UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 13, 1997
Commission file number: 1-11782
ESQUIRE COMMUNICATIONS LTD.
( Exact name of Small Business issuer as specified in its charter)
DELAWARE 13-3703760
(State or other jurisdiction (I.R.S Employer
of incorporation or organization) Identification No.)
216 EAST 45TH STREET, NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (212) 687-8010
- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed from last
report)
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
ESQUIRE COMMUNICATIONS LTD.
KRAUSS, KATZ & ACKERMAN, INC.
AND
AMERICAN NETWORK SERVICES, INC.
PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
BASIS OF COMBINATION-PROFORMA
The accompanying pro forma combined statements of operations have been
derived from Esquire Communications Ltd.'s ("ESQ.COM") statements of operations
for year ended December 31, 1996 and the six-month period ended June 30, 1997.
Adjustments have been made to such information to give effect to the following
transactions and events as if each had occurred as of the beginning of the
period covered by these pro forma combined statements of operations:
A. ESQ.COM's acquisition of Krauss, Katz & Ackerman, Inc. ("KKA") on
June 13, 1997.
B. ESQ.COM's acquisition of American Network Services, Inc. ("DepoNet") on
June 18, 1997.
C. ESQ.COM's private sale of Series A Convertible Preferred Stock which
closed on or about June 18, 1997. The net proceeds from the private sale
of $7.1 million ( Gross $7.5 million and estimated related cost of $.4
million) were used for the above acquisitions.
D. ESQ.COM's assumed borrowing of $9.0 million under its revolving loan
agreement with Antares Leveraged Capital Corp. used for the above
acquisitions.
The pro forma combined statements of operations have been adjusted on a
proforma basis for the above transactions and assumptions (pro forma
adjustments) discussed in the accompanying notes.
The accompanying pro forma financial information does not purport to
represent what ESQ.COM's results of operations or financial condition would have
been had such transactions in fact occurred at beginning of the periods
presented or to project ESQ.COM's results of operations or financial position in
or for any future periods.
<PAGE>
ESQUIRE COMMUNICATIONS LTD.
KRAUSS, KATZ & ACKERMAN, INC.
AND
AMERICAN NETWORK SERVICES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1996
BASIS OF COMBINATION OF HISTORICAL FINANCIAL INFORMATION
ESQ.COM's operating results represent historical results of operations for
the year ended December 31, 1996. See ESQ.COM's 1996 financial statements
previously filed with its annual report on form 10-KSB. KKA and DepoNet include
historical results of operations for the year ended December 31, 1996.
PROFORMA ADJUSTMENTS
(1) EXPENSES
OPERATING EXPENSES:
To record the estimated cost of court reporting work performed by the
principals of KKA. The principals of KKA were paid salaries which had
no relation to the amount of court reporting work performed by them.
In addition, such salaries were part of general and administrative
expenses.
GENERAL AND ADMINISTRATIVE:
To record the estimated salary reduction to be realized with respect
to the negotiated employment agreement entered into with the
principals of KKA and DepoNet and to eliminate certain expenses of KKA
and DepoNet that were unrelated to the business acquired by ESQ.COM.
DEPRECIATION AND AMORTIZATION:
To record amortization of goodwill arising from KKA and DepoNet
acquisitions.
INTEREST EXPENSE:
To record the additional interest cost as a result of the assumed debt
increase with the proceeds of the revolving loan agreement to finance
the acquisition of KKA and DepoNet.
OTHER INCOME:
To adjust KKA's income from assets that were not acquired by ESQ.COM.
PROVISION FOR TAXES:
To record income tax on the pro forma income at effective statutory
rates with assumed termination of Subchapter S Corporation status of
KKA and DepoNet.
<PAGE>
ESQUIRE COMMUNICATIONS LTD.
KRAUSS, KATZ & ACKERMAN, INC.
AND
AMERICAN NETWORK SERVICES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1996
PREFERRED DIVIDEND REQUIREMENTS:
To record the dividend payable on the Series A Convertible Preferred
Stock sold in June 1997 to finance KKA and DepoNet acquisitions.
PRO FORMA PER SHARE COMPUTATION:
The computation of proforma net income per share of common share
amounts for the year ended December 31, 1996 has, in determining the
average number of common shares outstanding, given retroactive effect
for 750,000 shares of common stock of ESQ.COM assumed to be issued in
the acquisition of DepoNet.
<TABLE>
<CAPTION>
ESQUIRE COMMUNICATIONS LTD.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED December 31, 1996
( In Thousands Except Per Share Data)
Historical Pro Forma
ESQ.COM KKA DepoNet Adjustments Combined
<S> <C> <C> <C> <C> <C>
Revenues $24,583 $6,793 $3,011 $34,387
Costs and expenses:
Operating expenses 13,925 3,220 (1) 204 17,349
General and administrative expenses 8,443 3,451 2,331 (1) (1,911) 12,314
Depreciation and amortization 1,158 50 66 (1) 762 2,036
------ ----- ----- ------ -------
23,526 6,721 2,397 (945) 31,699
------ ----- ----- ---- ------
Income from operations 1,057 72 614 945 2,688
Other income (expense)
Interest expense (1,163) (30) (32) (1) (793) (2,018)
Interest and other income 9 2 (1) (2) 9
------ ---- ----- ----- -------
(1,154) (28) (32) (795) (2,009)
------ ---- ----- ------ ------
(Loss) income before provision for income taxes
and extraordinary item (97) 44 582 150 679
Income Taxes provision 212 (1) 326 538
--- ----- ------ ---- ---
(Loss) income before extraordinary item (309) 44 582 (176) 141
Extraordinary item- loss on early extinguishment
of debt, net of tax benefit of $104 (157) (157)
---------------------------- ------------ ---------
Net (loss) income (466) 44 582 (176) (16)
Dividends on preferred stock (75) (1) (450) (525)
--------- ------ -------- ----------- --------
Net income applicable to
common stockholders ($541) $44 $582 ($626) ($541)
======== ====== ======== ========== ========
Pro forma (loss) earnings per share:
Income before extraordinary item ($0.08)
Extraordinary item (0.03)
Net (loss) ($0.11)
=============
Pro forma weighted average common
shares outstanding 4,851,680
=============
</TABLE>
ESQUIRE COMMUNICATIONS LTD.
KRAUSS, KATZ & ACKERMAN, INC.
AND
AMERICAN NETWORK SERVICES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
For the six months ended June 30, 1997
BASIS OF COMBINATION OF HISTORICAL FINANCIAL INFORMATION
ESQ.COM's operating results represent historical results of operations for
the six months ended June 30, 1997. See ESQ.COM's June 30, 1997 financial
statements previously filed with its form 10-QSB. KKA and DepoNet include
historical results of operations for the period January 1, 1997 to the date of
acquisition by ESQ.COM.
PROFORMA ADJUSTMENTS
(2) EXPENSES
OPERATING EXPENSES:
To record the estimated cost of court reporting work performed by the
principals of KKA. The principals of KKA were paid salaries which had
no relation to the amount of court reporting work performed by them.
In addition, such salaries were part of general and administrative
expenses.
GENERAL AND ADMINISTRATIVE:
To record the estimated salary reduction to be realized with respect
to the negotiated employment agreement entered into with the
principals of KKA and DepoNet and to eliminate certain expenses of KKA
and DepoNet that were unrelated to the business acquired by ESQ.COM.
DEPRECIATION AND AMORTIZATION:
To record amortization of goodwill arising from KKA and DepoNet
acquisitions.
INTEREST EXPENSE:
To record the additional interest cost as a result of the assumed debt
increase with the proceeds of the revolving loan agreement to finance
the acquisition of KKA and DepoNet.
OTHER INCOME:
To adjust KKA's income from assets that were not acquired by ESQ.COM.
<PAGE>
ESQUIRE COMMUNICATIONS LTD.
KRAUSS, KATZ & ACKERMAN, INC.
AND
AMERICAN NETWORK SERVICES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
For the six months ended June 30, 1997
PROVISION FOR TAXES:
To record income tax on the pro forma income at effective statutory
rates with assumed termination of Subchapter S Corporation status of
KKA and DepoNet.
PREFERRED DIVIDEND REQUIREMENTS:
To record the dividend payable on the Series A Convertible Preferred
Stock sold in June 1997 to finance KKA and DepoNet acquisitions.
PRO FORMA PER SHARE COMPUTATION:
The computation of proforma net income per share of common share
amounts for the six months ended June 30, 1997 has, in determining the average
number of common shares outstanding, given retroactive effect for 750,000 shares
of common stock of ESQ.COM assumed to be issued in the acquisition of DepoNet.
<TABLE>
<CAPTION>
ESQUIRE COMMUNICATIONS LTD.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED June 30, 1997
( In Thousands Except Per Share Data)
Historical Pro Forma
ESQ.COM KKA DepoNet Adjustments Combined
<S> <C> <C> <C> <C> <C>
Revenues $18,955 $3,437 $1,469 $23,861
Costs and expenses:
Operating expenses 11,057 1,591 (2) 102 12,750
General and administrative expenses 7,356 1,552 1,258 (2) (885) 9,281
Depreciation and amortization 981 21 58 (2) 349 1,409
-------- ------ ------- ------ --------
19,394 3,164 1,316 (434) 23,440
-------- ------ ------ ------ --------
Income from operations (439) 273 153 434 421
Other income (expense)
Interest expense (893) (16) (23)(2) (353) (1,285)
Interest and other income 14 1 (2) (1) 14
--------- ------- ------ ------- -------
(879) (15) (23) (354) (1,271)
--------- ------- ------ ------- -------
(Loss) income before provision for income taxes (1,318) 258 130 80 (850)
Income Taxes (benefit) provision (424) (2) 196 (228)
--------- ------- ----- -------- --------
Net (loss) income (894) 258 130 (116) (622)
Dividends on preferred stock (240) (2) (206) (446)
--------- ------ ----- -------- --------
Net income applicable to
common stockholders ($1,134) $258 $130 ($322) ($1,068)
========= ======= ====== ========= =========
Pro forma (loss) earnings per share:
Net (loss) ($0.22)
=========
Pro forma weighted average common
shares outstanding 4,869,031
===========
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
August 27, 1997
By:/S/ DAVID A. HIGSON
David A. Higson
Senior Vice President, Chief
Financial Officer
<PAGE>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Combined Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
PEAT MARWICK LLP
1600 Market Street
Philadelphia, PA 19103-7212
INDEPENDENT AUDITORS' REPORT
The Stockholders
Krauss, Katz & Ackerman, Inc.:
We have audited the accompanying combined balance sheets of Krauss, Katz &
Ackerman, Inc. and affiliate as of December 31, 1996 and 1995, and the related
combined statements of operations, stockholders' equity and cash flows for the
years then ended. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Krauss, Katz &
Ackerman, Inc. and affiliate at December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
KPMG Marwick LLP
May 16, 1997
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Combined Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
<S> <C> <C>
Cash $ 95,467 23,882
Accounts receivable, net of allowance for doubtful accounts
of $83,455 in 1996 and $43,176 in 1995 1,493,781 1,275,398
Other 100 100
- -----------------------------------------------------------------------------------------------
Total current assets 1,589,348 1,299,380
- -----------------------------------------------------------------------------------------------
Property and equipment:
Furniture and equipment 662,330 634,487
Less accumulated depreciation and amortization 592,270 557,788
- -----------------------------------------------------------------------------------------------
Net property and equipment 70,060 76,699
- -----------------------------------------------------------------------------------------------
Security deposits 9,789 12,719
Intangible assets, net of accumulated amortization of
$53,818 in 1996 and $37,871 in 1995 185,372 201,319
- -----------------------------------------------------------------------------------------------
Total assets $ 1,854,569 1,590,117
===============================================================================================
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Combined Balance Sheets
December 31, 1996 and 1995
Liabilities and Stockholders' Equity 1996 1995
<S> <C> <C>
Current liabilities:
Due to stockholders, net $ 163,233 117,755
Current portion of long term debt 16,189 16,846
Accounts payable 686,721 505,380
Accrued expenses 546,319 421,839
- ----------------------------------------------------------------------------------------------
Total current liabilities 1,412,462 1,061,820
- ----------------------------------------------------------------------------------------------
Security deposits 1,775 1,775
Long term debt less current portion 129,621 145,810
- ----------------------------------------------------------------------------------------------
Total liabilities 1,543,858 1,209,405
- ----------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock of no par value, 1,000 shares authorized
300 shares issued and outstanding 3,300 3,300
Additional paid-in capital 424,506 424,506
Retained earnings (117,095) (47,094)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity 310,711 380,712
- -----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,854,569 1,590,117
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Combined Statements of Operations
Years ended December 31, 1996 and 1995
1996 1995
<S> <C> <C>
Income:
Fees $ 6,793,259 6,231,543
Rent reimbursement 18,565 21,483
Equipment rental 5,047 7,696
- ----------------------------------------------------------------------------------------
Total income 6,816,871 6,260,722
Direct costs 3,219,541 2,956,341
- ----------------------------------------------------------------------------------------
Gross profit 3,597,330 3,304,381
- ----------------------------------------------------------------------------------------
Depreciation and amortization 50,428 73,585
Officers' salaries 1,223,279 1,266,696
Other operating expenses 2,251,282 2,038,505
- ----------------------------------------------------------------------------------------
Operating income (loss) 72,341 (74,405)
- ----------------------------------------------------------------------------------------
Interest expense (30,015) (36,756)
Interest income 1,673 1,800
- ----------------------------------------------------------------------------------------
Net income (loss) $ 43,999 (109,361)
========================================================================================
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Combined Statements of Stockholders' Equity
Years ended December 31, 1996 and 1995
Additional Total
Common paid-in Retained stockholders'
stock capital earnings equity
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ 3,300 424,506 62,267 490,073
Net loss - - (109,361) (109,361)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 3,300 424,506 (47,094) 380,712
- ------------------------------------------------------------------------------------------------------------------------
Net income - - 43,999 43,999
Dividends - - (114,000) (114,000)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $ 3,300 424,506 (117,095) 310,711
========================================================================================================================
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Combined Statements of Cash Flows
Years ended December 31, 1996 and 1995
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 43,999 (109,361)
- -------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 50,428 73,585
Changes in assets and liabilities:
Increase in accounts receivable (218,383) (79,403)
Increase in accounts payable 181,341 88,841
Increase in accrued expenses 124,480 91,313
- -------------------------------------------------------------------------------------------------------
Total adjustments 137,866 174,336
- -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 181,865 64,975
Cash flows from investing activities:
Purchase of property and equipment (27,842) (35,673)
Payments on note receivable - 28,126
(Increase) decrease in security deposits 2,930 (748)
- -------------------------------------------------------------------------------------------------------
Net cash used in investing activities (24,912) (8,295)
- -------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on long term debt (16,846) (82,243)
Payments to stockholders (114,000) (18,997)
Repayments of advances to stockholders 45,478 -
Other - 290
- -------------------------------------------------------------------------------------------------------
Net cash used in financing activities (85,368) (100,950)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 71,585 (44,270)
Cash at beginning of year 23,882 68,152
- -------------------------------------------------------------------------------------------------------
Cash at end of year $ 95,467 23,882
=======================================================================================================
Cash paid for interest $ 30,015 36,756
=======================================================================================================
</TABLE>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Notes to Combined Financial Statements
December 31, 1996 and 1995
(1) Business Activity
Krauss, Katz & Ackerman, Inc. (the Company) and affiliate provide court
reporting and other litigation support services.
(2) Summary of Significant Accounting Policies
Basis of Accounting
The accompanying combined financial statements have been prepared on the accrual
basis of accounting in which revenue and gains are recognized when earned and
expenses and losses are recognized when incurred.
Principles of Combination
The combined financial statements include the accounts of the Company and an
affiliate under common control. All significant intercompany transactions and
accounts have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates.
Intangible Assets
Intangible assets consist primarily of goodwill which represents the excess of
cost over the net assets of a business acquired. These assets are being
amortized using the straight-line method over their estimated lives of 15 years.
The Company assesses the recoverability of these intangible assets by
determining whether amortization of the balances over their remaining life can
be recovered through undiscounted future operating cash flows of the acquired
operation.
Property and Equipment
Property and equipment are recorded at cost. Depreciation on assets is provided
using the double declining balance method over lives ranging from 5 to 7 years.
Income Taxes
No provision for income taxes is reflected in the accompanying financial
statements since the stockholders of the Company have elected to be taxed
individually on the profits of the Company.
(2) Continued
Retirement Plans
The Company has established a profit sharing plan covering those employees
meeting certain eligibility requirements. Profit sharing expense under this plan
amounted to $115,000 and $153,245 in 1996 and 1995, respectively.
(3) Long Term Debt
Long-term debt at December 31 consisted of:
1996 1995
Installment note, secured by equipment,
payable in 48 monthly installments of $284
including interest at 13% through July 1996 $- 1,903
Installment note, payable in 40 quarterly
installments of $6,875 including interest at 8%
through October 2003 145,810 160,753
- -------------------------------------------------------------------------------
145,810 162,656
Less: current portion 16,189 16,846
- -------------------------------------------------------------------------------
Total $129,621 145,810
- -------------------------------------------------------------------------------
The long-term debt maturing during the next five years is:
1997 $16,189
1998 17,538
1999 19,001
2000 20,585
2001 22,301
Thereafter 50,196
------------------------------------------------------
(4) Related Party Transactions
The stockholders of the Company obtained a $250,000 line of credit which is
guaranteed by the Company. Proceeds from advances under the line were loaned to
the Company. The loan from the stockholders bears interest at 1/2% over prime
(8.75% at December 31, 1996). The outstanding balance under the line of credit
agreement was $209,000 and $220,000 at December 31, 1996 and 1995, respectively.
(5) Commitments and Contingencies
In September 1993, the Company entered into a lease agreement with an unrelated
party for its premises. The term of the lease is for a period of ten years. In
February 1995, the Company opened an additional office and entered into a lease
agreement with an unrelated party. The term of the lease is for a period of two
years with the option to renew for another one year period. The Company is also
obligated under various auto and equipment leases over periods ranging from 2 to
5 years. Lease expense for the period ended December 31, 1996 and 1995 was
$210,969 and $207,793, respectively.
The future minimum lease payments as of December 31 are:
1997 $322,668
1998 256,703
1999 253,537
2000 257,745
2001 247,116
Later years 258,636
--------------------------------------------
Total minimum payments required $1,596,405
---------------------------------------------
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
Unaudited Financial Statements
April 30, 1997 and 1996
TABLE OF CONTENTS
PAGE
Condensed Combined Balance Sheets 1
Condensed Combined Statements of Operations 2
Condensed Combined Statements of Cash Flows 3
Notes to Condensed Combined Financial Statements 4
<PAGE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
CONDENSED COMBINED BALANCE SHEETS
UNAUDITED
April 30, April 30,
1997 1996
ASSETS
<S> <C> <C>
Current assets:
Cash $164,569 $98,475
Accounts receivable, less allowance 1,305,155 1,340,698
Other 64,856 100
----------- -----------
Total current assets 1,534,580 1,439,273
Property and equipment, net 70,999 74,486
Other assets, net 189,603 205,792
----------- -----------
$1,795,182 $1,719,551
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $1,164,846 $1,157,929
Due to stockholders - 132,914
Current portion of long-term debt 16,850 16,404
----------- ----------
Total current liabilities 1,181,696 1,307,247
Long-term debt 121,028 137,795
Other liabilities 1,775 1,775
Stockholders' equity:
Common stock of no par value, 1000 shares
authorized, 300 shares issued and outstanding 3,300 3,300
Additional paid in capital 424,506 424,506
Retained earnings ( accumulated deficit) 62,877 (155,072)
--------- ----------
Total stockholders' equity 490,683 272,734
------------ -------------
$1,795,182 $1,719,551
============ =============
See notes to condensed combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
CONDENSED COMBINED STATEMENTS OF OPERATIONS
UNAUDITED
For the Four Months Ended
April 30, April 30,
1997 1996
<S> <C> <C>
Fees income $2,498,680 $2,031,285
Costs and expenses:
Direct costs 1,156,644 962,691
General and administrative expenses 1,135,170 1,150,316
Depreciation and amortization 15,613 16,809
---------- ----------
2,307,427 2,129,816
Income (loss) from operations 191,253 (98,531)
Other income ( expense):
Interest expense (11,803) (10,005)
Interest income 522 558
----------- -----------
(11,281) (9,447)
----------- -----------
Net income (loss) 179,972 (107,978)
=========== ===========
See notes to condensed combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
UNAUDITED
For the Four Months Ended
April 30, April 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities
Net income ( loss) $179,972 ($107,978)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization 15,613 16,809
(Increase) decrease in assets:
Accounts receivable 188,626 (65,300)
Other current assets (19,340)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses (68,194) 230,710
------------ ----------
Net cash provided by operating activities 296,677 74,241
------------ -----------
Cash flows from investing activities
Purchase of property and equipment (10,624) (9,281)
Decrease (increase) in other assets (380) 2,931
------------ ----------
Net cash used in investing activities (11,004) (6,350)
Cash flows from financing activities
Payments on long-term debt (7,932) (8,457)
(Repayments to) advances by stockholders (208,639) 15,159
------------- ----------
Net cash (used in) provided by financing activities (216,571) 6,702
------------- ----------
Net increase in cash 69,102 74,593
Cash-beginning of period 95,467 23,882
------------- ----------
Cash-end of period $164,569 $98,475
============= ==========
Supplemental information:
Approximate interest paid during the period $12,000 $10,000
============= ==========
See notes to condensed combined financial statements.
</TABLE>
KRAUSS, KATZ & ACKERMAN, INC. AND AFFILIATE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1997
NOTE A-- BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310(b) to Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. The results of operations for the interim
periods are not necessarily indicative of the results that may be attained for
an entire year. For further information, refer to the Company's Financial
Statements and footnotes for the fiscal year ended December 31, 1996 filed with
Esquire Communications Ltd.'s Form 8-K.
The condensed combined financial statements include the accounts of the
Company and an affiliate under common control. All significant intercompany
transactions and accounts have been eliminated.
NOTE B-- SUBSEQUENT EVENTS
Subsequent to April 30, 1997 the Company sold substantially all of its
assets and operations, subject to assumptions of certain liabilities, to a
publicly traded court reporting company. The Company ceased operations effective
June 13, 1997 with operations being conducted by the successor corporation.
<PAGE>
FINANCIAL STATEMENTS
AMERICAN NETWORK SERVICES, INC.
DECEMBER 31, 1996
WITH
INDEPENDENT AUDITOR'S REPORT
<PAGE>
AMERICAN NETWORK SERVICES, INC.
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT............................................ 1
FINANCIAL STATEMENTS:
Balance Sheets as of December 31, 1995 and 1996...................... 2
Statements of Income for the Years Ended
December 31, 1995 and 1996........................................... 3
Statements of Stockholders' Equity (Deficit)
Ended December 31, 1995 and 1996..................................... 4
Statements of Cash flows for the Years Ended
December 31, 1995 and 1996........................................... 5
NOTES TO THE FINANCIAL STATEMENT....................................... 6-9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
American Network Services, Inc.
We have audited the accompanying balance sheets of American Network
Services, Inc. as of December 31, 1995 and 1996, and the related statements of
income, stockholders' equity (deficit), and cash flows for the years ended
December 31, 1995 and 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Network Services,
Inc. as of December 31, 1995 and 1996, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
FREED MAXICK SACHS & MURPHY, P.C.
August 7, 1997
Buffalo, New York
<PAGE>
AMERICAN NETWORK SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
ASSETS 1995 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 164,533 $ 244,867
Trade receivables, net of allowance for doubtful
accounts of $30,693 ($18,549 - 1995) 80,738 82,037
Prepaid expenses 36,817 139,299
Note receivable - 117,188
-------- ---------
Total current assets 282,088 583,391
Equipment:
Furniture and equipment 75,762 104,006
Computers and software 102,544 186,266
--------- --------
178,306 290,272
Less accumulated depreciation and amortization 78,718 120,318
--------- --------
99,588 169,954
Other assets:
Deposits 2,901 2,901
Intangibles, net 7,823 73,089
--------- --------
10,724 75,990
--------- --------
$ 392,400 $ 829,335
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note payable $ - $ 351,563
Accounts payable and accrued expenses 124,892 243,593
Unearned revenue and prepaid fees 196,270 257,320
Current portion of long term debt - 78,125
Customer deposits 27,963 30,266
--------- --------
Total current liabilities 349,125 960,867
Long-term debt - 156,250
Stockholders' equity (deficit):
Common stock, no par, $.01 stated value, authorized
100,000 shares; issued 76,653 shares - 1996
(8,328 - 1995) 831 767
Additional paid-in capital 159,505 159,571
Accumulated deficit (117,061) (555)
--------- --------
43,275 159,783
Less: Treasury stock, 8,125 shares at cost - (447,565)
--------- --------
Total stockholders' equity (deficit) 43,275 (287,782)
--------- --------
$ 392,400 $ 829,335
========= =========
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN NETWORK SERVICES, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Sales $ 2,837,417 $ 3,010,984
Operating expenses:
Executive compensation 579,348 717,608
Marketing 574,365 704,118
General and administrative expenses 405,350 603,087
Member relations 305,494 339,783
Quality assurance 38,128 32,822
----------- -----------
Total operating expenses 1,902,685 2,397,418
----------- -----------
Income from operations 934,732 613,566
Other expense:
Interest expense - (32,043)
----------- -----------
Net income $ 934,732 $ 581,523
=========== ===========
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN NETWORK SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
Additional
Common Stock Treasury Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
---------------------- --------------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 8,327.550 $ 831 - $ - $ 159,505 $ (285,178)
Net income - - - - - 934,732
Dividends - - - - - (766,615)
----------- ----------- ------------ ---------- -------------- -----------
Balance, December 31, 1995 8,327.550 831 - - 159,505 (117,061)
Redemption of shares - - (812.500) (447,565) - -
Retirement of shares (662.225) (64) - - 66 -
10 for 1 stock split,
October 21, 1996 68,987.925 - (7,312.500) - - -
Net income - - - - - 581,523
Dividends - - - - - (465,017)
----------- ----------- ------------ ---------- -------------- -----------
Balance, December 31, 1996 76,653.250 $ 767 (8,125.000) $ (447,565) $ 159,571 $ (555)
========== =========== =========== =========== ============== ===========
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN NETWORK SERVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 934,732 $ 581,523
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 26,648 66,401
Decrease in assets:
Accounts receivable (33,608) (1,299)
Prepaid expenses (9,406) (102,482)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (9,429) 118,701
Unearned revenue (84,690) 61,050
Customer deposits 1,898 2,303
----------- -----------
Net cash provided by operating activities 826,145 726,197
Cash flows from investing activities:
Purchases of equipment (25,741) (111,966)
Issuance of note receivable - (117,188)
Purchase of intangibles (6,000) (90,067)
----------- -----------
Net cash used in investing activities (31,741) (319,221)
Cash flows from financing activities:
Proceeds from note payable - 351,563
Redemption of common stock (7,537) (213,188)
Distributions to stockholders (766,615) (465,017)
----------- -----------
Net cash used in financing activities (774,152) (326,642)
Net increase in cash and cash equivalents 20,252 80,334
Cash and cash equivalents - beginning of year 144,281 164,533
----------- -----------
Cash and cash equivalents - end of year $ 164,533 $ 244,867
=========== ===========
Supplemental cash flow information:
Income taxes paid $ - $ -
=========== ===========
Interest paid $ - $ 25,632
=========== ===========
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN NETWORK SERVICES, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - American Network Services, Inc. (the Company) is a
referral network which connects legal professionals to providers of legal
support services such as court reporting and process serving. Network firms are
located throughout North America and the United Kingdom. Credit is granted to
substantially all customers.
ACCOUNTING ESTIMATES - The process of preparing financial statements in
conformity with generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets, liabilities,
revenues and expenses. Such estimates primarily relate to unsettled transactions
and events as of the date of the financial statements. Accordingly, actual
results may differ from estimated amounts.
CONCENTRATION OF CREDIT RISK - Financial instruments that potentially
subject the Company to concentration of credit risk consists principally of cash
and cash equivalent accounts in financial institutions. Although the cash
accounts exceed the federally insured deposit amount, management does not
anticipate nonperformance by the financial institutions. Management reviews the
financial viability of these institutions on a periodic basis.
REVENUE RECOGNITION - Court reporting and process service contract revenue
is recognized over the term of the agreement, which is one year. Agent of choice
contract revenue is recognized monthly as earned. Customer payments received or
billed prior to the service period are recorded as customer deposits and
unearned revenue and recognized as income when earned.
EQUIPMENT - Equipment is stated at cost. Depreciation is computed over the
estimated useful lives using the straight-line method. Maintenance and minor
repairs are expensed as incurred. Depreciation expense for the years ended
December 31, 1995 and 1996 was $26,398 and $41,600, respectively.
INTANGIBLES - Intangibles which consist of trademarks, a noncompete
agreement, and the establishment of an Internet site are being amortized over a
period of 10, 2, and 5 years, respectively (see Note 3).
INCOME TAXES - The Company has elected to be treated as an S corporation.
The federal and state tax regulations provide that, in lieu of corporation
income taxes, the stockholders are taxed on their proportionate share of the
Company's taxable income; consequently, income taxes are not provided for in the
accompanying financial statements.
CASH AND CASH EQUIVALENT - For purposes of reporting cash flows, the
Company includes all cash accounts, which are not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments purchased with
a maturity of three months or less as cash and cash equivalents. The cash
equivalent consists of a money market account.
<PAGE>
AMERICAN NETWORK SERVICES, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and cash
equivalents, accounts receivable, accounts payable, and accrued liabilities are
reasonable estimates of their fair value due to their short maturity. Based on
the borrowing rates currently available to the Company for loans similar to its
bank notes payable, the fair value approximates its carrying amount.
ADVERTISING - The Company prepays certain advertising costs and expenses
them as utilized. Included in prepaid expenses is $29,914 and $74,584 of
advertising costs at December 31, 1995 and 1996, respectively. Advertising
expense was $417,503 and $429,110 for years ended December 31, 1995 and 1996,
respectively.
NOTE 2. - NOTE RECEIVABLE
In May 1996, the Company received a note receivable from a stockholder in
the amount of $117,188 for the purchase of another stockholder's shares. The
note bears interest at prime plus 1% (9.5%). This note was repaid in full by the
stockholder in May 1997 and has therefore been classified as current in the
accompanying financial statements. Included in accounts receivable at December
31, 1996 is $1,355 of accrued interest from this note.
NOTE 3. - INTANGIBLES
Intangibles consist of the following:
December 31,
---------------------------------------------
1995 1996
------------------- ----------------------
Trademarks $ 8,500 $ 8,500
Noncompete agreement - 75,000
Internet site - 15,067
--------- ---------
8,500 98,567
Accumulated amortization 677 25,478
--------- ---------
$ 7,823 $ 73,089
========= =========
Total amortization expense for the years ended December 31, 1995 and 1996
was $250 and $24,801, respectively.
<PAGE>
AMERICAN NETWORK SERVICES, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. - NOTE PAYABLE
The Company has a note payable to a bank which bears interest at prime plus
1% (9.5%). The outstanding principal balance as of December 31, 1995 and 1996
was $-0- and $351,563, respectively. The note matured on May 9, 1997 and was
renewed in the principal amount of $281,250 which is due May 9, 1998. The note
was secured by 5,546 shares of Company stock and the personal guarantees from
the stockholders. This note was repaid in June of 1997 as part of the sale of
the Company assets (see Note 10).
NOTE 5. - LONG TERM DEBT
The Company's long term debt consists of a note payable to a former
stockholder in connection with a stock redemption (see Note 7). The note is
payable in three annual installments of $78,125 plus quarterly payments of
interest at 8% per annum. The note is secured by a stock pledge, personal
guarantees of certain stockholders, and a stock escrow agreement. Scheduled
annual maturities on this note were $78,125 for 1997, 1998 and 1999. The note
was repaid in June of 1997 as part of the sale of the Company assets (see Note
10).
NOTE 6. - EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) plan for all eligible employees. Employees
may defer up to 15% of their compensation and employers may make a matching
contribution not to exceed 6% of the employees compensation. The Company may
also make a qualified non-elective contribution as well as a discretionary
contribution. The Company has not contributed to the plan for the years ended
December 31, 1995 and 1996.
NOTE 7. - EQUITY TRANSACTIONS
In May 1996, the Company entered into a purchase and redemption agreement
with a former stockholder. The terms of the agreement required the Company to
repurchase 1,301 shares prior to a stocksplit for an aggregate consideration of
$393,750, of which $159,375 was paid in cash at closing, and the remainder of
$234,375 was in the form of a promissory note payable (see Note 5). The note is
secured by a stock pledge and escrow agreement along with certain personal
guarantees. As additional consideration for obtaining a 2 year non-compete
agreement, the stockholder was compensated $75,000 by the Company. The Company
also repurchased 174 shares prior to a stocksplit from another former
stockholder in the amount of $53,815. The Company retired a total of 662 shares
from the repurchase of shares from these stockholders.
In October 1996, the Company had a 10 for 1 stock split for all issued
shares.
<PAGE>
AMERICAN NETWORK SERVICES, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. - COMMITMENTS AND CONTINGENCIES
In 1996, the Company adopted an incentive compensation plan for the benefit
of two of its officers which provided for bonus and profit participation based
on predetermined formulas. Total compensation expense was $179,216 for the year
ended December 31, 1996. These contracts were terminated as part of the sale of
the Company in June 1997.
NOTE 9. - OPERATING LEASE OBLIGATION
The Company leases its office space located in Norcross, Georgia. The lease
expires April 30, 2000. Future minimum lease payments excluding common area
maintenance charges are as follows:
Year ending April 30,
1998 $ 75,473
1999 78,075
2000 80,678
----------
$ 234,226
----------
The lease provides for a terminating option at the end of the twentieth
month. The Company must provide 90 days written notice and pay a lease
termination penalty of $5,000.
NOTE 10. - SUBSEQUENT EVENT
In June of 1997, the Company entered into the sale of substantially all of
its assets and operations, subject to assumption of certain liabilities, to a
publicly traded court reporting company. The purchase price was approximately
$6,440,000 in cash and 750,000 shares of restricted common stock of the
acquiring company which were trading at $4-7/16 per share in June of 1997. The
transaction also included certain terms, conditions, covenants and
representations of the Company and its principal stockholders. The Company
ceased operations effective June 18, 1997 with operations being conducted by the
successor corporation.
In July of 1997, the Company became party to an arbitration action pursuant
to which a customer is seeking to prevent the termination of its agreement and
seeking damages for alleged wrongful termination from its referral base. The
Company was issued a temporary restraining order prohibiting it from terminating
the customer until the court rules on a motion for a preliminary injunction. The
Company intends to defend its position.
<PAGE>
AMERICAN NETWORK SERVICES, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 11. - SUMMARY OF NON-CASH FINANCING TRANSACTION
The Company, in connection with the redemption of a former stockholder's
shares, issued a note payable to the stockholder for a portion of the purchase
agreement in the amount of $234,375 (see Note 5 and 7).
<PAGE>
AMERICAN NETWORK SERVICES, INC.
Unaudited Financial Statements
April 30, 1997 and 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Condensed Balance Sheets 1
Condensed Statements of Income and Retained Earnings
(Accumulated Deficit) 2
Condensed Statements of Cash Flows 3
Notes to Condensed Financial Statements 4
<PAGE>
AMERICAN NETWORK SERVICES, INC.
CONDENSED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
April 30, April 30,
1997 1996
============ ============
<S> <C> <C>
ASSETS
Current assets:
Cash $210,958 $295,630
Accounts receivable, less allowance 99,636 100,015
Prepaid expenses 114,239 48,564
Note receivable 117,188
------------ -----------
Total current assets 542,021 444,209
Property and equipment, net 236,559 160,240
Other assets, net 65,877 17,933
------------ -----------
$844,457 $622,382
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note payable $351,563
Accounts payable and accrued expenses 268,659 184,435
Unearned revenue and prepaid fees 248,734 226,169
Customer deposits 31,216 28,166
Current portion of long-term debt 78,125 -
----------- -----------
Total current liabilities 978,297 438,770
Long-term debt 156,250
Stockholders' equity deficit:
Common stock of no par value, 100,000 shares
authorized, 76,653 and 83,276 shares issued,
respectively 767 833
Additional paid in capital 159,571 159,505
Retained earnings (accumulated deficit) (2,863) 23,274
Less: Treasury stock, 8,125 shares at cost (447,565)
------------ -----------
Total stockholders' equity (deficit) (290,090) 183,612
------------ -----------
$844,457 $622,382
============ ============
See notes to condensed financial statements.
</TABLE>
<PAGE>
AMERICAN NETWORK SERVICES, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED (DEFICIT) EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
For the Four Months Ended
April 30, April 30,
1997 1996
<S> <C> <C>
============ ===========
Sales $1,015,536 $1,009,624
Operating expenses:
Executive compensation 256,371 204,523
Marketing 394,717 256,503
General and administrative expenses 203,286 189,443
Members relations 136,393 99,223
Quality assurance 12,549 9,597
------------ -----------
1,003,316 759,289
Income from operations 12,220 250,335
Other income ( expense):
Interest expense (17,163) -
Interest income 40,635 -
------------ -----------
23,472 -
------------ -----------
Net income 35,692 250,335
Accumulated deficit- beginning of period (555) (117,061)
Less distribution to stockholders (38,000) (110,000)
Retained earnings ( accumulated deficit) - end of period ($2,863) $23,274
============ ============
See notes to condensed financial statements.
</TABLE>
<PAGE>
AMERICAN NETWORK SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the Four Months Ended
April 30, April 30,
1997 1996
=========== ===========
<S> <C> <C>
Cash flows from operating activities
Net income $85,532 $250,335
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 31,256 12,782
(Increase) in assets:
Accounts receivable (17,599) (19,277)
Other current assets (5,445) (11,747)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses 12,100 59,543
Unearned revenue (14,956) 29,899
Customer deposits 950 203
----------- -----------
Net cash provided by operating activities 91,838 321,738
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (83,947) (73,252)
Decrease (increase) in other assets (3,800) (7,389)
----------- -----------
Net cash used in investing activities (87,747) (80,641)
----------- -----------
Cash flows from financing activities
Distributions to stockholders (38,000) (110,000)
------------ -----------
Net cash used in financing activities (38,000) (110,000)
------------ -----------
Net increase ( decrease) in cash (33,909) 131,097
Cash- beginning of period 244,867 164,533
----------- -----------
Cash- end of period $210,958 $295,630
=========== ===========
Retained earnings (accumulated deficit)
Approximate interest paid during the period $17,000 -
=========== ===========
See notes to condensed financial statements.
</TABLE>
<PAGE>
AMERICAN NETWORK SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1997
NOTE A-- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310(b) to Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. The results of operations for the interim
periods are not necessarily indicative of the results that may be attained for
an entire year. For further information, refer to the Company's Financial
Statements and footnotes for the fiscal year ended December 31, 1996 filed with
Esquire Communications Ltd.'s Form 8-K.
NOTE B-- EQUITY TRANSACTIONS
In October 1996, the Company had a 10 for 1 stock split of all issued
shares, and the accompanying financial statements give retroactive effect to the
split.
NOTE C-- SUBSEQUENT EVENTS
Subsequent to April 30, 1997 the Company sold substantially all of its
assets and operations, subject to assumptions of certain liabilities, to a
publicly traded court reporting company. The Company ceased operations effective
June 18, 1997 with operations being conducted by the successor corporation.
