UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File No.: 333-7006
TECHNICAL MAINTENANCE CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 87-0485304
- -------------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
1800 E. SAHARA, SUITE 107
LAS VEGAS, NEVADA 89104
- ----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (702)-734-7557
Registrant's facsimile number, including area code (702)-734-7500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. (x) Yes ( ) No
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding as of Nov. 13, 1997
- ------------------------------------- --------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 14,584,707 SHARES
$.001 PAR VALUE SERIES A PREFERRED STOCK 100 SHARES<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements, included as Exhibit I, have
been prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not include all information and footnotes necessary for a
complete presentation of financial position, results of operations, cash flows
and stockholders' equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position
have been included and all such adjustments are of a normal recurring nature.
Operating results for the quarter ended September 30, 1997 are not necessarily
indicative of the results that can be expected for the year ending December 31,
1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's ongoing development of its digital jukebox ("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 three months.
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.
The Company's affiliated company, Touchtunes Digital Jukebox Inc.
("Touchtunes"), which conducts the development operations on behalf of the
Company has received $4,000,000 CDN for the further development and promotion
of the Digital Jukebox. By virtue of the agreement entered into between the
Company and Touchtunes relative to work to be rendered by Touchtunes in
connection with the Digital Jukebox, the Company should have sufficient capital
resources necessary in order to conclude the financing of its start-up
activities. In order to commence full scale commercial operations, management
estimates that an additional $24,000,000 U.S. capital will be required. It is
anticipated that a combination of equity and debt financing will be arranged by
the Company.
PART II - OTHER INFORMATION
Item 6. Exhibits
Annexed as Exhibit I are the Interim Financial Statements of the Registrant for
the Quarter ended September 30, 1997.
Exhibit (27) - Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TECHNICAL MAINTENANCE CORPORATION
Date: November 13, 1997 Per: /s/Tony Mastronardi
----------------------------
Tony Mastronardi,
Chief Executive and Chief Financial Officer<PAGE>
<PAGE>
EXHIBIT I
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM FINANCIAL STATEMENTS
FOR THE QUARTER ENDED
SEPTEMBER 30, 1997<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM BALANCE SHEET
AS AT SEPTEMBER 30, 1997
(with comparatives as at December 31, 1996)
(Unaudited)
<S> <C> <C>
1997 1996
$ $
----------- -----------
ASSETS
Current
Cash 784 96
Prepaid expenses - 21,306
----------- -----------
784 21,402
----------- -----------
Computer equipment, net (note 2) 12,887 17,177
Software development costs, net (note 2) 168,000 222,000
Intangibles, net (note 2) 1,463,863 1,453,693
----------- -----------
1,645,534 1,714,272
----------- -----------
LIABILITIES
Current
Accounts payable 110,802 1,140,345
Advances from affiliated company (note 3) 1,607,287 909,031
----------- -----------
1,718,089 2,049,376
Deficiency in investment in affiliated company (note 4) 5,467 -
----------- -----------
Total liabilities 1,723,556 2,049,376
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Capital stock (note 5) 14,585 12,909
Additional paid-in capital 3,366,662 1,430,020
Accumulated deficit (3,459,269) (1,778,033)
----------- -----------
Total stockholders' equity (deficit) (78,022) (335,104)
----------- -----------
Total liabilities and stockholders' equity 1,645,534 1,714,272
----------- -----------
</TABLE>
See notes to interim financial statements
<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 PERIOD ENDED SEPTEMBER 30 ,1997
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
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
$ $ $ $ $
----------- ------------ ------- ------- ---------- ------------- -----------
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 during the quarter - 100 - - 150 - 150
ended March 31, 1997
Net loss for the quarter ended - - - - - (415,395) (415,395)
March 31, 1997
Issuance of shares during the 1,675,707 - 1,676 - 1,936,492 - (1,938,168)
quarter ended June 30, 1997
Net loss for the quarter ended - - - - - (563,916) (563,916)
June 30, 1997
Net loss for the quarter ended - - - - - (701,925) (701,925)
September 30, 1997 ----------- ------------ ------- ------- ---------- ------------- -----------
Balances, September 30, 1997 14,584,707 100 14,585 - 3,366,662 (3,459,269) (78,022)
----------- ------------ ------- ------- ---------- ------------- -----------
</TABLE>
See notes to interim financial statements
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF LOSS
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997
(with comparartives for the quarter and nine months ended September 30, 1996)
(Unaudited)
<S> <C> <C> <C> <C>
Quarter Nine months Quarter Nine months
ended ended ended ended
Sept 30,1997 Sept 30,1997 Sept 30,1996 Sept 30,1996
$ $ $ $
----------- ----------- ----------- ------------
Expenses
Resesarch and development costs 281,696 539,867 108,366 199,940
Professional fees 48,719 351,298 69,845 146,051
Management fees 25,300 59,288 29,420 55,189
Rent 16,790 35,514 6,115 14,492
Travel and transportation 63,513 157,499 46,693 84,886
Selling and promotional 78,569 110,818 14,594 19,106
Office 37,650 81,228 21,177 31,883
Interest 40,145 40,145 - -
Amortization - computer equipment 1,430 4,290 1,425 4,275
Amortization - software development costs 18,000 54,000 18,000 54,000
Amortization - patents 30,413 91,239 12,600 37,800
Amortization - non-competition agreements 50,000 150,000 - -
----------- ----------- ----------- ------------
Loss before equity in earnings of 692,225 1,675,186 328,235 647,622
affiliated company
Equity in earnings of affiliated 9,700 6,050 - -
company (note 4) ----------- ----------- ----------- ------------
Net loss 701,925 1,681,236 328,235 975,857
----------- ----------- ----------- ------------
Net loss per share (0.04) (0.12) (0.03) (0.07)
----------- ----------- ----------- ------------
Number of shares used to compute 14,584,707 14,026,138 12,909,000 12,909,000
net loss per share ----------- ----------- ----------- ------------
</TABLE>
See notes to interim financial statements
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF CASH FLOWS
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997
(with comparatives for the quarter and nine months ended September 30, 1996)
(Unaudited)
<S> <C> <C> <C> <C>
Quarter ended Nine months ended Quarter ended Nine months ended
Sept. 30, 1997 Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1996
$ $ $ $
-------------- ----------------- -------------- -----------------
Cash flows from operating activities:
Net loss (701,925) (1,681,236) (328,235) (647,622)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization 99,843 299,529 32,025 96,075
Equity in earnings of affiliated company 9,700 6,050 - -
Changes in assets and liabilities:
Prepaid expenses - 21,306 - -
Accounts payable (10,703) 10,457 296,210 170,945
Advances from affiliated company 722,574 1,476,924 - 461,342
-------------- ----------------- -------------- -----------------
Net cash provided by operations 119,489 133,030 - 80,740
-------------- ----------------- -------------- -----------------
Cash flows from investing activities:
Purchase of software development costs - - - (80,740)
Purchase of patents (119,500) (131,909) - -
Investment in affiliated company - (583) - -
-------------- ----------------- -------------- -----------------
Net cash used by investing activities (119,500) (132,492) - (80,740)
-------------- ----------------- -------------- -----------------
Cash flows from financing activities:
Proceeds from sale of preferred stock - 150 - -
-------------- ----------------- -------------- -----------------
Net cash provided by financing activities - 150 - -
-------------- ----------------- -------------- -----------------
Net (decrease) increase in cash (11) 688 - -
Cash at beginning of period 795 96 - -
-------------- ----------------- -------------- -----------------
Cash at end of period 784 784 - -
-------------- ----------------- -------------- -----------------
Non cash investing and financing activities:
The following were exchanged for Class A
Common Shares
Accounts payable - 1,040,000 - -
Advances from affiliated company - 898,168 - -
-------------- ----------------- -------------- -----------------
- 1,938,168 - -
-------------- ----------------- -------------- -----------------
</TABLE>
See notes to interim financial statements
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE OF ACCUMULATED EXPENSES AND DEFICIT DURING THE DEVELOPMENT PERIOD
(Unaudited)
<S> <C> <C> <C> <C> <C>
Total
Dec 8, 1994- Mar 31 June 30 Sept 30 Dec 8, 1994-
Dec 31,1996 1997 1997 1997 Sept. 30,1997
$ $ $ $ $
------------- --------- -------- -------- --------------
Expenses
Resesarch and development costs 394,736 74,033 184,138 281,696 934,603
Professional fees 513,518 155,698 146,881 48,719 864,816
Management fees 123,609 14,078 19,910 25,300 182,897
Rent 50,764 6,147 12,577 16,790 86,278
Travel and transportation 263,685 28,640 65,346 63,513 421,184
Selling and promotional 65,681 18,526 13,723 78,569 176,499
Office 61,021 18,430 25,148 37,650 142,249
Interest - - 40,145 40,145
Amortization 304,019 99,843 99,843 99,843 603,548
------------- --------- -------- -------- --------------
Accumulated expenses and deficit 1,777,033 415,395 567,566 692,225 3,452,219
during the development period ------------- --------- -------- -------- --------------
</TABLE>
See notes to interim financial statements
<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE OF CASH FLOWS DURING THE DEVELOPMENT PERIOD
(Unaudited)
<S> <C> <C> <C> <C> <C>
Total
Dec 8, 1994- Mar 31, June 30, Sept 30, Dec 8, 1994-
Dec 31,1996 1997 1997 1997 Sept.30,1997
$ $ $ $ $
------------ --------- ---------- --------- ------------
Cash flows from operating activities:
Net loss (1,777,033) (415,395) (567,566) (692,225) (3,452,219)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Amortization 304,019 99,843 99,843 99,843 603,548
Write-off of software development costs 27,996 - - 27,996
Changes in assets and liabilities: -
Prepaid expenses (21,306) 21,306 - -
Accounts payable 140,345 (8,768) 29,928 (10,703) 150,802
Advances from affiliated company - 435,260 438,590 722,574 1,596,424
------------ --------- ---------- --------- ------------
Net cash provided (used) by operations (1,325,979) 132,246 795 119,489 (1,073,449)
------------ --------- ---------- --------- ------------
Cash flows from investing activities: -
Investment in affiliated company - (583) - (583)
Purchase of patents (101,346) (131,909) - (119,500) (352,755)
Purchase of software development costs (110,447) - - (110,447)
------------ --------- ---------- --------- ------------
Net cash used by investing activities (211,793) (132,492) - (119,500) (463,785)
------------ --------- ---------- --------- ------------
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 (11) 784
-
Cash at beginning of period - 96 - 795 -
------------ --------- ---------- --------- ------------
Cash at end of period 96 - 795 784 784
------------ --------- ---------- --------- ------------
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
<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 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. <PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 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 -Advances from Affiliated Company
These advances bear interest at the affiliated company's bank prime rate
plus 6%.
Note 4 -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
------------------------------------------------------------<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
Note 4 -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 is accounted for on the equity basis. For the quarter
ended September 30, 1997 the results of operations for Touchtunes were
approximately as follows (in U.S. dollars):
$
Revenues 571,000
Expenses 528,000
Earnings from operations 43,000
Income taxes 18,600
------------------------------------------------------------
Net earnings 24,400
------------------------------------------------------------
Equity in net earnings of investee 12,200
Proportionate share of expenses incurred
by investee relating to the issuance of shares 20,900
Equity pick-up from investee 9,700
------------------------------------------------------------
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. <PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
Note 5 -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) 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.<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
Note 6 - Proforma Information
a) Proforma loss per share
Based on the stock reserved in note 5(b), the proforma loss per share
for the quarter ended September 30, 1997 would be approximately .04
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 5(b):
$
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 7 - Related Party Transactions
a) Touchtunes Digital Jukebox Inc., an affiliated company as described in
note 4, charged $531,000 for research and development and operating
expense reimbursements. Included in the reimbursements were management
fees paid to Touchtunes Digital Jukebox Inc. of approximately $25,000.
b) Interest charges of approximately $40,000 were accrued in favour of
Touchtunes Digital Jukebox Inc. for amounts owing.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 784
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 784
<PP&E> 2248298
<DEPRECIATION> 603548
<TOTAL-ASSETS> 1645534
<CURRENT-LIABILITIES> 1718089
<BONDS> 0
0
0
<COMMON> 14585
<OTHER-SE> (92607)
<TOTAL-LIABILITY-AND-EQUITY> 1645534
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 701925
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (701925)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
