-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MRk704dLVbuLXEv28Oo/XSVIP9earw0kcuIZiqwEVuo9Sr7SfcyS4R1vizh53iqT LLO4CjLVO6mOAAgI4/OcXQ== 0000925328-97-000044.txt : 19971106 0000925328-97-000044.hdr.sgml : 19971106 ACCESSION NUMBER: 0000925328-97-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971105 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURACOM INC CENTRAL INDEX KEY: 0001037453 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 222817302 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13427 FILM NUMBER: 97708375 BUSINESS ADDRESS: STREET 1: 50 TICE BLVD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07675 BUSINESS PHONE: 2019309500 MAIL ADDRESS: STREET 1: 50 TICE BLVD STREET 2: 50 TICE BLVD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07675 10-Q 1 3RD QUARTER FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 1997 Commission File Number: 1-13427 SECURACOM, INCORPORATED State of Incorporation: Delaware I.R.S. Employer I.D.: 22-2817302 50 Tice Boulevard Woodcliff Lake, New Jersey 07675 (201) 930-9500 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 twelve months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes No X * * The registrant became subject to the filing requirements of the Securities Exchange Act of 1934 on October 1, 1997. There were 5,834,140 shares of Common Stock, par value $0.01 per share, outstanding at October 30, 1997. SECURACOM, INCORPORATED Quarter ended September 30, 1997 Index - -------------------------------------------------------------------------------- Page Part I. Financial information Item 1. Financial Statements............................................3 Balance Sheets as of December 31, 1996 and September 30, 1997 (unaudited)...........................................................3 Statements of Operations for the three and nine months ended September 30, 1996 and 1997 (unaudited).........................4 Statements of Cash Flows for the nine months ended September 30, 1996 and 1997 (unaudited)...............................5 Notes to Financial Statements.........................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................8 Part II. Other information Item 2. Changes in Securities and Use of Proceeds.......................11 Item 6. Exhibits and Reports on Form 8-K...............................11 Signature................................................................12 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements SECURACOM, INCORPORATED BALANCE SHEETS
December 31, September 30, 1996* 1997 (Unaudited) ASSETS Current assets: Cash and cash equivalents.................................................. $ 609,342 $ 4,730 Accounts receivable, net of allowance for doubtful accounts of $42,000 in 1996 and 1997..................................... 1,777,456 2,153,866 Costs and estimated earnings in excess of billings on uncompleted contracts.................................................... 1,148,560 4,245,394 Prepaid expenses and other................................................. 120,937 206,665 Investment in SSIH, Ltd.................................................... 700,000 -------------- -------------- Total currents assets................................................. 3,656,295 7,310,655 Plant and equipment, net...................................................... 714,989 763,422 Deferred registration costs................................................... -- 548,385 Other assets.................................................................. 195,803 212,706 -------------- -------------- $ 4,567,087 $ 8,835,168 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) Current liabilities: Current maturities of capital lease obligations $ 21,454 $ 48,863 Accounts payable........................................................... 2,739,271 5,279,861 Billings in excess of costs and estimated earnings on uncompleted contracts.................................................... 103,184 80,755 Accrued expenses and other................................................. 641,506 895,444 -------------- -------------- Total current liabilities............................................. 3,505,415 6,304,923 Long-term liabilities: Notes payable.............................................................. 2,541,000 3,210,500 Capital lease obligations, less current maturities 116,399 211,341 Stockholders' equity (deficiency): Common stock, $0.01 par value per share; authorized 20,000,000 shares; issued and outstanding 4,434,140 shares in 1996 and 1997........................................ 44,341 44,341 Additional paid-in capital................................................. 10,582,197 10,644,197 Accumulated deficit........................................................ (12,222,265) (11,580,134) ----------- ----------- (1,595,727) (891,596) -------------- ----------- $ 4,567,087 $ 8,835,168 ============== ==============
* Derived from audited financial statements as of December 31, 1996. The accompanying notes are an integral part of these statements. 3 SECURACOM, INCORPORATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1997 1996 1997 ------------- ------------ ------------- -------------- Earned revenues.................................. $ 1,136,064 $ 4,182,763 $ 3,066,534 $ 11,422,961 Cost of earned revenues.......................... 927,333 3,006,339 2,172,916 8,216,515 ------------- ------------ ------------- -------------- Gross profit................................ 208,731 1,176,424 893,618 3,206,446 Selling, general and administrative expenses.................................... 854,072 876,098 2,794,751 2,256,627 ------------- ------------ ------------- -------------- Operating income (loss).......................... (645,341) 300,326 (1,901,133) 949,819 Interest and financing fees...................... (55,973) (111,711) (132,656) (343,488) Interest and other income........................ 2,693 24,082 4,375 35,800 ------------- ------------ ------------- -------------- Net income (loss)........................... $ (698,621) $ 212,697 $ (2,029,414) $ 642,131 ============= ============ ============= ============== Weighted average common shares outstanding................................. 4,417,000 4,605,000 4,417,000 4,605,000 ============= ============ ============= ============== Net income (loss) per share...................... $ (.16) $ .05 $ (.46) $ .14 ============= ============ ============= ==============
The accompanying notes are an integral part of these statements. 4 SECURACOM, INCORPORATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1996 1997 --------------- ---------------- Cash flows from operating activities: Net income (loss)....................................................... $ (2,029,414) $ 642,131 -------------- ---------------- Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization......................................... 48,750 99,958 Noncash compensation.................................................. 28,000 -- Amortization of debt discount......................................... 7,000 31,500 Changes in operating assets and liabilities: Accounts receivable..................................................... 252,856 (376,410) Costs and estimated earnings in excess of billings on uncompleted contracts..................................... 303,919 (3,096,834) Prepaid expenses and other.............................................. 1,504 (85,728) Other assets............................................................ (821) (16,903) Accounts payable........................................................ 554,386 2,540,590 Billings in excess of costs and estimated earnings on uncompleted contracts.............................................. (287,148) (22,429) Accrued expenses and other.............................................. 112,708 253,938 --------------- ---------------- Total adjustments................................................... 1,021,154 (672,318) --------------- ---------------- Net cash from operating activities.................................. (1,008,260) (30,187) ---------- ---------------- Cash flows from investing activities: Investment in SSIH, Ltd................................................. -- (700,000) Acquisition of plant and equipment...................................... (269,534) (5,044) --------------- --------------- Net cash used by investing activities................................... (269,534) (705,044) --------------- --------------- Cash flows from financing activities: Proceeds from notes payable............................................. 815,000 700,000 Principal payments on notes payable--stockholder........................ (200,000) Principal payments of capital lease obligations......................... (14,389) (20,996) Deferred registration costs............................................. -- (548,385) Proceeds from issuance of common stock and exercise of warrants.................................................. 204,000 -- --------------- ---------------- Net cash provided by financing activities............................... 824,611 130,619 --------------- ---------------- Net (decrease) in cash and cash equivalents................................ (453,183) (604,612) Cash and cash equivalents at beginning of period........................... 555,34 609,342 --------------- ---------------- Cash and cash equivalents at end of period................................. $ 102,162 $ 4,730 =============== ================
The accompanying notes are an integral part of these statements. 5 NOTES TO FINANCIAL STATEMENTS 1. Basis of Presentation The unaudited balance sheet as of September 30, 1997 and the unaudited statements of operations and statements of cash flows for the nine months ended September 30, 1996 and 1997 are condensed financial statements in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they omit certain information included in complete financial statements and should be read in conjunction with the financial statements and notes contained in a registration statement on Form S-1 which the Company filed with the Securities and Exchange Commission on October 1, 1997. In the opinion of the Company, the unaudited financial statements at September 30, 1997 and for the nine months ended September 30, 1996 and 1997, include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations for such periods. Results of operations for the nine months ended September 30, 1997 are not necessarily indicative of results to be expected for the full year. 2. Income (Loss) Per Share Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding. Except as noted in the following paragraph, stock warrants have not been included in the calculation as their inclusion would be antidilutive. Warrants issued for the purchase of shares of Common Stock at an exercise price below the initial public offering price of $8.50 per share during the 12 months preceding the date of the Company's initial filing of a registration statement with the Securities and Exchange Commission have been included in the number of weighted average shares outstanding for all periods presented calculated abased on the treasury stock method. The Company believes that the implementation of Statement of Financial Accounting Standards 128, Earnings Per Share, will not have a material impact on the calculation of earnings per share. 3. Costs and Estimated Earnings on Uncompleted Contracts Costs and estimated earnings on uncompleted contracts at December 31 1996 and September 30, 1997 which are expected to be collected within one year are as follows;
December 31, September 30. 1996 1997 --------------- --------------- Costs incurred on contracts.................................................. $ 32,222,489 $ 12,632,437 Estimated earnings........................................................... 3,889,963 4,359,792 --------------- --------------- 36,112,452 16,992,229 Less billings to date........................................................ 35,067,076 12,827,590 --------------- --------------- $ 1,045,376 $ 4,164,639 =============== ===============
6 4. Initial Public Offering The Company completed an initial public offering of 1,920,000 shares of its Common Stock in October 1997, of which 1,400,000 shares were sold by the Company and 520,000 shares were sold by an existing shareholder. The sale provided net proceeds to the Company of $10.0 million. The underwriters also purchased an additional 288,000 share pursuant to their over-allotment option. The stockholder received all of the net proceeds of the sale of shares pursuant to the over-allotment option. With the use of proceeds the Company repaid its outstanding notes payable of $3.4 million. 5. Investment in SSIH Immediately following the initial public offering, the Company's limited partnership interest in SSIH was redeemed for $700,000 cost plus interest of $23,712. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion and analysis of the Company's financial condition and historical results of operations should be read in conjunction with the condensed financial statements and the related notes thereto included elsewhere in this report. Overview The Company is a single-source provider of comprehensive, technology-based security solutions for medium and large commercial and government facilities in the United States and abroad. The Company offers a broad range of services, including: (i) consulting and planning; (ii) engineering and design; (iii) systems integration; and (iv) maintenance and technical support. The Company derives its revenues primarily from long-term, fixed-price contracts. Earnings are recognized based upon the Company's estimates of the cost and percentage of completion of individual contracts. Earned revenues equal the project's total contract amount multiplied by the proportion that direct project costs incurred on a project bear to estimated total project costs. Project costs include direct labor and benefits, direct material, subcontract costs, project related travel and other direct expenses. Clients are invoiced based upon negotiated payment terms for each individual contract. Terms usually include a 25% downpayment and the balance as stages of the work are completed. Maintenance contracts are billed either in advance, monthly, or quarterly. As a result, the Company records as an asset costs and estimated earnings in excess of billings and as a liability billings in excess of costs and estimated earnings. Results of Operations The following table sets forth the percentages of earned revenues represented by certain items reflected in the Company's statements of operations. 8
Three Months Nine Months Ended Ended September 30, September 30, 1996 1997 1996 1997 Earned Revenues...................................................... 100.0% 100.0% 100.0% 100.0% Cost of earned revenues.............................................. 81.6 71.9 70.9 71.9 ------ ------ ------ ------ Gross profit...................................................... 18.4 28.1 29.1 28.1 Selling, general and administrative expenses......................... 75.2 21.0 91.1 19.8 ------ ------ ------ ------ Operating income (loss)........................................... (56.8) 7.1 (62.0) 8.3 Interest and financing fees.......................................... (4.9) (2.6) (4.3) (3.0) Interest and other income............................................ 0.2 0.6 0.1 0.3 ------ ------ ------ ------ Net income (loss)................................................. (61.5)% 5.1% (66.2)% 5.6% ====== ====== ====== ======
Three Months Ended September 30, 1997 Compared With Three Months Ended September 30, 1996 Revenues increased by 268.2% from $1.1 million in the three months ended September 30, 1996 to $4.2 million in the three months ended September 30, 1997. The increase was due to work completed for new clients and an increase in work completed on existing projects. Revenues from the World Trade Center project, which commenced in October 1996, were $2.9 million in the 1997 period. In addition, revenues from the Metropolitan Washington Airport Authority increased from $0.4 million in the 1996 period to $0.5 million in the 1997 period. Cost of earned revenues increased from $0.9 million in the three months ended September 30, 1996 to $3.0 million in the three months ended September 30, 1997, primarily due to the increase in revenues. Gross margin increased from 18.4% in the 1996 period to 28.1% in the 1997 period. Selling, general and administrative expenses remained substantially constant at $0.8 million in the three months ended September 30, 1997. As a percentage of revenues, they decreased from 75.2% in the 1996 period to 21.0% in the 1997 period due to the increase in revenues. Interest expense and financing fees increased 99.6% from $0.05 million in the three months ended September 30, 1996 to $0.1 million in the three months ended September 30, 1997 due to an increase in outstanding indebtedness resulting from the issuance of $2.1 million of subordinated debentures during 1996 and $0.7 million of subordinated debentures during the first six months of 1997. Net income increased from a net loss of $0.7 million in the three months ended September 30, 1996 to net income of $0.2 million in the three months ended September 30, 1997. This increase in net income was primarily due to the significant increase in revenues while selling, general and administrative expenses remained substantially constant. 9 Nine Months Ended September 30, 1997 Compared With Nine Months Ended September 30, 1996 Revenues increased by 272.5% from $3.1 million in the nine months ended September 30, 1996 to $11.4 million in the nine months ended September 30, 1997. The increase was due to work completed for new clients and an increase in work completed on existing projects. Revenues from the World Trade Center project, which commenced in October 1996, were $7.1 million in the 1997 period. In addition, revenues from the Metropolitan Washington Airport Authority increased from $0.8 million in the 1996 period to $2.1 million in the 1997 period. In addition, $0.1 million of revenue was recognized in the 1997 period on a project for which all of the costs were accrued during 1996. Cost of earned revenues increased from $2.2 million in the nine months ended September 30, 1996 to $8.2 million in the nine months ended September 30, 1997, primarily due to the increase in revenues. Gross margin declined from 29.1% in the 1996 period to 28.1% in the 1997 period. The reason for the decline in gross margin is that in the 1996 period there was a one-time adjustment of $0.2 million to the cost of earned revenues to reflect a reduction in a subcontractor's costs upon the final closeout of the TVA project. Net of this adjustment, gross margin was 21.6% in the 1996 period. Selling, general and administrative expenses decreased by 19.3% from $2.8 million in the nine months ended September 30, 1996 to $2.3 million in the nine months ended September 30, 1997, primarily due to a $0.3 million reduction in legal fees relating to certain litigation and $0.2 million reduction in indirect labor costs. Interest expense and financing fees increased 158.9% from $0.1 in the nine months ended September 30, 1996 to $0.3 million in the nine months ended September 30, 1997 due to an increase in outstanding indebtedness resulting from the issuance of $2.1 million of subordinated debentures during 1996 and $0.7 million of subordinated debentures during the first six months of 1997. Net income increased from a net loss of $2.0 million in the nine months ended September 30, 1996 to net income of $0.6 million in the nine months ended September 30, 1997. This increase in net income was primarily due to the significant increase in revenues and the decrease in selling, general and administrative expenses. Liquidity and Capital Resources Prior to the initial public offering (the "IPO") of its Common Stock in October 1997, the Company's primary sources of cash were the proceeds from private placements of Common Stock and notes from 1992 through 1995 and of subordinated debentures and warrants during 1995 and 1996. During each of those years, the Company's operations had negative cash flows as the Company increased its marketing efforts, opened new offices and hired additional staff to support anticipated growth. The net use of cash from operations in 1994, 1995, and 1996 was $1.9 million, $1.9 million and $1.6 million, respectively, and for the nine months ended September 30, 1997 was $0.03 million. From 1992 through 1995, members of a private investor group purchased an aggregate of 3.6 million shares of Common Stock at a total purchase price of $8.3 million, generating net proceeds to the Company of $8.0 million, and $0.5 million aggregate principal amount of 10% demand notes, generating an equal amount of net proceeds to the Company. The demand notes were converted in 1995 into 103,000 shares of Common Stock. 10 In addition, from 1995 through March 31, 1997, members of the same investor group purchased $3.4 million aggregate principal amount of 10% subordinated debentures, together with warrants to purchase 478,580 shares of Common Stock at an exercise price of $7.00 per share, generating net proceeds to the Company of $3.2 million. In 1996, an additional $0.2 million was raised through the exercise of warrants by members of the Board of Directors. In October 1997, the Company completed the IPO, which resulted in net proceeds to the Company of approximately $10.0 million after payment of offering expenses by the Company. Following the IPO, the Company's interest in a partnership was redeemed at its cost of $0.7 million plus interest of $0.02 million. In addition, in October 1997, the Company used proceeds of the IPO to repay $3.4 million of outstanding notes payable. The Company's anticipated capital requirements include approximately $0.4 million to open two new regional offices during 1997, $1.0 million to expand and upgrade its management information systems and $1.0 million to further develop and document its command center integration software. The Company intends to fund these requirements with proceeds from the IPO and other available working capital. The Company has in the past experienced cash flow shortages. The Company believes that the net proceeds of the IPO and cash generated from future operations will enable it to meet its cash requirements for the foreseeable future and enable it to pursue its current plans for expansion. 11 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds The Company's Registration Statement on Form S-1 (File No. 333-26439) relating to the initial public offering (the "Offering") of an aggregate of 2,208,000 shares (the "Shares") of its Common Stock, par value $0.01 per share, was declared effective by the Securities and Exchange Commission on October 1, 1997. Of the 2,208,000 shares of Common Stock registered under the Registration Statement, 1,400,000 were sold by the Company and 808,000 were sold by a stockholder of the Company that owns more than 10% of the Company's outstanding Common Stock (the "Selling Stockholder"). The 808,000 shares sold by the Selling Stockholder included 288,000 shares sold upon exercise of an over-allotment option granted to the underwriters of the Offering. The managing underwriters of the Offering were Cruttenden Roth Incorporated and Scott & Stringfellow, Inc. (the "Representatives"). The Offering commenced on October 1, 1997, and the sale of the Shares was completed on October 7, 1997. The Shares were sold at a price of $8.50 per share, for aggregate proceeds of $11,900,000 and $6,868,000 to the Company and the Selling Stockholder, respectively. After deducting underwriting discounts and commissions of $0.7225 per share and a $408,000 non-accountable expense allowance paid to the Representatives (of which $297,500 was paid by the Company and $110,500 was paid by the Selling Stockholder), the Selling Stockholder received net proceeds of $6,173,720 and the Company received net proceeds of $10,591,000 less expenses incurred in connection with the Offering, all of which were paid or are payable by the Company. On October 7, 1997, the Company also issued to the Representatives, at a purchase price of $0.001 per warrant, warrants to purchase up to an aggregate of 140,000 shares of Common Stock. The Registration Statement became effective on October 1, 1997, after the September 30, 1997 ending date for the period covered by this report. The amount of expenses incurred by the Company in connection with the Offering, and the application by the Company of the net proceeds received by the Company in the Offering, will be disclosed as required by Rule 463 under the Securities Act of 1933, as amended, in the Company's periodic report for the fiscal year ending December 31, 1997 and, to the extent necessary, in subsequent periodic reports filed by the Company pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. Item 6. Exhibits and Reports on Form 8-K a. Exhibits 11.1 Calculation of Net Income (Loss) Per Share 27.1 Financial Data Schedule b. Reports on Form 8-K. None 12 Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SECURACOM INCORPORATED /s/ LARRY M. WEAVER - ----------------------------------------------------- Larry M. Weaver Executive Vice President, Chief Operating Officer and Chief Financial Officer November , 1997 13 EX-11 2 COMPUTATION PER SHARE EXHIBIT 11 Calculation of Weighted Average Shares Outstanding for Net Income (Loss) Per Share
September 30, 1996 1997 ------------ ------------ Earnings: Net Income (Loss)................................................................ $ (2,029,414) $ 642,131 ============ ============= Shares: Weighted Average Number of Common Shares Outstanding................................................................... 4,293,230 4,434,140 Additional Shares Under Treasury Stock Method from Warrants Issued 12 Months Prior to 9/30/97............................... 123,279 170,674 ------------ ------------- Average Common Shares Outstanding and Equivalents................................ 4,416,509 4,604,814 ============ ============= Earnings (Loss) Per Share........................................................ $ (0.46) $ 0.14 ============ =============
EX-27 3 FDS --
5 1 U.S. DOLLARS 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1 4,730 0 2,195,833 (42,000) 0 7,310,655 1,140,857 (377,435) 8,835,168 6,304,923 3,210,500 0 0 44,341 (935,937) 8,835,168 11,422,961 11,422,961 8,216,515 8,216,515 2,256,627 0 343,488 642,131 0 642,131 0 0 0 642,131 0.14 0
-----END PRIVACY-ENHANCED MESSAGE-----