-----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, N/+PwFP/mZ4hqTe8NGeb+wYjpfys0814ly3pXosJXo4jolpPlGkcla4yFigTZAPQ 2tWud8O8aYwahm4q6dXvfg== 0001047469-98-026127.txt : 19980702 0001047469-98-026127.hdr.sgml : 19980702 ACCESSION NUMBER: 0001047469-98-026127 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980430 ITEM INFORMATION: FILED AS OF DATE: 19980701 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIDEX CORP CENTRAL INDEX KEY: 0000047254 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 060682273 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-05513 FILM NUMBER: 98659031 BUSINESS ADDRESS: STREET 1: 61 WILTON RD CITY: WESTPORT STATE: CT ZIP: 06880-3121 BUSINESS PHONE: 2032261144 MAIL ADDRESS: STREET 1: 61 WILTON ROAD CITY: WESTPORT STATE: CT ZIP: 06880-3121 FORMER COMPANY: FORMER CONFORMED NAME: HI G INC DATE OF NAME CHANGE: 19840829 8-K/A 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------------- FORM 8-K/A AMENDMENT TO APPLICATION OR REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 TRIDEX CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) AMENDMENT NO. 1 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report, dated April 30, 1998, on Form 8-K as set forth in the pages attached hereto: (List all such items, financial statements, exhibits or other portions amended) Item 7. Financial Statements and Exhibits Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. TRIDEX CORPORATION (Registrant) By: /s/ Seth M. Lukash --------------------------- Seth M. Lukash Chairman of the Board and Chief Executive Officer June 30, 1998 Page 1 of 21
Item 7. Financial Statements and Exhibits. Page No. (a) Financial statements of businesses acquired Progressive Software, Inc., Financial Statements 3 (b) Pro forma financial information Tridex Corporation and Subsidiaries pro forma consolidated condensed financial statements: Unaudited Pro Forma Consolidated Condensed Financial Information 14 Pro Forma Consolidated Condensed Statement of Income for the year ended December 31, 1997 15 Pro Forma Consolidated Condensed Statement of Income For the quarter ended March 31, 1998 16 Pro Forma Consolidated Condensed Balance Sheet at March 31, 1998 17 Notes to Unaudited Pro Forma Consolidated Condensed Financial Information 18 (c) Exhibits Exhibit 24.1 Consent of Independent Accountants (RE: Registration Statements on Form S-8) 20 Exhibit 24.2 Consent of Independent Accountants (RE: Registration Statements on Form S-8) 21
2 PROGRESSIVE SOFTWARE, INC. FINANCIAL REPORT DECEMBER 31, 1997 3 CONTENTS
- ------------------------------------------------------------------------------- INDEPENDENT AUDITOR'S REPORT - McGladrey & Pullen, LLP 5 - ------------------------------------------------------------------------------- INDEPENDENT AUDITOR'S REPORT - Arthur Andersen LLP 6 - ------------------------------------------------------------------------------- FINANCIAL STATEMENTS Balance sheets 7 Statements of income 8 Statements of stockholder's equity (deficit) 9 Statements of cash flows 10 Notes to financial statements 11 - 13 - -------------------------------------------------------------------------------
4 INDEPENDENT AUDITOR'S REPORT To the Stockholder of Progressive Software, Inc. We have audited the accompanying balance sheets of Progressive Software, Inc. as of December 31, 1997 and 1996, and the related statements of income, stockholder's equity (deficit), and cash flows for the years then ended. 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 Progressive Software, Inc. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ McGLADREY & PULLEN, LLP Charlotte, North Carolina February 4, 1998, except for the last sentence of Note 2 and Note 7 as to which the date is April 17, 1998 5 Report of Independent Public Accountants To the Stockholder of Progressive Software, Inc.: We have audited the accompanying statements of income, changes in stockholder's equity and cash flows of Progressive Software, Inc. for the year ended December 31, 1995. 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 audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Progressive Software, Inc. for the year ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Arthur Andersen, LLP Charlotte, North Carolina, November 21, 1996 (except with respect to the matter discussed in Note 7, as to which the date is April 17, 1998). 6 PROGRESSIVE SOFTWARE, INC. BALANCE SHEETS December 31, 1997 and 1996
ASSETS 1997 1996 - ----------------------------------------------------------------- --------------------- -------------------- Current Assets Cash and cash equivalents $ 93,220 $ 317,501 Accounts receivable, net of allowance for doubtful accounts of $95,000 in 1997 and $22,000 in 1996 (Notes 2 and 4) 4,223,773 3,043,217 Advances to employees 39,891 40,685 Inventory, net of allowance for obsolete inventory of $50,000 for 1997 and 1996 (Note 2) 4,567,492 5,433,001 Loan to related parties (Note 6) 585,901 556,833 --------------------- -------------------- Total current assets 9,510,277 9,391,237 --------------------- -------------------- Equipment and leasehold improvements (Note 3) Office furniture 626,660 483,747 Computer equipment 558,080 269,688 Leasehold improvements 147,816 120,442 Vehicles 34,409 - --------------------- -------------------- --------------------- -------------------- 1,366,965 873,877 Accumulated depreciation (305,255) (122,511) --------------------- -------------------- --------------------- -------------------- 1,061,710 751,366 --------------------- -------------------- --------------------- -------------------- Other assets Capitalized software development costs, net of accumulated amortization of $97,320 in 1997 and $0 in 1996 1,308,476 269,537 --------------------- -------------------- Total assets $ 11,880,463 $ 10,412,140 --------------------- -------------------- --------------------- --------------------
LIABILITIES AND STOCKHOLDER'S EQUITY - ----------------------------------------------------------------- --------------------- -------------------- Current liabilities Line of credit (Note 2) $ 8,763,938 $ 6,317,650 Current maturity of capital lease obligation (Note 3) 8,413 - Accounts payable 1,949,098 2,583,828 Accrued expenses (Note 3) 450,896 175,194 Deferred revenue 703,187 4,420 --------------------- -------------------- --------------------- -------------------- Total current liabilities 11,875,532 9,081,092 --------------------- -------------------- --------------------- -------------------- Long-term portion of capital lease obligation (Note 3) 8,731 - --------------------- -------------------- --------------------- -------------------- Commitments (Note 3) Stockholder's equity (deficit): Common stock, par value $181.50 per share, 100,000 shares authorized, 10,000 shares issued and outstanding 1,815,000 1,815,000 Retained deficit (Note 2) (1,818,800) (483,952) --------------------- -------------------- --------------------- -------------------- Total stockholder's equity (deficit) (3,800) 1,331,048 --------------------- -------------------- --------------------- -------------------- Total liabilities and stockholder's equity (deficit) $ 11,880,463 $ 10,412,140 --------------------- -------------------- --------------------- --------------------
See Notes to Financial Statements 7 PROGRESSIVE SOFTWARE, INC. STATEMENTS OF INCOME Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995 - ------------------------------------------------------- ----------------- ----------------- ---------------- Sales (Note 4) $ 33,817,965 $ 28,347,931 $ 16,648,526 Cost of sales 23,772,489 20,796,484 11,132,307 Amortization of capitalized software 97,320 - - ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- Gross profit 9,948,156 7,551,447 5,516,219 ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- Selling expenses 885,646 588,013 91,870 General and administrative expenses 5,492,775 4,048,009 2,132,523 Product development expenses 1,367,665 1,245,794 1,283,565 Depreciation expenses 182,745 99,303 21,662 ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- 7,928,831 5,981,119 3,529,620 ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- Operating income 2,019,325 1,570,328 1,986,599 ----------------- ----------------- ---------------- Financial income (expenses): Interest income 10,198 40,456 26,222 Interest expense (691,724) (448,627) (242,789) ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- (681,526) (408,171) (216,567) ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- Net income $ 1,337,799 $ 1,162,157 $ 1,770,032 ----------------- ----------------- ---------------- ----------------- ----------------- ----------------
See Notes to Financial Statements. 8 PROGRESSIVE SOFTWARE, INC. STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT) Years Ended December 31, 1997, 1996 and 1995
Retained Total Earnings Stockholder's Common Stock (Deficit) Equity (Deficit) - ------------------------------------------------- ------------------ ------------------- ------------------- Balance, December 31, 1994 $ 1,815,000 $ 1,798,852 $ 3,613,852 Net income - 1,770,032 1,770,032 Distributions - (3,441,153) (3,441,153) ------------------ ------------------- ------------------- Balance, December 31, 1995 $ 1,815,000 $ 127,731 $ 1,942,731 Net income - 1,162,157 1,162,157 Distributions - (1,773,840) (1,773,840) ------------------ ------------------- ------------------- Balance, December 31, 1996 $ 1,815,000 $ (483,952) $ 1,331,048 Net income - 1,337,799 1,337,799 Distributions - (2,672,647) (2,672,647) ------------------ ------------------- ------------------- ------------------ ------------------- ------------------- Balance, December 31, 1997 $ 1,815,000 $ (1,818,800) $ (3,800) ------------------ ------------------- ------------------- ------------------ ------------------- -------------------
See Notes to Financial Statements. 9 PROGRESSIVE SOFTWARE, INC. STATEMENTS OF CASH FLOWS Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995 - ------------------------------------------------------- ----------------- ---------------- ----------------- Cash Flows from Operating Activities: Net income $ 1,337,799 $ 1,162,157 $ 1,770,032 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 280,065 99,303 21,662 Gain on disposition of equipment - - (500) Decrease (increase) in: Accounts receivable, net (1,180,556) (1,113,709) 169,130 Advances to employees 794 (18,866) (8,119) Inventory, net 15,061,650 11,128,301 13,913,628 Other current assets - 33,616 (33,616) Increase (decrease) in: Accounts payable (659,730) 1,793,183 614,470 Accrued expenses 275,702 168,096 (3,891) Deferred revenue 698,767 (46,398) - Payments under line of credit agreement (11,749,853) (10,364,618) (13,521,457) ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Net cash provided by operating activities 4,064,638 2,841,065 2,921,339 ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Cash Flows from Investing Activities: Proceeds on disposition of property and equipment - - 16,250 Purchase of equipment (442,880) (534,417) (276,910) Loan to related parties (585,901) (556,833) - Capitalized software development cost (1,136,259) (269,537) - ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Net cash used in investing activities (2,165,040) (1,360,787) (260,660) ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Cash Flows from Financing Activities: Distributions (2,115,814) (1,773,840) (3,441,153) Payments on capital lease obligation (8,065) - - ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Net cash used in financing activities (2,123,879) (1,773,840) (3,441,153) ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Net decrease in cash and cash equivalents (224,281) (293,562) (780,474) Cash and cash equivalents, beginning of year 317,501 611,063 1,391,537 ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Cash and equivalents, end of year $ 93,220 $ 317,501 $ 611,063 ----------------- ---------------- ----------------- ----------------- ---------------- ----------------- Supplemental disclosures of cash flow information - interest paid $ 664,283 $ 411,997 $ 236,142 Supplemental schedule of non-cash investing and financing activities: Line of credit draws to acquire inventory $ 14,196,141 $ 12,885,897 14,855,613 Shareholder loan charged to distributions 556,883 - - Capital lease obligation incurred for purchase of equipment 25,209 - - Equipment purchased on account 25,000 - - See Notes to Financial Statements.
10 PROGRESSIVE SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------ Note 1. Nature of Business and Significant Accounting Policies NATURE OF BUSINESS: The Company is an International Business Machines Corporation (IBM) Remarketer and Business partner specializing in point-of-sale and back office applications for restaurant and retail customers located throughout the United States. The Company's warehouse and corporate office is located in Charlotte, North Carolina. The Company also maintains offices in Washington, Colorado, Georgia, Indiana and California. IBM hardware and service is combined with design, software, implementation, and support services provided by the Company to provide customized solutions for each customer's needs. A summary of the Company's significant accounting policies follows: CASH AND CASH EQUIVALENTS: For the purpose of reporting cash flows, the Company considers all cash and temporary investments (overnight cash investments) to be cash and cash equivalents. CREDIT RISK: The corporation maintains demand deposits with the bank, the balances of which at times throughout the year exceed federally insured amounts. INVENTORY: Inventory, which consists entirely of computer equipment used with the software applications developed and installed by the Company, is stated at the lower of cost, as measured on a weighted-average basis, or market value. EQUIPMENT: Equipment and leasehold improvements are stated at cost. Depreciation expense, which includes amortization of assets acquired under capital leases, is computed primarily by the straight line method over the following estimated useful lives:
Useful Life in Years Computer equipment 5 Furniture and fixtures 7 Leasehold improvements 7 Vehicles 5
REVENUE RECOGNITION: Revenue includes hardware sales, design, implementation and support of software systems, and related consultation services. Revenue on hardware and software sales is recognized upon delivery to the customer. Service revenue is recognized as the related services are performed. COST OF SALES: Cost of sales includes those material costs incurred related to hardware/software packages sold. DEFERRED REVENUE: Deferred revenue includes cash received for services not yet performed or when the earnings process is not yet complete. CAPITALIZED SOFTWARE AND PRODUCT DEVELOPMENT EXPENSES: In accordance with the provisions of Financial Accounting Standards Number 86, during 1996 and 1997, the Company capitalized a total of $1,405,796 of production costs related to the development of the windows version of the Company's computer software products, which is being amortized over a period of five years. According to FASB 86, capitalization of computer software development should begin when technological feasibility exists, which is defined as the completion of a working model. The initial working model was rolled out for testing in October 1996. Product development expenses of $1,367,665, $1,245,894 and $219,950 incurred during the years ended December 31, 1997, 1996 and 1995, respectively, include the costs of developing the Windows version of the computer software up to the point of technological feasibility and the continual enhancements to the DOS version of the software. These costs are expensed when incurred. CONCENTRATION OF CREDIT RISK: Substantially all of the Company's sales are to the restaurant and retail industries located throughout the United States. The Company generally does not require collateral for its accounts receivable. The Company performs ongoing credit evaluations of its customers' financial conditions. 11 PROGRESSIVE SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Note 1. Nature of Business and Significant Accounting Policies (Continued) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions. These affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INCOME TAXES: The Company has elected to be treated as an S Corporation for federal and North Carolina state income tax purposes. As such, substantially all income or losses of the Company are reported by the stockholder of the Company on his individual tax return. Therefore, the Company does not provide for income taxes or tax liabilities in its financial statements. The Company's policy is to distribute amounts adequate to cover the stockholder's tax obligation resulting from the taxable income of the Company. Historically the Company has distributed amounts in excess of tax obligation of the shareholder. Note 2. Line of Credit The Company has a $10,000,000 line of credit with IBM. The line of credit is for equipment financing under its remarketing agreement. The outstanding balance is due on demand and is secured by the Company's accounts receivable and inventory. Principal and interest are due on the fifth, fifteenth and twenty-fifth of each month according to the terms of each billing statement received. Interest is due on these dates, ranging from prime rate plus 1.25% to prime rate plus 1.50%, depending on the payment option elected (30 to 180-day terms). The prime rate was 8.50% and 8.25% at December 31, 1997 and 1996, respectively. The Company had $8,763,938 and $6,317,650 outstanding as of December 31, 1997 and 1996, respectively. The line of credit is personally guaranteed by the shareholder of the Company. In addition, the line of credit contains various restrictions on operations and other matters and requires certain financial ratios to be maintained and requires all other debt to be subordinate to the line of credit. As of December 31, 1997 and 1996, the Company was not in compliance with certain of these loan covenant provisions. IBM has waived these covenant violations as of December 31, 1997 and 1996; however, they have not been waived through the maturity date and IBM has the right to request the line of credit to be paid on demand. See note 7. Note 3. Commitments The Company leases a building under an operating lease agreement expiring December 31, 2000, from a limited partnership in which the shareholder of Progressive Software, Inc. is a partner. The lease requires annual rent of $342,000. The agreement also requires the Company to pay all property taxes, normal maintenance, and insurance on the property. The Company leases a vehicle under a capital lease agreement, which requires monthly payments of $793 through December of 1999, and is collateralized by the vehicle with a carrying value of $24,671. The Company leases certain vehicles and office space that are accounted for as operating leases. As of December 31, 1997, future minimum rental payments, under the above leases are as follows:
Years ending December 31 Capital Lease Operating Leases Total - ---------------------------------------------- -------------------- -------------------- ------------------- 1998 $ 9,514 $ 414,629 $ 424,143 1999 9,108 382,328 391,436 2000 - 342,000 342,000 -------------------- -------------------- ------------------- -------------------- ------------------- -------------------- ------------------- Total minimum lease payments $ 18,622 $ 1,138,957 $ 1,157,579 -------------------- ------------------- -------------------- ------------------- Less the amount representing interest (1,478) -------------------- -------------------- -------------------- Present value of net minimum lease payments $ 17,144 -------------------- --------------------
Total rent expense included in the statement of income is $538,041 for 1997, $420,936 for 1996 and $212,174 for 1995. 12 PROGRESSIVE SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Note 3. Commitments (continued) The Company has sales to customers located in numerous states. Some of these sales may be subject to state and local sales taxes if the customer is not exempt or self-assessing. The Company has recognized an accrued expense of approximately $100,000 as an estimate of their liability at December 31, 1997. Note 4. Major Customers Net sales for the years ended December 31, 1997, 1996 and 1995 include sales to the following major customers, together with the receivables due from those customers as of December 31, 1997 and 1996:
Amount of Net Sales For Year Ended December 31, ------------------------------------------------------------- 1997 1996 1995 -------------------- -------------------- ------------------- -------------------- -------------------- ------------------- Customer A $ 3,187,508 $ 5,066,245 $ 918,447 Customer B 432,634 3,858,346 - Customer C 7,774,149 6,151,357 4,412,917 Customer D 1,634,522 2,989,101 - Customer E 3,624,086 - - -------------------- -------------------- ------------------- -------------------- -------------------- ------------------- $ 16,652,899 $ 18,065,049 $ 5,331,364 -------------------- -------------------- ------------------- -------------------- -------------------- -------------------
Accounts Receivable As Of December 31, ----------------------------------------- 1997 1996 -------------------- -------------------- -------------------- -------------------- Customer A $ 187,768 $ 300,056 Customer B - 21,632 Customer C 1,610,501 529,290 Customer D 181,787 1,007,710 Customer E 15,373 - -------------------- -------------------- -------------------- -------------------- $ 1,995,429 $ 1,858,688 -------------------- -------------------- -------------------- --------------------
Note 5. Profit-Sharing 401(k) Plan The Company has a qualified profit-sharing 401(k) plan for all employees who work 1,000 hours or more a year, upon the attainment of age 21 and the completion of one year of service. The Company matches 50% of the participant's contribution up to 6% of their compensation, but not in excess of $750. The amount charged to expense was $46,252 for 1997, $21,305 for 1996 and $18,836 for 1995. Note 6. Related Party Transactions At December 31, 1997, in addition to the lease described in note 3 and the distributions of $2,672,647 reflected on the statement of stockholder's equity, the Company has an unsecured, noninterest bearing demand note for $585,901 from a corporation in which the shareholder of Progressive Software, Inc. is also a shareholder Note 7. Subsequent Event - Sale of Business On April 17, 1998, the Company's shareholder sold the business to Tridex Corporation, an unrelated entity, based on the market value of the Company. Tridex Corporation repaid the line of credit with IBM in full. Note 8. Future Reporting Requirements The American Institute of Certified Public Accountants has issued Statement of Position 97-2, Software Revenue Recognition, which the Company has not been required to adopt as of December 31, 1997. The Statement is effective for all software contracts entered into on or after January 1, 1998. According to the Statement of Position, revenue is to be recognized when the following four criteria have been met: 1) persuasive evidence of an arrangement exists, 2) delivery has occurred, 3) the vendor's fee is fixed or determinable and, 4) collectibility is probable. Management anticipates that the effect of adopting Statement of Position 97-2 will not have a significant impact on the Company. 13 TRIDEX CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION The Unaudited Pro Forma Consolidated Condensed Statements of Income of Tridex Corporation ("Tridex" or the "Company") for the year ended December 31, 1997 and the quarter ended March 31, 1998 and the Unaudited Pro Forma Consolidated Condensed Balance Sheet as of March 31, 1998 (collectively the "Pro Forma Financial Statements") have been prepared to illustrate the estimated effects of the acquisition of Progressive Software Inc. ("Progressive") by the Company. The Pro Forma Financial Statements do not reflect any anticipated cost savings or any other benefits that are anticipated to result from the Progressive acquisition and there can be no assurance that any such cost savings or other benefits will occur. The Unaudited Pro Forma Consolidated Condensed Statements of Income give pro forma effect to the Progressive acquisition as if it had occurred January 1, 1997. The Unaudited Pro Forma Consolidated Condensed Balance Sheet gives pro forma effect to the acquisition of Progressive as if it occurred on March 31, 1998. The Pro Forma Financial Statements do not purport to be indicative of the results of operations or financial position of the Company that would have actually been obtained had such transactions been completed as of the assumed dates and for the periods presented or which may be obtained in the future. The pro forma adjustments are described in the accompanying notes and are based on available information and certain assumptions that the Company believes are reasonable. These Pro Forma Financial Statements should be read in conjunction with: (i) the separate historical consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997 and Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and (ii) the financial statements of Progressive and the notes thereto included elsewhere in this Form 8-K/A. A preliminary allocation of purchase price has been estimated based on available information and is subject to the final purchase price settlement. The actual allocation of purchase price and the resulting effect on income from operations may differ significantly from the pro forma amounts included herein. Consequently the Pro Forma Financial Statements are subject to change and the final amounts may differ substantially. 14 TRIDEX CORPORATION AND SUBSIDIARIES Pro Forma Consolidated Condensed Statement of Income For the Year Ended December 31, 1997 (Dollars in thousands, except per share amounts) UNAUDITED
Progressive Tridex Software, Corporation Inc. Pro Forma Historical Historical Adjustments Pro Forma - -------------------------------------------- --------------- --------------- ---------------- --------------- Net sales $ 25,833 $ 33,818 $ 59,651 Operating costs and expenses: Cost of sales 19,629 23,773 43,402 Engineering, design and product development costs 693 1,368 2,061 Selling, administrative and general expenses 5,661 6,378 12,039 Depreciation and amortization expense 864 280 $ 2,960 (a) 4,104 --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- 26,847 31,799 2,960 61,606 --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- Operating income (loss) (1,014) 2,019 (2,960) (1,955) Other charges (income): Interest (income) expense, net (603) 681 2,531 (b) 2,609 Other, net 201 201 --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- Income (loss) before income taxes (612) 1,338 (5,491) (4,765) Income tax benefit (44) (1,528)(c) (1,572) --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- Income (loss) from continuing operations (568) 1,338 $ (3,963) $ (3,193) ---------------- --------------- ---------------- --------------- Discontinued operations 533 --------------- --------------- --------------- --------------- Net income (loss) $ (35) $ 1,338 --------------- --------------- --------------- --------------- Loss per share - basic and diluted: Loss from continuing operations $ (0.11) $ (0.52) --------------- --------------- Income from discontinued operations 0.10 --------------- --------------- Net loss $ (0.01) --------------- --------------- Average common shares outstanding 5,157,000 999,714 (d) 6,156,714 --------------- ---------------- --------------- --------------- ---------------- ---------------
TRIDEX CORPORATION AND SUBSIDIARIES Pro Forma Consolidated Condensed Statement of Income For the Quarter Ended March 31, 1998 (Dollars in thousands, except per share amounts) UNAUDITED
Progressive Tridex Software, Corporation Inc. Pro Forma Historical Historical Adjustments Pro Forma - -------------------------------------------- --------------- --------------- ---------------- --------------- Net sales $ 6,212 $ 4,917 $ 11,129 Operating costs and expenses: Cost of sales 4,746 2,911 7,657 Engineering, design and product development costs 280 948 1,228 Selling, administrative and general expenses 1,091 1,374 2,465 Depreciation and amortization expense 229 58 $ 740 (a) 1,027 --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- 6,346 5,291 740 12,377 --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- Operating loss (134) (374) (740) (1,248) Other charges (income): Interest (income) expense, net (226) 267 620 (b) 661 Other, net (1) (1) --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- Income (loss) before income taxes 93 (641) (1,360) (1,908) Income tax provision (benefit) 46 (695)(c) (649) --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- Net income (loss) $ 47 $ (641) $ (665) $ (1,259) --------------- --------------- ---------------- --------------- --------------- --------------- ---------------- --------------- Earnings (loss) per share basic and diluted: Net income (loss) $ 0.01 $ (0.20) --------------- --------------- --------------- --------------- Average common shares outstanding 5,351,000 999,714 (d) 6,350,714 --------------- ---------------- --------------- --------------- ---------------- ---------------
16 TRIDEX CORPORATION AND SUBSIDIARIES Pro Forma Consolidated Condensed Balance Sheet March 31, 1998 (Dollars in thousands) UNAUDITED
Pro Forma Adjustments ------------------------------ -------------- --------------- Proceeds Progressive from Payment of Tridex Software, Issuance of Purchase Price Corporation Inc. Debt and Historical Historical Stock Pro Forma ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ (e) (f) ASSETS Current assets: Cash and cash equivalents $ 16,708 $ 26,751 $ (43,051) $ 408 Receivables 3,445 $ 3,845 2,251 (h) 9,541 Inventories 3,839 4,583 8,422 Deferred taxes and other current assets 817 451 (451) 817 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ Total current assets 24,809 8,879 26,751 (41,251) 19,188 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ Plant and equipment, net 1,212 1,073 2,285 Excess of cost over fair value of net assets acquired and other intangibles 2,392 14,801 17,193 Deferred tax assets 206 10,520 10,726 Other assets 300 1,338 (1,338) 300 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ $ 28,919 $ 11,290 $ 26,751 $ (17,268) $ 49,692 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank loan payable $ 9,137 $ 1,751 $ (9,137) $ 1,751 Current portion of long term debt 1,200 1,200 Accounts payable, accrued liabilities and income taxes payable $ 4,638 1,927 1,835 8,400 Deferred revenue 1,042 1,042 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ Total current liabilities 4,638 12,106 2,951 (7,302) 12,393 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ Long term debt, less current portion: Term loan payable 10,800 10,800 Senior subordinated notes, net of discount 9,772 9,772 ------------- ------------- -------------- --------------- ------------ 0 0 20,572 0 20,572 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ Shareholders' equity: Common stock, at stated value 1,377 1,815 71 (g) (1,636)(g) 1,627 Additional paid-in capital 25,273 3,157 (g) 4,819 (g) 33,249 Accumulated deficit (626) (2,631) (13,149)(g) (16,406) ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ 26,024 (816) 3,228 (9,966) 18,470 Receivable from sale of stock (801) (801) Common shares held in treasury, at cost (942) (942) ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ 24,281 (816) 3,228 (9,966) 16,727 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------ $ 28,919 $ 11,290 $ 26,751 $ (17,268) $ 49,692 ------------- ------------- -------------- --------------- ------------ ------------- ------------- -------------- --------------- ------------
17 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (a) The additional amortization expense is the amortization of purchased software technology and the excess of cost over fair value of net assets acquired ($14,801 over five years). (b) Reflects adjustments for additional interest expense assuming the Progressive acquisition occurred on January 1, 1997 as follows:
Year ended Three months Imputed December 31, Ended March 31, Rate Amount 1997 1998 ---- ------ ---- ---- Term loan 8.15% $11,550 $941 $244 Subordinated debt 13.86% $11,000 1,525 381 Working capital facility 8.15% $1,751 143 36 ------------------- ------------------ Total pro forma interest expense 2,609 661 Less historical Tridex/Progressive interest expense (78) (41) ------------------- ------------------ ------------------- ------------------ Total pro forma interest expense adjustment $2,531 $620 ------------------- ------------------ ------------------- ------------------
The Company estimates that an increase or decrease in interest rates on variable rate debt of 1/8% would increase or decrease annual interest expense by approximately $17. The Company has obtained instruments that hedge against interest rate movements on one-half of the term loan balance. (c) The adjustment to the provision for income taxes eliminates the provision for income taxes recorded by Tridex and records the net tax benefit at an estimated rate of 33% in the year ended December 31, 1997 and 34% in the quarter ended March 31, 1998. (d) The additional shares represent (i) 714,000 shares issued (at $7.00 per share) to the selling shareholder of Progressive, as part of the purchase price for Progressive and (ii) 285,714 shares sold to Massachusetts Mutual Life Insurance Company and certain related entities at $7.00 per share to finance part of the cash portion of the purchase price. In connection with the acquisition, the Company also (i) adopted the 1998 Non-Executive Long Term Incentive Plan, under which options to purchase 195,500 shares of Common Stock at $7.00 per share were granted to non-executive employees of Progressive and (ii) issued options to certain officers of Progressive under the existing 1997 Long Term Incentive Plan to purchase 65,000 shares of Common Stock at $7.00 per share. (e) Reflects the sources and uses of funds for the Progressive acquisition, assuming the Progressive acquisition occurred as of March 31, 1998:
Sources of funds: Cash of the Company $16,300 Issuance of common stock and warrants 3,228 Senior term loan 12,000 Revolving line of credit 1,751 Senior subordinated notes 9,772 ------------------------- ------------------------- Total sources of funds $43,051 ------------------------- ------------------------- Uses of funds: Cash consideration for Progressive acquisition $33,914 Repayment of Progressive line of credit 9,137 ------------------------- ------------------------- Total uses of funds $43,051 ------------------------- -------------------------
18 (f) The estimated purchase price and preliminary adjustments to the historical book value of Progressive are as follows:
Purchase price: Estimated value of cash and stock issued $46,249 Book value of net liabilities assumed 816 Acquisition expenses 1,835 ------------------------- ------------------------- Purchase price in excess of net liabilities assumed $48,900 ------------------------- ------------------------- Preliminary allocation of purchase price in excess of net liabilities assumed: Assumed debt $9,137 Write-off of capitalized software cost (1,338) In-process technology 26,300 Estimated goodwill and other intangibles 14,801 ------------------------- ------------------------- Total $48,900 ------------------------- -------------------------
The Company estimates that $26,300 of the purchase price represents purchased in-process technology that has not yet reached technological feasibility and has no alternative future use. This amount will be expensed as a non-recurring charge upon completion of the acquisition. This amount has been reflected as an increase to accumulated deficit and has not been included in the Pro Forma Consolidated Condensed Statement of Income due to its non-recurring nature. (g) The adjustments to common stock, additional paid-in capital and accumulated deficit as a result of the Progressive acquisition are as follows:
Pro Forma Adjustments -------------------------------------- Issuance of Payment of Common stock: Common Stock Purchase Price ----------------- ------------------- Issuance of common stock, stated value $ 71 $ 179 Elimination of Progressive common stock (1,815) ----------------- ------------------- Total pro forma adjustments $ 71 $(1,636) ----------------- ------------------- ----------------- ------------------- Additional paid in capital: Issuance of common stock $ 1,929 $ 4,819 Value of warrants issued in connection with senior subordinated notes 1,228 ----------------- ------------------- Total pro forma adjustments $ 3,157 4,819 ----------------- ------------------- ----------------- ------------------- Accumulated deficit: Elimination of Progressive accumulated deficit $ 2,631 Write-off of in-process technology, net of income tax benefit (15,780) ----------------- ------------------- ----------------- ------------------- Total pro forma adjustments $(13,149) ----------------- ------------------- ----------------- -------------------
(h) Represents estimate of amount due from seller based on certain purchase price adjustments. 19 EX-24.1 2 EXHIBIT 24.1 Exhibit 24.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Tridex Corporation Registration Statements on Form S-8 (No. 333-52555, No. 333-52557 and No. 333-52559) and in the related Prospectuses, of our report, dated February 4, 1998, except for the last sentence of Note 2 and Note 7 as to which the date is April 17, 1998, relating to the financial statements of Progressive Software, Inc., included in the Form 8-K/A Amendment No. 1 for the years ended December 31, 1997 and 1996. /s/ McGLADREY & PULLEN, LLP Charlotte, NC June 30, 1998 20 EX-24.2 3 EXHIBIT 24.2 Exhibit 24.2 Consent of Independent Accountants As independent public accountants, we hereby consent to the incorporation by reference of our report dated November 21, 1996, on the statements of income, stockholder's equity and cash flow of Progressive Software, Inc. for the year ended December 31, 1995, included on page 6 of this Form 8-K/A, into the Registration Statement on Form S-8 of the Tridex Corporation 1997 Long Term Incentive Plan (file number 333-52559), Registration Statement on Form S-8 of the Tridex Corporation Non-Employee Directors' Stock Plan (file number 333-52555) and Registration Statement on Form S-8 of the 1998 Tridex Corporation Non-Executive Long Term Incentive Plan (file number 333-52557). /s/ Arthur Andersen, LLP Charlotte, North Carolina June 30, 1998 21 -----END PRIVACY-ENHANCED MESSAGE-----