SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File No. 33-55254-47
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)-792-7405
Registrant's facsimile number, including area code (702)-734-7500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: CLASS A COMMON
STOCK (Par Value
$.001 per share)
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 Exchange 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (&229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ( )
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 December 31, 1996
- ------------------------------------ -----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 12,909,000 SHARES<PAGE>
PART I
ITEM 1. Business
The Registrant was incorporated under the laws of Nevada on August 9, 1990.
Prior to December 1994, the Registrant did not engage in any business
activities. The Registrant is still in the development stage and has not
generated any revenues.
On December 8, 1994, the Registrant acquired the exclusive rights to a patent-
pending (PCT/FR94/01185) for a Digital Jukebox (the "Jukebox"). Since then,
the Registrant's primary focus has been on the development of the Jukebox. The
Registrant has an ongoing development agreement with Touchtunes Juke Box Inc.,
a Montreal-based Canadian corporation, to continue to enhance the features of
the Jukebox.
During 1995, on behalf of the Registrant, Touchtunes Juke Box Inc. filed six
additional PCT patent applications in order to reinforce the protection of the
Jukebox technology. These additional PCT patent applications have been filed
claiming the priority date of the prior PCT patent application of October 12,
1994. This claim has been accepted by the International Patent Office
Organization. These six additional PCT patent applications have been filed
under the numbers (FR95/01333, FR95/01334, FR95/01335, FR95/01336, FR95/01337,
FR95/01338).
During 1995, the Registrant acquired a computer operating system which is
referred to as the "Real Time Modular Multi-Process Kernel". The procurement
of this technology was deemed necessary by management since other currently
available operating systems were not suitable to meet the processing needs of
the Jukebox technology. It was estimated that the Registrant will save
substantial licensing fees by purchasing the operating system instead of paying
for the right to use it. The acquisition was financed by the issuance of stock
to the vendor of the technology.
The Jukebox uses a proprietary software platform which is optimized to use
computer languages to achieve high-speed sound reproduction and video
animation. Overall, the Jukebox is a high- performance, high-tech, low
maintenance invention that outperforms even the most advanced jukeboxes
available in the industry today. The Jukebox has also been developed with the
foresight that it will probably be used as the launchpad to the home version of
a "Music on Demand" system.
The Registrant's current plan to exploit its Jukebox technology is to enter
into long-term manufacturing agreements with several possible suppliers for
production of the Jukebox units. Its marketing and distribution strategy will
be aimed at penetrating the market through the jukebox operators. Responses to-
date from jukebox operators have been favourable due to the technological
advances contained in the Jukebox technology.<PAGE>
During 1996, the Registrant realized the following developmental advances of
its Jukebox:
1) The development of more user friendly interface screens resulted in the
filing of an additional patent application (FR 96/11677, priority date:
September 25, 1996). The previous seven patent filings passed preliminary
international examination and, according to the Registrant's patent attorney
and confirmed by other legal opinions received, the possibilities of having
these patents granted are extremely favourable in each country where they
were filed.
2) In order to prepare for a pilot market test scheduled for early 1997 and to
be able to accommodate a variety of telecommunications media at the time of
production, the Registrant developed a communications protocol compatible
with any communications network and any encryption methodology.
Concurrently, the Registrant initiated negotiations with one of the largest
telecommunications carriers in the U.S., MCI Communications, in order to
finalize an agreement for conducting the market trial and a possible long-
term relationship.
3) In preparation for the September 1996 AMOA trade show in Dallas, the
Registrant constructed five prototype jukeboxes. Establishing a presence on
the trade show floor allowed the Registrant to demonstrate their predominant
technological position within the jukebox market.
During 1996, the Registrant realized the following contractual advancements
with respect to its Jukebox:
1) In July 1996, the Registrant announced that it had acquired the first ever
issued performing rights license for a music downloading jukebox. The
Registrant was granted licenses from the ASCAP, BMI, and SESAC. These
organizations' collective portfolios comprise nearly all of the world's
copyrighted material.
2) During the latter part of 1996, the Registrant concluded contractual
arrangements with Warner Brothers Records Inc., Capital Records Inc., Virgin
Records America Inc., MCA Records Inc., and Polygram Group Distribution Inc.,
wherein the Registrant would be granted the right to use the sound recordings
owned and controlled by these companies. To the Registrant's knowledge, it is
the first company in the world to have negotiated these types of contractual
arrangements with any record label company for a digital downloading, coin-
operated sound re-production medium.
3) In December 1996, the Registrant concluded a contractual arrangement with
Oraxium International Inc. ("Oraxium"), an independant third party. This
agreement precludes Oraxium from competing with the Registrant in all
territories where the Registrant has filed patents regarding its Jukebox
technology. It also contains confidentiality provisions. This agreement is
in effect for a five year period commencing January 1, 1997.
4) In December 1996, the Registrant concluded contractual arrangements with
Mr. Pierre Martineau and Mr. Sylvain Duchesne. These parties are the
principal software developers involved in the ongoing development of the
Jukebox. These agreements preclude Mr. Martineau and Mr. Duchesne from
competing with the Registrant in all territories where the Registrant has
filed patents regarding its Jukebox technology. They also contain
confidentiality provisions. These agreements are in effect for a five year
period commencing January 1, 1997.
5) By the end of 1996, negotiations had commenced with Bose Corporation as a
potential original equipment manufacturer for the Registrant's Jukebox.
Further, negotiations are ongoing with Pioneer Electronics Corporation.<PAGE>
The Registrant also owns other intellectual properties which were acquired
during 1995, and described in previous filings. To date, the Registrant has
not expended any resources on the development of these properties, preferring
to focus its attention of the development of the Jukebox. Management
anticipates that until such time as commercial production of the Jukebox
commences, it will not be developing these other properties. However, the
Registrant followed all requirements to these other intellectual properties in
order to keep the patent process current and up-to-date. This has led to the
granting of certain additional patents. Further, other patent filings were
conducted in order to extend coverage on an international basis.
ITEM 2 Properties
With the exception of the intellectual properties described in Item 1, the
Registrant owns no properties. It leases an office located at 1800 E Sahara,
Suite 107, Las Vegas, Nevada. The Registrant plans to open a fully staffed
sales and marketing office, during 1997.
ITEM 3 Legal Proceedings
As of December 31, 1996, to the knowledge of the Registrant, its officers and
directors, neither the Registrant nor any of its officers or directors, is a
party to any material legal proceeding or litigation which would impact the
operations of the Registrant.
ITEM 4 Submission of Matters to a Vote of Security Holders
No matter was submitted to the Registrant's security holders for a vote during
the fiscal year ending December 31, 1996.
PART II
ITEM 5 Market for Registrant's Common Equity and Related Stockholder's Matters
As of December 31, 1996, there were 467 stockholders of the Registrant's Class
A common stock. The Registrant has not previously declared or paid any
dividends on its Class A common stock and does not anticipate declaring any
dividends in the foreseeable future. To the best of the Registrant's
knowledge, over the past two years, there has been relatively little trading
activity in the Registrant's Class A common stock.<PAGE>
ITEM 6 Selected Financial Data
TECHNICAL MAINTENANCE CORPORATION
SUMMARY OF OPERATIONS
DECEMBER 1996
1996 1995 1994 1993 1992
---------- --------- -------- --------- -------
Total assets 1,714,272 780,767 63,539 0 0
Revenues 0 0 0 0 0
Operating expenses 991,970 785,063 0 0 0
Net earnings (loss) (991,970) (785,063) 0 0 0
Per Share Data
Earnings (loss) (0.08) (.07) 0 0 0
Average Class A common
Shares Outstanding 12,909,000 10,535,844 1,065,753 1,000,000 1,000,000<PAGE>
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results
of Operation
The Registrant's ongoing development of the Jukebox technology and its other
intellectual property acquisitions provides it with several future
opportunities for financial success. At this time, the Registrant has no
operational history and must bear the financial risks inherent in any business
in its start-up phase. The Registrant currently has no liquidity and no
presently available capital resources, such as lines of credit, guarantees,
etc. At this time the Registrant is negotiating for equity financing with
venture capitalists.
ITEM 8 Financial Statements and Supplementary Data
Attached is Appendix A containing the following information:
- Independent Auditors' Reports
- Balance Sheet as at December 31, 1996 and 1995
- Income Statements for the two years ended December 31, 1996
- Statement of Cash Flows for the two years ended December 31, 1996
- Statement of Stockholders Equity for the two years ended December 31, 1996
- Notes to Financial Statements
- Independent Auditors' Reports on supplement schedules
- Schedule V - Property, plant and equipment for the two years ended
December 31, 1996
- Schedule VI - Accumulated depreciation, depletion and amortization of
property, plant and equipment for the two years ended December 31, 1996
ITEM 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Registrant had appointed Armstrong, Gilmour and Associates, Certified
Public Accountants to audit the Registrant's financial statements for the
fiscal year ended December 31, 1995. Audited reports for the prior year ended
December 31, 1994 were prepared by Perelson, Weiner, Certified Public
Accountants. Management had no disagreement with Perelson Weiner on any
accounting matter or financial disclosure. This change in accountants from
Perelson Weiner was precipitated because the Registrant, being in a start-up
phase, negotiated a fee with Armstrong, Gilmour and Associates which is more
suitable to its current circumstances.
PART III
ITEM 10 Directors and Executive Officers of the Registrant
The following officers and directors were appointed to their positions with the
Registrant:
Name Age Position Since
- ---------------- ---- ------------------------ ----------------
Tony Mastronardi 36 President, Director December 8, 1994
Guy Nathan 53 Secretary, Director December 8, 1994
Tonino Lattanzi 45 Vice-president, Director December 8, 1994
Tony Mastronardi:
Currently residing in Montreal, Canada, Mr. Mastronardi is a full-time employee
of the Registrant. He is responsible for overseeing the operations of the
Registrant, including the negotiation of agreements with<PAGE>
manufacturers/distributors, approving new projects, and coordinating project
research and development. From 1993 to 1996, he was active in the management
and overseeing of Viatel Communications Inc., a Montreal-based cellular phone
distributor. Mr. Mastronardi had also worked from 1984 to 1996 in Les Pavages
Samacon Inc., a Montreal-based family-owned construction company. He completed
his post-secondary school studies at Dawson College in 1981.
Guy Nathan:
Currently residing in France, Mr. Nathan is a recognized inventor having
patented over 100 intellectual property inventions since 1965. From 1982 to
1986, he worked for Elf Aquitaine, a large multi-national corporation. At the
time of his departure, he was the head of new technological developments. In
1992, he created the company, Societe FAAM in France, a manufacturer of
batteries and electrical vehicles. Presently, he is a full-time employee with
the Registrant. His role is to seek out opportunities for technological
acquisitions, approve the technical specifications of new products and organize
and staff project research and development. He is also the President of Techno
Expres SA.
Tonino Lattanzi:
Currently residing in France, Mr. Lattanzi has been an active shareholder in
several European corporations since 1975. In 1975, he created Bennes Expres, a
French corporation specializing in industrial waste management and residential
garbage collection. This company currently has over 250 employees. In 1989,
he created a corporation in Italy called Neturba, which performs the same
functions in Italy as Bennes Expres does in France. In 1989, he also created a
French corporation called France Pression Expres, a company specializing in
construction alteration, road repairs, etc. relating to cement structures. In
1992, he created along with Mr. Nathan, the corporation FAAM France. He is
currently a director of this corporation, which specializes in the manufacture
of batteries and electric vehicles. Mr. Lattanzi's business experience and
financial contacts will play a major role in allowing Technical Maintenance
Corporation to secure European financing for its projects.<PAGE>
ITEM 11 Executive Compensation
The Registrant has made no arrangements for the remuneration of its officers
and directors, except that they are entitled to receive reimbursement for
actual, demonstratable out-of-pocket expenses, including travel expenses, if
any made on the Registrant's behalf in the carrying out of its business
operations. No remuneration has been paid to the Registrant's officers and
directors for the year ended December 31, 1996. No representation can be made
as to the compensation or other remuneration, which may ultimately be paid to
the Registrant's management. When the Registrant successfully secures
financing, reasonable management remuneration packages will be created.
ITEM 12 Security Ownership of Certain Beneficial Owners and Management
On November 30, 1995, the Registrant amended a previous agreement with Techno
Expres, SA, a corporation incorporated under the laws of France for the
acquisition of certain patent interests. The Registrant had reserved
10,000,000 shares for issuance in contemplation of this transaction. The
10,000,000 shares were acquired by Techno Expres, SA for investment and were
issued in December 1995. Techno Expres, SA is owned 33% each by Messrs. Tony
Mastronardi, Guy Nathan and Tonino Lattanzi, the three directors of the
Registrant. The Registrant claims an exemption from Section 5 of the
Securities Act of 1933 by virtue of Section 4(2) thereof.
During December 1995, the Registrant also issued for investment, 100,000 shares
to Albert Dutour, an independent third party, in consideration of $150,000;
275,000 shares to Oraxium International Inc., an independent third party in
consideration for the extinguishment of $193,612 of indebtedness of the
Registrant; 300,000 shares to Tonino Lattanzi, a director of Registrant, in
consideration for operating money advanced to Registrant in the amount of
$300,000; 234,000 shares to Touchtunes Jukebox Inc., for services rendered to
Registrant having a value of $203,337, and for expenses incurred of $31,440.
Touchtunes Jukebox Inc. is owned by Messrs. Tony Mastronardi, Guy Nathan and
Tonino Lattanzi, the three directors of the Registrant. The aggregate of
909,000 shares were acquired for investment by the respective subscribers.
Registrant claims an exemption from Section 5 of the Securities Act of 1933 by
virtue of Section 4(2) thereof.
During 1996, the Registrant authorized the issue of 1,100,707 Class A common
shares to Touchtunes Juke Box Inc. as consideration for services rendered to
the Registrant having a value of $898,168. Tony Mastronardi, a director of the
Registrant, is a principal shareholder of Touchtunes Juke Box Inc.. The
1,100,707 Class A common shares are reserved by the Registrant but have not
been issued.
On September 25, 1996, the Registrant authorized the issuance of 75,000 Class A
common shares to Giovanni D'Andrea, an independant third party, as
consideration for services rendered to the Registrant having a value of
$40,000. The 75,000 shares are reserved by the Registrant but have not been
issued.
On December 20, 1996, the Registrant authorized the issuance of 400,000 Class A
common shares to Oraxium International Inc., an independant third party, 50,000
Class A common shares to Pierre Martineau and 50,000 Class A common shares to
Sylvain Duchesne. The issuance of the shares was authorized as consideration
for these parties entering into confidentiality and non-competition agreements
with the Registrant. Mr. Martineau and Mr. Duchesne are the principal software
developers involved in the ongoing development of the Jukebox. The 500,000
Class A common shares are reserved by the Registrant but have not been issued.<PAGE>
The following table sets forth information regarding the beneficial stock
ownership of the Registrant's executive officers and directors and each person
known by the Registrant to own five percent or more of the outstanding shares
of its Class A common stock on December 31, 1996.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ----------------------- --------------------- ------------
Tony Mastronardi
President, Director 10,000,000 shares (1) 77.47%
4973, Felix Mclernan 230,495 shares (2) 1.79%
Pierrefonds QC H8Y 3L2
Guy Nathan
Secretary, Director 10,000,000 shares (1) 77.47%
1, rue Jeanne D'Arc 230,495 shares (2) 1.79%
91330
Yerres France
Tonino Lattanzi
Vice President, Director 300,000 shares 2.32%
7, rue Leon Blum 10,000,000 shares (1) 77.47%
Z.I. Des Glaises, 230,495 shares (2) 1.79%
91120
Paliseau France
All officers and 300,000 shares 2.32%
directors as a group 10,000,000 shares (1) 77.47%
(three persons) 230,495 shares (2) 1.79%
(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 Alfortville France, the record owner of 10,000,000 shares of
the Registrant's Class A common stock.
(2) Messrs. Mastronardi, Nathan and Lattanzi are the shareholders of the
capital stock of Touchtunes Juke Box Inc., a Canadian corporation with
offices at 1, Place Commerce, suite 330, Verdun QC H3E 1A2, the record
owner of 230,495 shares of the Registrant's Class A common stock. Their
shares of Touchtunes Juke Box Inc. are held as follows:
Tony Mastronardi 50%
Guy Nathan 16.67%
Tonino Lattanzi 33.33%
ITEM 13 Certain Relationships and Related Transactions
No officer, director, nominee for election as a director or associate of such
officer, director or nominee is or has been in debt to the Registrant during
the last fiscal year.<PAGE>
PART IV
ITEM 14 Exhibits, Financial Statements and Reports on Form 8-K
a) Financial Statements and Schedules:
- The financial statements of Technical Maintenance Corporation as set
forth in Item 8 and filed as part of this report
- Schedule V - Property, plant and equipment
- Schedule VI - Accumulated depreciation, depletion and amortization of
property, plant and
equipment
Financial statement schedules and other than those listed above have been
omitted since they are either not required or the information is otherwise
included.
b) Reports on Form 8-K.
Form 8K for the month of January 1996.
c) Exhibits
Exhibit (27) Financial Data Schedule
<PAGE>
TECHNICAL MAINTENANCE
CORPORATION
(A Development Stage Company)
Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Reports Thereon)<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.
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 in conformity with generally accepted
accounting principles.
Armstrong Gilmour Accountancy Corporation
Walnut Creek, CA
March 28, 1997<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
Deficit accumulated during the (1,778,033) (786,063)
development stage ----------- -----------
Total stockholders' equity (335,104) 656,866
(deficit) ---------- -----------
$1,714,272 780,767
=========== ===========
See accompanying notes to financial statements.
(1)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Operations
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---------- --------- ----------
Net sales $ _ _ _
Operating expenses:
Research and development 246,430 148,306 _
Professional and consulting fees 223,899 289,619 _
Travel and transportation 116,126 147,559 _
Management fees 85,847 37,762 _
Selling and promotional expenses 65,681 _ _
Office expenses 40,165 20,856 _
Rent 24,579 26,185 _
Depreciation 77,726 71,726 _
Amortization 111,517 43,050 _
---------- --------- ----------
Net loss $(991,970) (785,063) _
========== ========= ==========
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
=========== =========== ============
Statements of Stockholders' Equity (Deficit)
Years Ended December 31, 1996, 1995 and 1994
Class A Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- -------- -------- ----------- ----------
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 10,909,000 10,909 1,367,481 _ 1,378,390
common stock
Net loss _ _ _ (785,063) (785,063)
--------- -------- -------- ----------- ----------
Balances, 12,909,000 12,909 1,430,020 (786,063) 656,866
December 31, 1995
Net loss _ _ _ (991,970) (991,970)
--------- -------- -------- ----------- ----------
Balances, 12,909,000 $ 12,909 1,430,020 (1,778,033) (335,104)
December 31, 1996 ========== ======== ========= ============ ===========
See accompanying notes to financial statements.
(2)<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A Development Stage Company)
Statements of Cash Flows
December 31, 1996, 1995 and 1994
1996 1995 1994
----------- --------- --------
Cash flows from operating
activities:
Net loss $ (991,970) (785,063) _
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 189,243 114,776 _
Write-off of software _ 27,996 _
development costs
Changes in assets and
liabilities:
Prepaid expenses (21,306) _ _
Accounts payable 61,475 32,940 _
Accrued expenses 45,930 _ _
----------- --------- --------
Net cash used by operations (716,628) (609,351) _
----------- --------- --------
Cash flows from investing
activities:
Increase in costs of intangibles (101,346) _ _
Purchase of software _ (110,447) _
----------- --------- --------
Net cash used by investing (101,346) (110,447) _
activities ----------- --------- --------
Cash flows from financing
activities:
Advances from stockholders 818,070 569,798 _
Proceeds from sale of common _ 150,000 _
stock ----------- --------- --------
Net cash provided by financing 818,070 719,798 _
activities ----------- --------- --------
Net increase in cash 96 _ _
Cash at beginning of year _ _ _
----------- --------- --------
Cash at end of year $ 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
Software _ 193,612 56,625
Advances from stockholders _ 534,778 _
----------- --------- --------
$ _ 1,228,390 63,539
=========== ========= ========
Accrual of non-competition $ 1,000,000 _ _
agreement =========== ========= ========
See accompanying notes to financial statements.
(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)
(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.
(Continued)
(5)<PAGE>
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)
(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)
(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.
(7)<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
SUPPLEMENTAL SCHEDULES TO THE FINANCIAL STATEMENTS
The Board of Directors
Technical Maintenance Corporation
(A Development Stage Company):
The audits referred to in our report dated March 28, 1997, included the related
financial statements schedules for each of the years in the two-year period
ended December 31, 1996, included in this Form 10-K. The financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedules
based on our audits. In our opinion, based on our audits, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
Armstrong Gilmour Accountancy Corporation
Walnut Creek, CA
March 28, 1997<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TECHNICAL MAINTENANCE CORPORATION
Date: March 31, 1997
Per: /s/Tony Mastronardi
----------------------------------
Tony Mastronardi
President, Chief Financial Officer
and Director
Per: /s/Guy Nathan
----------------------------------
Guy Nathan
Secretary and Director<PAGE>
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