FORM 10-QSB/A - 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 AUGUST 31, 1996
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 August 31, 1996, Registrant had 1,059,174 shares of common stock, $.001
Par Value, outstanding.
<PAGE>
INDEX
Page
Number
------
Part I. Financial Information
Item I.Financial Statements
Consolidated Balance Sheets as of August 31,
1996 (Unaudited) and November 30, 1995 2
Consolidated Statements of Operations Three
Months Ended August 31, 1996 and
August 31, 1995 (Unaudited) 3
Consolidated Statements of Operations, Nine
Months Ended August 31, 1996 and
August 31, 1995 (Unaudited) 4
Consolidated Statement of Changes in Stock-
holders' Equity from November 30, 1995
through August 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows,
Three Months Ended August 31, 1996 and
August 31, 1995 (Unaudited) 6
Consolidated Statements of Cash Flows,
Nine Months Ended August 31, 1996 and
August 31, 1995 (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 16
1
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
August 31 November 30
1996 1995
--------------- ----------------
<S> <C> <C>
Current Assets
Cash in bank $ 118,588 $ 355,138
Inventory 691,951 622,165
Income tax refund receivable - 128,200
Accounts receivable, net of allowance
for doubtful accounts 689,802 685,824
Other current assets 175,028 53,491
--------------- ----------------
Total Current Assets 1,675,369 1,844,818
Property and equipment, net of accumulated
depreciation 1,284,126 1,430,230
Goodwill, net of accumulated amortization 907,614 1,026,001
Other assets 102,169 83,213
--------------- ----------------
Total Assets $ 3,969,278 $ 4,384,262
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 531,635 $ 1,088,444
Notes payable, current portion 544,886 47,520
Mortgage payable, current portion 82,185 8,490
Other current liabilities 138,887 21,112
--------------- ----------------
Total Current Liabilities 1,297,593 1,165,566
Notes payable, net of current portion 63,752 67,488
Mortgage payable, net of current portion 532,357 611,807
Other liabilities 14,721 14,693
--------------- ----------------
Total Liabilities 1,908,423 1,859,554
--------------- ----------------
Stockholders' Equity:
Preferred stock - $.001 par value
5,000,000 shares authorized - -
Common stock - $.001 par value,
15,000,000 shares authorized;
1,013,786 shares issued and
outstanding at November 30, 1995
and 1,059,174 at August 31, 1996 1,059 1,014
Additional paid-in capital 2,330,007 2,128,939
Retained earnings (270,211) 394,755
--------------- ----------------
Total Stockholders' Equity 2,060,855 2,524,708
--------------- ----------------
Total Liabilities and Stockholders' Equity $ 3,969,278 $ 4,384,262
=============== ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
August 31 August 31
1996 1995
---------------- -----------------
<S> <C> <C>
Revenue:
Sales $ 1,124,503 $ 2,259,400
Cost of sales (exclusive
of depreciation and salaries
shown separately below) 287,075 1,086,263
---------------- -----------------
Gross Profit 837,428 1,173,137
---------------- -----------------
Operating Expenses
Salaries 523,413 628,589
Advertising and promotion 28,785 40,997
Contract services 23,055 19,793
Rent 80,903 51,861
Travel and entertainment 29,485 12,289
Depreciation/amortization 107,589 81,416
Other operating expenses 276,692 335,453
---------------- -----------------
Total Operating Expenses 1,069,922 1,170,398
---------------- -----------------
Net Operating Income (Loss) (232,494) 2,739
Other Income 11,184 13,373
---------------- -----------------
Net income (loss), before provision
for income taxes (221,310) 16,112
Provision for income taxes - -
---------------- -----------------
Net Income (Loss) $ (221,310) $ 16,112
================ =================
Net Income (Loss) per Share $ (.21) $ .02
================ =================
Weighted Average Shares Outstanding 1,036,674 1,042,919
================ =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
August 31 August 31
1996 1995
---------------- -----------------
<S> <C> <C>
Revenue:
Sales $ 3,674,243 $ 4,750,802
Cost of sales (exclusive
of depreciation and salaries
shown separately below) 1,229,452 2,049,220
---------------- -----------------
Gross Profit 2,444,791 2,701,582
---------------- -----------------
Operating Expenses
Salaries 1,498,924 1,129,350
Advertising and promotion 139,595 129,676
Contract services 111,123 38,011
Rent 241,218 98,828
Travel and entertainment 66,162 30,365
Depreciation/amortization 326,730 96,316
Other operating expenses 794,236 650,504
---------------- -----------------
Total Operating Expenses 3,177,988 2,173,050
---------------- -----------------
Net Operating Income (Loss) (733,197) 528,532
Other Income 68,231 19,783
---------------- -----------------
Net income (loss), before provision
for income taxes (664,966) 548,315
Provision for income taxes - 189,207
---------------- -----------------
Net Income (Loss) $ (664,966) $ 359,108
================ =================
Net Income (Loss) per Share $ (.64) $ .41
================ =================
Weighted Average Shares Outstanding 1,036,480 878,239
================ =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From November 30, 1995 through August 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-in Retained
No./shares Amount Capital Earnings Total
---------- ------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1995 ...................... 5,068,928 $ 5,069 $2,124,884 $ 394,755 $ 2,524,708
Stock issued ...................................... 1,940 2 1,211 -- 1,213
One for five reverse stock split .................. (4,056,694) (4,057) 4,057 -- --
Stock issued for cash ............................. 45,000 45 75,955 -- 76,000
Discount on options ............................... -- -- 123,900 -- 123,900
Net (loss) for the nine month period ended
August 31, 1996 ................................... -- -- -- (664,966) (664,966)
---------- ------- ---------- --------- -----------
Balance at August 31, 1996 ........................ 1,059,174 $ 1,059 $2,330,007 $(270,211) $ 2,060,855
========== ======= ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
August 31 August 31
1996 1995
---------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (221,310) $ 16,112
Adjustments to reconcile net
income to net cash used
in operating activities
Depreciation and amortization 107,588 81,416
(Decrease) in accounts payable
and accrued expenses (337,587) (341,058)
(Increase) decrease in
accounts receivable 107,921 (421,024)
(Increase) in inventory (95,410) (45,104)
(Increase) in unearned revenue - (68,202)
Other, net (88,894) (58,422)
---------------- -----------------
Net Cash (Used in) Operating
Activities (527,692) (836,282)
---------------- -----------------
Cash Flows from Investing Activities:
(Purchases) of property and
equipment (13,288) (121,977)
Disposition of investments - 634,999
---------------- -----------------
Net Cash Provided by (Used in)
Investing Activities (13,288) 513,022
---------------- -----------------
Cash Flows from Financing Activities:
(Repayment) from notes and
mortgages payable (2,555) (115,564)
Proceeds from notes payable 250,000 -
Common stock issued 199,900 -
---------------- -----------------
Net Cash Provided by (Used in)
Financing Activities 447,345 (115,564)
---------------- -----------------
(Decrease) in cash (93,635) (438,824)
Cash, Beginning of Period 212,223 652,486
---------------- -----------------
Cash, End of Period $ 118,588 $ 213,662
================ =================
Interest Paid $ 13,977 $ 17,864
================ =================
Income Taxes Paid $ - $ -
================ =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
August 31 August 31
1996 1995
---------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (664,966) $ 359,108
Adjustments to reconcile net
income to net cash used
in operating activities
Depreciation and amortization 326,730 96,316
Increase (decrease) in accounts
payable and accrued expenses (556,809) (262,845)
(Increase) in accounts
receivable (3,978) (446,184)
(Increase) in inventory (69,786) (213,637)
(Decrease) in income taxes
payable - (113,262)
Decrease in income tax refund
receivable 128,200 -
Decrease in unearned revenue - (52,137)
Other, net (22,690) (100,505)
---------------- -----------------
Net Cash (Used in) Operating
Activities (863,299) (733,146)
---------------- -----------------
Cash Flows from Investing Activities:
Purchases of property and
equipment and other (62,239) (866,869)
Disposition of investments - 640,782
---------------- -----------------
Net Cash (Used in) Investing
Activities (62,239) (226,087)
---------------- -----------------
Cash Flows from Financing Activities:
(Repayment) of notes payable (12,125) (115,564)
Proceeds from notes and mortgage
payables 500,000 622,000
Common stock issued 201,113 293,750
---------------- -----------------
Net Cash Provided by Financing
Activities 688,988 800,186
---------------- -----------------
Increase (decrease) in cash (236,550) (159,047)
Cash, Beginning of Period 355,138 372,709
---------------- -----------------
Cash, End of Period $ 118,588 $ 213,662
================ =================
Interest Paid $ 29,382 $ 17,864
================ =================
Income Taxes Paid $ - $ 281,290
================ =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1996 and 1995
(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 August 31, 1996, the statements of income and
the statements of cash flows for the three and nine month periods ended
August 31, 1996 and August 31, 1995 and the statement of changes in
stockholders' equity for the nine month period ended August 31, 1996
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 August 31, 1996, 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 the number of outstanding shares of common
stock in the financial statements have been adjusted to give effect to
such split.
8
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Enhanced Services Company, Inc. (the "Company") provides upgrade, repair,
maintenance and asset management services for portable computers as well as
digital video multimedia presentation 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 multi-media
services are provided through the Company's wholly-owned NB Engineering
subsidiary.
The Company's consolidated results of operations and position for and as of
the end of its nine months ended August 31, 1996 are not comparable to last
year's nine month period because: (1) NB Engineering was acquired at the end of
last year's second quarter, on May 31, 1995, and it is accordingly included in
the results of operations only for the three months ended August 31, 1995, (2)
Laptop Solutions-California was formed during the second quarter of 1995 and it
is accordingly included in the results of operations only for the six months
ended August 31, 1995, and (3) The Company acquired its office building in
Houston, Texas at the end of its second quarter on May 25, 1995 and it is
accordingly included in the results of operations only for the three months
ended August 31, 1995.
9
<PAGE>
A. OPERATIONS OF LAPTOP SOLUTIONS-TEXAS
Laptop Solutions-Texas' results of operations for nine months ended
August 31, 1996 and August 31, 1995 are summarized below:
1996 1995 CHANGE (%)
---- ---- ----------
Sales $ 2,639,087 $3,720,251 (29.1)%
Cost of sales
exclusive of depreciation
and salaries) 993,469 1,532,974 (35.2)%
--------- -----------
Gross Profit 1,645,618 2,187,277 (24.8)%
Operating Expenses 1,556,594 1,397,743 11.4 %
Other Income 54,357 6,485 738.2 %
---------- -----------
Net Income,
before income taxes $ 143,381 $ 796,019 (64.7)%
========== =========
In comparing the results of operations for 1996 to 1995, it is important to
note the change in sources of Laptop Solutions-Texas revenue. Laptop
Solutions-Texas received a contract from an international computer manufacturer
to provide integration services, storage, receiving, shipment and asset
management for certain portable computers, as directed by the manufacturer, for
a monthly fee that amounted to $115,000 during the nine months ended August 31,
1996. The Company, during the second quarter of 1996, announced that it had
formed a Solutions Engineering Division to provide custom products for customers
and a peripheral device product line. While the assembly and sale of the first
peripheral device, a removable hard drive pak, will be primarily at the Laptop
Solutions-Texas facility in Houston, Texas, other projects may be assembled and
sold through the Laptop Solutions-California facility in Irvine, California. The
Company completed design of a pak containing a removable hard drive for use in
Toshiba's Tecra 700 series of laptops, and it began shipping units of the
removable hard drive pak in the beginning of the fourth quarter of 1996. Laptop
Solutions-Texas continues to encounter significantly more competition in
providing enhancement and upgrade services than in 1995, when it was a more
significant supplier of such services to certain customers. During the first
10
<PAGE>
nine months of fiscal 1996, although margins increased in Laptop
Solutions-Texas's enhancement and upgrade services, the average revenue and
related cost of sales decreased substantially due to a rapid drop in industry
pricing of the primary component. Additionally, increased competition for
enhancement and upgrade services contributed to decreased revenues from such
services in the first nine months of fiscal 1996 compared with 1995, while
revenues from repair and warranty services continue to increase in 1996.
Cost of goods sold decreased in 1996 to $993,469 from $1,532,974, a decrease
of $539,505, or 35.2%, primarily as a result of the lower number of enhancement
and upgrade units serviced. A non-recurring credit to Cost of Goods Sold was
recorded in the third quarter of 1996 with a positive effect of $62,580. The
increase in warranty repairs over the last year and the corresponding increase
in transaction volumes contributed to a delay in recognition of the credit.
Salaries and contract employees in 1996 amounted to $819,538 as compared to
$756,271 in 1995, a increase of $63,267, or 8.4%. Personnel and related cost
increases were primarily due to increased level of warranty and repair services.
Rent increased from $52,857 in 1995 to $126,244 in 1996, an increase of $73,387,
or 138.8%, as a result of increased office and warehouse space. Other operating
expenses contributing to increased operating costs included payroll taxes,
professional and consulting fees, travel, telephone and other general and
administrative expenses.
Management believes that to achieve profits similar to prior periods will
require greater volume than was required in the past, and there can be no
assurance that Laptop Solutions-Texas will be able to achieve such volume.
B. FORMATION AND OPERATIONS OF LAPTOP SOLUTIONS-CALIFORNIA
During the second fiscal quarter of 1995, the Company formed Laptop
Solutions-California, a wholly-owned subsidiary, to perform upgrade and repair
services for portable computers on the west coast. This entity provides similar
services as Laptop Solutions-Texas, also a wholly-owned subsidiary.
11
<PAGE>
Laptop Solutions-California's results of operations for nine months
ended August 31, 1996 and six months ended August 31, 1995 are summarized as
follows:
1996 1995 CHANGE (%)
---------- ----------- ----------
Sales $ 140,382 $ 98,555 42.4 %
Cost of sales
(exclusive of depreciation
and salaries) 50,911 13,193 285.9 %
---------- -----------
Gross Profit 89,471 85,362 4.8 %
Operating Expenses 264,597 165,518 59.9 %
---------- -----------
Net Income,
before income taxes $(175,126) $ (80,156) (118.5)%
========== ===========
The factors relating to Laptop Solutions-Texas's business in 1995 discussed
above generally also apply to Laptop Solutions-California. Management continues
to believe that a presence in the west coast market is a prudent investment in
the future of the Company. Management and administrative personnel for the
Solutions Engineering Division are located at the Irvine, California facility
and are included in Laptop Solutions-California's operating expenses. While the
removable hard drive pak is being assembled in the Houston, Texas facility, the
Irvine, California facility is being utilized for custom configuration of laptop
computers. Laptop Solutions-California received a purchase order during the
third quarter of 1996 to enhance four hundred laptops with touch screen
capabilities. This project is currently in progress.
C. ACQUISITION AND OPERATIONS OF NB ENGINEERING, INC.
The Company entered into the custom digital video compression and engineering
services businesses through the acquisition of NB Engineering, Inc. on May 31,
1995.
12
<PAGE>
NB Engineering's results of operations for nine months ended August 31,
1996 and three months ended August 31, 1995 are summarized as follows:
1996 1995 CHANGE (%)
----------- ----------- ----------
Sales $ 887,586 $ 932,184 (72.6)%
Cost of sales
(exclusive of depreciation
and salaries) 170,994 493,970 (89.8)%
----------- -----------
Gross Profit 716,592 438,214 63.5 %
Operating Expenses 1,245,673 559,444 101.5 %
Other Income 42,624 4,027 958.5 %
----------- -----------
Net Income,
before income taxes $ (486,457) $ (117,203) (214.0)%
=========== ===========
During the third quarter, the Company finalized the development of its ability
to "format author" (premaster film for video and interactive multimedia
applications) full length motion pictures, using the compression standard known
as Digital Versatile Disk (DVD). DVD allows a full length motion picture to be
stored on a 5.25" optical disc at broadcast quality video and Dolby AC-3 quality
surround sound stereo. This emerging standard is, management believes, likely to
be a future digital standard for home delivery of full length motion pictures.
NB Engineering, during the third quarter, entered into an agreement with a West
Coast post-production facility to jointly develop and deliver DVD titles to an
entertainment industry user. NB Engineering, plans to deliver its first
completed title towards the end of the fourth quarter or early in the first
quarter of 1997.
13
<PAGE>
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 nine months
ended August 31, 1996 and three months ended August 31, 1995 are summarized as
follows:
1996 1995 CHANGE (%)
---- ---- ----------
Rental Income $ 159,772 $ 27,664 477.5 %
Cost of Building
Operations 188,629 25,270 646.5 %
----------- ---------
Gross Profit (28,857) 2,394 (1305.4)%
Other Expenses 118,013 34,117 (33.8)%
Other Income 107 -0- N/A
----------- ----------
Net Income,
before income taxes $ (146,763) $ (31,723) (362.6)%
=========== ==========
The Company and Laptop Solutions-Texas use a portion of the building for their
offices and as warehouse facilities. Certain additional office space is leased
to other tenants. As of the end of the third fiscal quarter of 1995, the vacancy
rate was approximately 50%. Leases have been signed that reduced the vacancy to
19% during the third quarter of 1996. Management believes that, attributing a
market rental rate charge to Laptop Solutions-Texas, the building should
break-even at that level of occupancy. Management believes that the Company was
able to acquire this property and its improvements at less than its market
value, and it believes that it will prove to be a good long-term investment. Had
the Company not acquired this building and continued renting facilities in
Texas, it is estimated that the rental costs would not be materially different
than the net operating costs of the building during the third quarter of 1996,
and at the current level of occupancy, it should result in a savings to the
Company as well as the opportunity for possible appreciation in the value of the
property. While management believes that this is likely to continue over a
period of time, there can be no assurance that it will.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1996, the Company had stockholders' equity totaling $2,060,855
as compared to $2,524,708 at November 30, 1995, a decrease of $463,853. This
decrease resulted from a net loss of $664,966, the issuance of 1,940 shares of
stock valued at $1,213, the exercise of 45,000 warrants for the cash
consideration of $76,000 and discount on options granted of $123,900 during the
nine month period ended August 31, 1996. The Company's working capital was
$377,776 at August 31, 1996 as compared to $679,252 at November 30, 1995, a
decrease of $301,476. This decrease was primarily the result of the net loss for
the period and an increase in the working capital loan.
The Company executed a working capital loan in the amount of $500,000 on January
19, 1996 (amended as of June 1, 1996). The loan is due May 31, 1997 with
interest paid monthly at 2% above the prime rate quoted by the Wall Street
Journal and is secured by certain accounts receivable and inventory. The Company
borrowed $500,000 as of August 31, 1996. Management plans that income generated
from Laptop Solutions-Texas and -California operations should be sufficient to
finance their operations. Procurement of disk drives to assemble a large volume
of removable disk paks will require additional funds, as will continuation of NB
Engineering operations at least during the fourth quarter. Such funds need to be
provided through additional equity capital or other working capital financing.
However, there can be no assurances that such funds will be available, or, if
available, on favorable terms.
15
<PAGE>
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
Exhibit 27 - Financial Data Schedule
16
<PAGE>
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 ____________________
R. C. Smith, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 118,588
<SECURITIES> 0
<RECEIVABLES> 732,897
<ALLOWANCES> 43,095
<INVENTORY> 691,951
<CURRENT-ASSETS> 1,675,369
<PP&E> 1,731,429
<DEPRECIATION> 447,303
<TOTAL-ASSETS> 3,969,278
<CURRENT-LIABILITIES> 1,297,593
<BONDS> 614,543
0
0
<COMMON> 1,059
<OTHER-SE> 2,059,824
<TOTAL-LIABILITY-AND-EQUITY> 3,969,278
<SALES> 3,595,241
<TOTAL-REVENUES> 3,674,243
<CGS> 1,120,884
<TOTAL-COSTS> 1,229,452
<OTHER-EXPENSES> 3,177,988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,884
<INCOME-PRETAX> (664,966)
<INCOME-TAX> 0
<INCOME-CONTINUING> (664,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (664,966)
<EPS-PRIMARY> (.64)
<EPS-DILUTED> (.64)
</TABLE>
