UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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.: 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)-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-Q 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.
EXHIBIT (27) Financial Data Schedule<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, hereunto duly authorized.
TECHNICAL MAINTENANCE CORPORATION
Date: August 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 FINANCIAL STATEMENTS
FOR THE QUARTER ENDED
JUNE 30, 1997
Contents
Interim Balance Sheet 1
Interim Statement of Stockholders' Equity 2
Interim Statement of Loss 3
Interim Statement of Cash Flows 4
Notes to Interim Financial Statements 5<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM BALANCE SHEET
AS AT JUNE 30, 1997
(Unaudited)
$
- ---------------------------------------------------------------------------
ASSETS
Current
Cash 795
Computer equipment, net (note 2) 14,317
Software development costs, net (note 2) 186,000
Intangibles, net (note 2) 1,424,776
Investment in affiliated company (note 3) 583
- ---------------------------------------------------------------------------
Total assets 1,626,471
- ---------------------------------------------------------------------------
LIABILITIES
Current
Accounts payable 121,505
Advances from affiliated company 884,713
- ---------------------------------------------------------------------------
Total liabilities 1,006,218
- ---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock (note 4) 14,585
Additional paid-in capital 3,366,662
Accumulated deficit (2,760,994)
- ---------------------------------------------------------------------------
Total stockholders' equity 620,253
- ---------------------------------------------------------------------------
Total liabilities and stockholders' equity 1,626,471
- ---------------------------------------------------------------------------
See notes to interim financial statements
- 1 -<PAGE>
<TABLE>
<CAPTION>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE QUARTER ENDED 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, April 1, 1997 12,909,000 100 12,909 - 1,430,170 (2,193,428) (750,349)
Issuance of shares (notes 4 (b), 4 (c)) 1,675,707 - 1,676 - 1,936,492 - 1,938,168
Net loss - - - - - (567,566) (567,566)
- ------------------------------------------------------------------------------------------------------------------------------
Balances, June 30, 1997 14,584,707 100 14,585 - 3,366,662 (2,760,994) (670,253)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to interim financial statements
- 2 -<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF LOSS
FOR THE QUARTER ENDED JUNE 30, 1997
(Unaudited)
$
- --------------------------------------------------------------------------
Expenses
Research and development costs 184,138
Professional fees 146,881
Management fees 19,910
Rent 12,577
Travel and transportation 65,346
Selling and promotional 13,723
Office 25,148
Amortization - computer equipment 1,430
Amortization - software development costs 18,000
Amortization - patents 30,413
Amortization - non-competition agreements 50,000
- --------------------------------------------------------------------------
Net loss 567,566
- --------------------------------------------------------------------------
Net loss per share (note 5) (.04)
- --------------------------------------------------------------------------
Number of shares used to compute net loss per share 14,584,707
- --------------------------------------------------------------------------
See notes to interim financial statements
- 3 -<PAGE>
TECHNICAL MAINTENANCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED JUNE 30, 1997
(Unaudited)
$
- --------------------------------------------------------------------------
Cash flows from operating activities:
Net loss (567,566)
Adjustment to reconcile net loss to net cash
used by operating activities:
Amortization 99,843
Changes in assets and liabilities:
Accounts payable 29,928
Advances from affiliated company 438,590
- --------------------------------------------------------------------------
Net cash provided by operations 795
Cash at beginning of quarter -
- --------------------------------------------------------------------------
Cash at end of quarter 795
- --------------------------------------------------------------------------
Non cash investing and financing activities:
The following were exchanged for Class A Common Shares:
Accounts payable 1,040,000
Advances from stockholders 898,168
- --------------------------------------------------------------------------
1,938,168
- --------------------------------------------------------------------------
See notes to interim financial statements
- 4 -<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.
- 5 -<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. 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
Less: profit on intercompany transactions (9,995)
-------------------------------------------------------------------------
Net equity in earnings of investee (6,345)
-------------------------------------------------------------------------
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.
- 6 -<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.
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.
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.
- 7 -<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.
- 8 -<PAGE>
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