-----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, HS94zQTHU8y3iYUOy/4ySgR7XTRkqn+WUCZuPonC3p1JLS+R7wTglu9M+pUz8Wyt dmIf9z0UBsAm+TfFh0HlaA== 0000912057-97-021505.txt : 19970623 0000912057-97-021505.hdr.sgml : 19970623 ACCESSION NUMBER: 0000912057-97-021505 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970415 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970620 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALARMGUARD HOLDINGS INC CENTRAL INDEX KEY: 0000319250 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 330318116 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08138 FILM NUMBER: 97627760 BUSINESS ADDRESS: STREET 1: 125 FRONTAGE ROAD STREET 2: STE 1880 CITY: ORANGE STATE: CT ZIP: 06477 BUSINESS PHONE: 6192311818 MAIL ADDRESS: STREET 1: 125 FRONTAGE ROAD STREET 2: STE 1880 CITY: ORANGE STATE: CT ZIP: 06477 FORMER COMPANY: FORMER CONFORMED NAME: TRITON GROUP LTD DATE OF NAME CHANGE: 19950328 8-K/A 1 8-KA: 1-14 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest Commission File Number 0-21882 event reported): APRIL 15, 1997 ALARMGUARD HOLDINGS, INC. Incorporated in Delaware IRS Employee Identification Number: 33-0318116 Principal Executive Office: Telephone: (203) 795-9000 125 Frontage Road Orange, CT 06477 This Current Report on Form 8-K/A is filed by Alarmguard Holdings, Inc. ("Alarmguard"), a Delaware corporation, formerly Triton Group Ltd. ("Triton"), as an amendment to that certain Current Report on Form 8-K filed by Alarmguard on April 22, 1997. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired The following unaudited financial statements of Security Systems Holdings, Inc. ("SSH"), as of and for the interim three-month period ended March 31, 1997 are provided herein: (1) Condensed Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996 (2) Condensed Consolidated Statements of Operations for each of the three-month periods ending March 31, 1997 and 1996 (3) Condensed Consolidated Statements of Cash Flows for each of the three-month periods ending March 31, 1997 and 1996 (4) Notes to Financial Statements (b) Pro Forma Financial Information. The following unaudited pro forma condensed combined financial information sets forth, for the respective periods and as of the dates indicated, the results of operations and the financial position of Alarmguard after giving effect to the merger ("Merger") on April 15, 1997 of SSH, a Delaware corporation, and Triton Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Alarmguard ("Merger Sub"), and the acquisition (the "Pro Acquisition") on May 1, 1997 by SSH of all of the outstanding capital stock of Protective Alarms, Inc., a Connecticut corporation, as if the transactions were consummated as of the respective dates indicated below. The unaudited pro forma financial information should be read in conjunction with Alarmguard's audited historical consolidated financial statements and notes thereto as of December 31, 1996 and 1995 and each of the three years in the period ended December 31, 1996. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that actually would have occurred if the Merger and the Pro Acquisition had been consummated as of such dates in accordance with the assumptions set forth below, nor is it necessarily indicative of future operating results or financial position. The unaudited pro forma condensed combined balance sheet as of March 31, 1997 reflects the Merger and the Pro Acquisition as if such transactions had occurred on March 31, 1997. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 1996 and the three-month interim period ended March 31, 1997 reflects the Merger and Pro Acquisition as if the transactions had occurred on January 1, 1996. 2 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. ALARMGUARD HOLDINGS, INC. Dated: June 20, 1997 By: /s/ David Heidecorn ---------------------------------- David Heidecorn Executive Vice President & Chief Financial Officer 3 ITEM 7. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED SECURITY SYSTEMS HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ($ IN THOUSANDS)
MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- (UNAUDITED) (NOTE) ASSETS Current assets: Cash and cash equivalents $322 $230 Accounts Receivable, less allowance for doubtful account of $239 and $298, respectively 3,884 3,791 Inventories 1,906 1,698 Prepaid expenses 294 332 Other current assets 250 250 --------------- ------------------ Total current assets 6,656 6,301 Property & equipment, net 2,231 2,478 Customer installation costs, net of accumulated amortization of $2,987 and $2,383, respectively 8,081 7,531 Acquired customer contracts, net of accumulated amortization of $11,928 and $11,077, respectively 15,592 16,443 Covenants not to compete, net of accumulated amortization of $4,704 and $4,341, respectively 2,567 2,930 Goodwill, net of accumulated amortization of $467 and $436, respectively 2,026 2,057 Other assets 1,160 1,391 --------------- ------------------ Total assets $38,313 $39,131 --------------- ------------------ --------------- ------------------ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities: Accounts payable $1,933 $1,469 Accrued expenses 1,833 1,390 Current portion of term loan 4,169 4,169 Current portion of notes payable 2,501 696 Deferred monitoring revenue 4,691 4,621 Other current liabilities 912 1,008 --------------- ------------------ Total current liabilities 16,039 13,353 Term loan, less current portion 27,267 26,467 Subordinated debt 4,951 4,951 Notes payable, less current portion 876 2,563 Other liabilities 299 422 Redeemable preferred stock, $100 par value; Series A, 5% cumulative dividends, 50,000 shares authorized, issued and outstanding 6,056 5,994 Redeemable preferred stock, $120 par value; Series B, 5% cumulative dividends, 72,500 shares authorized, issued and outstanding 10,388 10,279 STOCKHOLDER'S DEFICIENCY: Common stock, $1.00 par value; 256,500 shares authorized, 236,671 shares (including 33,748 of non-voting shares) issued and outstanding. 237 237 Additional paid in capital 35 35 Accumulated deficit (27,800) (25,135) Notes receivable from officers (35) (35) --------------- ------------------ Total stockholders' deficiency (27,563) (24,898) --------------- ------------------ Total liabilities and stockholders' deficiency $38,313 $39,131 --------------- ------------------ --------------- ------------------
See accompanying notes to unaudited condensed consolidated financial information. Note: The balance sheet as of December 31, 1996 has been derived from the audited balance sheet as of that date. 4 SECURITY SYSTEMS HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31 ----------------------- 1997 1996 ------- ------ Recurring revenue $4,173 $3,468 Installation revenue 2,031 1,618 Service revenue 393 317 -------------- -------------- Total Revenue 6,597 5,403 Monitoring expense 595 540 Installation expense 1,313 869 Service expense 765 669 -------------- -------------- Total Cost of Revenue 2,673 2,078 Gross Profit 3,924 3,325 Sales and marketing expense 1,016 922 General and administrative expense 2,187 1,989 Depreciation and amortization expense 2,371 1,902 -------------- -------------- Total operating expenses 5,574 4,813 Operating loss (1,650) (1,488) Other expense: Interest expense (844) (643) Other expense, net (12) -------------- -------------- Net loss (2,494) (2,143) Dividend requirement on preferred stock (171) (171) -------------- -------------- Loss applicable to common shares ($2,665) ($2,314) -------------- -------------- -------------- -------------- Pro forma loss per common share: Pro forma loss per common share ($0.87) ($0.74) Shares used in computing pro forma loss per common share 2,877 2,877
See accompanying notes to unaudited condensed consolidated financial information. 5 SECURITY SYSTEMS HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31 ---------------------- 1997 1996 ---- ---- Operating activities: Net loss ($2,665) ($2,314) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation & amortization 2,371 1,902 Customer installation costs (1,154) (1,488) Changes in operating assets & liabilities, net of effects of acquisitions: Accounts receivable (93) 477 Inventories (208) (18) Prepaid expenses 38 81 Other current assets 5 Other assets 229 (70) Accounts payable 464 (113) Accrued expenses 614 (23) Deferred revenue 70 (163) Other current liabilities (311) 356 -------------- ------------- Net cash used in operating activities (645) (1,368) Investing activities: Acquisition of businesses (350) Purchases of property & equipment (50) (118) -------------- ------------- Net cash used in investing activities (50) (468) Financing activities: Proceeds from term loan 800 1,700 Proceeds from bridge Loan 500 Payments of term loan (458) Financing fees paid (30) Payments of other notes payable and capital leases (513) (195) -------------- ------------- Net cash provided by financing activities 787 1,017 Increase (decrease) in cash and cash equivalents 92 (819) Cash and cash equivalents at beginning of period 230 1,561 -------------- ------------- Cash and cash equivalents at end of period $322 $742 -------------- ------------- -------------- ------------- Supplementary cash flow Information: Cash paid for interest $855 $630 ---- ---- ---- ----
See accompanying notes to unaudited condensed consolidated financial information. 6 SECURITY SYSTEMS HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes 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 a fair presentation have been included. Operating results for the three months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. The unaudited interim financial information should be read in conjunction with SSH's audited consolidated financial statements as of and for the year ended December 31, 1996. 2. ACQUISITIONS During the first three months of 1996, SSH acquired certain operating assets of a company in the security alarm installation and monitoring business for $350,000 in cash and the issuance of $569,000 in a note payable to the sellers. The acquisition added approximately $28,000 of MRR and 1,300 customers. The acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. In connection with the acquisition, SSH received customer contracts ($521,000), and other assets ($521,000) and assumed current liabilities ($123,000). No acquisitions were completed during the three-month period ended March 31, 1997. The results of operations of the acquired company have been included in the consolidated statements of operations from the date of acquisition. The pro forma financial information giving effect to this acquisition has not been provided as the results of operations were not materially affected by this acquisition. 3. INVENTORIES Inventories consist principally of alarm components and supplies. 4. CUSTOMER INSTALLATION COSTS During the three months ended March 31, 1997 and 1996, SSH incurred approximately $990,000 and $1,435,000, respectively, in customer installation costs directly attributable to the operations of the direct marketing program. SSH added approximately 2,000 and 2,600 customers, respectively, through the direct marketing program during these periods. 5. LONG TERM DEBT In January 1997, SSH amended its term loan and acquisition credit agreement to increase the direct marketing program line ("Program Line") from $13,062,000 to $14,562,000. The amendment also deferred all scheduled principal payments until April 30, 1997. At March 31, 1997, the term loan balance, acquisition loan balance and Program Line balance was approximately $31,436,000. 7 6. SUBSEQUENT EVENTS On April 15, 1997, a wholly-owned subsidiary of Triton Group Ltd. ("Triton"), a Delaware Corporation, merged with and into SSH, whereby the holders of all of SSH's common and redeemable preferred stock received approximately 2,877,368 shares (excluding approximately 46,003 shares reserved for stock options) of Triton common stock. The merger was accounted for as a reverse acquisition whereby the net assets of Triton (principally cash) were recorded at net book value and the pre-merger financial statements of SSH will become the historical financial statements of Triton and SSH. The pro forma loss per common share for the three months ended March 31, 1997 and 1996 gives effect to the conversion of all preferred and common stock into Triton common stock as noted above. Such conversion excludes shares issuable upon exercise of outstanding stock options. In connection with the merger, SSH refinanced its subordinated debt existing at March 31, 1997 with new subordinated debt with an aggregate principal amount of $4,600,000 and a stated interest rate of 15%. Two officers of SSH are holders of an aggregate amount of $200,000 of the newly issued subordinated debt. In addition, SSH issued warrants to purchase approximately 216,000 shares of Triton Common Stock at an exercise price of $11.11 per share which will be accounted for as a discount to the new subordinated debt and will be amortized over the life of the underlying debt instrument (two years). Concurrent with the merger, SSH refinanced its credit agreement existing at March 31, 1997 with a new credit agreement ("New Credit Agreement"). The New Credit Agreement consists of a two year $60 million non-amortizing revolving loan agreement which converts to a five year term loan. On May 1, 1997, SSH purchased all of the issued and outstanding shares of capital stock of Protective Alarms, Inc. ("Protective Alarms"), for an initial purchase price of $17.1 million. Up to $4.2 million in additional consideration will be paid to the sellers of Protective Alarms upon (i) the installation of national account contracts pending on the closing date; and (ii) certain other obligations being met during the year following the closing of the acquisition. Protective Alarms is a security alarm system company doing business primarily in Connecticut and Westchester County, New York, that provides security equipment and monitoring services to homeowners and businesses. In addition, Protective Alarms, Inc. specializes in chain account sales under the name "Pro National," primarily in the Northeastern United States. On May 28, 1997, SSH acquired certain operating assets of Absolute Life Safety Security Systems, Inc. ("Absolute") for approximately $250,000 in cash and $1.1 million in unregistered Alarmguard Holdings, Inc. (parent company of SSH as of April 15, 1997) common stock. Absolute is a security alarm system company with approximately 1,000 customers in Fairfield County, Connecticut and Metropolitan New York. The acquisitions were accounted for under the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the respective dates of acquisition. 8 ITEM 7. (b) PRO FORMA FINANCIAL INFORMATION ALARMGUARD HOLDINGS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (P) AS OF MARCH 31, 1997
SECURITY SYSTEMS TRITON HOLDINGS GROUP LTD. INC. PRO FORMA ("TRITON") ("SSH") ADJUSTMENTS ---------- ------- ----------- ASSETS Current assets: Cash and cash equivalents $15,155 $322 ($5,051) (A,B,C,D) Accounts receivable, net 627 3,884 (500) (E) Inventories 1,906 Prepaid expenses 42 294 Other current assets 250 ----------- ------------ ------------ Total current assets 15,824 6,656 (5,551) Property and equipment, net 8 2,231 Customer installation costs, net 8,081 Acquired customer contracts, net 15,592 Covenants not to compete, net 2,567 Goodwill, net 2,026 Investment in Mission West Properties 1,700 (F) Other assets 2,250 1,160 335 (A) ----------- ------------ ------------ Total assets $18,082 $38,313 ($3,516) ----------- ------------ ------------ ----------- ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable $97 $1,933 Accrued expenses 374 1,833 $140 (B,G) Current portion of term loan 4,169 (4,169) (A) Current portion of notes payable 2,501 (900) (B,E) Deferred revenue 4,691 Other current liabilities 912 ----------- ------------ ------------ Total current liabilities 471 16,039 (4,929) Term loan, less current portion 27,267 4,169 (A) Subordinated debt 4,951 (678) (B) Notes payable, less current portion 876 Other liabilities 2,546 299 Redeemable preferred stock 16,444 (16,444) (D) Stockholders' equity (deficit): Common stock 2 237 (238) (D) Additional paid-in capital 21,774 35 7,893 (A,B,C,D,F,G) Accumulated deficit (6,711) (27,800) 6,676 (D) Notes receivable from officers (35) 35 ----------- ------------ ------------ Total stockholders' equity (deficit): 15,065 (27,563) 14,366 ----------- ------------ ------------ Total liabilities and stockholders' equity (deficit): $18,082 $38,313 ($3,516) ----------- ------------ ------------ ----------- ------------ ------------ PRO FORMA TRITON PRO FORMA SSH AND TRITON AND PROTECTIVE PRO FORMA AND PROECTIVE SSH ALARMS ADJUSTMENTS ALARMS ---------- ---------- ----------- -------------- ASSETS Current assets: Cash and cash equivalents $10,426 ($26) ($9,608) (H) $792 Accounts receivable, net 4,011 1,393 5,404 Inventories 1,906 301 2,207 Prepaid expenses 336 262 176 (H) 774 Other current assets 250 (250) (H) ------------ ------------ ------------ ------------ Total current assets 16,929 1,930 (9,682) 9,177 Property and equipment, net 2,239 788 3,027 Customer installation costs, net 8,081 867 8,948 Acquired customer contracts, net 15,592 15,462 (H) 31,054 Covenants not to compete, net 2,567 5,000 (H) 7,567 Goodwill, net 2,026 2,026 Investment in Mission West Properties 1,700 1,700 Other assets 3,745 47 (40) (H) 3,752 ------------ ------------- ------------- ------------ Total assets $52,879 $3,632 $10,740 $67,251 ------------- ------------- ------------- ------------ ------------- ------------- ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable $2,030 $619 $2,649 Accrued expenses 2,347 368 $950 (H) 3,665 Current portion of term loan 0 778 (778) (H) 0 Current portion of notes payable 1,601 9 2,396 (H) 4,006 Deferred revenue 4,691 1,172 5,863 Other current liabilities 912 912 ------------ ------------- -------------- ----------- Total current liabilities 11,581 2,946 2,568 17,095 Term loan, less current portion 31,436 550 8,650 (H) 40,636 Subordinated debt 4,273 4,273 Notes payable, less current portion 876 876 Other liabilities 2,845 8 2,853 Redeemable preferred stock Stockholders' equity (deficit): Common stock 1 5 (5) (H) 1 Additional paid-in capital 29,702 0 29,702 Accumulated deficit (27,835) 123 (473) (H) (28,185) Notes receivable from officers ------------- ------------- ------------- ------------ Total stockholders' equity (deficit): 1,868 128 (478) 1,518 ------------- ------------- ------------- ------------ Total liabilities and stockholders' equity (deficit): $52,879 $3,632 $10,740 $67,251 ------------- -------------- ------------- ------------ ------------- -------------- ------------- ------------
See accompanying notes to unaudited pro forma condensed combined financial statements. 9 ALARMGUARD HOLDINGS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (P) FOR THE THREE MONTHS ENDED MARCH 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
SECURITY PRO FORMA SYSTEMS TRITON, TRITON HOLDINGS, PRO FORMA SSH AND GROUP LTD. INC. PRO FORMA TRITON AND PROTECTIVE PRO FORMA PROTECTIVE (TRITON) (SSH) ADJUSTMENTS SSH ALARMS ADJUSTMENTS ALARMS ----------- ----------- ------------ ---------- ---------- ----------- ---------- Recurring revenue $4,173 $4,173 $1,146 $5,319 Installation revenue 2,031 2,031 810 2,841 Service revenue 393 393 47 440 ----------- ----------- ------------ ---------- ---------- ---------- ---------- Total revenue 6,597 6,597 2,003 8,600 Monitoring expense 595 595 236 831 Installation expense 1,313 1,313 579 1,892 Service expense 765 765 279 1,044 ----------- ----------- ------------ ---------- ---------- ---------- ---------- Total cost of revenue 2,673 2,673 1,094 3,767 Gross profit 3,924 3,924 909 4,833 Sales and marketing expense 1,016 1,016 335 1,351 General and administrative expense $261 2,187 2,448 518 2,966 Depreciation and amortization expense 2,371 2,371 140 $636(L) 3,147 ----------- ----------- ------------ ---------- ---------- ---------- ---------- Total operating expenses 261 5,574 5,835 993 636 7,464 ----------- ----------- ------------ ---------- ---------- ---------- ---------- Operating loss (261) (1,650) (1,911) (84) (636) (2,631) Other income (expense) (N) 3,154 (844) ($3,219) (J,O) (909) (38) (222) (M) (1,169) ----------- ----------- ------------ ---------- ---------- ---------- ---------- Income (loss) from operations $2,893 ($2,494) ($3,219) ($2,820) ($122) ($858) ($3,800) ----------- ----------- ------------ ---------- ---------- ---------- ---------- ----------- ----------- ------------ ---------- ---------- ---------- ---------- Income (loss) from operations per common share $1.34 ($0.87) ($0.56) ($0.76) Number of shares used in calculating income (loss) from operations per common share 2,155 2,877 5,032 5,032
See accompanying notes to unaudited pro forma condensed combined financial statements. 10 ALARMGUARD HOLDINGS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (P) FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
SECURITY PRO FORMA SYSTEMS TRITON, TRITON HOLDINGS PRO FORMA SSH AND GROUP LTD. INC. PRO FORMA TRITON AND PROTECTIVE PRO FORMA PROTECTIVE (TRITON) (SSH) ADJUSTMENTS SSH ALARMS JUSTMENTS ALARMS ---------- --------- ----------- ---------- ---------- --------- --------- Recurring revenue $15,011 $15,011 $4,067 $19,078 Installation revenue 7,613 7,613 3,110 10,723 Service revenue 1,528 1,528 322 1,850 ---------- --------- ----------- ---------- ---------- -------- ---------- Total revenue 24,152 24,152 7,499 31,651 Monitoring expense 2,258 2,258 662 2,920 Installation expense 4,685 4,685 2,209 6,894 Service expense 2,837 2,837 975 3,812 ---------- --------- ----------- ---------- ---------- -------- ---------- Total cost of revenue 9,780 9,780 3,846 13,626 Gross profit 14,372 14,372 3,653 18,025 Sales and marketing expense 3,732 3,732 1,104 4,836 General and administrative expense $1,528 8,435 9,963 2,230 12,193 Depreciation and amortization expense 8,142 8,142 640 $2,544(L) 11,326 --------- --------- ----------- --------- ---------- -------- ---------- Total operating expenses 1,528 20,309 21,837 3,974 2,544 28,355 Operating loss (1,528) (5,937) (7,465) (321) (2,544) (10,330) Other income (expense) (N) 3,970 (3,051) ($3,676)(J,K) (2,757) (214) (888)(M) (3,859) ----------- --------- ----------- --------- ---------- -------- ---------- Income(loss) before income taxes 2,442 (8,988) (3,676) (10,222) (535) (3,432) (14,189) Income tax benefit 377 377 95 472 ----------- --------- ----------- --------- ---------- -------- ---------- Income (loss) from continuing operations $2,819 ($8,988) ($3,676) ($9,845) ($440) ($3,432) ($13,717) ----------- --------- ----------- --------- ---------- -------- ---------- ----------- --------- ----------- --------- ---------- -------- ---------- Income (loss) from continuing operations per common share $1.31 ($3.12) ($1.96) ($2.73) Number of shares used in calculating income (loss) from continuing operations per common share 2,155 2,877 5,032 5,032
See accompanying notes to unaudited pro forma condensed combined financial statements. 11 ALARMGUARD HOLDINGS, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (A) Concurrent with the Merger, SSH refinanced its existing credit facility. The costs incurred in this effort (approximately $1.1 million) were deferred and will be amortized over the term of the respective underlying debt. In addition, the unamortized costs related to the prior credit facility and subordinated debt (approximate book value of $800,000) were charged to expense in connection with the early extinguishment of debt. Pursuant to the terms of the new credit facility, no principal payments are due for two years. Therefore, the $4.2 million current portion of the term loan under the old credit facility at the time of the Merger was reclassified to non-current. (B) In connection with the Merger, SSH refinanced its existing subordinated debt which accrued interest at 10% (8% through September 30, 1996) and was due in 1998. The new subordinated debt matures two years after the consummation of the Merger, and accrues interest at 15%. In addition, $650,000 of SSH's existing subordinated debt was repaid from cash on hand. Additionally, a certain seller of a previously acquired company received both cash ($300,000) and $100,000 of the new subordinated debt for a note payable which was outstanding on March 31, 1997. In connection with the refinancing, the subordinated debtholders were issued warrants. The estimated fair value of such warrants (approximately $327,000) was offset against the proceeds of the subordinated debt and is being amortized as interest expense over the two-year life of such debt. (C) In connection with the Merger, SSH and Triton incurred approximately $4.0 million in transaction costs (including $1.1 million relating to the new credit facility, see Note A), consisting primarily of legal, accounting, printing, and investment banking fees. (D) Pursuant to the Merger Agreement, SSH became a wholly-owned subsidiary of Triton through the merger of a wholly owned subsidiary of Triton ("Merger Sub") with and into SSH and the conversion and exchange of shares of SSH Common and Preferred Stock for shares of Triton Common Stock, thus making SSH the legal acquiree and Triton the legal acquiror. (Triton's name was changed to Alarmguard in connection with the Merger.) However, because pursuant to the Merger Agreement, the SSH stockholders received approximately 57% of the outstanding Triton Common Stock, the Merger was accounted for as a "reverse acquisition." Triton was designated the accounting acquiree and SSH the accounting acquiror. As such, the net assets (principally cash) of Triton (the issuing company) were recorded at net book value and the pre-Merger financial statements of SSH, the accounting acquiror (i.e., the legal acquiree), became the historical financial statements of the combined company. In addition, pre-Merger stockholders' deficiency and loss per share were retroactively restated for the equivalent number of shares received by the accounting acquiror (SSH) in the combination, with differences between the par value of the issuer's (Triton) and accounting acquiror's (SSH) stock recorded as an adjustment to paid-in capital of Alarmguard. The shares issued in connection with the merger were allocated among the SSH stockholders as follows: (i) the shares of SSH Common Stock were converted into approximately 874,683 shares of Triton Common Stock; (ii) the shares of SSH Series A Preferred Stock, together with all dividends thereon that have accrued and remain unpaid through January 31, 1997, were converted into approximately 752,649 shares of Triton Common Stock; and (iii) the shares of SSH Series B Preferred Stock, together with all dividends thereon that have accrued and remain unpaid through January 31, 1997, were converted into approximately 1,250,036 shares of Triton Common Stock. Dividends which accrued and remained unpaid from February 1, 1997 through April 15,1997 (consummation of the Merger) in the amount of $140,000 were paid in cash to the holders of the SSH Preferred Stock. Accordingly, this adjustment was recorded to reflect the issuance of the new common shares for the outstanding SSH common Stock and SSH Preferred Stock. (E) Per the terms of the Merger Agreement, SSH had available a $1.5 million bridge loan from Triton pursuant to which SSH borrowed $500,000. The respective receivable and payable have been eliminated. 12 (F) Triton owns 44% of Mission West Properties. The carrying value of this investment has been adjusted to reflect the expected net realizable value of this investment following the sale of Mission West's remaining real estate assets. (G) Per the Merger Agreement, Triton Group Management, Inc. ("TGM"), agreed to facilitate the disposition of the remaining Triton investments during the twelve months following the Merger. For services provided, TGM will receive a management fee of approximately $200,000. (H) On May 1, 1997, Alarmguard purchased all of the issued and outstanding stock of Protective Alarms for an initial purchase price of approximately $17.1 million in cash. Up to $4.2 million in additional consideration will be paid to the sellers of Protective Alarms upon (i) the installation of national account contracts pending on May 1, 1997; and (ii) certain other obligations being met during the year following the acquisition. The acquisition was accounted for under the purchase method of accounting and accordingly, the purchase price was allocated to the assets acquired (acquired customer contracts of $15.8 million and covenants not to compete of $5.0 million) and liabilities assumed based on their relative fair values at the date of acquisition. In accordance with the terms of the agreement, Alarmguard made an initial payment of $250,000 and paid $9.6 million in cash, of which a portion was used to pay off the current ($778,000) and long-term debt ($550,000) of Protective Alarms concurrent with the closing of the transaction. Alarmguard also wrote off the deferred costs ($40,000) related to this debt. In addition, $9.2 million in borrowings under the new credit facility and a note payable due to the sellers partially secured by a letter of credit as a purchase price holdback ($1.8 million) was used to pay for the remaining balance of the purchase price. Also, approximately $1.0 million of transaction related expenses were incurred including $400,000 relating to severance and termination costs to be paid in connection with the assimilation of the acquired business. (I) The pro forma information is based on the historical financial statements of Triton for the years ended March 31, 1996 and March 31, 1997, the historical financial statements of SSH for the year ended December 31, 1996 and the three months ended March 31, 1997, and the historical financial statements of Protective Alarms for the year ended September 30, 1996 and the six months ended March 31, 1997. The historical financial statements of Triton and Protective Alarms have been adjusted to conform with SSH's December 31 year-end. (J) To record as interest expense, the amortization of the estimated fair value of the warrants issued in connection with the refinancing of SSH's existing subordinated debt and the interest expense that would have been incurred on the new subordinated debt (see Note B) as if they were outstanding during the periods presented. (K) The historical statement of operations of Triton for the twelve months ended December 31, 1996 (as derived) includes a non-recurring gain of $3.2 million resulting from the reconsolidation of La Jolla Insurance company, Ltd., a wholly owned subsidiary of Triton, which has been eliminated. (L) To record amortization expense of acquired customer contracts (ten-year life) and covenants not to compete (five-year life) resulting from the acquisition of Protective Alarms (see Note H). (M) To record interest expense on the borrowings incurred to finance the acquisition of Protective Alarms (see Note H). Interest is calculated at Alarmguard's estimated borrowing rate (9% per annum) at December 31, 1996 and March 31, 1997. (N) Principally interest expense, net, for SSH and Protective Alarms. (O) The historical statement of operations of Triton for the three months ended March 31, 1997 (as derived) includes a non-recurring gain of $3.1 million which represents Triton's share of the gain recognized by Mission West following the sale by Mission West of the majority of its real estate assets. 13 (P) The pro forma balance sheet as of March 31, 1997 and pro forma statements of operations for the year ended December 31, 1996 and three months ended March 31, 1997 do not include the operations of an acquisition (aggregate purchase price of approximately $200,000) completed by Alarmguard on April 22, 1997 as this acquisition did not have a material effect on the pro forma financial information. 14 -----END PRIVACY-ENHANCED MESSAGE-----