8-K...........
TYPE: 8-K
SEQUENCE: 1
DESCRIPTION: FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 9, 1998
ENHANCED SERVICES COMPANY, INC.
(Exact Name of Registrant as Specified in Charter)
Colorado 0-24256 76-0462973
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3415 South Sepulveda Boulevard, Suite 500, Los Angeles, CA 90034
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 310-397-3003
Item 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 22, 1998, the Company announced that it had acquired
the ownership interests in Brands For Less, L.L.C. a privately held Connecticut
discount on-line shopping company.
Brands For Less, L.L.C. offers consumers a comprehensive
e-commerce solution that delivers in one location, access to over sixty (60) of
the world's online specialty retailers at discount prices across popular
consumer product categories trade-named "e-partments(TM)." Brands For Less,
L.L.C. is dedicated to simplifying Internet shopping for the consumer by
delivering an intuitive, informative, and efficient shopping experience that
brings together specialty retailers and brand names at a lower price in a
secure, private, and reliable Internet environment. Brands For Less, L.L.C.
currently offers over 1,500 brands, and over 200,000 products. This acquisition
solidifies the Company's position in the online shopping arena and will allow
the Company and Brands For Less, L.L.C. to benefit from the cost savings derived
through in-house advertising placement.
The transaction was undertaken pursuant to a Securities
Acquisition Agreement to which Enhanced Services Company, Inc., its wholly owned
newly formed subsidiary, BFL Acquisition Co., Inc. a Delaware Corporation
(collectively the "Company"); Brands For Less, L.L.C., a Delaware Limited
Liability Company ("BFL") and the members of BFL were the principal parties. In
the transaction effective December 9, 1998, as modified on December 15 and 21,
1998, the Company acquired all of the interests of the members of BFL, with 90%
of such interests delivered at the closing and the balance to be delivered or
otherwise transferred on or about February 1, 1999.
The total consideration for the transaction, as modified, is
approximately $35 million, including: (i) up to $6.50 million in cash to be paid
directly to the members (of which $1.6 million was paid and the balance is be
paid in February); (ii) a $25 million promissory note, the proceeds of which are
payable to the members of BFL in 2002, with interest at the rate of 10% per
annum, payable quarterly, commencing on March 31, 1999; (iii) $3 million to fund
BFL operations for the three months from November 15, 1998; and (iv) obligations
to pay investment banking and other fees and costs. The Company is being issued
interests in BFL for its advances. Netvest Capital Partners LP, a stockholder of
the Company, acquired 66,667 newly issued interests in BFL for the $200,000
advanced for BFL's operations prior to closing. The modifications provided the
Company with certain interim extensions and increased the amount to be paid to
the members. The obligations under the promissory note are secured by a pledge
of the assets and membership interests of BFL.
In February 1999, the members of BFL will be issued, on a pro
rata basis, Warrants to acquire 3.2 million shares of Company common stock and
have received a commitment from the Company to deliver, on or before December
31, 1999, Warrants to acquire 1.8 million additional shares of common stock or
substitute consideration. The Warrants are exercisable for a three year period,
commencing in February 2000, at an exercise price which is
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the lesser of $4 per share or the market price of the Company's common stock, on
the exercise date.
In connection with the transaction, BFL entered into a new
employment agreement with George Russell to serve as President and Chief
Executive Officer of BFL pursuant to which Mr. Russell receives, in addition to
salary and other executive benefits, incentive compensation and an option to
acquire 1 million shares of Company common stock at an exercise price of $1.50
per share of which 50% are expected to vest in February 1999, and 25% will vest
on each of December 1, 1999 and 2000.
The Company is funding the transaction through the issuance of
common stock and convertible securities and Warrants in private placements to
accredited investors and offshore institutions. As of the date hereof, $5.2
million for convertible securities has been funded and the Company has agreed to
issue Warrants to acquire up to 560,000 shares of Company common stock at an
exercise price of $1.00 per share, subject to certain market price adjustments
at the date of exercise.
Item 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
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Item 5. OTHER EVENTS.
Not applicable.
Item 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) and (b) The financial statements and pro forma financial
information required by this item to give effect to the BFL transaction will be
filed in accordance with Item 7(a)(4) within the time periods prescribed by such
item.
(c) Exhibits
2 SECURITIES ACQUISITION AGREEMENT, portions of
which have been redacted and marked by an
asterisk (*) to reflect portions of the
Securities Acquisitions Agreement for which
the Company is seeking confidential treatment.
99 Press release dated December 22, 1998.
Item 8. CHANGE IN FISCAL YEAR.
Not applicable
Item 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
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 hereunto duly authorized.
Enhanced Services Company, Inc.
Registrant
Date: December 28, 1998 By: /s/ Robert C. Smith
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Robert C. Smith, Treasurer (Chief
Financial Officer and Authorized
Signatory)
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