan of Operation Management's Discussion and
Analysis of Financial Condition
and Results of Operations
18.Description of Property Business _ Property
iii<PAGE>
19.Certain Relationships and Related Certain Transactions
Transactions
20.Market for Common Equity and Related Risk Factors; Price Range of
Stockholder Matters Common Stock; Dividend Policy and
Description of Capital Stock
21.Executive Compensation Management - Executive
Compensation
22.Financial Statements Financial Statements
23.Changes in and Disagreements with Not Applicable
Accountants on Accounting and
Financial Disclosure
24.Indemnification of Directors and Part II
Officers
25.Other Expenses of Issuance and Part II
Distribution
26.Recent Sales of Unregistered Part II
Securities
27.Exhibits Part II; Exhibits
28.Undertakings Part II
29.Financial Statements Not Applicable
iv<PAGE>
PROSPECTUS
Subject to Completion, Dated November 5, 1997
TECHNICAL MAINTENANCE CORPORATION
2,000,000 SHARES OF CLASS A COMMON STOCK
(Par Value $.001 Per Share)
This Prospectus relates to the offering of 2,000,000 shares of the
Class A Common Stock ("Common Stock") of Technical Maintenance Corporation (the
"Company"), which may be sold from time to time by selling shareholders named
herein (the "Selling Shareholders"). The Company will receive no part of the
proceeds of such sales (see "Use of Proceeds"). All expenses incurred in
connection with this offering will be borne by the Company.
The Company has been advised by the Selling Shareholders that they
intend to sell all or a portion of the shares offered hereby from time to time
in the over-the-counter market. Such sales will be made through brokers at
prices prevailing at the time the sales are made. The Selling Shareholders and
any brokers executing sell orders on behalf of the Selling Shareholders, may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended, and any commissions received by such brokers may be deemed underwrit-
ing commissions under such Act.
The Company's Common Stock is traded in the over-the-counter market
on the "OTC Bulletin Board" under the symbol TCMN. On October 16, 1997, the
last reported sales price of the Common Stock was $2.00 per share.
Upon completion of this offering, the Company's officers and
directors will own approximately 67.6% of the outstanding shares of Common
Stock. As such, they will have the power to elect all of the Company's direc-
tors, to approve or disapprove all matters requiring stockholders' approval and
to control the Company's management, policies and operations. (See "PRINCIPAL
SHAREHOLDERS").
______________________________
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE RISK FACTORS (Pages 6-10)
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
______________________________
1<PAGE>
No person is authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering described herein. The Prospectus does not constitute an
offer to sell securities in any state to any person to whom such offer would be
unlawful.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files annual and quarterly reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information may be
inspected and copied at the Commission's Public Reference Section, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, as well as at the Commission's
Regional Offices at 7 World Trade Centre, 13th Floor, New York, New York 10048;
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies
of such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N. W., Washington, D.C. 20549.
The Commission also maintains a Website that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The Website address is: http:/www.sec.gov.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere or
incorporated by reference in this Prospectus.
The Company
The Company was incorporated under the laws of Nevada on August 9,
1990, by persons who are no longer principals. Present management took
control of the Company in December 1994. (See "CERTAIN TRANSACTIONS".) Prior
thereto, the Company did not engage in any business activities. The Company is
still in the development stage and has not generated any revenues. The Company
has a mailing office at 1800 E. Sahara, Suite 107, Las Vegas, Nevada 89104 and
a branch office at 1110 Lake Cook Road, Suite 353, Buffalo Grove, Illinois
60089. Its principal business offices are located at One Commerce Place, Suite
570, Montreal (Nun's Island), Quebec H3E 1A2, Canada. The Company's telephone
number in Canada is 514-762-6244. (See "BUSINESS - Properties").
2<PAGE>
The Company operates its business through Touchtunes Digital Jukebox
Inc. ("Touchtunes"), a Canadian subsidiary corporation which was organized by
the Company in March 1997, specifically for that purpose and which has been
capitalized in the manner described below under "Initial Funding". On the
effective date of this Prospectus, Touchtunes will become a wholly owned
subsidiary of the Company. (See "CERTAIN TRANSACTIONS - With the Selling
Shareholders").
Business
Since December 8, 1994, the Company has concentrated its efforts on
raising funds for the development and promotion of the technology for a
patented digital jukebox, combining the latest computer systems, telecommunica-
tion peripherals and multimedia hardware (the "Digital Jukebox"). The Digital
Jukebox is a state-of-the-art high tech unit, capable of storing, in compressed
digital format, a minimum of 500 songs, upgradable to virtually unlimited
capacity. The Company's Digital Jukebox is believed by management to be
capable of replacing present conventional jukeboxes which use loading
mechanisms, laser and other high maintenance parts, with a low maintenance,
high powered digital computer system, able to store and reproduce in digital
format, a virtually unlimited selection of music, at its original level of
quality. (See "BUSINESS - Patent Technology".)
Initial Funding
Since taking control of the Company in December 1994, the officers
and principal shareholders of the Company have financed its operations
primarily through their own resources and efforts. (See "CERTAIN TRANSACTIONS"
and "PRINCIPAL SHAREHOLDERS".) On March 21, 1997, two independent Canadian
investors, Societe Innovatech du Grand Montreal and Sofinov Societe Financiere
d'Innovation Inc. (the "Selling Shareholders"), agreed to invest $4,000,000
Canadian Dollars (CDN) for the further development and promotion of the Digital
Jukebox, upon certain terms and conditions described below. To accomplish
this, the Selling Shareholders agreed to invest $4,000,000 CDN in Touchtunes
Digital Jukebox Inc. ("Touchtunes"), a Canadian subsidiary organized by the
Company specifically for that purpose. The Company entered into an agreement
by which Touchtunes agreed to carry out the research and development work for
the Digital Jukeboxes and all such additional services as may be reasonably
requested by the Company in connection with implementation of the Digital
Jukebox project. (See "BUSINESS" and "CERTAIN TRANSACTIONS".)
The Selling Shareholders purchased 100 Class B shares and 20 Class C
shares of Touchtunes, at a price of $5,000 CDN per share, for an immediate cash
consideration of $600,000 CDN. The Selling Shareholders also subscribed to an
additional 680 Class C shares of Touchtunes, at a price of $5,000 CDN per
share, for a total consideration of $3,400,000 CDN. Both the Class C shares
and the funds were deposited in escrow. The Class B and the Class C shares of
Touchtunes may be exchanged at the option of the Selling Shareholders, into
2,000,000 shares of Series A Preferred Stock of the Company and then converted
share for share into Common Stock. On May 9, 1997, the Selling Shareholders
released an additional $750,000 CDN against delivery of 150 Class C shares,
leaving a balance of $2,650,000 CDN and 530 Class C shares in escrow. On July
17, 1997, the Selling Shareholders released the remaining $2,650,000 CDN to
Touchtunes against delivery to them of the remaining 530 Class C shares of
Touchtunes. These funds are now being used to implement the start-up business
activities of the Company. (See "Business Start-Up Activities" and "BUSINESS -
Marketing Strategy".)
3<PAGE>
The Selling Shareholders have agreed that when this Prospectus
becomes effective under the Securities Act, they will exercise their option to
exchange all their Class B and Class C shares of Touchtunes into 2,000,000
shares of Series A Preferred Stock of the Company and will immediately convert
all such shares into 2,000,000 shares of Common Stock of the Company.
Business Start-Up Activities
The Company will require the entire $4,000,000 CDN received by the
initial funding to complete its start-up business activities. These funds will
be used to: (i) conduct a market trial test; (ii) register the Company's
patents in the United States, Japan, Canada and member countries of the
European patent office organization; (iii) continue research and development of
the Digital Jukebox; (iv) establish a national sales network; and (v) negotiate
long term contracts with major music label companies for non-exclusive music
rights. Management believes this will be sufficient capital until March 1,
1998. Thereafter, management estimates that it will require additional capital
of approximately $38,000,000 U.S. to commence full-scale commercial operations.
(See "BUSINESS - Future Financing".)
Management estimates that these start-up business activities will
continue until March 1, 1998, at which time the Company will be ready to
manufacture Digital Jukeboxes. In order to rapidly penetrate the existing
jukebox market, the Company plans to pay the manufacturing costs of the Digital
Jukeboxes and provide them for use by current jukebox operators without cost.
(See "BUSINESS - Jukebox Manufacturers".) The jukebox operators are expected
to install the Digital Jukeboxes in lieu of their existing conventional units,
at their present locations, or in new locations, and provide the necessary
maintenance to keep the Digital Jukeboxes in good working order. The Company
plans to enter jukebox operator agreements with such operators, to be
negotiated individually with each, whereby the Company and the operator will
share in the income generated by each Digital Jukebox. The Company plans to
manufacture and install 5,000 units with jukebox operators by the end of 1998.
(See "BUSINESS - Marketing Strategy".)
Management estimates that manufacturing and distribution costs for
the number of Digital Jukeboxes needed to operate on a commercially profitable
basis will require additional capital estimated at approximately $38,000,000
U.S. (See "BUSINESS - Future Financing".) The Company has no present commit-
ments for raising such additional funds and no assurances can be given that
such funds will be available, when and if needed by the Company. (See "RISK
FACTORS".)
The Offering
The Company is the owner of 800 Class A shares of Touchtunes. Class
A shares entitle the holder to one vote per share. The Selling Shareholders
own 100 Class B shares and 700 Class C shares of Touchtunes. Class B shares
entitles the holder to eight votes per share and Class C shares are non-voting.
At present, the Company and the Selling Shareholders have equal voting rights
in Touchtunes.
The Class B and Class C shares of Touchtunes are exchangeable at the
option of the Selling Shareholders into 2,000,000 Series A Preferred shares of
the Company which, in turn, are convertible share for share into 2,000,000
shares of Common Stock of the Company. Once the Selling Shareholders exercise
their exchange rights for Series A Preferred shares of the Company and convert
them into Common Stock, the Company will become the sole remaining shareholder
of Touchtunes. It is anticipated that this will take place on the effective
4<PAGE>
date of this Prospectus. (See "CERTAIN TRANSACTIONS" and "SELLING
SHAREHOLDERS".)
This Prospectus is intended to register the sale by the Selling
Shareholders of a maximum of 2,000,000 shares of the Company's Common Stock
reserved for issuance to them, upon exercise of their rights to exchange their
100 Class B shares and 700 Class C shares of Touchtunes into 2,000,000 of the
Company's Series A Preferred shares and their conversion of such Series A Pre-
ferred shares (plus 100 shares of Series A Preferred Stock which they already
own) into 2,000,100 shares of the Company's Common Stock. (See "CERTAIN
TRANSACTIONS".)
Summary Financial Data
Statement of Operations Data:
Six
Months Ended
Year ended June 30,
December (Unaudited)
31,
1994 1995 1996 1996 1997
------------ ----------- ------------ ------------ -----------
Net sales $ - $ - $ $ - $ -
Depreciation $ - $ 114,776 $ 189,243 $ 64,050 $ 199,686
and amortizati
Operating loss $ - $ (785,063) $ (991,970) $ (319,387) $ (982,961)
Net loss $ - $ (785,063) $ (991,970) $ (319,387) $ (982,961)
5<PAGE>
Development Period:
December 8, 1994 December 8, 1994
to December 31, 1996 to June 30, 1997
(Unaudited)
-------------------- ------------------
Net sales $ - $ -
Depreciation $ 304,019 $ 503,705
and amortization
Operating loss $ (1,777,033) $ (2,759,994)
Net loss $ (1,777,033) $ (2,759,994)
Balance Sheet Data:
As At
As At December 31, June 30,
(Unaudited)
1994 1995 1996 1996 1997
---------- ----------- ------------- ----------- -------------
Current Assets $ - $ - $ 21,402 $ - $ 795
Total Assets $ 63,539 $ 780,767 $ 1,714,272 $ 797,457 $ 1,626,471
Working Capital $ - $ (123,901) $ (2,027,974) $ (459,978) $ (1,005,423)
(deficiency)
Stockholders' $ 63,539 $ 656,866 $ ( 335,104) $ 337,479 $ 620,253
equity
(deficiency)
Use of Proceeds
The Company will receive no part of the proceeds from the sale of the
2,000,000 shares of Common Stock by the Selling Shareholders. All expenses
incurred in connection with this offering will be borne by the Company. (See
"SELLING SHAREHOLDERS".)
RISK FACTORS
The shares of Common Stock being offered hereby are speculative.
They involve a very high degree of risk. Before considering the purchase of
any shares of Common Stock, a prospective investor should carefully consider,
in addition to the other information contained in this Prospectus, the
following risk factors. No person should purchase any of the shares of Common
Stock if they cannot afford to lose their entire investment.
1. Limited Operating Experience. The Company was incorporated in August
1990. It did not commence business activities until December 1994, when
present management took control. The Company's Digital Jukebox is still in its
development stage and must still undergo a market trial test. No revenues have
been generated from the sale of Digital Jukeboxes, the Company's only current
product. The Company believes that revenues from the Digital Jukeboxes will
constitute a significant portion of its revenues for the foreseeable future.
Accordingly, any factor adversely affecting the introduction, promotion and
revenues from the Digital Jukeboxes would have a material adverse effect on the
Company's business and the results of its operations. (See "BUSINESS".)
2. No Financial History. The Company has received no revenues from
operations and has no significant financial history. Future financial perform-
ance will depend on the successful development, promotion and customer
acceptance of its patented Digital Jukebox. There can be no assurance that the
6<PAGE>
Company will be successful in promoting and marketing any present or enhanced
versions of the Digital Jukebox. At June 30, 1997, the Company had a working
capital deficiency of ($1,005,423). (See "SELECTED FINANCIAL DATA _ Balance
Sheet Data," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Liquidity and Capital Resources" and "BUSINESS".)
3. Dependence on Key Personnel. The Company will be dependent for its
success on the personal, day-to-day efforts and abilities of its two key execu-
tive officers, Tony Mastronardi and Guy Nathan. (See "MANAGEMENT" and
"PRINCIPAL SHAREHOLDERS".) In addition, the Company must employ a chief
financial officer to monitor its finances. Its success will also depend to a
significant extent upon a number of key technical employees. Competition for
such technical personnel is intense. The failure of the Company to hire and
retain talented administrative and technical personnel or the loss of one or
more key employees could have an adverse effect on the Company's business and
results of operations.
4. Further Development Requirements and Possible Obsolescence. The Company's
future success will depend upon its ability to complete the development of its
Digital Jukebox and introduce features and enhancements which meet changing
customer requirements on a timely basis. (See "BUSINESS - Patented Techno-
logy".) Once developed, there can be no assurance that the Digital Jukebox
will achieve market acceptance. In addition, there can be no assurance that
other products or technologies will not render the Digital Jukebox non-
competitive or obsolete. (See "BUSINESS - Industry Background".)
5. Lack of Firm Orders. At present, the Company has received no firm orders
for the use of its Digital Jukeboxes. There can be no assurance that any of
the arrangements being proposed by the Company for their use by existing
jukebox operators will be concluded. (See "BUSINESS - Marketing Strategy.")
6. Intense Competition and Marketing Risks. The market for jukeboxes is
extremely competitive. There are substantial barriers to entry in this market
due to the large amount of capital required. The Company expects such competi-
tion to intensify in the future. The Company's potential competitors have
significantly greater financial and other resources than the Company. (See
"BUSINESS - Jukebox Manufacturers".) The Company's ability to compete
successfully in this market will depend upon a number of factors, including:
the success of its test marketing plan; the willingness of jukebox operators to
work with the Company; access to capital; the capacity, reliability and
security of the telecommunications network used; the pricing policy of competi-
tors and suppliers; the timing of the introduction of new products and
services; and industry and general economic trends. There can be no assurance
that the Company will be successful in introducing its Digital Jukeboxes into
this market or that the revenues generated will prove profitable. (See
"BUSINESS - Marketing Strategy".)
7. Lack of Revenue; Future Capital Requirements; and the Uncertainty of
Funding. To date, the Company has not generated any revenues from its opera-
tions. Management estimates that start-up costs for the development and
promotion of the Digital Jukebox until March 1, 1998, the projected point of
commercial manufacturing, will approximate $4,000,000 CDN, the total amount the
Company has received. The Company expects that its capital resources will
enable it to maintain its start-up business operations until then. At that
time, the Company will need approximately $38,000,000 U.S. in order to
manufacture and ship its Digital Jukeboxes on a commercial basis. For that
purpose, the Company must seek additional funding through public or private
equity or debt financing. There can be no assurance that such financing will
be available on terms favorable to the Company, or at all. If adequate funds
7<PAGE>
are not available or are not available on acceptable terms, the Company may not
be able to commercialize its Digital Jukeboxes. (See "BUSINESS".)
8. Need For Further Technological Advances. There can be no assurance that
the technological lead, which management believes the Company's Digital Jukebox
presently enjoys, will remain. The Company's future success will depend, in
part, on its ability to effectively use leading technologies, to continue to
develop its technical expertise, to enhance its current Digital Jukebox and
develop new features which will meet changing customer needs on a timely and
cost effective basis. There can be no assurance that the Company can do this.
(See "BUSINESS - Patented Technology".)
9. Limited Patent Protection. The Company has filed eight international
patent applications under the Patent Cooperation Treaty, a worldwide
organization, in order to protect its Digital Jukebox's technology. It will
continue its efforts to protect such patent claims during its start-up business
operations and thereafter. Nevertheless, there can be no assurances concerning
the scope, validity or value of such patents and patent applications; nor as to
freedom from infringement, by the manufacture, use or sale of Digital
Jukeboxes, of patents held by others, although the Company is not aware of any
infringing patents. (See "BUSINESS - Patented Technology".)
10. No Manufacturing Facilities or Experience. The Company has no
manufacturing facilities. The Digital Jukebox has never been manufactured on a
commercial scale. There can be no assurance that the Digital Jukeboxes can be
manufactured at a cost or in quantities necessary to make them profitable. If
the Company is not able to contract with a manufacturer for a sufficient number
of Digital Jukeboxes on acceptable terms, or if it should encounter delays or
difficulties in its relationship with the manufacturer, the introduction of the
Digital Jukeboxes would be delayed, which would have a material adverse affect
on the Company. (See "BUSINESS -Jukebox Manufacturers".)
11. No Marketing Experience. Up until July 1, 1997, the Company had no sales,
marketing or distribution capability. Since July 1, 1997, the Company has
employed a Vice-President of sales and marketing, a sales manager and a service
manager. To market its Digital Jukeboxes, the Company must develop a marketing
and sales force with technical expertise and with supporting distribution capa-
bility. There can be no assurance that the Company will be able to establish
in-house sales and distribution capabilities or that it will be successful in
gaining market acceptance for its Digital Jukebox. There can be no assurance
that the Company will be able to attract suitable personnel to develop
successfully, its marketing strategy. (See "BUSINESS - Marketing Strategy".)
12. Dependence Upon a Sole Equipment Manufacturer. The Company will be
dependent upon a single equipment manufacturer for its Digital Jukeboxes. It
is presently negotiating with Bose Corporation. Once an agreement is entered,
the Company will become subject to Boses' performance and may also be subject
to increases in costs which could adversely affect the Company's business and
results of operations. ("BUSINESS - Jukebox Manufacturers".)
13. No Market for Common Stock. As of October 16, 1997, there were
approximately 500 holders of the Company's Common Stock. Over the past two
years, there has been relatively little activity in the Common Stock, which is
traded over-the-counter on the "OTC Bulletin Board". There can be no assurance
that an active public market will develop or be sustained after the sale of the
Common Stock by the Selling Shareholders. (See "PRICE RANGE OF COMMON STOCK".)
14. Shares Eligible For Future Sale. Future sales by existing shareholders
could have a material adverse effect on the price of the Common Stock. Upon
exercise by the Selling Shareholders of their exchange rights and their
8<PAGE>
conversion rights, the Company will have 16,584,807 shares of Common Stock
issued and outstanding. Of this, 11,215,049 shares (67.6%) are owned by
present management. (See "PRINCIPAL SHAREHOLDERS".) No assurance can be given
as to the effect that future sales of shares held by present shareholders will
have on the market price prevailing from time to time.
15. Control of the Company. Upon completion of this offering, the Company's
officers and directors will own approximately 67.6% of the outstanding shares
of Common Stock, assuming the sale of all 2,000,000 shares by the Selling
Shareholders. As such, they will have the power to elect all of the Company's
directors, to approve or disapprove all matters requiring stockholders'
approval (regardless of the vote of any other stockholders) and to control the
Company's management, policies and operations. (See "PRINCIPAL SHAREHOLDERS".)
16. No Dividends. The Company has never declared or paid dividends on its
Common Stock. It intends to retain future earnings, if any, to support the
growth of its business and does not anticipate paying cash dividends in the
foreseeable future. (See "DIVIDEND POLICY.")
17. Securities Not Listed on NASDAQ. The Company's Common Stock is not listed
for quotation on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or on any securities exchange. The Common Stock is
subject to certain "Penny Stock Rules" adopted by the Securities Exchange
Commission, relative to transactions in securities with a market price of less
than $5.00. These require a broker to provide his customer with, among other
things: (1) detailed information about the nature and risks of "penny" stocks,
prior to executing a transaction; (2) make a written determination that the
stock is a suitable investment for the purchaser; and (3) receive the
purchaser's prior written agreement to execute the transaction. These
disclosure requirements may have the effect of reducing the level of trading in
the Company's Common Stock. In that event, investors in this offering may find
it more difficult to sell their securities.
9<PAGE>
For all the foregoing reasons, an investment in the Company's Common
Stock involves a high degree of risk. Any person considering such an
investment should be aware of these risk factors.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Shareholders.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded in the over-the-counter market
on the "OTC Bulletin Board" since June 7, 1995, under the symbol TCMN. The
quotations below from the National Quotation Bureau, Inc. represent the high
and low, bid and asked prices, by quarters, since that date. These do not
include retail markups, markdowns or commissions. Nor do they represent actual
transactions.
Bid Prices Asked Prices
High Low High Low
1995
June 7 through Unpriced Unpriced
June 30
July 3 through $4.50 $1.125 $4.75 $1.875
September 29
October 2 through $4.50 $.875 $4.875 $1.375
December 29
1996
January 2 through $1.625 $.875 $2.25 $1.125
March 29
April 1 through $3.25 $1.1875 $5.00 $1.375
June 28
July 1 through $3.75 $1.875 $4.25 $3.00
September 30
October 1 through $2.00 $1.00 $3.00 $2.00
December 31
1997
January 2 through $2.75 $1.00 $4.00 $1.50
March 31
April 1 through $2.125 $1.25 $3.00 $2.00
June 30
July 1 through $1.875 $1.00 $2.125 $1.97
September 30
10<PAGE>
On October 16, 1997, the last reported sales price of the Common Stock
on the OTC Bulletin Board was $2.00 per share. On that date, there were
approximately 500 holders of record of the Common Stock.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common
Stock. It intends to retain future earnings, if any, to support the growth of
its business and does not anticipate paying cash dividends in the foreseeable
future.
CAPITALIZATION
The following table sets forth the Company's capitalization at June
30, 1997.
June 30, 1997
-------------
Short term debt $ 1,006,218
Long term debt -
-------------
Stockholders Equity:
Preferred Stock - $.001 par value, authorized _ -
10,000,000 shares, 100 shares issued and
outstanding
-------------
Common Stock - $.001 par value, authorized _ 14,585
35,000,000 shares, 14,584,707 shares issued and
outstanding
-------------
Capital in excess of par value 3,366,662
-------------
Retained earnings (deficit) ( 2,760,994)
-------------
Total stockholders equity 620,253
-------------
SELECTED FINANCIAL DATA
The following selected financial data for the three year period from
January 1, 1994 through December 31, 1996 has been derived from the financial
statements of the Company audited by Armstrong Gilmour, Accountancy
Corporation. Their reports appear elsewhere herein. The Company's operating
results for the six months ended June 30, 1997 may not be indicative of the
operating results to be expected for the full year.
11<PAGE>
Summary Financial Data
Statement of Operations Data:
Six
Months Ended
Year ended December 31, June 30,
(Unaudited)
1994 1995 1996 1996 1997
---------- ----------- ----------- ----------- -----------
Net sales $ - $ - $ - $ - $ -
Depreciation $ - $ 114,776 $ 189,243 $ 64,050 $ 199,686
and amortization
Operating loss $ - $ (785,063) $ (991,970) $ (319,387) $ (982,961)
Net loss $ - $ (785,063) $ (991,970) $ (319,387) $ (982,961)
Development Period:
December 8, 1994 December 8, 1994
to December 31, 1996 to June 30, 1997
(Unaudited)
-------------------- ----------------
Net sales $ - $ -
Depreciation $ 304,019 $ 503,705
and amortization
Operating loss $ (1,777,033) $ (2,759,994)
Net loss $ (1,777,033) $ (2,759,994)
Weighted average
number
Of Class A Common
Stock:
Shares outstanding, 1,000,000 2,000,000 12,909,000 12,909,000 12,909,000
beginning
of period
Share issuance's 1,000,000 10,909,000 - - 1,675,707
during the period
Shares outstanding, 2,000,000 12,909,000 12,909,000 12,909,000 14,584,707
end of period
Weighted average 1,065,753 10,535,844 12,909,000 12,909,000 14,584,707
number
of shares
Net loss per Class $ - $ (0.07) $ (0.08) $ (0.01) $ (0.04)
Common Stock
12<PAGE>
Balance Sheet Data:
As At
As At December 31, June 30,
(Unaudited)
1994 1995 1996 1996 1997
---------- ----------- ------------- ----------- -------------
Current Assets $ - $ - $ 21,402 $ - $ 795
Total Assets $ 63,539 $ 780,767 $ 1,714,272 $ 797,457 $ 1,626,471
Working Capital $ - $ 123,901 $ (2,027,974) $ (459,978) $ (1,005,423)
(deficiency)
Stockholders' $ 63,539 $ 656,866 $ ( 335,104) $ 337,479 $ 620,253
equity
(deficiency)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the information set forth in "Business Start-Up Activities" in the
"PROSPECTUS SUMMARY," under "Selected Financial Data" and the financial
statements and notes thereto included elsewhere in this Prospectus.
General and Results of Operations
The Company's ongoing development of the Digital Jukebox and its
other intellectual property acquisitions provide it with several future
opportunities for financial success. To date, the Company's financial
resources have been used to fund this development as well as professional costs
relating to patent applications in connection with the Digital Jukebox and
other fees. The Company has generated no revenue to date, and none is expected
until it concludes the start-up phase for the Digital Jukebox, which is
anticipated in approximately 6 months.
13<PAGE>
Seasonality
Management is not aware of any factors or attributes relating to the
Company's business that have caused, or in the future are reasonably likely to
cause, any seasonality which would have a material effect on the Company's
financial condition or results of operations.
Liquidity and Capital Resources
On March 21, 1997, the Selling Shareholders agreed to invest
$4,000,000 CDN for the further development and promotion of the Digital
Jukebox, upon certain terms and conditions previously described. (See "CERTAIN
TRANSACTIONS - With Selling Shareholders"). By July 17, 1997, the entire amount
was delivered to the Company. This will supply the Company with sufficient
capital resources necessary in order to conclude the financing of its start-up
activities, projected to be March 1, 1998. In order to commence full-scale
commercial operations, management estimates that an additional $38,000,000 U.S.
capital will be required at that time. It is anticipated that a combination of
equity and debt financing will be arranged by the Company.
BUSINESS
The Company was incorporated under the laws of Nevada on August 9,
1990, by persons no longer principals. Prior to December 8, 1994, the Company
did not engage in any business activities. The Company is still in the deve-
lopment stage and has still not generated any revenues from the business opera-
tions in which it has engaged and the marketing strategy which it has
developed.
In December 1994, the Company acquired the exclusive rights to a
newly patented technology, the "Digital Jukebox". (See "Patented Technology".)
Since then, the Company has concentrated all of its efforts on the development
of this Digital Jukebox, which combines in a single unit the latest computer
systems, telecommunication peripherals and multimedia hardware. Management
believes the Digital Jukebox is capable of replacing the loading mechanisms,
the laser and the high maintenance parts employed by conventional jukeboxes,
with this low maintenance, high power computer system, capable of storing and
reproducing, in digital format, any music selection at its original level of
quality.
From December 1994 until March 1997, the Company's activities have
been funded by present management through their own resources and efforts.
Subsequently, the Company received $600,000 CDN on March 27, 1997; $750,000 CDN
on May 9, 1997; and $2,650,000 CDN on July 17, 1997; to start-up its business
operations. (See "CERTAIN TRANSACTIONS"). These funds will provide sufficient
capital until March 1, 1998 to complete the Company's start-up activities.
Thereafter, additional financing of approximately $38,000,000 U.S. will be
needed for commercial operations. No arrangements have been made as yet, to
obtain such additional funds. (See "Future Financing".)
14<PAGE>
Patented Technology
On December 8, 1994, the Company acquired the exclusive rights to a
patent-pending (PCT/FR94/01185) Digital Jukebox, developed by Touchtunes
Jukebox Joint Venture (See "CERTAIN TRANSACTIONS".) The core of the Digital
Jukebox's technology is a proprietary-programming platform, optimized for high-
speed sound reproduction and video animation. The Digital Jukebox is capable
of storing, in compressed digital format, a minimum of 500 songs, upgradable to
virtually unlimited capacity. The Digital Jukebox is also equipped with a
telecommunication protocol allowing the downloading of music to each individual
Digital Jukebox from a remote central library. The result is a high
performance, low maintenance, remotely configurable, computer controlled unit,
using state-of-the-art technology standards. In the opinion of management,
with its integrated and flexible software program, the Digital Jukebox
outperforms any conventional jukebox on the market today, for simultaneous
sound reproduction, graphics display, video animation and telecommunication
services.
Specifically designed for use in the jukebox industry, the operating
system software will tabulate all played selections and automatically generate
detailed pay-for-play statements, indicating the royalty amounts owing for each
respective artist or record label company. This feature has helped the Company
to obtain performance rights and recording rights from performance rights
societies and music label companies, authorizing the Company to reproduce
copyrighted music on its Digital Jukeboxes. (See "Contractual Arrangements".)
The statistics generated by Digital Jukeboxes can be used to
determine the popularity of artists and titles, together with music preferences
and trends. This information on musical tastes is critical to the music
industry and can be made available by the Company to record label companies.
Furthermore, Digital Jukeboxes can be used to test market new songs, which can
be downloaded on each Digital Jukebox within 24 hours. Consumer response can
be monitored on a daily basis.
To protect its technology, the Company has filed seven international
patent applications under the Patent Cooperation Treaty (PCT), a worldwide
organization. These applications have a priority date of October 12, 1994.
Recently, an eighth patent has been filed with a priority date of September 25,
1996. Four patents cover the Company's downloading network configuration,
operating system technology, title selection and system control methodology as
it applies to the jukebox industry. The other four patents, cover its
application to potential markets outside the jukebox industry, such as resi-
dential and other markets, which can be serviced by the same network
configuration. The initial seven patent applications passed preliminary
international examination. Nevertheless, there can be no assurances concerning
the scope, validity or value of such patents and patent applications; nor their
freedom from infringement by others; although the Company is not aware of any
conflicting patents held by others. The Company has presently entered into the
national phase of processing the applications and has filed all seven initial
patents in each country applied for under the PCT.
15<PAGE>
Marketing Strategy
The Company's marketing and distribution strategy is aimed at
penetrating the jukebox industry through individualized arrangements made with
existing jukebox operators. The Company proposes to arrange for the renewal
and payment of licensing fees to the performing rights societies,
accountability and disbursement of royalty payments to the record label
companies, ongoing provision of music selections and for the manufacture and
delivery of the Digital Jukeboxes to the jukebox operators, all at no cost to
them, and to share with them in the revenue derived from their operation. (See
"Jukebox Manufacturers" and "Future Financing".)
The Company participated in the Amusement Showcase International
trade show held in Las Vegas from March 13 to March 15, 1997, which attracts
most major players in the coin operated industry. For this, the Company
arranged for the construction of 4 prototype Digital Jukeboxes and was the only
participant in this trade show to have a fully operational Digital Jukebox.
MCI Telecommunications Corporation provided the telecommunications services.
Bose Corporation, which manufactured the prototypes for the Company, supplied
its sound system. The Company together with MCI Telecommunications Corporation
and Bose Corporation hosted a seminar during which they presented the Digital
Jukebox to jukebox operators.
By June 30, 1997, the Company had delivered 20 prototype units of the
Digital Jukebox to selected jukebox operators for the purpose of conducting a
trial marketing test. In all, 17 jukebox operators in 11 states were selected
to participate in this commercial marketing test which is scheduled to last 4
months and will be used to gauge consumer response and the practicality of
down-loading music on demand from a central music library to individual Digital
Jukeboxes. The test is being conducted in collaboration with MCI Telecom-
munications Corporation which will provide the telecommunication facilities and
financial resources to cover the costs of storing music data in a central
location, transmitting the compressed music data and installing and maintaining
telephone lines to the Digital Jukeboxes on location. Bose Corporation
manufactured the 20 prototypes of the Digital Jukebox for use in conducting
this commercial market test. The sound system of the Digital Jukeboxes was
also designed and supplied by Bose Corporation.
After an analysis of the marketing test's results, including
recommendations made by the general public as well as the jukebox operators,
the Company will incorporate the suggested refinements in the final version of
the Digital Jukebox to be manufactured for commercial use. Based on early
results of this marketing test, the Company is confident that it will prove
successful and the Digital Jukebox will receive wide market exposure. The data
furnished by the test will also be used in negotiating contracts with the music
label companies. (See "Contractual Arrangements".)
16<PAGE>
Industry Background
According to industry sources, there are an estimated 312,000
conventional jukeboxes presently in use in the United States. These are owned
by approximately 2,300 operators, who own an average of 135 units each. The
locations comprising an operator's group of jukeboxes are called their
"routes". Many larger operators possess more than 300 jukeboxes in their
routes. Some routes with less than the average number of jukeboxes carry a
larger proportion of other amusement/entertainment equipment, in order to
provide an adequate revenue stream. The Company plans to distribute its
Digital Jukeboxes through arrangements made with jukebox operators for the use
of these units, without any initial payments. (See "Marketing Strategy".)
There can be no assurance that this strategy will be successful or profitable
to the Company.
Surveys taken of "consumer impressions", consisting of the number of
times that people hear music played on a jukebox, consistently demonstrate that
jukeboxes make 75-80 million "impressions" on a weekly basis in the United
States. Approximately 120,000 of the 312,000 conventional jukeboxes now in
use are newer CD units. Yearly sales of new CD units in 1996 are estimated at
approximately 20,000 units. These CD units can carry 100 CDs with approxi-
mately 1,000 songs. The remaining 192,000 conventional jukeboxes in use are
old 45 rpm units. These older units carry between 80-100 two-sided records for
a total of 160-200 songs. The Company's Digital Jukebox holds a minimum of 500
songs, upgradable to virtually unlimited capacity.
Each 45-rpm record is individually selected for the popularity of at
least one of its two sides. Although the newer CD jukeboxes have five times
the capacity of the older 45-rpm models, each song is not necessarily well
known or popular. To compensate for this, compilation discs containing a
variety of songs are used to supplement the CD units. For both the old 45 rpm
units and the new CD units, releases featuring the "greatest hits" of a
particular artist, are usually available only after they have reached the
height of their popularity. By contrast, the Company's Digital Jukebox can
deliver the "greatest hits" of a particular artist, or even a brand new song,
within twenty-four hours.
Inventories of CD albums and vinyl records stored in conventional
jukeboxes, must be continuously serviced by the operators, in order to keep
track of the selections within each jukebox at any given time. On a monthly
basis, operators must visit their conventional jukeboxes in order to rotate and
up-date the music selection and to make necessary changes to the title display.
The Digital Jukebox eliminates the need to change CD albums or vinyl records.
All music selections can be supplied completely by telecommunication. Jukebox
operators need not visit each Digital Jukebox to up-date the music selection.
Operators can even permit owners at the various sites where the Digital
Jukeboxes are located, to order the music titles, thereby tailoring the music
selection to the specific tastes of the owner's clientele. With the Digital
Jukebox, they need not maintain an inventory of CD albums and vinyl records.
Jukebox operators who use the Company's Digital Jukebox can order and
receive, on a 24 hour basis, individual music titles, including the newest
releases, from a remote central music library maintained by the Company, merely
by following the instructions on a touch-screen, an integral part of each
Digital Jukebox. (See "Marketing Strategy".) Their selection will be
immediately delivered to the Digital Jukebox via the Company's proprietary
telecommunications downloading network and stored within the memory of the
Digital Jukebox at their desired location. Customers can then browse through
the music repertoire using the same touch-screen and play any selection in the
Digital Jukebox.
17<PAGE>
Jukebox Manufacturers
Manufacturers sell jukeboxes to distributors who, in turn, sell the
units to operators. They range in price from $3,500 to $4,000 per unit and the
distributors sell them in turn to jukebox operators in a price range of $4,500
to $5,000 per unit. In addition to providing warranties and replacement parts
for their units, manufacturers conduct the research and development required to
produce a quality product. The latest advances in technology, the minimization
of moving parts and the all-important aesthetics factor are critical in
producing a commercially successful jukebox. The leading manufacturers are
Rowe International Inc., NSM-America, Wurlitzer Jukebox Company and Rock-
Ola/Antique Apparatus.
The components required to assemble the Company's Digital Jukebox
consist of standard off-the-shelf products utilized to build personal
computers. The Company plans to contract out the design, manufacturing and
delivery of the Digital Jukebox. It is presently negotiating with Bose
Corporation ("Bose") for that purpose. Bose manufactured the 20 prototype
Digital Jukeboxes being used by the Company in conducting its marketing test.
There can be no assurance that the market test will be successful or that, if
successful, a satisfactory agreement can be reached with Bose to manufacture
Digital Jukeboxes.
The Company estimates that the cost of manufacturing, delivering and
installing each unit will be $4,800. A total of 5,000 units are believed
necessary for commercial operations. There can be no assurance that the
Company will be able to raise the estimated $24,000,000 U.S. needed to
manufacture the Digital Jukeboxes on a commercial basis and the additional
$14,000,000 U.S. needed by the Company to continue its business operations.
(See "Future Financing".)
Competition
Competition in the manufacture, distribution and use of conventional
jukeboxes is intense. Some manufacturers have other lines of equipment which
they produce, in addition to conventional jukeboxes, within the
amusement/entertainment industry. However, none of the manufacturers are known
to be involved in the placement or operation of any of their jukebox units.
Through their distribution network, manufacturers sell their equipment, usually
in bulk quantities, to local distributors. All of these manufacturers have far
greater resources than the Company.
Competition for Company's Digital Jukebox can also be expected from
those who seek to design, develop and market, units similar to the Digital
Jukebox for use in the jukebox industry, with comparable or superior features,
technologies and advances. While the Company believes the Digital Jukebox is
currently far superior to any conventional jukebox on the market, there can be
no assurance that other technologically advanced jukeboxes may not be designed
and marketed by existing manufacturers or others, in competition with the
Digital Jukeboxes of the Company.
Contractual Arrangements
Under United States copyright law, the public performance of
copyrighted music in a commercial establishment is subject to royalty payments
to the writers and publishers of the material. In the case of jukebox
operations, a license must be obtained from those societies who own the
copyrights. The three "performing rights societies", who collectively own
18<PAGE>
nearly all of the world's copyrighted music material are ASCAP, BMI and SESAC.
These societies are represented by the Jukebox License Office.
The Jukebox License Office has accepted the Company's downloading
Digital Jukeboxes under its designation and issued its first-ever license for
this type of equipment. Because the downloading Digital Jukeboxes will be
linked to a single proprietary network, the Company has the right to license
its Digital Jukeboxes as if they were part of one big jukebox "route".
A recording artist's rendition of a musical number, recorded under
contract with a record company, is subject to royalty payments. Record label
companies have traditionally included royalty charges in the purchase price of
their music releases, either on CD, vinyl or cassette tape. This gives them
control over the collection and distribution of payments to the artists they
represent.
The Company is negotiating with each record label company for the
right to play their music, based on the payment of a royalty charge each time a
selection is played. To date, PolyGram Records, Capitol Records/EMI, MCA
Records Inc., Virgin Records America Inc. and Warner Music Group have granted
the Company such rights to play their music. For the four month market trial
period (see "Marketing Strategy"), the results of the market trial will be used
to negotiate long term agreements with the record label companies and establish
the amount of royalties to be paid each time a selection is played. These
record companies have also agreed to provide part of their existing music
collections, including all new future releases, free of charge for inclusion in
the Company's central music library for the market trial test. The Company may
download selections to the music repertoires of any Digital Jukebox. A
mechanical right shall be paid each time the Company downloads a selection from
its central music library to an individual jukebox. The recording companies
will rely on the Company's ability to generate pay-for-play statements,
identifying the royalty amounts owing to them.
Future Financing
The $4,000,000 received from the Selling Shareholders will enable the
Company to complete its remaining business start-up activities, including: (1)
conducting a market trial test; (2) registration of the Company's patents in
the United States, Japan, Canada and the member countries of the European
patent office organization; (3) continuing research and development of the
Digital Jukebox; (4) establishing a national sales network; and (5) negotiating
long term contracts with the major music label companies. The Company
estimates that these start-up activities will continue until March 1, 1998, at
which time the Company will be ready to commence manufacturing the Digital
Jukeboxes. The manufacturing and delivery activities contemplated by the
Company will require an additional $24,000,000 U.S. in capital. An additional
$14,000,000 U.S. will also be needed by the Company, approximately $10,000,000
U.S. for continued operations and $4,000,000 U.S. for the development and
purchase of a "central server," a computer hardware and software system for
storing, downloading and accounting for music played on the Digital Jukeboxes.
The $38,000,000 U.S. additional funds will be needed by the Company
by March 1998, to penetrate the market rapidly. The Company plans to pay the
manufacturing costs of the Digital Jukeboxes and to provide them to the opera-
tors. (See "Marketing Strategy".) For their part, the operators will place the
units in their present locations and provide the maintenance needed to keep the
equipment in good working order. The Company plans to enter into agreements
with the jukebox operators, to be negotiated individually, by which the Company
and the operator will share the cashbox income generated by each Digital
Jukebox. The Company plans to share the income generated by its Digital
19<PAGE>
jukeboxes on the basis of approximately 45% to 50% for the Company and
approximately 50% to 55% for the jukebox operator.
There can be no assurances that the Company will be able to raise
this $38,000,000 U.S., as and when needed, on terms satisfactory to the
Company, or at all. Nor can there be any assurances that the Company will
interest enough jukebox operators to enter into arrangements of this nature.
Finally, there can be no assurances that even if all these events take place,
the operations of the Company will prove commercially profitable.
Properties
The Company owns no real estate. Its operations are conducted
through Touchtunes Digital Jukebox Inc. which has entered into a lease for a
term of three years commencing May 1, 1997, for 3,933 square feet of office
space at One Commerce Place, Nun's Island, Verdun (Quebec) Canada H3E 1A2. The
space is divided on two floors, 2,724 square feet in Suite 330 and 1,209 square
feet in Suite 570. The annual rent is $76,438 CDN payable in monthly
installments. The computer programmers are located in Suite 330 while
administration and secretarial services are conducted from Suite 570.
Management believes the leased premises are presently adequate for the
Company's operations. The Company recently rented 1259 square feet of office
space at 1110 Cook Road, Suite 353, Buffalo Grove, Illinois 60089, at an annual
rental of less than $25,000 for use as a sales and marketing office and parts
distribution centre.
Employees
The Company operates its business through Touchtunes Digital Jukebox
Inc., which has a total of sixteen employees. These comprise: 2 executive
officers; 1 sales and marketing executive; 1 sales manager, 1 service manager,
2 research and development directors; 1 administrative manager; 1 secretary; 1
bookkeeper; 1 graphic artist; and 5 computer programmers. The Company has no
collective bargaining agreement with any union and its employee relations are
satisfactory.
Legal Proceedings
There are no legal proceedings pending against the Company.
MANAGEMENT
Directors and Executive Officers
The executive officers and directors of the Company are listed below.
Name Office Age
Tony Mastronardi President and Director 37
Guy Nathan Senior Vice-President, 53
Secretary and Director
Tonino Lattanzi Vice-President and 45
Director
Jacques Bourque Assistant-Secretary 46
and
Director
Pierre Pharand Director 55
Andre Duquenne Director 58
20<PAGE>
Tony Mastronardi resides in Montreal, Canada. Since 1984, Mr. Mastronardi has
been employed by Les Pavages Samacon Inc., a Montreal-based family-owned
construction company. Since April 1993, he has also been active in the
management of Viatel Communications Inc., a Montreal-based cellular phone
distributor. His role with the Company evolved from Director of Sales to
President. He completed his post-secondary school studies at Damson College in
1981.
Guy Nathan currently resides in Montreal, Canada. Mr. Nathan is an inventor,
having patented numerous intellectual property inventions since 1965. He also
founded several companies for the purpose of promoting and marketing his
inventions. Mr. Nathan has a great deal of experience in telecommunications.
He was directly involved in the creation of photovoltaic powered television
transmitters and repeaters and microwave links; created a photovoltaic powered
modular television set for communal and educational tv use in third world
countries; acted as consultant for numerous African countries in matters of
telecommunications, more particularly in setting-up radio and television
networks by satellite; developed satellite dish antennas for direct television
reception in KU band and developed and patented an interactive cable tv.
Tonino Lattanzi resides in France. Mr. Lattanzi has organized and been an
active shareholder in several European corporations since 1975. In 1975, he
organized Bennes Expres, a French corporation specializing in industrial waste
management and residential garbage collection. In 1989, he organized Neturba,
an Italian corporation which performs the same functions in Italy as Bennes
Expres does in France. In 1989, he also organized France Pressions Expres, a
French corporation specializing in construction alteration, road repairs and
cement structures.
Jacques Bourque resides in Montreal, Canada. Mr. Bourque is a lawyer and
senior partner of the law firm of Guy & Gilbert which has offices in Montreal,
Canada. Mr. Bourque graduated from the law faculty of the Universite de
Montreal in 1973 and was admitted to the Bar of the Province of Quebec in 1975.
He also holds a Master in Business Administration from McGill University in
1977. Mr. Bourque has had extensive experience in corporate and commercial
law, specializing in mergers and acquisitions.
Pierre Pharand resides in Montreal, Canada. Mr. Pharand was appointed Vice-
President of Sofinov, Societe Financiere d'Innovation Inc. ("Sofinov") in
September 1996. Sofinov is a venture capital fund and a wholly owned
subsidiary of Caisse de Depot et placement du Quebec, a major pension fund with
57.2 billion dollars CDN of assets under management. Mr. Pharand holds a
Bachelor's degree in industrial relations from the Universite de Montreal in
1972 and a Bachelor's degree in business administration from McGill University
in 1964. He is also a Chartered Administrator. Prior to joining Sofinov, Mr.
Pharand was President of Acero Management International Inc., a consulting firm
specializing in the corporate development of technology-related companies. He
was also Chairman of the Board as well as President and Chief Executive Officer
of Datagram Inc., a communications and technology company. Mr. Pharand has
held a number of managerial positions with Campagnie Generale D'Electricite De
France, where he was in charge of different subsidiaries.
Andre Duquenne is Senior Vice President of Information Technologies of T2C2, a
venture capital fund organized by the Caisse de Depot, the Business Development
Bank of Canada and others. Mr. Duquenne served from 1993 to June 1997 as
21<PAGE>
Senior Vice President for technology placements at Societe Innovatech du Grand
Montreal, a $300,000,000 CDN fund, specializing in high-tech and biomedical
investments. Since 1993 he has served as a director for a number of public and
private companies including Cognicase Inc., Touchtunes Digital Jukebox Inc.,
Tecsys Inc., Toon Boom Technologies Inc., Systemcorp Inc. and PAD Systems Inc.
Executive Compensation
Until January 1, 1997, the Company had no arrangement for the
remuneration of its officers and directors, except that they received
reimbursement for actual, out-of-pocket expenses, including travel expenses,
made on behalf of the Company. No remuneration was paid to the officers and
directors of the Company for the year ended December 31, 1996.
On March 11, 1997, the Company entered into an employment agreement
with Tony Mastronardi, its President. The term of his employment is for five
years and the salary for his first year of employment was fixed at $125,000
CDN. The salary is payable commencing January 1, 1997. Mr. Mastronardi
entered a non-competition and confidentiality agreement with the Company for as
long as he remains in its employ and for an additional year thereafter. The
non-competition covenant will continue for as long as Mr. Mastronardi owns any
shares, directly or indirectly, in the Company.
On March 11, 1997, the Company also negotiated an employment agreement
with Guy Nathan, its Senior Vice-President and Secretary. The terms of the
employment agreement with Mr. Nathan are identical to those of the employment
agreement entered with Mr. Mastronardi. Mr. Nathan also executed a non-
competition and confidentiality agreement in favor of the Company on terms
identical to those of the non-competition and confidentiality agreement
executed by Mr. Mastronardi.
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
stock ownership of the Company's executive officers and directors and each
person known by the Company to own five percent or more of the outstanding
shares of its Common Stock as of June 30, 1997.
22<PAGE>
Name and Address Amount and Nature Percent of
Of Beneficial Owner of Beneficial Ownership Class
--------------------- ----------------------- -------------
Tony Mastronardi 10,001,920 shares (1) 68.58%
President, Director 866,825 shares (2) 5.94%
4973, Felix Mclernan
Pierrefonds QC H8Y
3L2
Guy Nathan 10,001,920 shares (1) 68.58%
Senior Vice-President 866,825 shares (2) 5.94%
Secretary, Director
1, rue Jeanne D'Arc
91330
Yerres France
Tonino Lattanzi 328,038 shares 2.25%
Vice President, 10,001,920 shares (1) 68.58%
Director 866,825 shares (2) 5.94%
12, rue Dubois 14,666 shares (3) .001%
92140
Clamart France
All officers and 11,215,049 shares 76.896%
Directors as a group
(six persons)
Oraxium International 901,600 shares (4) 6.18%
P.O. Box 159
Hibiscus Square
Pond Street, Grand
Turk
Turks and Caicos
Islands
British West Indies
- --------------------------
(1) Messrs. Mastronardi, Nathan and Lattanzi each own 33% of the capital stock
of Techno Expres, SA, a French corporation with offices at 36, rue Du Marche,
94140 Alfort Ville France, the owner of 10,001,920 shares of the Company's
Common Stock.
(2) Messrs. Mastronardi, Nathan and Lattanzi own 50%; 16.67% and 33.33%
respectively, of the capital stock of Touchtunes Juke Box Inc., a Canadian
corporation with offices at One Commerce Place, suite 330, Nun's Island QC H3E
1A2, the owner of 866,825 shares of the Company's Common Stock.
(3) Mr. Lattanzi indirectly owns Neturba SRL, an Italian corporation with
offices at via Bonafica 26 63040 Malitignano, Italy the owner of 14,666 shares
of the Company's Common Stock.
(4) Oraxium International Inc. is an independent corporation which acquired
901,600 shares of Common Stock from the Company between December 1994 and April
1997 for work involving the Digital Jukebox technology and software. The
Company has been informed that Oraxium International Inc. was organized under
to laws of Turks and Caicos Islands. (See "CERTAIN TRANSACTIONS").
23<PAGE>
CERTAIN TRANSACTIONS
With Officers,
Directors and Others
On December 8, 1994, Touchtunes Jukebox Joint Venture (the "Joint
Venture"), an informal partnership comprising four corporations and two
individuals, purchased 760,400 shares of Common Stock from the persons who
organized the Company, for a cash consideration of $75,000. Such persons are
no longer affiliated with the Company. An additional 1,000,000 shares of
Common Stock was acquired at that time by the Joint Venture in consideration
for exclusive rights to the patent pending (PCT/FR94/01185) for the Digital
Jukebox. All 1,760,400 shares were acquired for investment. Subsequently, the
partners distributed these shares among themselves and dissolved the Joint
Venture. Tony Mastronardi, President of the Company, was the owner of one
corporation which received 714,950 shares. Another corporation, Touchtunes
Juke Box Inc., which received 216,666 shares, is owned 50% by Tony Mastronardi;
16.67% by Guy Nathan; and 33.33% by Tonino Lattanzi, officers and directors of
the Company. Mr. Nathan also received 180,000 shares directly. Oraxium
International Inc., which is now a principal shareholder of the Company,
received 225,000 shares. The other individual and the remaining corporation
were independent third parties, having no affiliation with the Company.
On March 6, 1995, the Company agreed to issue 10,000,000 shares of
Common Stock to S.G.R.M. Inc. ("SGRM"), a corporation incorporated under the
laws of the Turks and Caicos Islands, in exchange for patents, patents pending
and other intellectual property rights. In November 1995, this agreement was
amended and the 10,000,000 shares of Common Stock were issued to Techno Expres,
S.A., a French corporation, owned 33% each, by Messrs. Tony Mastronardi, Guy
Nathan and Tonino Lattanzi, officers and directors of the Company. The
10,000,000 shares were acquired for investment.
During December 1995, the Company issued an aggregate of 909,000
shares of Common Stock as follows: 100,000 shares to Albert Dutour, an
independent third party, in consideration of $150,000; 275,000 shares to
Oraxium International Inc. as part of the consideration for the purchase by the
Company of the "realtime modular multi-process kernel", the platform on which
the software of the Digital Jukebox is built; 300,000 shares to Tonino
Lattanzi, a director of the Company, in consideration for operating money
advanced to the Company in the amount of $300,000; 234,000 shares to Touchtunes
Juke Box Inc. ("Juke Box"), for services rendered to the Company having a value
of $203,337, and for expenses incurred of $31,440. Juke Box is owned 50% by
Tony Mastronardi; 16.67% by Guy Nathan; and 33.33% by Tonino Lattanzi, officers
and directors of the Company. Oraxium International Inc. is a principal
shareholder of the Company. The 909,000 shares were acquired for investment by
the respective subscribers.
On September 25, 1996, the Company authorized the issuance of 900,888
shares of Common Stock to Juke Box for a cash consideration of $477,470 and
75,000 shares to Giovanni D'Andrea, an independent third party, for
professional services valued at $40,000. On December 20, 1996, the Company
authorized the issuance of 400,000 shares of Common Stock to Oraxium Interna-
tional Inc. and 50,000 shares each, to Messrs. Pierre Martineau and Sylvain
Duchesne, employees of Juke Box, in consideration for agreeing to extend the
scope and duration of non-competition covenants given to the Company. On
December 27, 1996, the Company authorized the issuance of 199,819 shares of
Common Stock to Juke Box for a cash consideration of $420,698. All 1,675,707
shares were issued in April 1997 and were acquired for investment by the
respective parties. Juke Box is owned 50% by Tony Mastronardi; 16.67% by Guy
24<PAGE>
Nathan; and 33.33% by Tonino Lattanzi, officers and directors of the Company.
Oraxium International Inc. is a principal shareholder of the Company.
With the Selling Shareholders
On March 21, 1997, two independent Canadian investors, Societe
Innovatech du Grand Montreal and Sofinov Societe Financiere d'Innovation Inc.
(the "Selling Shareholders") agreed to invest $4,000,000 Canadian Dollars (CDN)
in the Company, upon certain terms and conditions. To accomplish this, they
invested $4,000,000 CDN in Touchtunes Digital Jukebox Inc. ("Touchtunes"), a
Canadian subsidiary organized by the Company specifically for that purpose, in
the manner described below.
The Selling Shareholders purchased 100 Class B shares and 20 Class C
shares of Touchtunes, at a price of $5,000 CDN per share, for an immediate cash
consideration of $600,000 CDN. They also subscribed to an additional 680
Class C shares of Touchtunes, at a price of $5,000 CDN per share, for a total
consideration of $3,400,000 CDN. Both the Class C shares and the funds were
deposited in escrow. On May 9, 1997, the Selling Shareholders released an
additional $750,000 CDN from escrow against delivery to them of 150 Class C
shares, leaving a balance of $2,650,000 CDN and 530 Class C shares in escrow.
Payment of this $2,650,000 CDN was released from escrow on July 17, 1997
against delivery of the remaining 530 Class C shares. The Selling Shareholders
also purchased 100 shares of Series A Preferred Stock of the Company. This
Prospectus is intended to cover their sale of a maximum of 2,000,000 shares of
the Common Stock reserved for issuance to them upon exercise of their rights to
exchange their 100 Class B shares and 700 Class C shares of Touchtunes into
2,000,000 of the Company's Series A Preferred shares and their subsequent
conversion of such Series A Preferred shares (and the 100 shares of Series A
Preferred Stock which they already own) into 2,000,100 shares of Common Stock.
The Company is the owner of 800 Class A shares of Touchtunes,
acquired at a price of $1.00 CDN per share. Class A shares entitle the holder
to one vote per share. The Selling Shareholders own 100 Class B shares and 700
Class C shares of Touchtunes. Class B shares entitle the holder to eight votes
per share and Class C shares are non-voting. Thus, the Company and the Selling
Shareholders have equal voting rights in Touchtunes. The Company entered into
has an agreement by which Touchtunes agreed to carry out the research and
development work for the Digital Jukeboxes and all such additional services as
may be reasonably requested by the Company in connection with the Digital
Jukebox project.
The Company and the Selling Shareholders have also entered into a
shareholders agreement governing their relationship in Touchtunes. Each has
the right to appoint three members to the six member Board of Directors of
Touchtunes. In the event of a deadlock, the Board of Directors may be
increased to seven members. The seventh member will be chosen jointly by the
Company and the Selling Shareholders. If the Selling Shareholders exercise all
of their exchange rights, the Company will remain the sole shareholder of
Touchtunes.
All the shares in Touchtunes acquired and to be acquired by the
Selling Shareholders are exchangeable at their option, at a value of $1.50 U.S.
per share, into a maximum of 2,000,000 <F1> Series A Preferred shares of the
<F1> The conversion price of $1.50 U.S. per share was arrived at by
converting the $4,000,000 CDN investment into United States dollars, using a
conversion rate of $0.75 U.S. The $4,000,000 CDN investment is deemed a
$3,000,000 U.S. investment. At $1.50 U.S. per share, the maximum number of
shares converted would be 2,000,000.
25<PAGE>
Company. Series A Preferred shares are convertible into Common Stock, share
for share. The Selling Shareholders have the right to exchange each of their
Class B and Class C shares of Touchtunes for a maximum of 2,500 Series A
Preferred shares of the Company, for a total of 2,000,000 Series A Preferred
shares.
Based on the present number of shares of Common Stock of the Company
issued and outstanding (14,584,707 shares), assuming the exchange of their
Class B and Class C Touchtunes shares for Series A Preferred Stock of the
Company and their conversion of such Series A Preferred Stock (plus the 100
shares of Series A Preferred Stock which they already own) into 2,000,100
shares of Common Stock, the Selling Shareholders will own 12.06% of the
16,584,807 shares of Common Stock which will then be outstanding. It is
anticipated that this will take place on the effective date of this Prospectus.
On March 21, 1997, the Company and the Selling Shareholders also
entered into a shareholders agreement governing their relationship as
shareholders of the Company. This provided the Selling Shareholders with the
right to appoint two members to the Company's Board of Directors. Their
designees, Pierre Pharand and Andre Duquenne, have since been elected as
Directors. (See "MANAGEMENT".)
SELLING SHAREHOLDERS
This Prospectus is intended to permit the sale by Societe Innovatech
du Grand Montreal and Sofinov Societe Financiere d'Innovation Inc. (the
"Selling Shareholders") of a maximum of 2,000,000 shares of the Company's
Common Stock reserved for issuance to them upon exercise of their rights to
exchange their shares of Touchtunes into 2,000,000 of the Company's Series A
Preferred shares and their subsequent conversion of such Series A Preferred
shares (plus the 100 shares of Series A Preferred Stock which they already own)
into 2,000,100 shares of the Company's Common Stock. (See "CERTAIN TRANSAC-
TIONS".)
The following table sets forth the names of the Selling Shareholders,
the number of shares of Common Stock to be owned beneficially by each of them,
once they exercise their exchange rights and convert their Series A Preferred
shares into Common Stock, and the number of shares which may be offered
pursuant to this Prospectus. This information is based upon information
provided by the Selling Shareholders. This also assumes that the exchange
rights of the Selling Shareholders will be exercised for the maximum of
2,000,000 Series A shares on the effective date of this Prospectus and
immediately converted into Common Stock.
26<PAGE>
Shares Beneficially Owned Number of Shares
Prior to Offering (1) Shares Beneficially Owned
being After Offering (1)(3)
Offered
Name Number Percent Number Percent
(2) (2)
- ------------- ---------- --------- ---------- ------- --------
Sofinov 1,200,060 7.2 1,200,000 0 0
Societe-
Financiere
d'Innovation
Inc.
Societe 800,040 4.8 800,000 0 0
Innovatech du
Grand Montreal
___________________________
(1) These independent Canadian entities have sole voting and investment power
with respect to all the shares beneficially owned by them.
(2) Applicable percentage of ownership is based on 16,584,807 shares of Common
Stock issued and outstanding, once their exchange rights and conversion rights
are exercised.
(3) Assumes the sale of all the shares of Common Stock offered hereby.
The Selling Shareholders have advised the Company that they intend to
sell their shares from time to time at prices prevailing in the over-the-
counter market at the time of such sales. They will not pay more than usual
brokerage commission rates.
DESCRIPTION OF CAPITAL STOCK
The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Amended and Restated
Articles of Incorporation.
27<PAGE>
Common Stock
The Company is authorized to issue 35,000,000 shares of Class A
Common Stock ("Common Stock") par value $.001 per share, of which 16,584,707
shares are outstanding as of the date hereof, after giving effect to the
conversion of all Series A Preferred shares into Common Stock.
Holders of Common Stock are entitled to one vote for each share held
of record on each matter submitted to a vote of stockholders. There is no
cumulative voting for elections of directors. Holders of Common Stock are
entitled to receive ratably, dividends when, as, and if declared by the Board
of Directors out of funds legally available therefore and, upon the
liquidation, dissolution, or winding up of the Company, are entitled to share
ratably in all assets remaining after the payment of liabilities.
Holders of Common Stock have no preemptive rights and have no rights
to convert their Common Stock into any other securities. The outstanding
shares of Common Stock are validly authorized and issued, fully paid, and
nonassessable.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Series A
Preferred Stock, par value $.001 per share. Only 100 shares were issued prior
to the date hereof. An additional 2,000,000 shares will be issued and
outstanding on the effective date hereof, giving effect to the exchange by the
Selling Shareholders of their Class B and Class C shares of Touchtunes for
2,000,000 shares of Series A Preferred Stock.
The Common Stock and the Series A Preferred Stock rank equally in all
respects and have identical rights. Each Series A Preferred share can be
converted into one share of Common Stock at the option of the holder thereof.
An aggregate of 2,000,000 shares of Series A Preferred Stock have been reserved
for issuance to the Selling Shareholders on the effective date of this
Prospectus. On that date, it is anticipated that the Selling Shareholders will
convert their 2,000,100 shares of Series A Preferred Stock into Common Stock.
(See "SELLING SHAREHOLDERS" and "CERTAIN TRANSACTIONS").
Transfer Agent
The Company has appointed National Stock Transfer, Inc. as transfer
agent for the Common Stock.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will
be passed upon for the Company by Karp and Sommers, 950 Third Avenue, New York,
New York 10022.
EXPERTS
The financial statements of Technical Maintenance Corporation for the
fiscal years ended December 31, 1996, 1995 and 1994 incorporated by reference
herein, have been audited by Armstrong Gilmour, Accountancy Corporation, as set
forth in their reports thereon included therein. Such financial statements of
Technical Maintenance Corporation are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as an expert
in accounting and auditing.
28<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
-------
December 31, 1996
Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7-8-9-10
June 30, 1997
Interim Balance Sheet F-11
Interim Statement of Stockholder's Equity F-12
Interim Statement of Loss F-13
Interim Statement of Cash Flows F-14
Schedule of Accumulated Expenses and Deficits
During the Development Period F-15
Schedule of Cash Flows During the Development F-16
Period
Notes to Interim Financial Statements F-17-18-19-20-21
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Technical Maintenance Corporation
(A Development Stage Company):
We have audited the accompanying balance sheets of Technical Maintenance
Corporation (A Development Stage Company) as of December 31, 1996 and 1995, and
the related statements of operations, stockholders' equity (deficit) and cash
flows for each of the years in the three-year period ended December 31, 1996
and for the development period from December 8, 1994 through December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Technical Maintenance
Corporation (A Development Stage Company) as of December 31, 1996 and 1995, and
the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1996 and for the development period from
December 8, 1994 through December 31, 1996 in conformity with generally accepted
accounting principles.
/s/Armstrong Gilmour
Accountancy Corporation
Walnut Creek, CA
March 28, 1997
F-2
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Balance Sheets
December 31, 1996 and 1995
1996 1995
---------- -----------
Assets
Current assets:
Cash $ 96 _
Prepaid expenses 21,306 _
---------- -----------
Total current assets 21,402 _
---------- -----------
Fixed assets:
Computer equipment 28,629 28,629
Software 360,000 360,000
---------- -----------
388,629 388,629
Less accumulated depreciation (149,452) (71,726)
---------- -----------
Net fixed assets 239,177 316,903
Intangibles, net of accumulated 1,453,693 463,864
amortization ---------- -----------
$1,714,272 780,767
=========== ===========
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable $ 94,415 32,940
Accrued expenses 45,930 _
Accrued non-competition agreement
obligations, including $800,000 1,000,000 _
due to a stockholder
Advances from stockholders 909,031 90,961
---------- -----------
Total current liabilities 2,049,376 123,901
---------- -----------
Stockholders' equity (deficit):
Class A common stock, $.001 par value
Authorized: 25,000,000 shares
Issued and outstanding: 12,909,000 12,909 12,909
Additional paid-in capital 1,430,020 1,430,020
Accumulated deficit (1,000) (1,000)
Deficit accumulated during the (1,777,033) (785,063)
development stage ----------- -----------
Total stockholders' equity (335,104) 656,866
(deficit) ---------- -----------
$1,714,272 780,767
=========== ===========
See accompanying notes to financial statements.
F-3 (1)<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Operations Development
Period
Years Ended December 8, 1994 -
1996 1995 1994 December 31, 1996
---------- --------- ---------- ------------------
<S> <C> <C> <C> <C>
Net sales $ _ _ _
Operating expenses:
Research and development 246,430 148,306 _ 394,736
Professional and consulting fees 223,899 289,619 _ 513,518
Travel and transportation 116,126 147,559 _ 263,685
Management fees 85,847 37,762 _ 123,609
Selling and promotional expenses 65,681 _ _ 65,681
Office expenses 40,165 20,856 _ 61,021
Rent 24,579 26,185 _ 50,764
Depreciation 77,726 71,726 _ 149,452
Amortization 111,517 43,050 _ 154,567
---------- --------- ---------- ----------------
Net loss $(991,970) (785,063) _ 1,777,033
========== ========= ========== ================
Net loss per share $ (0.08) (0.07) _
========== ========= ==========
Number of shares used to compute
net loss per share 12,909,000 10,535,844 1,065,758
=========== =========== ============
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Years Ended December 31, 1996, 1995 and 1994 Deficit
Accumulated
Class A Additional during the
Common Stock Paid-in Accumulated Development
Shares Amount Capital Deficit Period Total
--------- -------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, 1,000,000 $ 1,000 _ (1,000) _ _
January 1, 1994
Issuance of 1,000,000 1,000 62,539 _ _ 63,539
common stock --------- -------- -------- ----------- ----------- ----------
Balances, 2,000,000 2,000 62,539 (1,000) _ 63,539
December 31, 1994
Issuance of
common stock:
Nov 24-$.05 per share 10,000,000 10,000 490,000 _ 500,000
Dec 31-$.70 per share 275,000 275 193,337 _ 193,612
$1.00 per share 300,000 300 299,700 _ 300,000
$1.00 per share 234,000 234 234,544 _ 234,778
$1.50 per share 100,000 100 149,900 _ 150,000
Net loss _ _ _ _ (785,063) (785,063)
--------- -------- -------- ----------- ----------- ----------
Balances, 12,909,000 12,909 1,430,020 (1,000) (785,063) 656,866
December 31, 1995
Net loss _ _ _ (991,970) (991,970)
--------- -------- -------- ----------- ----------- ----------
Balances, 12,909,000 $ 12,909 1,430,020 (1,000) (1,777,033) (335,104)
December 31, 1996 ========== ======== ========= ============ =========== ===========
See accompanying notes to financial statements.
</TABLE>
F-5 (2)<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Cash Flows
Development
Years Ended Period
December 8, 1994 -
1996 1995 1994 December 31, 1996
----------- --------- -------- ------------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss $ (991,970) (785,063) _ (1,777,033)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 189,243 114,776 _ 304,019
Write-off of software _ 27,996 _ 27,996
development costs
Changes in assets and
liabilities:
Prepaid expenses (21,306) _ _ (21,036)
Accounts payable 61,475 32,940 _ 94,415
Accrued expenses 45,930 _ _ 45,930
----------- --------- -------- ------------------
Net cash used by operations (716,628) (609,351) _ (1,325,979)
----------- --------- -------- ------------------
Cash flows from investing
activities:
Increase in costs of intangibles (101,346) _ _ (101,346)
Purchase of software _ (110,447) _ (110,447)
----------- --------- -------- ------------------
Net cash used by investing (101,346) (110,447) _ (211,793)
activities ----------- --------- -------- ------------------
Cash flows from financing
activities:
Advances from stockholders 818,070 569,798 _ 1,387,868
Proceeds from sale of common _ 150,000 _ 150,000
stock ----------- --------- -------- ------------------
Net cash provided by financing 818,070 719,798 _ 1,537,868
activities ----------- --------- -------- ------------------
Net increase in cash 96 _ _ 96
Cash at beginning of year _ _ _ _
----------- --------- -------- ------------------
Cash at end of year $ 96 _ _ 96
=========== ========= ======== ==================
Supplemental cash flow information:
Interest paid $ _ _ _ _
=========== ========= ======== ==================
Income taxes paid $ _ _ _ _
=========== ========= ======== ==================
Noncash investing and financing
activities:
The following were exchanged
for common stock:
Patents $ _ 500,000 6,914 506,914
Software _ 193,612 56,625 250,237
Advances from stockholders _ 534,778 _ 534,778
----------- --------- -------- ------------------
$ _ 1,228,390 63,539 1,291,929
=========== ========= ======== ==================
Accrual of non-competition $ 1,000,000 _ _ 1,000,000
agreement =========== ========= ======== ==================
</TABLE>
See accompanying notes to financial statements.
F-6 (3)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Years Ended December 31, 1996, 1995 and 1994
1) The Company and Its Summary of Significant Accounting Policies
Nature of Operations
Technical Maintenance Corporation (the Company) is a development stage
company, which has not generated any revenue since it commenced operations
in 1994. The Company's primary efforts have been directed at the
development of a digital jukebox, which will utilize digital audio transfer
technology to distribute music titles through a proprietary distribution
network. The development of the Company's commercial products will require
additional funds. There is no assurance that commercially successful
products will be developed or that the Company will achieve profitable
operations.
The Company has no employees and operating expenses have been funded by
stockholder advances. Substantially all of the developmental activities are
conducted through a Canadian corporate stockholder, Touchtunes Jukebox, Inc.
Touchtunes Jukebox, Inc. charges the Company for costs incurred plus the
equivalent to a 15% management fee.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Fixed Assets
Fixed assets consist of computer equipment and purchased software which are
stated at cost. Depreciation commenced in 1995 and is provided on a
straight-line basis over estimated useful lives of 5 years.
Intangibles
(i) Software Development Costs
Costs related to the conceptual formation and design of internally
developed software are expensed as research and development as incurred.
It is the Company's policy that certain internal software development
costs, incurred after technical feasibility has been demonstrated and
which meet recoverability tests, are capitalized and amortized over the
economic life of the product. The establishment of technical feasibility
and the ongoing assessment of recoverability of those costs requires
judgment by management with respect to certain external factors,
including but not limited to anticipated future gross revenue, estimated
economic life and changes in technology. No internal software
development costs have been capitalized as of December 31, 1996.
(Continued)
F-7 (4)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(1)The Company and Its Summary of Significant Accounting Policies, continued
(ii) Patents
Patents consist primarily of processes and systems related to the
operation of a digital jukebox and the interactive program distribution
for telebroadcasting. Patents contributed by stockholders in exchange
for stock are valued at the stockholder's cost, which was approximately
$507,000.
The patents and related intellectual property are amortized on a
straight-line basis over their estimated economic lives of 5 years.
Amortization commenced in 1995.
(iii) Non-Competition Agreements
The Company has non-competition agreements with the provider of computer
operating systems and several system programmers who assisted in the
development of the system. The agreements are effective January 1, 1997
and cover the succeeding five years. The costs will be amortized on a
straight line basis over the five-year life of the agreements.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax basis of
assets and liabilities using currently enacted tax rates and laws.
Net Loss Per Share
Net loss per share is computed using the weighted-average number of shares
of common stock outstanding.
Reclassification
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
2) Intangibles
Intangible assets consist of the following at December 31:
1996 1995
------------ ----------
Patents $ 608,260 506,914
Non-competition agreements 1,000,000 _
------------ ----------
1,608,260 506,914
Less accumulated amortization (154,567) (43,050)
------------ ----------
$ 1,453,693 463,864
============ ==========
(Continued)
F-8 (5)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
3) Income Taxes
No provision for income taxes is included in the financial statements
because the Company has had continuous losses and there is no assurance that
there will be future taxable income toward which the current loss
carryforward might offset.
Accordingly, the Company has a potential deferred tax asset of approximately
$602,000 (based on the 34% Federal tax rate) which results from a net
operating loss carryforward of $1,771,000, which will expire through the
year 2011. However, a valuation reserve has been established against the
deferred tax asset since the utilization of the carryforward is not assured.
The Company incorporated in the state of Nevada, which has no state income
tax.
4) Related Party Transactions
Following are transactions that occurred between the Company and its
stockholders:
Non-Competition Agreement
On December 20, 1996, the Company entered into a five year non-competition
agreement with Oraxium International, Inc., which is a stockholder and the
supplier of the Company's computer operating system. The agreement takes
effect January 1, 1997 and provides for $800,000 of consideration. The
Board of Directors has authorized the issuance of 400,000 shares of
restricted Class A common stock which it valued at $2 per share. At March
28, 1997, the shares had not been issued and the obligation is reflected as
a liability on the balance sheet.
Purchases
In 1995, the Company purchased a computer operating system from Oraxium
International, Inc. for $360,000, which was paid through the issuance of
275,000 shares of common stock valued at $193,612. The balance of the
purchase price was paid in cash.
In 1995, the Company exchanged 10,000,000 shares of its common stock for
patents from its controlling shareholder, Techno Expres S.A.. The patents
were recorded at $500,000 which approximated Techno Expres' cost.
(Continued)
F-9 (6)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
4) Related Party Transactions, continued
Expenses
Touchtunes Jukebox, Inc., a stockholder, charged the Company approximately
$647,000 in 1996 and $318,000 in 1995 for research and development and
operating expense reimbursements. Included in the reimbursements were fees
to Touchtunes of $85,847 in 1996 and $38,762 in 1995 as a 15% mark-up on
actual costs.
In 1995, Mr. Tonino Lattanzi, a stockholder and member of the Board of
Directors, received $62,000 in fees and was reimbursed $125,000 in
professional fees and $113,000 in travel and promotional expenses. Mr.
Lattanzi received 300,000 shares of common stock as consideration for the
fees and expenses.
In 1995, $59,000 of consulting fees were paid to Oraxium International,
Inc., a stockholder of the Company.
Amounts Owed to Stockholders
At December 31, 1996 and 1995, the Company owed Touchtunes Jukebox, Inc., a
stockholder, $908,031 and $87,861, respectively, for expense advances. The
advances are non-interest bearing and due on demand. In 1996, the Board of
Directors approved the issuance of 1,100,707 shares of common stock in
payment of $898,168 of advances from Touchtunes Jukebox, Inc. The shares
have not been issued as of March 28, 1997 and the amount continues to
carried as an advance from stockholder in the balance sheet. In 1995,
Touchtunes received 234,000 shares of common stock, valued at $234,000, as a
partial settlement of the then outstanding balance of advances.
Other stockholders had advances to the Company of $1,000 and $3,100 at
December 31, 1996 and 1995, respectively.
Included in accrued non-competition agreement obligations at December 31,
1996 is an $800,000 obligation to Oraxium International, Inc.
5) Common Stock
In late 1996, the Board of Directors approved the issuance of 1,675,707
Class A common stock to vendors and stockholders as consideration for
obligations totaling $1,938,168. None of the shares were actually issued in
1996 and the obligations continued to be reported as liabilities in the
balance sheet. Had the shares been issued when approved, the stockholders'
equity would have been increased by $1,938,168. Because the Board's actions
occurred in late 1996, the effect on loss per share, based on weighted-
average shares outstanding, was insignificant.
F-10 (7)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM BALANCE SHEET
AS AT JUNE 30, 1997
(with comparatives as at December 31, 1996)
(Unaudited)
1997 1996
$ $
- ---------------------------------------------------------------------------
ASSETS
Current
Cash 795 96
Prepaid expenses - 21,306
- ---------------------------------------------------------------------------
795 21,402
- ---------------------------------------------------------------------------
Computer equipment, net (note 2) 14,317 17,177
Software development costs, net (note 2) 186,000 222,000
Intangibles, net (note 2) 1,424,776 1,453,693
Investment in affiliated company (note 3) 4,233 0
- ---------------------------------------------------------------------------
1,630,121 1,714,272
- ---------------------------------------------------------------------------
LIABILITIES
Current
Accounts payable 121,505 1,140,345
Advances from affiliated company 884,713 909,031
- ---------------------------------------------------------------------------
Total liabilities 1,006,218 2,049,376
- ---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Capital stock (note 4) 14,585 12,909
Additional paid-in capital 3,366,662 1,430,020
Accumulated deficit (2,757,344) (1,778,033)
- ---------------------------------------------------------------------------
Total stockholders' equity (deficit) 623,903 (335,104)
- ---------------------------------------------------------------------------
Total liabilities and stockholders' equity 1,630,121 1,714,272
- ---------------------------------------------------------------------------
See notes to interim financial statements
F-11
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE QUARTERS ENDED MARCH 31, 1997 AND JUNE 30 1997
(Unaudited)
Class A Series A Class A Series A Additional Accumulated Total
Common Preferred Common Preferred Paid-in Deficit
Stock Stock Stock Stock Capital
Issued Issued
$ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------ ------------ ---------- ------- -------- ---------- ----------- ----------
Balances, January 1, 1996 12,909,000 - 12,909 - 1,430,020 (786,063) 656,866
Net loss - - - - - (991,970) (991,970)
- ------------------------------ ------------ ---------- ------- -------- ---------- ----------- ----------
Balances, December 31, 1996 12,909,000 - 12,909 - 1,430,020 (1,778,033) (335,104)
- ------------------------------ ------------ ---------- ------- -------- ---------- ----------- ----------
Issuance of shares - 100 - - 150 - 150
Net loss - - - - - (415,395) (415,395)
- ------------------------------ ------------ ---------- ------- -------- ---------- ----------- ----------
Balances, March 31, 1997 12,909,000 100 12,909 - 1,430,170 (2,193,428) (750,349)
- ------------------------------ ------------ ---------- ------- -------- ---------- ----------- ----------
Issuance of shares (note 4) 1,675,707 - 1,676 - 1,936,492 - 1,938,168
Net loss - - - - - (563,916) (563,916)
- ------------------------------ ------------ ---------- ------- -------- ---------- ----------- ----------
Balances, June 30, 1997 14,584,707 100 14,585 - 3,366,662 (2,757,344) 623,903
- ------------------------------ ------------ ---------- ------- -------- ---------- ----------- ----------
</TABLE>
See notes to interim financial statements
F-12
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF LOSS
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1997
(with comparartives for the quarter and six months ended June 30, 1996)
(Unaudited)
Quarter ended Six months ended Quarter ended Six months ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
$ $ $ $
<S> <C> <C> <C> <C>
- -------------------------------------------------------- ----------- --------------- --------------- ----------------
Expenses
Resesarch and development costs 184,138 258,171 45,595 91,574
Professional fees 146,881 302,579 49,742 76,206
Management fees 19,910 33,988 11,492 25,769
Rent 12,577 18,724 2,068 8,377
Travel and transportation 65,346 93,986 23,215 38,193
Selling and promotional 13,723 32,249 4,512 4,512
Office 25,148 43,578 4,448 10,706
Amortization - computer equipment 1,430 2,860 1,425 2,850
Amortization - software development costs 18,000 36,000 18,000 36,000
Amortization - patents 30,413 60,826 12,600 25,200
Amortization - non-competition agreements 50,000 100,000 - 0
- -------------------------------------------------------- ----------- --------------- --------------- ----------------
Loss before equity in earnings of affiliated company 567,566 982,961 173,097 319,387
Equity in earnings of affiliated company (3,650) (3,650) - -
- -------------------------------------------------------- ----------- --------------- --------------- ----------------
Net loss 563,916 979,311 173,097 319,387
- -------------------------------------------------------- ----------- --------------- --------------- ----------------
Net loss per share (0.04) (0.07) (0.01) (0.02)
- -------------------------------------------------------- ----------- --------------- --------------- ----------------
Number of shares used to compute net loss per share 14,584,707 13,746,854 12,909,000 12,909,000
- -------------------------------------------------------- ----------- --------------- --------------- ----------------
</TABLE>
See notes to interim financial statements
F-13
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF CASH FLOWS
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1997
(with comparatives for the quarter and six months ended June 30, 1996)
(Unaudited)
Quarter ended Six months ended Quarter ended Six months ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
$ $ $ $
<S> <C> <C> <C> <C>
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Cash flows from operating activities:
Net loss (563,916) (979,311) (173,097) (319,387)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization 99,843 199,686 32,025 64,050
Equity in earnings of affiliated company (3,650) (3,650) - 0
Changes in assets and liabilities:
Prepaid expenses - 21,306 - 0
Accounts payable 29,928 21,160 35,040 106,045
Advances from affiliated company 438,590 873,850 106,032 230,032
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Net cash provided by operations 795 133,041 - 80,740
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Cash flows from investing activities:
Purchase of computer equipment - - - 0
Purchase of software development costs - - - (80,740)
Purchase of patents - (131,909) - 0
Investment in affiliated company - (583) - 0
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Net cash used by investing activities - (132,492) - (80,740)
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Cash flows from financing activities:
Proceeds from sale of preferred stock - 150 - 0
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Net cash provided by financing activities - 150 - 0
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Net increase in cash 795 699 - 0
Cash at beginning of period - 96 - 0
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Cash at end of period 795 795 - 0
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
Non cash investing and financing activities:
The following were exchanged for Class A Common Shares:
Accounts payable 1,040,000 1,040,000 - 0
Advances from affiliated company 898,168 898,168 - 0
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
1,938,168 1,938,168 - 0
- ------------------------------------------------------- -------------- --------------- ------------ ------------------
</TABLE>
See notes to interim financial statements
F-14
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE OF ACCUMULATED EXPENSES AND DEFICIT DURING THE DEVELOPMENT PERIOD
(Unaudited)
Total
Dec 8, 1994- Dec 8, 1994-
Dec 31,1996 Mar 31,1997 June 30, 1997 June 30,1997
$ $ $ $
<S> <C> <C> <C> <C>
- ----------------------------------------------- ------------- ----------- ----------- -------------
Expenses
Resesarch and development costs 394,736 74,033 184,138 652,907
Professional fees 513,518 155,698 146,881 816,097
Management fees 123,609 14,078 19,910 157,597
Rent 50,764 6,147 12,577 69,488
Travel and transportation 263,685 28,640 65,346 357,671
Selling and promotional 65,681 18,526 13,723 97,930
Office 61,021 18,430 25,148 104,599
Amortization 304,019 99,843 99,843 503,705
- ----------------------------------------------- ------------- ----------- ----------- -------------
Accumulated expenses and deficit
during the development period 1,777,033 415,395 567,566 2,759,994
- ----------------------------------------------- ------------- ----------- ----------- -------------
</TABLE>
See notes to interim financial statements
F-15
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE OF CASH FLOWS DURING THE DEVELOPMENT PERIOD
(Unaudited)
Total
Dec 8, 1994- Dec 8, 1994-
Dec 31,1996 Mar 31,1997 June 30, 1997 June 30,1997
$ $ $ $
<S> <C> <C> <C> <C>
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Cash flows from operating activities:
Net loss (1,777,033) (415,395) (567,566) (2,759,994)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Amortization 304,019 99,843 99,843 503,705
Write-off of software development costs 27,996 - - 27,996
Changes in assets and liabilities:
Prepaid expenses (21,306) 21,306 - 0
Accounts payable 140,345 (8,768) 29,928 161,505
Advances from affiliated company - 435,260 438,590 873,850
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Net cash provided (used) by operations (1,325,979) 132,246 795 (1,192,938)
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Cash flows from investing activities:
Investment in affiliated company - (583) - (583)
Purchase of patents (101,346) (131,909) - (233,255)
Purchase of software development costs (110,447) - - (110,447)
Purchase of computer equipment - - - 0
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Net cash used by investing activities (211,793) (132,492) - (344,285)
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Cash flows from financing activities:
Advances from stockholders 1,387,868 - - 1,387,868
Proceeds from sale of preferred stock 150,000 150 - 150,150
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Net cash provided by financing activities 1,537,868 150 - 1,538,018
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Net increase (decrease) in cash 96 (96) 795 795
Cash at beginning of period - 96 - -
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Cash at end of period 96 - 795 795
- ------------------------------------------------------ -------------- ------------ --------------- --------------
Non cash investing and financing activities:
The following were exchanged for Class A Common Shares:
Patents 506,914 - - 506,914
Software 250,237 - - 250,237
Accounts payable - - 1,040,000 1,040,000
Advances from stockholder 534,778 - - 534,778
Advances from affiliated company - - 898,168 898,168
- ------------------------------------------------------ -------------- ------------ --------------- --------------
1,291,929 - 1,938,168 3,230,097
- ------------------------------------------------------ -------------- ------------ --------------- --------------
</TABLE>
See notes to interim financial statements
F-16
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
Note 1 -Organization and Background
Technical Maintenance Corporation (the Company) is a development stage
company formed in 1990 which has not generated any revenue. The
development of commercial products will require additional funds. There
is no assurance that commercially successful products will be developed
or that the Company will achieve profitable operations.
Note 2 - Summary of Significant Accounting Policies
a) Computer Equipment
The computer equipment is recorded at cost and is amortized on the
straight-line basis over its estimated economic life of 5 years.
b) Software Development Costs
Costs related to the conceptual formation and design of internally
developed software are expensed as research and development as
incurred. It is the Company's policy that
certain internal software development costs incurred after technical
feasibility has been demonstrated and which meet recoverability
tests are capitalized and amortized over the economic life of the
product. The establishment of technological feasibility and the
ongoing assessment of recoverability of those costs requires judgment
by management with respect to certain external factors including, but
not limited to, anticipated future gross revenue, estimated economic
life and changes in technology.
Software development costs capitalized to date are being amortized on
the straight-line basis over their estimated economic life of five
years.
c) Intangibles
i) Patents
Patents consist primarily of processes and systems related to the
operation of a digital jukebox and the interactive program
distribution for telebroadcasting.
The patents and the related intellectual property are amortized on a
straight-line basis over their estimated economic lives of 5 years.
F-17
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
Note 2 - Summary of Significant Accounting Policies - cont'd
c) Intangibles
ii) Non-Competition Agreements
The Company has non-competition agreements with the provider of
computer systems and several system programmers who assisted in the
development of the system. The cost of these agreements will be
amortized over the five year term of the contract.
d) Currency of Measurement
The currency of measurement used in the preparation of these
financial statements is the U.S. dollar.
Note 3 -Investment in Affiliated Company
This amount represents a non-controlling interest in Touchtunes Digital
Jukebox Inc., ("Touchtunes"), a Canadian Corporation. Touchtunes was
incorporated on February 7, 1997 and commenced operations on March 7,
1997. On that date, Touchtunes acquired from Touchtunes Juke Box Inc.
("Juke Box") the following assets and assumed the following liabilities:
$
- ------------------------------------------------------------------
Assets
Accounts receivable - affiliated company 414,000
Prepaid expenses 17,000
Fixed assets 211,000
- ------------------------------------------------------------------
642,000
- ------------------------------------------------------------------
Liabilities
Bank indebtedness 13,000
Accounts payable 387,000
Loans payable 242,000
- ------------------------------------------------------------------
642,000
- ------------------------------------------------------------------
F-18
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
Note 3 -Investment in Affiliated Company - cont'd.
The Company controls 50% of the votes of Touchtunes and has the ability
to elect 50% of the board of directors.
Touchtunes' revenues are derived solely from development services
provided to the Company.
This investment will be accounted for on the equity basis. For the
quarter ended June 30, 1997 the results of operations for Touchtunes
were as follows (in U.S. dollars):
$
- ------------------------------------------------------------------
Development fees 418,000
Expenses 409,000
- ------------------------------------------------------------------
Earnings from operations 9,000
Income taxes 1,700
- ------------------------------------------------------------------
Net earnings 7,300
- ------------------------------------------------------------------
Equity in net earnings of investee 3,650
- ------------------------------------------------------------------
Pursuant to a stockholders' agreement, the stockholders exercising
control over the remaining 50% of Touchtunes may convert their
stockholdings into shares of the Company at which time Touchtunes would
become a wholly-owned subsidiary.
Should Touchtunes became a wholly-owned subsidiary, prior to
consolidation, its balance sheet accounts would be translated using
current exchange rates in effect at the balance sheet date and for
revenues and expense accounts using an average exchange rate during the
period. The gains or losses resulting from translation will be included
in stockholders' equity.
Per agreement with the remaining 50% stockholders of Touchtunes, the
outside investors have provided a total capitalization of $4,000,000
Canadian.
F-19
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
Note 4 -Capital Stock
a) The capital stock of the Company is comprised of the following:
$
- ------------------------------------------------------------------
Class A Common Stock, $.001 par value
Authorized: 35,000,000 shares
Issued: 14,584,707 shares 14,585
Series A Preferred Stock, $.001 par value
Authorized: 10,000,000 shares
Issued: 100 shares -
- ------------------------------------------------------------------
14,585
- ------------------------------------------------------------------
b) During the quarter, the Company issued 575,000 Class A Common Shares
to repay accounts payable totalling 1,040,000.
c) During the quarter the Company issued 1,100,707 Class A Common
Shares to repay advances from stockholders totalling 898,168.
d) The Company has reserved 2,000,000 shares of the authorized Series A
Preferred Stock for issuance to third-party investors upon the
occurrence of certain events. In addition, 2,000,000 shares of Class
A Common Stock have been reserved for issuance for any potential
conversion of these shares.
F-20
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
Note 5 - Proforma Information
a) Proforma loss per share
Based on the stock reserved in note 4(d), the proforma loss per share
for the quarter ended June 30, 1997 would be approximately .03 using
16,584,707 as the number of shares issued.
b) Proforma Capital Stock
The proforma capital stock would appear as follows based on the
shares reserved in note 4(d):
$
- ------------------------------------------------------------------
Class A Common Stock, $.001 par value
Authorized: 35,000,000 shares
Issued: 14,584,707 shares 14,585
Series A Preferred Stock, $.001 par value
Authorized: 10,000,000 shares
Issued: 2,000,100 shares 2,000
- ------------------------------------------------------------------
16,585
- ------------------------------------------------------------------
Additional paid-in capital 6,364,662
- ------------------------------------------------------------------
Note 6 - Related Party Transactions
Touchtunes Digital Jukebox Inc., an affiliated company as described in
note 3, charged $418,000 for research and development and operating
expense reimbursements. Included in the reimbursements were management
fees paid to Touchtunes Digital Jukebox Inc. of approximately $19,000.
F-21
<PAGE>
No dealer, salesman or other person
has been authorized to give any
information or to make any 2,000,000 Shares
representations other than those
contained in this Prospectus and, if Class A Common Stock
given or made, such other information (par value $.001)
and representations must not be
relied upon as having been authorized TECHNICAL MAINTENANCE
by the Company. This Prospectus does CORPORATION
not constitute an offer or
solicitation by anyone in any state
in which such offer or solicitation PROSPECTUS
is not authorized, or in which the
person making such offer or
solicitation is not qualified to do November 5, 1997
so, or to any person to whom it is
unlawful to make such offer or
solicitation. The delivery of this
Prospectus at any time does not imply
that the information herein is
correct as of any time subsequent to
the date hereof.
TABLE OF CONTENTS
Page Page
Available Information ...........2 Business ......................14
Prospectus Summary ..............2 Patented Technology .........14
The Company ...................2 Marketing Strategy ..........16
Business ......................3 Industry Background .........16
Initial Funding ...............3 Jukebox Manufacturers .......17
Business Start-Up Competition .................18
Activities ..................4 Contractual Arrangements ....19
The Offering ..................5 Future Financing ............19
Summary Financial Data ........5 Properties ..................20
Use of Proceeds ...............6 Employees ...................20
Risk Factors ....................6 Legal Proceedings 20
Use of Proceeds ................10 Management ....................20
Price Range of Common Stock ....10 Directors and
Dividend Policy ................11 Executive Officers ........20
Capitalization .................11 Executive Compensation ......22
Selected Financial Data ........11 Principal Shareholders ........22
Statement of Operations Data .12 Certain Transactions ..........24
Balance Sheet Data ...........13 With Officers, Directors
Management's Discussion and and Others ................24
Analysis of Financial With Selling Shareholders ...25
Condition and Results Selling Shareholders ..........26
of Operations ................13 Description of Capital Stock ..27
General and Results Common Stock ................27
of Operations ................13 Preferred Stock .............28
Seasonality ..................13 Transfer Agent ..............28
Liquidity and Legal Matters .................28
Capital Resources ..........13 Experts .......................28
Index to Financial Statements F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Article VIII, Sections 1, 2, 3 and 4 of Registrant's By-laws provide:
"Section 1. Indemnification. No officer or Director shall be personally
liable for any obligations of the corporation or for any duties or obligations
of the corporation or for any duties or obligations arising out of any acts or
conduct of said officer or Director performed for or on behalf of the
corporation. The corporation shall and does hereby indemnify and hold harmless
each person and his heirs and administrators who shall serve at any time
hereafter as a Director or officer of the corporation from and against any and
all claims, judgments and liabilities to which such persons shall become
subject by reason of his having heretofore or hereafter been a Director or
officer of the corporation, or by reason of any action alleged to have
heretofore or hereafter taken or omitted to have been taken by him as such
Director or officer, and shall reimburse each such person for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability, including power to defend such person from all suits or claims as
provided for under the provisions of the Nevada Business Corporation Act;
provided, however, that no such person shall be indemnified against, or be
reimbursed for, any expense incurred in connection with any claim or liability
arising out of his own negligence or willful misconduct. The rights accruing
to any person under the foregoing provisions of this section shall not exclude
any other right to which he may lawfully be entitled, nor shall anything herein
contained restrict the right of the corporation to indemnify or reimburse such
person in any proper case, even though not specifically herein provided for.
The corporation, its directors, officers, employees and agents shall be fully
protected in taking any action or making any payment, or in refusing so to do
in reliance upon the advice of counsel."
"Section 2. Other Indemnification. The indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer or employee, and shall inure to the benefit of the heirs, executors and
administrators of such person."
"Section 3. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, officer or employee
of the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
liability under the provisions of this section or of the general Corporation
Law of Nevada."
"Section 4. Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the corporation by its
Board of Directors, in lieu of such indemnity, to settle any such claim,
action, suit or proceeding at the expense of the corporation by the payment of
1<PAGE>
the amount of such settlement and the costs and expenses incurred in connection
therewith."
The Nevada Business Corporation Act provides that, subject to restrictions
contained in the statute, a corporation may indemnify any person made or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the corporation or other than by or in
the right of the corporation by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. A
person, who has been successful on the merits or otherwise in any suit or
matter covered by the indemnification statute, must be indemnified against
expenses (including attorneys' fees), actually and reasonably incurred by him
in connection therewith. Indemnification must be authorized upon a
determination, as set forth by statute, that the circumstances are appropriate.
The articles of incorporation, bylaws, or an agreement made by the corporation
may provide that expenses incurred in defense must be paid in advance, as
incurred and prior to final disposition to the person to be indemnified if such
person agrees to repay the amount if it is ultimately determined he is not
entitled to indemnification. The indemnification or advancement of expenses
provided by statute is not exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled. Indemnification or
the advancement of expenses may not be made if a final adjudication establishes
that the director's acts or omissions involved intentional misconduct, fraud,
or a knowing violation of the law and was material to the cause of action.
(Sec. 78.751) Insurance may be purchased by the corporation, or other
financial arrangements made, on behalf of any person entitled to
indemnification against any liability incurred in an official capacity regard-
less of whether the person could be indemnified under the statute. (Sec.
78.752)
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses which will be paid by
Registrant in connection with the issuance and distribution of the securities
being registered. With the exception of the registration fee, all amounts
shown are estimates.
Registration Fee $ 1,818.18
Blue Sky Fee 500.00
Printing and Engraving 4,500.00
Legal fees and expenses 80,000.00
Accounting fees and expenses 10,000.00
Transfer Agent fees and expenses 1,500.00
Miscellaneous expenses 2,500.00
Total $100,818.18
============
2<PAGE>
Item 26. Recent Sales of Unregistered Securities
In the past three years, Registrant has made the following sales of
unregistered securities, all of which sales were exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or as
otherwise indicated herein.
1. On December 8, 1994, Touchtunes Jukebox Joint Venture (the "Joint
Venture"), an informal partnership comprising four corporations and two
individuals, purchased 760,400 shares of Common Stock from the persons who
organized Registrant, for a cash consideration of $75,000. Such persons are no
longer affiliated with Registrant. An additional 1,000,000 shares of Common
Stock was acquired from Registrant at that time by the Joint Venture in
consideration for exclusive rights to the patent pending (PCT/FR94/01185) for
the Digital Jukebox. All 1,760,000 shares were acquired for investment by such
persons, none of whom is a resident or citizen of the United States.
Subsequently, the partners dissolved the Joint Venture and distributed the
shares among themselves as follows:
Gestion Chevaux Pur-Sang Inc. 714,950 shares
3098-8026 Quebec Inc. 263,784 shares
Guy Nathan 180,000 shares
Oraxium International Inc. 225,000 shares
Edward Moore 160,000 shares
Touchtune Juke Box Inc. 216,666 shares
Tony Mastronardi, President of Registrant, was the sole shareholder of Gestion
Chevaux Pur-Sang Inc. Touchtune Juke Box Inc. is owned 50% by Mr. Mastronardi;
16.67% by Guy Nathan and 33.33% by Tonino Lattanzi, officers and directors of
Registrant. Oraxium International Inc. is a principal shareholder of
Registrant.
2. On March 6, 1995, the Company agreed to issue 10,000,000 shares of
Common Stock to S.G.R.M. Inc. ("SGRM"), a corporation incorporated under the
laws of the Turks and Caicos Islands, in exchange for patents, patents pending
and other intellectual property rights. In November 1995, this agreement was
amended and the 10,000,000 shares of Common Stock were issued to Techno Expres,
S.A., a French corporation, owned 33% each, by Messrs. Tony Mastronardi, Guy
Nathan and Tonino Lattanzi, officers and directors of the Company. The
10,000,000 shares were acquired for investment by such persons, none of whom is
a resident or citizen of the United States.
3. During December 1995, the Company issued an aggregate of 909,000
shares of Common Stock as follows: 100,000 shares to Albert Dutour, an
independent third party, in consideration of $150,000; 275,000 shares to
Oraxium International Inc., as part of the consideration paid by Registrant for
its purchase of the platform on which the software for the Digital Jukebox is
built; 300,000 shares to Tonino Lattanzi, a director of the Company, in
consideration for operating money advanced to the Company in the amount of
$300,000; 234,000 shares to Touchtunes Juke Box Inc., for services rendered to
the Company having a value of $203,337 and for expenses incurred of $31,440.
Touchtunes Juke Box Inc. is owned 50% by Tony Mastronardi; 16.66% by Guy
Nathan; and 33.33% by Tonino Lattanzi, officers and directors of the Company.
Oraxium International Inc. is a principal shareholder of Registrant. The
909,000 shares were acquired for investment by such persons, none of whom is a
3<PAGE>
resident or citizen of the United States.
4. On September 25, 1996, the Company authorized the issuance of 900,888
shares of Common Stock to Touchtunes Juke Box Inc. for a cash consideration of
$477,470 and 75,000 shares to Giovanni D'Andrea, an independent third party,
for professional services valued at $40,000. On December 20, 1996, the Company
authorized the issuance of 400,000 shares of Common Stock to Oraxium Interna-
tional Inc., in consideration for agreeing to extend the scope and duration of
a non-competition covenant given to the Company and 50,000 shares each, to
Pierre Martineau and Sylvain Duchesne, employees of Touchtunes Juke Box Inc.,
in consideration for their non-compete covenants. On December 27, 1996, the
Company authorized the issuance of 199,819 shares of Common Stock to Touchtunes
Juke Box Inc. for a cash consideration of $420,698. All 1,675,707 shares were
issued in April 1997 and were acquired for investment by such persons, none of
whom (except for Mr. D'Andrea) is a resident or citizen of the United States.
5. On March 21, 1997, two independent Canadian investors, Societe
Innovatech du Grand Montreal and Sofinov Societe Financiere d'Innovation Inc.
(the "Selling Shareholders") agreed to invest $4,000,000 Canadian Dollars (CDN)
in Registrant upon certain terms and conditions. To accomplish this, they
invested $4,000,000 CDN in Touchtunes Digital Jukebox Inc. ("Touchtunes"), a
Canadian subsidiary organized by Registrant specifically for that purpose, in
the following manner. The Selling Shareholders purchased 100 Class B shares
and 20 Class C shares of Touchtunes, at a price of $5,000 CDN per share, for an
immediate cash consideration of $600,000 CDN. They also subscribed to an
additional 680 Class C shares of Touchtunes, at a price of $5,000 CDN per
share, for a total consideration of $3,400,000 CDN. Both the Class C shares
and the funds were deposited in escrow. The Selling Shareholders also
purchased 100 shares of Series A Preferred Stock of the Registrant for $150.
On May 9, 1997, the Selling Shareholders released an additional $750,000 CDN
from escrow to Registrant against delivery to them of 150 Class C shares,
leaving a balance of $2,650,000 CDN and 530 Class C shares in escrow. Payment
of this $2,650,000 CDN was released from escrow on July 17, 1997, against
delivery of the remaining 530 Class C shares. This Registration Statement is
intended to cover their sale of a maximum of 2,000,000 shares of the Common
Stock reserved for issuance to them upon exercise of their rights to exchange
their 100 Class B shares and 700 Class C shares of Touchtunes into 2,000,000
shares of Registrant's Series A Preferred shares and their subsequent conver-
sion of such Series A Preferred shares (with the 100 shares they already own)
into 2,000,100 shares of Registrant's Common Stock. All such shares were
acquired for investment by these two Canadian investors, neither of whom is a
resident or citizen of the United States.
4<PAGE>
Item 27. Exhibits.
(a) The following exhibits are filed herewith:
3. (i) Registrant's Amended and Restated Articles of Incorporation.
Reference is made to Exhibit 8 of Registrant's Form 8-K for the
month of March 1997, which Exhibit is incorporated herein by
reference.
3. (ii) Registrant's Bylaws.
4. Form of Registrant's Common Stock certificates.
5. Opinion of Karp and Sommers.
9. Shareholder Agreement between Techno Expres S.A. the majority
shareholder of Registrant and the Selling Shareholders dated March
21, 1997, relative to their shares of Registrant. Reference is made
to Exhibit 7 of Registrant's Form 8-K for the month of March 1997,
which Exhibit is incorporated herein by reference.
10. (i) Agreement of Sale between Touchtunes Jukebox Joint Venture and
Registrant, dated December 9, 1994, relative to transfer of patent
rights in exchange for 1,000,000 shares of Common Stock of
Registrant. Reference is made to Exhibit A of Registrant's Form 10-K
for the fiscal year ended December 31, 1994, which Exhibit is
incorporated herein by reference.
10. (ii) Summary of International Patent Application for the Digital Jukebox.
Reference is made to Exhibit B of Registrant's Form 10-K for the
fiscal year ended December 31, 1994, which Exhibit is incorporated
herein by reference.
10. (iii)Development Agreement between Touchtunes Juke Box Inc. and
Registrant, dated March 8, 1995. Reference is made to Exhibit C of
Registrant's Form 10-K for the fiscal year ended December 31, 1994,
which Exhibit is incorporated herein by reference.
10. (iv) Agreement between Oraxium International, Inc. and Registrant, dated
January 30, 1995, relative to the acquisition of a computer operating
system. Reference is made to Exhibit A of Registrant's Form 8-K for
the month of March 1995, which Exhibit is incorporated herein by
reference.
10. (v) Agreement between S.G.R.M. Inc. and Registrant, dated March 6, 1995,
relative to the acquisition of patent rights in exchange for
10,000,000 shares of Common Stock. Reference is made to Exhibit B of
Registrant's Form 10-K for the fiscal year ended December 31, 1994,
which Exhibit is incorporated herein by reference.
5<PAGE>
10. (vi) Amended Agreement between S.G.R.M. Inc., Techno Expres, S.A. and
Registrant, dated November 30, 1995, relative to the acquisition of
patent rights in exchange for 10,000,000 shares of Common Stock.
Reference is made to Exhibit C annexed to Registrant's Form 8-K for
the month of November 1995, which Exhibit is incorporated herein by
reference.
10. (vii) Subscription Agreement for the purchase of 100 Class B shares and 20
Class C shares of Touchtunes Digital Jukeboxes Inc. ("Touchtunes"),
dated March 21, 1997. Reference is made to Exhibit 1 of Registrant's
Form 8-K for the month of March 1997, which Exhibit is incorporated
herein by reference.
10.(viii) Escrow Agreement for the deposit of $3,400,000 CDN and 680 Class C
shares of Touchtunes by the Selling Shareholders, dated March 21,
1997. Reference is made to Exhibit 2 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (ix) Agreement between Touchtunes and Registrant, relative to work to be
rendered in connection with Registrant's Digital Jukebox project.
Reference is made to Exhibit 4 of Registrant's Form 8-K for the month
of March 1997, which Exhibit is incorporated herein by reference.
10. (x) Stock Exchange Agreement between Registrant and Selling Shareholders
for the exchange by the Selling Shareholders of their Class B and
Class C shares of Touchtunes for Series A Preferred shares of Regis-
trant. Reference is made to Exhibit 5 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (xi) Subscription Agreement for the purchase of 100 Series A Preferred
shares of Registrant by the Selling Shareholders. Reference is made
to Exhibit 6 of Registrant's Form 8-K for the month of March 1997,
which Exhibit is incorporated herein by reference.
10. (xii) Shareholder Agreement between Techno Expres S.A., the majority
shareholder of Registrant and the Selling Shareholders, relative to
their shares of Common Stock of Registrant. Reference is made to
Exhibit 7 of Registrant's Form 8-K for the month of March 1997, which
Exhibit is incorporated herein by reference.
10.(xiii) Employment and Non-Competition Agreement between Registrant and Tony
Mastronardi. Reference is made to Exhibit 9 of Registrant's Form 8-K
for the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (xiv) Employment and Non-Competition Agreement between Registrant and Guy
Nathan. Reference is made to Exhibit 10 of Registrant's Form 8-K for
the month of March 1997, which Exhibit is incorporated herein by
reference.
10. (xv) Lease for premises at One Commerce Place, Nun's Island, Verdun
(Quebec), Canada, H3E 1A2 between Touchtunes Digital Jukebox Inc. and
landlord of said premises.
6<PAGE>
10. (xvi) OEM Purchase and Development Agreement with Bose Corporation, dated
March 1997.
10.(xvii) Jukebox License Office Certificate, dated March 11, 1997.
10.(xviii) Jukebox License Agreement with the American Society of Composers
Authors and Publishers, Broadcast Music Inc. and SESAC, Inc., dated
March 11, 1997.
21. Registrant has no subsidiaries. On the effective date of this
Registration Statement, it is anticipated that Touchtunes Digital
Jukebox Inc. will become a wholly owned subsidiary of Registrant.
23. (i) Consent of Armstrong Gilmour, Accountancy Corporation, independent
certified public accountants. <F1>
23. (ii) Consent of Karp and Sommers, attorneys at law (contained in their
opinion).
Item 28. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) To include any additional or changed material information
on the plan of distribution;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be treated
as a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
<F1> Filed with this Amendment.
7<PAGE>
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(d) The Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A under the
Securities Act and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time
the Securities and Exchange Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time as the initial bona
fide offering thereof.
8<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Montreal, Canada on October 20,
1997.
TECHNICAL MAINTENANCE CORPORATION
By: /s/Tony Mastronardi
------------------------------
Tony Mastronardi, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
------------ ----------------- ----------
/s/Tony Mastronardi President and Director November 4, 1997
- --------------------- (Principal Executive, Accounting
Tony Mastronardi and Financial Officer)
/s/Guy Nathan Senior Vice-President, November 4, 1997
- --------------------- Secretary and Director
Guy Nathan
/s/Tonino Lattanzi Vice-President and Director November 4, 1997
- ---------------------
Tonino Lattanzi
/s/Jacques Bourque Assistant-Secretary and Director November 4, 1997
- ---------------------
Jacques Bourque
Director -----------------
- ---------------------
Pierre Pharand
Director -----------------
- ---------------------
Andre Duquenne
9<PAGE>
As filed with the Securities and Exchange Commission on October 23, 1997
File No. 33-7006
EXHIBIT VOLUME
TO
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OF
TECHNICAL MAINTENANCE CORPORATION<PAGE>
INDEX TO EXHIBIT VOLUME
Item 27. Exhibits.
(a) The following exhibit is filed herewith:
23. (i) Consent of Armstrong Gilmour, Accountancy Corporation, independent
certified public accountants.
<PAGE>
Exhibit 23. (i) Consent of Armstrong Gilmour, Accountancy
Corporation, independent certified public accountants<PAGE>
Armstrong Gilmour
- -------------------------------------------------------------------------------
Accountancy Corporation Certified Public Accountants and Business Consultants
Consent of Independent Certified Public Accountants
The Board of Directors and Stockholders
Technical Maintenance Corporation:
We consent to incorporation by reference in the registration statement on Form
SB-2 (Registration #333-7006) of Technical Maintenance Corporation (A
Development Stage Company) of our report dated March 28, 1997, relating to the
balance sheets of Technical Maintenance Corporation as of December 31, 1996 and
1995, and the related statements of operations, stockholders' equity (deficit)
and cash flows for each of the years in the three-year period ended December
31, 1996 and for the development period from December 8, 1994 through December
31, 1996, which report appears in the December 31, 1996, annual report on Form
10-K of Technical Maintenance Corporation.
/s/Armstrong Gilmour
Accountancy Corporation
Walnut Creek, California
October 31, 1997<PAGE>
