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 June 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.EmployerIdentification
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 Aug. 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 June 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 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.
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.<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits
Annexed as Exhibit I are the Interim Financial Statements of the Registrant for
the Quarter ended June 30, 1997.
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: October 14, 1997 Per: /s/Tony Mastronardi
-------------------------------------------
Tony Mastronardi,
Chief Executive and Chief Financial Officer<PAGE>
EXHIBIT I
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM FINANCIAL STATEMENTS
FOR THE QUARTER ENDED
JUNE 30, 1997<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
<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
<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
<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
<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
<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
<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. <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
- ------------------------------------------------------------------<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. <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.<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.<PAGE>
