FORM 10-QSB - Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the period ended MAY 31, 1997
or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from_______ to________
Commission File Number 0-24256
ENHANCED SERVICES COMPANY, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1075908
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
16000 BARKERS POINT LANE, HOUSTON TX 77079
(Address of principal executive offices) (Zip Code)
(713) 566-5051
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report.)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicated by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 31, 1997, Registrant had 1,123,174 shares of common stock, $.001 Par
Value, outstanding.
INDEX
PAGE
NUMBER
Part I. Financial Information
Item I. Financial Statements
Consolidated Balance Sheets as of May 31,
1997 (Unaudited) and November 30, 1996 2
Consolidated Statements of Operations Three
Months Ended May 31, 1997 and
May 31, 1996 (Unaudited) 3
Consolidated Statements of Operations, Six
Months Ended May 31, 1997 and
May 31, 1996 (Unaudited) 4
Consolidated Statement of Changes in Stock-
holders' Equity from November 30, 1996
through May 31, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows,
Three Months Ended May 31, 1997 and
May 31, 1996 (Unaudited) 6
Consolidated Statements of Cash Flows,
Six Months Ended May 31, 1997 and
May 31, 1996 (Unaudited) 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 9
Part II. Other Information 15
1
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
May 31 November 30
1997 1996
------------- -------------
Current Assets
Cash in bank $ 307,858 $ 156,432
Inventory 774,921 551,603
Accounts receivable, net of allowance
for doubtful accounts 765,458 992,379
Other current assets 71,788 105,180
------------- -------------
Total Current Assets 1,920,025 1,805,594
Property and equipment, net of accumulated
depreciation 1,262,878 1,241,273
Goodwill, net of accumulated amortization 789,227 868,152
Other assets 77,524 47,544
------------- -------------
Total Assets $ 4,049,654 $ 3,962,563
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 798,514 $ 861,279
Notes payable, current portion 522,500 698,960
Mortgage payable, current portion 9,700 9,229
Other current liabilities 13,748 46,816
------------- -------------
Total Current Liabilities 1,344,462 1,616,284
Notes payable, net of current portion 16,174 -
Mortgage payable, net of current portion 598,114 602,878
Other liabilities 20,544 20,544
------------- -------------
Total Liabilities 1,979,294 2,239,706
------------- -------------
Stockholders' Equity:
Preferred stock - $.001 par value
5,000,000 shares authorized
8,000 issued and outstanding,
8.6% cumulative preferred
(liquidation preference of $800,000) 8 -
Common stock - $.001 par value,
15,000,000 shares authorized;
1,123,174 shares issued and
outstanding 1,123 1,103
Additional paid-in capital 3,224,581 2,397,063
Accumulated (deficit) (1,155,352) (675,309)
------------- -------------
Total Stockholders' Equity 2,070,360 1,722,857
------------- -------------
Total Liabilities and Stockholders' Equity $ 4,049,654 $ 3,962,563
============= =============
The accompanying notes are an integral part of the financial statements.
2
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
Ended Ended
May 31 May 31
1997 1996
------------- --------------
Revenue:
Sales $ 1,525,846 $ 1,278,246
Cost of sales (exclusive
of depreciation and salaries
shown separately below) 629,700 401,647
------------- --------------
Gross Profit 896,146 876,599
------------- --------------
Operating Expenses
Salaries 545,936 441,696
Advertising and promotion 76,959 41,566
Contract services 64,019 46,542
Rent 87,218 79,978
Travel and entertainment 32,794 14,363
Depreciation 56,917 66,371
Other operating expenses 382,997 289,170
------------- --------------
Total Operating Expenses 1,246,840 979,686
------------- --------------
Net Operating (Loss) (350,694) (103,087)
Interest expense (17,017) (2,228)
Other income 29,713 7,932
------------- --------------
Net (Loss) $ (337,998) $ (97,383)
============= ==============
Provision for preferred dividends (17,200) -
------------- --------------
Net (Loss) to Common Shareholders $ (355,198) $ (97,383)
=========== ==============
Net (Loss) per Common Share $ (.32) $ .10
============= ==============
Weighted Average Shares Outstanding 1,123,174 1,013,883
============= ==============
3
The accompanying notes are an integral part of the financial statements.
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Six Months
Ended Ended
May 31 May 31
1997 1996
------------- --------------
Revenue:
Sales $ 3,056,127 $ 2,550,741
Cost of sales (exclusive
of depreciation and salaries
shown separately below) 1,211,770 947,788
------------- --------------
Gross Profit 1,844,357 1,602,953
------------- --------------
Operating Expenses
Salaries 1,080,210 975,511
Advertising and promotion 124,621 110,491
Contract services 78,468 88,069
Rent 167,987 160,314
Travel and entertainment 57,378 36,677
Depreciation 108,543 140,217
Other operating expenses 729,004 576,970
------------- --------------
Total Operating Expenses 2,346,211 2,088,249
------------- --------------
Net Operating (Loss) (501,854) (485,296)
Interest expense (38,534) (6,083)
Other income 89,011 48,530
------------- --------------
Net (Loss) $ (451,377) $ (442,849)
============= ==============
Provision for Preferred Dividends (28,666) -
----------- ------------
Net (Loss) to Common Shareholders $ (480,043) $ (442,849)
=========== ============
Net Income (Loss) per Common Share $ (.43) $ .44
============= ==============
Weighted Average Shares Outstanding 1,123,174 1,013,980
============= ==============
4
The accompanying notes are an integral part of the financial statements.
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From November 30, 1996 through May 31, 1997
(Unaudited)
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ----------------------- PAID-IN ACCUMULATED
NO./SHARES AMOUNT NO./SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- ------- ---------- --------- ----------- ---------- ----------
Balance at November 30, 1995...... - $ - 1,103,174 $ 1,103 $ 2,397,063 $ (675,309) $1,722,857
Common stock issued............... - - 20,000 20 59,980 - 60,000
Preferred stock issued, net of
offering costs of $32,454....... 8,000 8 - - 767,538 - 767,546
Net (loss) for the six month
period ended May 31, 1997....... - 8 - - - (480,043) (480,043)
--------- ------- ---------- --------- ----------- ---------- ----------
Balance at May 31, 1997........... 8,000 $ 8 1,123,174 $ 1,123 $ 3,224,581 $(1,155,352) $2,070,360
========= ======= ========== ========= =========== =========== ==========
The accompanying notes are an integral part of the financial statements.
5
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
May 31 May 31
1997 1996
------------- --------------
Cash Flows from Operating Activities:
Net (loss) $ (355,198) $ (97,413)
Adjustments to reconcile net
loss to net cash used
in operating activities
Depreciation and amortization 96,378 105,834
Increase (decrease) in accounts
payable and accrued expenses 44,594 (932)
Decrease in accounts receivable (35,369) 18,554
(Increase) in inventory (74,375) (76,525)
Decrease in income tax refund
receivable - 128,200
Other, net (31,592) 38,032
------------- --------------
Net Cash Provided by (Used in)
Operating Activities (355,562) 115,750
------------- --------------
Cash Flows from Investing Activities:
(Purchases) of property and
equipment (114,505) (12,260)
------------- --------------
Net Cash (Used in) Investing
Activities (114,505) (12,260)
------------- --------------
Cash Flows from Financing Activities:
(Repayment) from notes and
mortgages payable (36,314) (28,549)
Common stock issued - 1,213
------------- --------------
Net Cash (Used in)
Financing Activities (36,314) (27,336)
------------- --------------
Increase (decrease) in cash (506,381) 76,154
Cash, Beginning of Period 814,239 136,069
------------- --------------
Cash, End of Period $ 307,858 $ 212,223
============= ==============
Interest Paid $ 17,017 $ 33,807
============= ==============
Income Taxes Paid $ - $ -
============= ==============
The accompanying notes are an integral part of the financial statements.
6
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Six Months
Ended Ended
May 31 May 31
1997 1996
------------- --------------
Cash Flows from Operating Activities:
Net (loss) $ (480,043) $ (442,849)
Adjustments to reconcile net
loss to net cash used
in operating activities
Depreciation and amortization 187,467 219,142
(Decrease) in accounts payable
and accrued expenses (62,765) (219,222)
(Increase) decrease in
accounts receivable 226,921 (111,899)
(Increase) decrease in
inventory (223,318) 25,624
Decrease in income tax refund
receivable - 128,200
Other, net (29,655) 65,397
------------- --------------
Net Cash (Used in) Operating
Activities (381,393) (335,607)
------------- --------------
Cash Flows from Investing Activities:
Purchases of property and
Equipment and other (130,148) -
------------- --------------
Net Cash (Used in) Investing
Activities (130,148) (48,951)
------------- --------------
Cash Flows from Financing Activities:
(Repayment of) notes payable (164,579) (9,570)
Preferred stock issued 767,546 -
Proceeds from notes and mortgage
payables - 250,000
Common stock issued 60,000 1,213
------------- --------------
Net Cash Provided by Financing
Activities 662,967 241,643
------------- --------------
Increase (decrease) in cash 151,426 (142,915)
Cash, Beginning of Period 156,432 355,138
------------- --------------
Cash, End of Period $ 307,858 $ 212,223
============= ==============
Interest Paid $ 38,534 $ 52,660
============= ==============
Income Taxes Paid $ - $ -
============= ==============
The accompanying notes are an integral part of the financial statements.
7
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997 and 1996
(1) ORGANIZATION
Enhanced Services Company, Inc. (ESC) a Colorado corporation, was
incorporated in 1987.
Laptop Solutions, Inc. (LSI), a Texas corporation was incorporated in
1991. LSI is in the business of internal hard drive, processor and RAM
upgrades for laptop and notebook computers and has selected November 30 as
its fiscal year end. LSI is a wholly-owned subsidiary of ESC.
Effective May 31, 1995, NB Engineering, Inc. (NBE), a wholly-owned
subsidiary of ESC, incorporated in Delaware, acquired substantially all of
the assets and assumed certain liabilities of NB Engineering, Inc. (NB) a
privately held Maryland corporation. NBE provides applications development
and digital video compression services and selling related video and
networking products.
The consolidated financial statements include the accounts of ESC and
subsidiaries since acquisition or formation. All intercompany accounts and
transactions have been eliminated.
(2) UNAUDITED STATEMENTS
The balance sheet as of May 31, 1997, the statements of income and the
statements of cash flows for the three and six month periods ended May 31,
1997 and May 31, 1996 and the statement of changes in stockholders' equity
for the six month period ended May 31, 1997 have been prepared by the
Registrant without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows at May
31, 1997, and for all periods presented, have been made.
(3) REVERSE STOCK SPLIT
During May, 1996 the Company effected a one for five reverse stock split.
All references to common stock in the financial statements have been
retroactively adjusted.
(4) STOCK ISSUE
Effective December 31, 1996 the Company issued 8,000 preferred
8
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997 and 1996
(4) STOCK ISSUE, CONTINUED
shares with gross proceeds to the Company of $800,000. The Company
incurred offering costs of approximately $32,454 which were netted against
the proceeds of the offering. The preferred stock has preference in
liquidation to the extent of the $800,000 plus cumulative dividends of
8.6% per annum.
Also effective December 31, 1996 the Company issued 20,000 shares of its
common stock for $60,000 pursuant to the exercise of certain stock
purchase rights.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
OVERVIEW
Enhanced Services Company, Inc. (the "Company") provides (a) upgrade,
repair, contract maintenance and asset management services, as well as
peripheral, enhancement and accessory products developed by the Company, for
portable computers, and (b) digital video multimedia presentation development
and processing services for marketing, training, archival storage, video
formatting and other applications. The Company's portable computer services and
products are provided through its wholly-owned Laptop Solutions-Texas and
- -California subsidiaries, and multimedia services are provided through the
Company's wholly-owned NB Engineering subsidiary.
The Company's second fiscal quarter ended May 31, 1997 and the comparable
quarter of 1996 are referred to in the discussions below as 1997 and 1996,
respectively.
The Company's consolidated results of operations and position for and as
of the end of its six months ended May 31, 1997 and 1996 are summarized and
discussed below:
Change
1997 1996 %
---- -----
Sales ........................... $ 3,056,127 $ 2,550,741 19.8%
Cost of sales
exclusive of depreciation
and salaries) ............... 1,211,770 947,788 27.9%
----------- -----------
Gross Profit .................... 1,844,357 1,602,953 15.1%
Operating &
Other Expenses .............. 2,346,211 2,088,249 12.4%
----------- -----------
Net Operating Income ............ (501,854) (485,296) (3.4)%
Interest Expense ................ (38,534) (6,083) 533.5%
Other Income .................... 89,011 48,530 83.4%
----------- -----------
Net Income (Loss)
before income taxes ......... $ (451,377) $ (442,849) (1.9)%
Provision for preferred dividends (28,666) -- --
----------- -----------
Net (Loss) to Common Shareholders $ (480,043) $ (442,849) (8.4)%
=========== ===========
10
a. OPERATIONS OF LAPTOP SOLUTIONS-TEXAS
Laptop Solutions-Texas' results of operations for three months ended May
31, 1997 and 1996 are summarized and discussed below:
Change
1997 1996 %
---- -----
Sales ....................... $ 845,959 $864,053 (2.1)%
Cost of sales
exclusive of depreciation
and salaries) ........... 399,373 324,929 22.9%
--------- --------
Gross Profit ................ 446,586 539,124 (17.2)%
Operating &
Other Expenses .......... 623,753 462,370 34.9%
--------- --------
Net Operating Income ........ (177,167) 76,754 (252.7)%
Other Income ................ 26,509 19,009 39.5%
--------- --------
Net Income (Loss)
before income taxes ..... $(150,658) $ 95,763 257.3%
========= ========
SALES: Revenue from upgrade and enhancement sales increased $40,764 from
$368,587 in 1996 to $409,351 in 1997, a increase of 11.1%, while the per unit
revenue continues to decline as a result of competitive pressure. Revenue from
Compatibility Plus(TM) sales, the removable hard disk pak that began shipping in
the fourth quarter of 1996, amounted to $36,521 in 1997. Revenues from
non-warranty repair and contract maintenance services decreased from $323,359 in
1996 to $246,545 in 1997, a decrease of $76,814 or 23.8%, while revenues from
warranty repair increased $15,330 from $115,852 in 1996 to $131,182 in 1997, an
increase of 13%, continuing the trend from non-warranty to warranty repair.
Management believes the increase is a result of certain manufacturers extending
the warranty period to three years from one year. Revenues from asset management
services decreased $11,500 to $23,000 in 1997 from $34,500 in 1996, a decrease
of 33%. The decrease was primarily the result of the sale by a major laptop
manufacture of its laptop division for which the service was provided.
COST OF SALES: Cost of sales of upgrade and enhancements services, as a percent
of sales, increased 19.9% in 1997 to $191,288, an increase of $73,395 or 62.2%
from $117,893 in 1996. Cost of sales of Compatibility Plus(TM) amounted to
$23,078 in 1997. Cost of sales of repair services increased $10,075 in 1997 to
$148,867 from $138,792, an increase of 7.3% as a result of increased parts costs
for certain newer units than in 1996. All other direct cost of sales, primarily
freight expense, decreased $6,944 to $35,939 in 1997 from $42,883 in 1996, a
decrease of 16.1%, as a result of a new freight contract
OPERATING AND OTHER EXPENSES: Salaries and related payroll cost in 1997 amounted
to $363,921 as compared to $259,590 in 1996, an increase of 40.2%. Personnel and
related cost increases were primarily due to increased sales and administrative
personnel. Credit card discounts increased $8,667 in 1997 to $12,763 from $4,096
in 1996 as more customers paid by credit card. Other taxes, including property
tax and State of Texas franchise tax increased $16,735 in 1997 to $18,490 from
$1,755 in 1996, as a result of valuation increases by the local taxing
authority. Advertising costs
11
increased $28,294 from $32,899 in 1996 to $61,193 in 1997, an increase of 86%,
due to the introduction of new products and services to the marketplace.
Computer expense increased $5,274 in 1997 to $11,947 from $6,673 in 1996, an
increase of 79% as a result of increasing the computer network capacity and
capabilities. Overhead allocation to Laptop Solutions-Texas from the Company
decreased from $10,627 in 1996 to $6,481 in 1997, a decrease of $4,146 or 64%.
The decrease was primarily in professional fees to the Company. Laptop
Solutions-Texas was charged a market rate for its office and warehouse space by
the Company of $25,998 for 1997 and 1996, and such amounts are included in
Operating and Other Expenses. Other operating expenses, included travel,
telephone, and other general and administrative expenses remained essentially
the same for the comparative period.
b. OPERATIONS OF LAPTOP SOLUTIONS-CALIFORNIA
Laptop Solutions-California's results of operations for three months ended
May 31, 1997 and 1996 are summarized and discussed below.
Change
1997 1996 (%)
---- ----- -----
Sales .................... $ 290,303 $ 39,811 629.2%
Cost of sales
(exclusive of depreciation
and salaries) ............ 171,639 23,313 636.3%
--------- --------
Gross Profit ............. 118,664 16,498 619.3%
Operating &
Other Expenses ......... 190,120 96,231 97.6%
--------- --------
Net Operating Net Income . (71,456) (79,733) (10.4)%
Other Income ............. 8,200 0
--------- --------
Net Income (Loss)
Before Taxes ........... $ (63,256) $(79,733) (20.7)%
========= ========
The Company in 1996 formed the Solutions Engineering Division, and its
management, technical and administrative personnel are included in Laptop
Solutions-California's operating expenses.
SALES: Repair and enhancement sales increased 209% in 1997 to $120,098 from
$38,838 in 1996. The increase primarily related to custom enhancement products.
During the second quarter of 1997, the Company initiated production and sales of
its anti-glare/anti-reflective film application to the screen of laptops and
notebooks resulting in revenue of $165,715. This resulted in a total increase in
sales of 629% from the previous year.
COST OF SALES: Cost of sales increased $161,414 in 1997, primarily due to the
cost of goods for the anti-glare/anti-reflective film and enhancement products.
OPERATING AND OTHER EXPENSES: Salaries, Contract Services and related personnel
expenses increased $49,827 in 1997 to $117,462 from $67,635 in 1996, an increase
of 73.7%. The increase was primarily related to increased production and
supervisory personnel. Rental expense increased
12
$16,232 in 1997 to $22,678 from $6,446 in 1996 as a result of a larger facility
to accommodate addition production capability. Expenses relating to the move to
the larger facility amounted to $7,565. All other operating expenses increased
$8,340 to $30,754 in 1997 from $22,414 in 1966, primarily as a result of
increased facilities, equipment depreciation, phone and computer expenses to
support the increased level of sales and production requirements.
c. OPERATIONS OF NB ENGINEERING, INC.
NB Engineering's results of operations for three months ended May 31, 1997
and 1996 are summarized and discussed below.
Change
1997 1996 (%)
---- ---- ---
Sales .................... $ 389,585 $ 373,203 4.4%
Cost of sales
(exclusive of depreciation
and salaries) ............ 58,686 50,814 15.5%
--------- ---------
Gross Profit ............. 330,896 322,389 2.6%
Operating &
Other Expenses ......... 449,987 424,680 6.0%
--------- ---------
Net Operating Income ..... (119,091) (102,291) (16.4)%
Other Income ............. 2,213 3,629 (38.5)%
--------- ---------
Net Income Before
income taxes ........... $(116,878) $ (98,662) (18.5)%
========= =========
SALES: Engineering and Compression sales in 1997 increased $36,560 in 1997 to
$359,166 from $322,606 1996, an increase of 11.3%. Hardware integration sales
declined $39,236 to $9,369 in 1997 as a result of phasing out of the business.
During the second Quarter of 1997, NB received its first purchase commitment for
DVD authoring resulting in revenue of $20,000. The purchase commitment extends
through the fourth quarter of 1997.
COST OF SALES: Cost of sales in 1997 decreased 25% from $50,814 in 1996 to
$40,782 in 1997 as a result of the continued phasing out of its hardware
integration sales.
OPERATING AND OTHER EXPENSES: Operating and other expenses of $457,090 in 1997
increased 14% from $393,797 in 1996. This increase is primarily due to
additional marketing related expenses.
13
d. ENHANCED SERVICES COMPANY, INC., ACQUISITION OF OFFICE BUILDING IN HOUSTON,
TEXAS
The Company, on May 31, 1995, acquired an office building in Houston, Texas.
Results of operations related to the office building for three months ended May
31, 1997and 1996 are summarized and discussed below.
Change
1997 1996 (%)
---- ---- ---
Rental Income ....... $ 68,141 $ 49,661 37.2%
Cost of Building
Operations ........ 75,353 60,913 24%
-------- --------
Net Income,
before income taxes $ (7,212) $(11,252) 36%
======== ========
Laptop Solutions-Texas uses a portion of the building for its offices and
warehouse facilities. Certain additional office space is leased to other
tenants. Rental income increased $18,480 to $68,141 as a result of increased
occupancy in 1997. The increase in cost of operating the building of 24% was the
result of increased occupancy and the related expenses of maintenance and
janitorial expense. Laptop Solutions-Texas was charged a market rate for its
office and warehouse space by the Company in the amounts of $26,000 for the year
1996 and 1997 and are included in Rental Income. The remaining space in the
building has been leased with the tenant occupancy beginning in mid July, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 1997, the Company had stockholders' equity totaling $2,070,361
as compared to $1,722,857 at November 30, 1996, an increase of $347,504. The
increase resulted from the closing a private placement of its cumulative
preferred stock with net proceeds of $767,546 on December 31, 1996, the interest
on the cumulative preferred stock of $28,666, the exercise of 20,000(post-split)
warrants for a cash consideration of $60,000 and the net loss for the six month
period of $451,380. The Company's working capital was $585,263 at May 31, 1997
as compared to $189,310 at November 30, 1996, a increase of $818,446. The
increase was primarily the result of a private placement of its cumulative
preferred stock with net proceeds of $767,546, the payment of dividends on the
cumulative preferred stock of $28,666, the exercise of 20,000 (post-split)
warrants for a cash consideration of $60,000 and the net loss for the period of
$451,380.
Management plans that income generated from operations, along with working
capital, will contribute to the financing of the Company's operations. NB
Engineering, Laptop Solutions-Texas and -California plan to obtain purchase
commitments that will provide funds to finance their operations and repayment of
the working capital loan. However, should the purchase commitments or new
business not materialize, which can not be assured, additional funds will be
required for operations and repayment of the working capital loan. Such funds
will need to be provided through additional debt financing and/or equity
capital, and there can be no assurance that such funds will be available, or, if
available, on favorable terms.
14
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
15
SIGNATURE
Pursuant to the requirements 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.
ENHANCED SERVICES COMPANY, INC.
By Date
16