<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
--------- ---------
Commission file number: 0-18034
ENTERPRISE SOFTWARE, INC
--------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 68-0158367
- --------------------------------------------------------------------------------
(State or other jurisdiction IRS Employer
of incorporation) Identification No.)
8415 Explorer Drive, Colorado Springs, CO 80920
-----------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (719) 265-3200
- --------------------------------------------------------------------------------
N/A
- --------------------------------------------------------------------------------
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
filing requirements for the past 90 days. Yes X NO
--- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 5,406,496 shares of Common
Stock, $0.001 par value, as of August 1, 1999.
<PAGE> 2
ENTERPRISE SOFTWARE, INC.
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Page
No.
Consolidated Condensed Balance Sheets --
June 30, 1999 and March 31, 1999 ........................ 1
Consolidated Condensed Statements of Operations -- Three
Months Ended June 30, 1999 and 1998...................... 3
Consolidated Condensed Statements of Changes in
Stockholders' Equity - Three months Ended June 30, 1999.. 4
Consolidated Condensed Statements of Cash Flows --
Three months Ended June 30, 1999 and 1998................ 5
Notes to Consolidated Condensed Financial Statements..... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................ 9
PART II. OTHER INFORMATION................................................. 12
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENTERPRISE SOFTWARE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, March 31,
1999 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,197,701 $ 5,233,587
Accounts and other receivables, net 3,764,617 3,594,948
Notes receivable, current portion 2,966,826 443,615
Prepaid expenses and deferred taxes 1,663,641 1,355,443
----------- -----------
Total current assets 10,592,785 10,627,593
Property and equipment, less accumulated depreciation and amortization 2,549,381 3,007,857
Notes receivable, net of current portion 593,806 2,290,557
Capitalized software development costs 2,644,865 2,682,025
Customer list and other identifiable assets, net 12,826,348 14,103,386
Goodwill, net 4,529,559 4,774,701
Other long-term assets 585,364 731,921
----------- -----------
TOTAL ASSETS $34,322,108 $38,218,040
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
1
<PAGE> 4
ENTERPRISE SOFTWARE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
June 30, March 31,
1999 1999
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 6,307,555 $ 7,559,362
Deferred income 2,784,020 3,420,046
Notes payable, current portion 313,640 522,860
Notes payable to related parties, current portion 745,157 763,240
Capital lease obligations, current portion 649,824 713,409
------------ ------------
Total current liabilities 10,800,196 12,978,917
Notes payable to related parties, net of current portion 13,892,749 13,994,617
Notes payable, net of current portion 5,717,000 7,322,860
Capital lease obligations, net of current portion 982,869 1,124,235
Other long term liabilities 411,838 400,000
------------ ------------
TOTAL LIABILITIES 31,804,652 35,820,629
Stockholders' equity:
Common stock $.001 par value
Authorized - 100,000,000 shares
Issued and outstanding - 5,406,496 shares 5,406 5,406
Additional paid-in capital 48,695,228 48,695,228
Accumulated deficit (46,174,283) (46,381,162)
Accumulated other comprehensive income (8,895) 77,939
------------ ------------
Total stockholders' equity 2,517,456 2,397,411
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,322,108 $ 38,218,040
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
2
<PAGE> 5
ENTERPRISE SOFTWARE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For Three Months Ended June 30,
-------------------------------
1999 1998
-------------------------------
<S> <C> <C>
Revenue $ 8,396,165 $ 7,502,286
Cost of sales 2,956,388 2,932,583
------------- --------------
Gross profit 5,439,777 4,569,703
Operating expenses:
Selling, general and administrative 2,909,736 2,660,174
Depreciation and amortization 773,460 662,715
Research and development 456,513 256,383
Occupancy costs 365,037 380,358
------------- --------------
4,504,746 3,959,630
------------- --------------
Operating Income 935,031 610,073
Other income (expense):
Interest income 84,134 144,626
Interest expense (800,101) (541,533)
Realized loss on foreign exchange (2,452) -
Miscellaneous, net 2,768 (247)
------------- --------------
(715,651) (397,154)
------------- --------------
Income before income taxes 219,380 212,919
Income taxes 12,501 14,320
------------- --------------
Net income allocable to common shareholders $ 206,879 $ 198,599
============= ==============
Basic and diluted earnings per share:
Net income per share $ 0.04 $ 0.04
============= ==============
Weighted average number of
common shares outstanding 5,406,496 4,513,012
============= ==============
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE> 6
ENTERPRISE SOFTWARE, INC.
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THREE MONTHS ENDED JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Foreign
------------------------ Additional Currency
Number of Common Paid-in Accumulated Translation
Shares Stock Capital Deficit Adjustment Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at March 31, 1999 5,406,496 $ 5,406 $ 48,695,228 $(46,381,162) $ 77,939 $ 2,397,411
Net income - - - 206,879 - 206,879
Other comprehensive loss,
foreign currency adjustment,net of tax - - - (86,834) (86,834)
--------- ------------ ------------ ------------ ---------- ------------
Balance at June 30, 1999 5,406,496 $ 5,406 $ 48,695,228 $(46,174,283) $ (8,895) $ 2,517,456
========= ============ ============ ============ ========== ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
4
<PAGE> 7
ENTERPRISE SOFTWARE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
DECREASE IN CASH AND CASH EQUIVALENTS For Three Months Ended June 30,
-------------------------------
1999 1998
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 206,879 $ 198,599
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 773,460 662,715
Amortization of discount on note payable 84,545 48,051
Loss (gain) on sale of property and equipment (3,304) 4,614
Realized loss on notes receivable due to foreign exchange 2,452 9,387
Changes in operating assets and liabilities (net of acquisitions):
Accounts receivable (304,842) (347,501)
Prepaid expenses and deferred taxes (90,422) (233,559)
Other assets - (38,105)
Accounts payable and accrued expenses (1,141,833) (457,452)
Deferred income (474,667) (324,958)
Other long-term liabilities 11,838 (3,751)
------------- --------------
NET CASH USED IN OPERATIONS (935,894) (481,960)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (180,014) (66,529)
Capitalized software development costs (606,725) (81,249)
Collection on notes receivable 276,263 111,702
Net proceeds from sale of subsidiary 608,000
Net proceeds from sale of property and equipment 2,980 32,979
Cash of divested business (46,426) -
------------- --------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 54,078 (3,097)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable and capitalized leases (2,686,157) (4,036,728)
Repayment of notes payable to related parties (284,913) (190,045)
Deferred financing costs - (50,000)
Proceeds from notes payable 817,000 3,408,310
Repurchase of Series A preferred stock - (2,100,000)
------------- --------------
NET CASH USED IN FINANCING ACTIVITIES (2,154,070) (2,968,463)
------------- --------------
DECREASE IN CASH AND CASH EQUIVALENTS (3,035,886) (3,453,520)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 5,233,587 6,169,382
------------- --------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,197,701 $ 2,715,862
============= ==============
</TABLE>
See accompanying notes to consolidated condensed financial statements
5
<PAGE> 8
ENTERPRISE SOFTWARE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Cash paid during the period for:
<S> <C> <C>
Interest Expense Paid 715,527 857,074
Income taxes - 3,910
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
For the three months ended June 30, 1999, the Company incurred capital
lease obligations of $ 25,500.
The Company sold the assets and certain liabilities of Revive for
$608,000 in cash and a note receivable of $1,105,053.
See accompanying notes to consolidated financial statements
6
<PAGE> 9
ENTERPRISE SOFTWARE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying consolidated condensed financial statements include
the accounts of Enterprise Software, Inc., plus the accounts of its
subsidiaries during the periods that such subsidiaries were owned by
Enterprise Software, Inc. (collectively "the Company"). The
subsidiaries include its wholly-owned subsidiaries of Cable
Computerized Management Systems, Inc. ("CCMS"), RVT Incorporated
(formerly known as Revive Technologies Incorporated ("Revive"))
(commencing with its purchase on September 1, 1998 through its sale
on April 16, 1999) and Enterprise Systems Group, Ltd. ("Enterprise")
together with Enterprise's subsidiary companies.
In the opinion of the Company, the unaudited condensed consolidated
financial statements contain all adjustments, consisting solely of
adjustments of a normal recurring nature, necessary to present fairly
the financial position, results of operations and cash flows for the
periods presented. These unaudited consolidated condensed financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X of the
Securities Exchange Act of 1934. Accordingly, they do not contain all
the information and footnotes required in a complete set of financial
statements. These statements should be read in conjunction with the
Company's audited annual consolidated financial statements and
footnotes thereto as of March 31, 1999 included in the Company's
Annual Report on Form 10-KSB, (the "1999 Form 10-KSB"), as filed with
the Securities and Exchange Commission. The results of operations for
the three month period ended June 30, 1999 are not necessarily
indicative of the results for the year ending March 31, 2000.
2. Net income per share was determined by taking the sum of the net
profit less preferred stock dividends divided by the weighted average
number of common shares outstanding. The impact of common share
equivalents on the determination of basic and diluted earnings per
share is not material for the three months ended June 30, 1999. All per
share amounts have been adjusted for the 1-for-4 stock split effective
on July 2, 1998.
3. On April 16, 1999, the Company sold the assets and certain liabilities
of Revive to ManTech Systems Solutions Corporation ("ManTech"), a
Virginia corporation for approximately $1.6 million, plus $108,000
reimbursement for expenses. The total consideration consisted of (i)
$608,000 in cash and (ii) ManTech's unsecured promissory note, dated
April 16, 1999, in the amount of $1,105,053. The promissory note is
payable in four quarterly installments of $276,263 plus interest at
6.5% per annum. In accordance with generally accepted accounting
principles, the Company wrote-down the assets of Revive to their net
realizable value and recorded a loss with respect to this transaction
of approximately $13.5 million (including $560,000 of income taxes)
which is included in the loss on disposal of subsidiary in the 1999
Form 10-KSB. Income tax expense was incurred as a result of realizing
a gain on the sale.
4. On June 27, 1999, the Company signed a definitive merger agreement with
LiveWire Acquisition Corporation ("LiveWire"), a wholly-owned
subsidiary of LiveWire Media, L.L.C., which was amended on July 26,
1999. Under the terms of the merger agreement, LiveWire will purchase
approximately 97 percent of the outstanding, common stock of the
Company for $9.25 per share in cash. Under the terms of the agreement,
certain shareholders will maintain 7% of the Company's stock, post-
acquisition. The price is subject to a possible downward adjustment of
up to $0.40 per share in the event of a shortfall in certain
performance criteria. LiveWire has indicated that it intends to repay
approximately $25 million of
7
<PAGE> 10
the Company's debt. The definitive merger agreement supercedes the
non-binding letter of intent that the Company and an affiliate of
LiveWire had entered into on May 2, 1999, under which LiveWire reserved
the right to offer shares in the surviving company to up to 7 percent
of existing stockholders of the Company in lieu of the proposed $10.00
per share merger consideration.
5. As previously discussed above, the Company wrote-down the assets of
Revive to their net realizable value as of March 31, 1999. As a result,
the Company's net worth fell below the requirements for listing under
the rules of the NASDAQ National Market System. The Company has
received a notice from the NASDAQ that indicates the potential
de-listing from trading on the NASDAQ market. Currently, the Company is
appealing the NASDAQ's determination and any de-listing action has been
stayed. The outcome of the appeal is unknown at this time.
6. Comprehensive income is computed as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1999 1998
----------------------------------
<S> <C> <C>
Net income $ 206,879 $ 198,599
Other comprehensive income,
net of tax
Foreign currency translation (86,834) (61,841)
----------------------------------
Comprehensive income $ 120,045 $ 136,758
</TABLE>
7. The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------------
1999 1998
---------------------------------
<S> <C> <C>
Net income $ 206,879 $ 198,599
Dividends to preferred shareholders - -
---------------------------------
Net income allocable to common
shareholders $ 206,879 $198,599
Weighted average shares 5,406,496 4,513,012
Effect of dilutive securities 196,381 119,664
---------------------------------
Adjusted weighted average shares 5,602,877 4,632,676
</TABLE>
8
<PAGE> 11
ENTERPRISE SOFTWARE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The results of operations for the three months ended June 30, 1999 and 1998
include the operations of Enterprise and CCMS.
Except for historical information contained herein, statements in this report
are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecast results. Reference is made to the risks identified
elsewhere in this Report and in the Company's other reports and registration
statements on file with the Securities and Exchange Commission.
Revenue
Revenue increased approximately 12% for the three months ended June 30, 1999
from the corresponding quarter a year ago. The increase in the quarter was due
to license income from newly installed systems. It is anticipated that revenue
in future periods will continue to increase as the business continues to grow.
Cost of Sales
Cost of sales as a percentage of revenue declined to 35% for the three months
ended June 30, 1999 compared to 39% for the same period from the prior year.
This is consistent with the growth in license rental income as predicted in
previous periods.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") as a percentage of revenue
remained relatively constant at approximately 35% for the three months ended
June 30, 1999, compared to the same period from the prior year.
It is anticipated that SG&A expenses will increase in future periods due to the
expanding business of the Company. The Company has been successful in
maintaining SG&A expenses as a constant percentage compared to revenue. The
Company believes that, in keeping with other software companies, it will be
under pressure to increase wage rates in order to retain qualified staff,
particularly through the Year 2000. The Company anticipates that pressure on
wage rates may be reduced once all of the Year 2000 testing has been completed
by the software industry later this year, and skilled staff become more readily
available.
Depreciation and Amortization
Depreciation and amortization increased by approximately 17% for the three
months ended June 30, 1999 compared to the comparative quarter of the
previous year. The increase for the three months ended June 30, 1999 was
primarily due to the amortization of the goodwill and other intangibles
associated with the acquisition of one of the subsidiaries of Enterprise.
9
<PAGE> 12
Research and Development
The Company is committed to continued development and improvement of its
products. Total expenditure in the three months ended June 30, 1999 amounted to
approximately $1,064,000 of which approximately $457,000 was expensed.
Approximately $607,000 has been capitalized in accordance with Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed" ("FAS 86"), and will be
amortized in future periods once the development is completed and the revenue
will be recognized. The Company's products are under constant review and the
Company expects that development expenditures will continue to increase in
future periods. The expensed cost of $456,513 includes $28,913 which was spent
on Y2K testing and remediation (see the discussion concerning Year 2000 below).
Corporate
The corporate overhead represents general and administrative expenses related to
the administration of the Company, exclusive of the expenses of the Company's
subsidiaries. There was an overall decrease in the expenses for the three months
ended June 30, 1999 of $43,000 compared to the prior period. The decrease was
substantially due to management's efforts to control costs.
Legal and professional fees increased substantially in the three months ended
June 30, 1999. Legal and professional fees increased from $166,813 in the three
months ended June 30, 1998, to $532,259 in the months ended June 30, 1999. This
increase was due to the work required in completing the documents relating to
the Revive asset sale and the definitive merger agreement with LiveWire. Legal
and professional fees were also incurred in the three months ended June 30,
1999 concerning the termination of employment of the former Chief Executive
Officer, negotiating a settlement for loss of office, and reviewing certain
transactions of the Company.
It is anticipated that legal and professional fees will continue to be higher
for the Company in the next quarters until the closing of the transactions
contemplated by the definitive merger agreement with LiveWire.
Interest Income
Interest income decreased in the current quarter due to a decrease in cash
balances, primarily as a result of the acquisitions of Revive.
Interest Expense
Interest expense increased from the prior period as a result of the issuance of
the subordinated debenture to Allied Capital Corporation, and the increase in
the line of credit to fund a portion of the acquisition of Revive.
Income Tax Expense
At June 30, 1999, the Company had a net operating loss carryforward of
approximately $23.0 million for federal income tax purposes, of which
approximately $3.3 million is subject to a separate return limitation. The
carryforwards expire in varying amounts and years through 2019. This loss
carryforward gives rise to a deferred tax asset of approximately $7.8 million at
June 30, 1999. This deferred tax asset has a 100% valuation allowance, as the
Company cannot determine if it is more likely than not that the deferred tax
asset will be realized. Because of changes in the Company's ownership, there is
an annual limitation on the usage of the net operating loss carryforwards.
Income tax expense for the three months ended June 30, 1999 and 1998 primarily
represent state taxes for the various states in which the Company does business.
10
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company had approximately $2.2 million in cash and cash
equivalents. The Company has a $7 million revolving credit facility of which
approximately $1.3 million was available at June 30, 1999. The Company's working
capital deficit was approximately $207,000 at June 30, 1999. This is compared to
a working capital deficit of approximately $2.4 million at March 31, 1999.
During the three months ended June 30, 1999, the Company used approximately $2.7
million to repay certain notes payable and capitalized leases.
Based on the projected operations of the Company's subsidiaries (Enterprise
and CCMS), the Company currently believes that its consolidated operations
will generate sufficient cash to fund the working capital needs of the Company
and its subsidiaries for the next twelve months. Such projections are based on
projected benefits to be derived from the operations of its subsidiaries. No
assurance can be given that the projected operations or projected benefits
will be realized.
Payments, on promissory notes and notes payable, in respect of recent
acquisitions, are expected to be met from the funds generated from operations.
There is no assurance that anticipated future capital financing will be
successful or that funds will be available from the Company's subsidiaries to
meet capital requirements.
Pursuant to the terms of the definitive merger agreement between the
Company and LiveWire Acquisition Corporation, dated as of June 27, 1999 and
amended as of July 26, 1999, LiveWire has agreed to enter into one or more
credit facilities to provide partial financing of the cash merger
consideration. Upon consummation of the merger of LiveWire with and into the
Company, the Company, as the surviving corporation, will assume the outstanding
debt obligations of LiveWire relating to such financing agreements.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (the Year 2000) approaches. The Year
2000 issue is the result of computer programs being written using two digits
rather that four to define the applicable year. If systems do not correctly
recognize date information when the year changes to 2000, there could be an
adverse impact on the Company.
The risk for the Company exists in five areas: (1) systems used by the Company
to run its business, (2) systems used by the Company's suppliers, (3) potential
support or other claims from the Company's customers, (4) the potential reduced
expenditure on new systems by prospective customers as a result of them spending
significant amounts on the testing and remediation of their existing information
systems, which have Year 2000 problems, and (5) the reluctance of prospective
customers to change systems in the period leading up to the millennium.
Year 2000 compliance is an issue for virtually all businesses whose computer
systems and applications may require significant hardware and software upgrades
or modifications. Companies including customers of the Company owning and
operating such systems may plan to devote a substantial portion of their
information systems' spending to fund such upgrades and modifications, and
divert spending otherwise allocated in their budgets for new software and
hardware. Such changes in customers' spending patterns could have a material
adverse impact of the Company's sales, operating results or financial condition
for the fiscal year ending March 31, 2000.
The Company has completed a comprehensive in-house review of its software
products. The review has identified the need for modifications, which have been
or are in the process of being completed. The Company has contacted its critical
suppliers to determine if the suppliers' operations and the products and
services they provide are Year 2000 compliant. Where practicable, the Company
will attempt to mitigate the risks with respect to the failure of suppliers to
be Year 2000 ready. In the event that suppliers are not Year 2000 compliant, the
Company will seek alternative sources of supplies. However, such failures remain
a possibility and could have an adverse impact on the Company' results of
operations or financial condition. In particular, little or no response has been
received from the public utilities, such as the electricity, telephone, and
water companies. As a result, this Company, along with most other businesses in
the United States and internationally, would be materially adversely impacted as
a direct result of the failure of these utilities to provide uninterrupted
supplies.
11
<PAGE> 14
Although the Company believes that its products will be Year 2000 compliant, not
all customer situations can be totally anticipated, particularly those involving
third party hardware and software. The Company may therefore see an increase in
support and other claims as a result of the millennium transition. Thereafter,
litigation regarding Year 2000 compliance issues may escalate. For these
reasons, the impact of customer claims could have a material adverse impact on
the Company's business, financial condition, and results of operations.
At the time of the acquisition of Boss Associates Limited ("Boss"), the Company
acquired seven clients that were using legacy systems previously supplied by
Boss. Following that acquisition, a decision was made that the Company would
neither test, nor remediate those old legacy systems at its own expense, and the
clients were notified accordingly. The Company has supplied compliant systems to
four of those clients. The other three clients have found alternative suppliers.
The total cost of the review and necessary modifications to June 30, 1999 has
amounted to approximately $361,000; including approximately $29,000 spent in the
three months ended June 30, 1999. The total costs for the whole project are
only 19% more than first estimated over a year ago.
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities and Use of Proceeds
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
(a). Exhibits
The following exhibits are filed as part of this quarterly report on
Form 10-QSB:
2.1 Agreement and Plan of Merger by and between the Registrant and
LiveWire Acquisition Corporation, dated as of June 27, 1999, as
amended as of July 26, 1999 (incorporated by reference to the
Registrant's Current Report of Form 8-K dated July 29, 1999).
27.1 Financial Data Schedule.
12
<PAGE> 15
(b). Reports on Form 8-K
On April 30, 1999 the Company filed a Form 8-K to report the sale of
RVT Incorporated (formerly known as Revive Technologies Incorporated). On
May 14, 1999, the Company filed a Form 8-K to report the signing of a
non-binding letter of intent with LiveWire Ventures, LLC.
On July 12, 1999, the Company filed a Form 8-K to report the execution
of a definitive merger agreement between the Company and LiveWire Acquisition
Corporation.
On July 29, 1999, the Company filed a Form 8-K to report the amendment
of the definitive merger agreement between the Company and LiveWire Acquisition
Corporation and certain related transactions.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENTERPRISE SOFTWARE INC.
Date: August 13, 1999
By: /s/ David W. Martin
------------------------------
David W. Martin
Chief Financial Officer
13
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 2,197,701
<SECURITIES> 0
<RECEIVABLES> 4,105,727
<ALLOWANCES> 341,110
<INVENTORY> 0
<CURRENT-ASSETS> 10,592,785
<PP&E> 5,071,608
<DEPRECIATION> 2,522,227
<TOTAL-ASSETS> 34,322,108
<CURRENT-LIABILITIES> 10,800,196
<BONDS> 0
0
0
<COMMON> 5,406
<OTHER-SE> 2,512,050
<TOTAL-LIABILITY-AND-EQUITY> 34,322,108
<SALES> 8,396,165
<TOTAL-REVENUES> 8,396,165
<CGS> 2,956,388
<TOTAL-COSTS> 2,956,388
<OTHER-EXPENSES> 4,420,296
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 800,101
<INCOME-PRETAX> 219,380
<INCOME-TAX> 12,501
<INCOME-CONTINUING> 206,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206,879
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
