FORM 10-Q - 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 FEBRUARY 28, 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 33-20399-D
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 February 28, 1997, Registrant had 1,123,174 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 February
28, 1997 (Unaudited) and November 30, 1996 .......... 2
Consolidated Statements of Operations, Three
Months Ended February 28, 1997 and
February 29, 1996 (Unaudited) ....................... 3
Consolidated Statements of Changes in Stock-
holders' Equity from November 30, 1996
through February 28, 1997 (Unaudited) ............... 4
Consolidated Statements of Cash Flows,
Three Months Ended February 28, 1997 and
February 29, 1996 (Unaudited) ....................... 5
Notes to Consolidated Financial Statements ............ 6
Item 2
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations .......................................... 8
Part II. Other Information ............................................. 14
Exhibit 27 - Financial Data Schedule ............................. 16
1
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
FEBRUARY 28 NOVEMBER 30
1997 1996
----------- -----------
<S> <C> <C>
Current Assets
Cash in bank ............................................ $ 814,239 $ 156,432
Inventory ............................................... 700,546 551,603
Accounts receivable, net of allowance
for doubtful accounts ................................. 730,089 992,379
Other current assets .................................... 84,166 105,180
----------- -----------
Total Current Assets .................................. 2,329,040 1,805,594
Property and equipment, net of accumulated
depreciation ................................................ 1,205,290 1,241,273
Goodwill, net of accumulated amortization ..................... 828,689 868,152
Other assets .................................................. 46,432 47,544
----------- -----------
Total Assets .................................................. $ 4,409,451 $ 3,962,563
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses ................... $ 753,920 $ 861,279
Notes payable, current portion .......................... 542,708 698,960
Mortgage payable, current portion ....................... 9,500 9,229
Other current liabilities ............................... 15,156 46,816
----------- -----------
Total Current Liabilities ............................. 1,321,284 1,616,284
Notes payable, net of current portion ......................... 30,008 --
Mortgage payable, net of current portion ...................... 600,586 602,878
Other liabilities ............................................. 20,544 20,544
----------- -----------
Total Liabilities ....................................... 1,972,422 2,239,706
----------- -----------
Stockholders' Equity:
Preferred stock - $.001 par value
5,000,000 shares authorized
8,000 issued and outstanding
(liquidation preference of $800,000) .................. 8 --
8.6% cumulative preferred
Common stock - $.001 par value,
1,123,174 shares authorized;
5,068,928 shares issued and
outstanding ........................................... 1,123 1,103
Additional paid-in capital .............................. 3,224,581 2,397,063
Accumulated (deficit) ................................... (788,683) (675,309)
----------- -----------
Total Stockholders' Equity ............................ 2,437,029 1,722,857
----------- -----------
Total Liabilities and Stockholders' Equity .................... $ 4,409,451 $ 3,962,563
=========== ===========
</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
Three Months Periods Ended
(Unaudited)
February 28, February 29,
1997 1996
----------- -----------
Revenue:
Sales .................................. $ 1,567,624 $ 1,274,048
Cost of sales (exclusive
of depreciation and salaries
shown separately below) .............. 605,490 546,142
----------- -----------
Gross Profit ........................ 962,134 727,906
----------- -----------
Operating Expenses:
Salaries ............................... 534,274 533,815
Advertising and promotion .............. 47,662 68,924
Contract services ...................... 14,449 41,528
Rent ................................... 80,769 80,338
Travel and entertainment ............... 24,584 22,316
Depreciation ........................... 51,626 73,846
Other operating expenses ............... 346,007 293,175
----------- -----------
Total Operating Expenses ............. 1,099,371 1,113,942
----------- -----------
Net Operating Income (Loss) ................ (137,237) (386,036)
----------- -----------
Interest expense ........................... (21,517) (3,854)
Other income ............................... 45,375 44,454
----------- -----------
Net (Loss) ................................. $ (113,379) $ (345,436)
Provision for preferred dividends .......... (11,466) --
Net (Loss) to Common Shareholders .......... $ (124,845) $ (345,436)
=========== ===========
Net (Loss) Per Common Share ................ $ (.11) $ (.34)
=========== ===========
Weighted Average Common Shares
Outstanding ............................... 1,123,174 1,013,786
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From November 30, 1996 through February 28, 1997
(Unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------- ------------------------- PAID-IN ACCUMULATED
NO./SHARES AMOUNT NO./SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1996 ... -- $ -- 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 three
month period ended
February 28, 1997 ............. -- -- -- -- -- (113,374) (113,374)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at February 28, 1997 ... 8,000 $ 8 1,123,174 $ 1,123 $ 3,224,581 $ (788,683) $ 2,437,029
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Month Periods Ended
(Unaudited)
FEBRUARY 28, FEBRUARY 29,
1997 1996
--------- ---------
Cash Flows from Operating Activities:
Net (loss) ................................... $(113,379) $(345,436)
Adjustments to Reconcile Net
Income to Net Cash Used
in Operating Activities
Depreciation and amortization ............. 91,089 113,308
(Decrease) in accounts payable
and accrued expenses ..................... (107,359) (218,290)
(Increase) decrease in accounts
receivable ............................... 262,290 (130,453)
(Increase) decrease in inventory .......... (148,943) 102,149
Other, net ................................ (9,529) 27,365
--------- ---------
Net Cash Provided by (Used in) Operating
Activities .................................. (25,831) (451,357)
--------- ---------
Cash Flows from Investing Activities:
Purchases of property and
equipment ................................... (15,643) (36,691)
Decrease in other investments ................ -- --
--------- ---------
Net Cash (Used in) Investing
Activities .................................. (15,643) (36,691)
--------- ---------
Cash Flows from Financing Activities:
Common stock issued .......................... 60,000 --
Preferred stock issued ....................... 767,546 --
Proceeds from notes payable .................. -- 285,000
(Repayment) of notes and mortgages
payable ..................................... (128,265) (16,021)
--------- ---------
Net Cash Provided by Financing
Activities .................................. 699,281 268,979
--------- ---------
Increase (Decrease) in Cash ...................... 657,807 (219,069)
Cash, Beginning of Period ........................ 156,432 355,138
--------- ---------
Cash, End of Period .............................. $ 814,239 $ 136,069
========= =========
Interest Paid .................................... $ 21,517 $ 3,854
========= =========
Income Taxes Paid ................................ $ -- $ --
========= =========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1997 and February 29, 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 inter-company accounts
and transactions have been eliminated.
(2) UNAUDITED STATEMENTS
The balance sheet as of February 28, 1997, the statements of operations
and the statements of cash flows for the three month periods ended
February 28, 1997 and February 29, 1996 and the statement of changes in
stockholders' equity for the three month period ended February 28, 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 February 28, 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 shares
with gross proceeds to the Company of $800,000. The Company
6
<PAGE>
ENHANCED SERVICES COMPANY, INC. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1997 and February 29, 1996
(4) STOCK ISSUE, CONTINUED
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.
7
<PAGE>
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 first fiscal quarter ended February 28, 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 three months ended February 28, 1997 and 1996 are summarized and
discussed below:
CHANGE
1997 1996 %
----------- ----------- -----
Sales ................................ $ 1,567,624 $ 1,274,048 23.0 %
Cost of sales
exclusive of depreciation
and salaries) ........................ 605,490 546,142 10.9%
----------- ----------- -----
Gross Profit ......................... 962,134 727,906 32.2%
Operating &
Other Expenses ................... 1,099,371 1,113,942 (1.3)%
----------- ----------- -----
Net Operating Income ................. (137,237) (386,436) 64.5%
Interest Expense ..................... (21,517) (3,854) 458.3%
Other Income ......................... 45,375 44,454 (2.1)%
----------- ----------- -----
Net Income (Loss)
before income taxes .............. $ (113,379) $ (345,436) 67.2%
Provision for preferred dividends .... (11,466) -- --
----------- ----------- -----
Net (Loss) to Common Shareholders .... $ (124,845) $ (345,436 63.9%
=========== =========== =====
8
<PAGE>
a. OPERATIONS OF LAPTOP SOLUTIONS-TEXAS
Laptop Solutions-Texas' results of operations for three months ended
February 28, 1997 and 1996 are summarized and discussed below:
CHANGE
1997 1996 %
---------- --------- -----
Sales ................................ $1,176,568 $ 941,338 25.0%
Cost of sales
exclusive of depreciation
and salaries) .................... 502,340 441,485 13.8%
---------- --------- -----
Gross Profit ......................... 674,228 499,853 34.9%
Operating &
Other Expenses ................... 612,419 559,020 9.6%
---------- --------- -----
Net Operating Income ................. 61,809 (59,167) 204.5%
Other Income ......................... 20,541 20,775 (1.1)%
---------- --------- -----
Net Income (Loss)
before income taxes .............. $ 82,350 $ (38,392) 314.5%
========== ========= =====
SALES: Revenue from upgrade and enhancement sales increased $10,559 from
$485,304 in 1996 to $495,863 in 1997, an increase of 2.2%, 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 $171,795 in 1997. Overall, revenues from
warranty and non-warranty repair and contract maintenance increased $59,782, or
15.7%, from $380,727 in 1996 to $440,509 in 1997. Revenues from non-warranty
repair and contract maintenance services decreased from $349,653 in 1996 to
$256,429 in 1997, a decrease of $93,224 or 26.6%, while revenues from warranty
repair increased $153,006 from $31,074 in 1996 to $184,080 in 1997, an increase
of 492%, continuing the shift from non-warranty to warranty repair revenues;
management believes that the trend is a result of certain manufacturers
extending the warranty period to three years from one year. Revenues from asset
management services decreased $11,663 to $34,500 in 1997 from $46,163 in 1996, a
decrease of 25%.
COST OF SALES: Cost of sales of upgrade and enhancements services, as a percent
of sales, increased 3.7% in 1997 to $203,826, an increase of $22,209 or 12.2%
from $181,617 in 1996. Cost of sales of Compatibility Plus(TM) amounted to
$87,550 in 1997. Cost of sales of repair services decreased $42,562 in 1997 to
$170,175 from $212,737, a decrease of 20% as a result of fewer units being
presented for repair than in 1996. All other direct cost of sales, primarily
freight expense, decreased $6,342 to $40,789 in 1997 from $47,131 in 1996, a
decrease of 13.5%, as a result of a new freight contract.
OPERATING AND OTHER EXPENSES: Salaries and related payroll cost in 1997 amounted
to $350,496 as compared to $320,339 in 1996, an increase of 9.4%. Personnel and
related cost increases were primarily
9
<PAGE>
due to the 25% increase in sales and additional administrative personnel. Other
taxes, including property tax and State of Texas franchise tax increased $13,049
in 1997 to $16,348 from $3,010 in 1996. The increase was primarily a result of
valuation increases by the local taxing authority. Advertising cost decreased
$29,323 from $63,499 in 1996 to $34,176 in 1997, a decrease of 46%. The decrease
in advertising was a result of management's decision to withhold advertising
commitments pending completion of quality assurance on new products planned to
be released in the second quarter of 1997. Computer expense increased $6,329 in
1997 to $13,548 from $7,219 in 1996, an increase of 88% as a result of
increasing the computer network capacity and capabilities. Overhead allocation
to Laptop Solutions-Texas from the Company increased from $32,159 in 1996 to
$34,624 in 1997, an increase of $2,465 or 7.7%. The increase was primarily the
result of interest on the credit line of $500,000, and professional fees of 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, increased from
$412,043 in 1996 to $452,398 in 1997, a increase of 9.8%, primarily as a result
of increased sales.
b. OPERATIONS OF LAPTOP SOLUTIONS-CALIFORNIA
Laptop Solutions-California's results of operations for three months ended
February 28, 1997 and 1996 are summarized and discussed below.
CHANGE
1997 1996 (%)
--------- --------- -----
Sales ............................. $ 73,840 $ 72,295 2.1 %
Cost of sales
(exclusive of depreciation
and salaries) ..................... 69,850 29,268 138.7 %
--------- --------- -----
Gross Profit ...................... 3,990 43,027 (90.7)%
Operating &
Other Expenses .................. 119,000 104,371 14.0 %
--------- --------- -----
Net Operating Net Income .......... (115,010) (61,344) (87.5)%
Other Income ...................... 665 0
--------- --------- -----
Net Income (Loss)
Before Taxes .................... $(114,345) $ (61,344) (86.4)%
========= ========= =====
The Company in 1996 formed Solutions Engineering Division, and its management,
technical and administrative personnel are included in Laptop
Solutions-California's operating expenses.
SALES: Repair and enhancement sales decreased 41% in 1997 to $42,930 from
$72,295 1996. Sale of
10
<PAGE>
custom products amounted to $30,600 in 1997.
COST OF SALES: Cost of sales increased $40,582 in 1997, including $21,000 cost
of sales for solution engineering products, to $69,850 from $29,268 in 1996, an
increase of 138.7%. Cost of sales increased primarily as a result of sales of
custom products.
OPERATING AND OTHER EXPENSES: Salaries and related payroll expenses increased
$17,066 in 1997 to $80,589 from $63,523 in 1996, an increase of 26.9%. The
increase was primarily related to increased staff of the Solutions Engineering
Division. All other operating expenses decreased $6,141 to $25,386 in 1997 from
$31,527 in 1966, a decrease of 19.5%, primarily as a result of decreased volume
in repair and enhancement sales. The reduced glare and increased contrast and
luminance LCD film application, marketed as ClairtyView(TM), began shipping in
the last days of the quarter
c. OPERATIONS OF NB ENGINEERING, INC.
NB Engineering's results of operations for three months ended February 28,
1997 and 1996 are summarized and discussed below.
CHANGE
1997 1996 (%)
--------- --------- --------
Sales ............................ $ 317,216 $ 258,863 22.5 %
Cost of sales
(exclusive of depreciation
and salaries) .................... 30,360 73,295 (58.6)%
--------- --------- ------
Gross Profit ..................... 286,856 185,568 54.6 %
Operating &
Other Expenses ................. 392,410 451,004 (13.0)%
--------- --------- ------
Net Operating Income ............. (105,554) (265,436) 60.2 %
Other Income ..................... 4,702 38,016 (87.6)%
--------- --------- ------
Net Income Before
income taxes ................... $(100,852) $(227,420) 55.7 %
========= ========= ======
SALES: Engineering sales in 1997 increased $181,367 in 1997 to $196,837 from
$15,470 in 1996, an increase of 1,172%. Increased demand for engineering
services was primarily responsible for the increase. Compression sales in 1997
were $116,958, a decline of 19% from $144,474 in 1996. The decline was primarily
the result of competitive pricing, resulting in a decrease in the price per
minute of data compression. Hardware integration sales in 1997 were $2,074 as
compared to $99,079 in 1996, as rapid changes in technology reduced demand for
the product. NB Engineering, during fiscal 1996, changed the direction and focus
of its business from hardware integration and engineering services to
11
<PAGE>
digital video compression, and multimedia development services, including DVD
authoring.
COST OF SALES: Cost of sales in 1996 decreased 83% from $73,295 in 1996 to
$30,360 in 1997 as a result of the decline in hardware integration sales.
OPERATING AND OTHER EXPENSES: Operating and other expenses of $392,410 in 1997
declined 13% from $451,004 in 1996. Salaries declined $60,686 to $175,748 in
1997 from $236,434 in 1996, a decrease of 25.7% as a result of the decline in
hardware sales. All other operating expenses increased 1% to $216,662 in 1996
from $214,570 in 1996.
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
February 28, 1997and 1996 are summarized and discussed below.
CHANGE
1997 1996 (%)
------- -------- --------
Rental Income ..................... $82,946 $ 55,542 49.3 %
Cost of Building
Operations ...................... 63,479 79,927 (20.6) %
------- -------- --------
Net Income,
before income taxes ............. $19,467 $(24,385) 179.8 %
======= ======== ========
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 $27,404 as a result of increased occupancy in
1997 to 83% from 50% in 1996. The decrease in cost of operating the building of
20.6% was the result of non-recurring maintenance in 1996. 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. Management believes that, attributing a market rental
rate charge to Laptop Solutions-Texas, the building should continue to be a
profitable investment.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1997, the Company had stockholders' equity totaling
$2,437,029 as compared to
12
<PAGE>
$1,722,857 at November 30, 1996, an increase of $714,172. 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 exercise of 20,000(post-split)
warrants for a cash consideration of $60,000 and the net loss for the period of
$113,379. The Company's working capital was $1,007,756 at February 28, 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 exercise of 20,000 (post-split)
warrants for a cash consideration of $60,000 and the net loss for the period of
$113,379.
Management plans that income generated from operations, along with working
capital, will be sufficient to implement planned capital expenditures of
approximately $150,000 and product development expenditures of approximately
$250,000 during 1997 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.
13
<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
None.
14
<PAGE>
SIGNATURES
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, thereunto duly authorized.
ENHANCED SERVICES COMPANY, INC.
By ______________________________________ Date
R. C. Smith, Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> FEB-28-1997
<CASH> 814,239
<SECURITIES> 0
<RECEIVABLES> 769,507
<ALLOWANCES> 63,606
<INVENTORY> 700,546
<CURRENT-ASSETS> 2,329,040
<PP&E> 1,768,935
<DEPRECIATION> 563,645
<TOTAL-ASSETS> 4,409,451
<CURRENT-LIABILITIES> 1,321,284
<BONDS> 0
0
8
<COMMON> 1,123
<OTHER-SE> 3,224,581
<TOTAL-LIABILITY-AND-EQUITY> 4,409,451
<SALES> 1,567,624
<TOTAL-REVENUES> 1,567,624
<CGS> 605,490
<TOTAL-COSTS> 1,099,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 39,418
<INTEREST-EXPENSE> 21,517
<INCOME-PRETAX> (113,379)
<INCOME-TAX> 0
<INCOME-CONTINUING> (113,379)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (113,379)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
