<PAGE>
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): MAY 1, 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
<PAGE>
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 May 15, 1997.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
The following audited financial statements of Protective Alarms, Inc. as of
and for the years ended September 30, 1996 and 1995 are provided herein:
(1) Independent Auditors' Report
(2) Balance Sheets as of September 30, 1996 and 1995
(3) Statements of Operations and Retained Earnings for the years ended
September 30, 1996 and 1995
(4) Statements of Cash Flows for the years ended September 30, 1996 and
1995
(5) Notes to Financial Statements for the years ended September 30, 1996
and 1995
(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 Security Systems Holdings,
Inc., a Delaware corporation ("SSH"), 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
<PAGE>
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
<PAGE>
ITEM 7. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Protective Alarms, Inc.
Greenwich, Connecticut
We have audited the accompanying balance sheets of Protective Alarms, Inc. (the
"Company") as of September 30, 1996 and 1995, and the related statements of
operations and retained earnings 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of September 30, 1996 and
1995, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
table of contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements. This schedule is the
responsibility of the Company's management. Such schedule has been subjected to
the auditing procedures applied in our audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects when considered
in relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP
December 20, 1996 (except for Notes 3, 4 and 9, for which the
date is April 30, 1997)
4
<PAGE>
PROTECTIVE ALARMS, INC.
BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 243,305 $ 117,245
Investment in marketable securities - 28,060
Accounts receivable (net of allowance for doubtful accounts of
$71,064 and $77,244 in 1996 and 1995, respectively) 1,378,064 1,498,898
Income taxes receivable 130,000 104,385
Inventories 289,642 300,132
Notes receivable 34,351 35,299
Prepaid expenses and other current assets 133,100 152,636
---------- ----------
Total current assets 2,208,462 2,236,655
---------- ----------
PROPERTY AND EQUIPMENT:
Equipment, furniture and fixtures 419,043 373,495
Leasehold improvements 620,093 616,893
Leased equipment 564,827 495,224
Vehicles 142,933 130,192
---------- ----------
1,746,896 1,615,804
Less accumulated depreciation and amortization 986,638 828,550
---------- ----------
Net property and equipment 760,258 787,254
DEBT ISSUANCE COSTS - Net 53,016 79,525
CUSTOMER LISTS - Net 1,081,322 1,651,602
OTHER ASSETS 7,500 7,500
---------- ----------
TOTAL ASSETS $4,110,558 $4,762,536
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 16,676 $ 6,066
Accounts payable 332,870 322,436
Accrued expenses 462,394 293,669
Short-term debt 286,550 100,000
Current portion of long-term debt 1,433,042 566,222
Deferred revenues 1,071,282 1,274,350
---------- ----------
Total current liabilities 3,602,814 2,562,743
LONG-TERM DEBT 13,551 1,444,687
---------- ----------
Total liabilities 3,616,365 4,007,430
---------- ----------
COMMITMENTS AND CONTINGENCIES (See Notes)
SHAREHOLDERS' EQUITY:
Common stock, no par value; 5,000 shares authorized,
100 shares issued and outstanding 5,000 5,000
Retained earnings 489,193 750,106
---------- ----------
Total shareholders' equity 494,193 755,106
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,110,558 $4,762,536
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
5
<PAGE>
PROTECTIVE ALARMS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
REVENUE $7,221,632 $7,427,719
COST OF GOODS SOLD 3,501,805 3,688,278
---------- ----------
Gross profit 3,719,827 3,739,441
---------- ----------
OPERATING EXPENSES:
Selling, general and administrative 2,857,734 3,017,349
Depreciation and amortization 651,410 608,291
Loss on disposal of asset 217,500 -
---------- ----------
Total operating expenses 3,726,644 3,625,640
---------- ----------
(LOSS) INCOME FROM OPERATIONS (6,817) 113,801
OTHER INCOME (EXPENSE):
Interest expense (223,119) (234,497)
Management fees (165,960) (165,157)
Other income 2,766 3,173
---------- ----------
LOSS BEFORE INCOME TAX BENEFIT (393,130) (282,680)
INCOME TAX BENEFIT 132,217 84,737
---------- ----------
NET LOSS (260,913) (197,943)
RETAINED EARNINGS , BEGINNING OF YEAR 750,106 948,049
---------- ----------
RETAINED EARNINGS, END OF YEAR $ 489,193 $ 750,106
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
6
<PAGE>
PROTECTIVE ALARMS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (260,913) $ (197,943)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 651,410 608,291
Provision for losses on accounts receivable 90,309 135,200
Gain on sale of marketable securities (3,940) -
Writedown of marketable securities 12,000 2,508
Decrease (increase) in deferred tax assets 2,580 (28,650)
Loss on disposal of asset 217,500 -
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 30,525 (861,395)
Decrease (increase) in notes receivable 948 (35,299)
Increase in income taxes receivable (25,615) (104,385)
Decrease in inventory 10,490 187,442
Increase (decrease) in prepaid expenses 16,956 (26,756)
Increase in accounts payable 10,434 68,004
Increase in accrued expenses 168,725 120,525
(Decrease) increase in deferred revenues (203,068) 606,884
---------- ----------
Net cash provided by operating activities 718,341 474,426
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (131,091) (284,311)
Purchase of marketable securities - (7,500)
Increase in customer lists (114,034) (17,678)
Proceeds from sale of marketable securities 20,000 -
---------- ----------
Net cash used in investing activities (225,125) (309,489)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt and note payable 203,226 100,000
Proceeds from long-term debt - 28,932
Principal payments on long-term debt (564,316) (582,077)
Principal payments on note payable (6,066) (38,381)
---------- ----------
Net cash used in financing activities (367,156) (491,526)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 126,060 (326,589)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 117,245 443,834
---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 243,305 $ 117,245
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes (refund) paid $ (91,431) $ 6,406
---------- ----------
---------- ----------
Interest paid $ 225,829 $ 234,497
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
7
<PAGE>
PROTECTIVE ALARMS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Protective Alarms, Inc. (the "Company"), was incorporated under the laws of
the State of Connecticut on October 21, 1977 with operations throughout the
tri-state area (primarily Connecticut and New York), and is engaged in the
business of selling, installing, servicing and monitoring residential and
commercial security systems.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS - The allowance for doubtful accounts is
based on management's analysis of the net realizable value of accounts
receivable.
INVENTORIES - Inventories consist of security equipment and related
protection items and is stated at the lower of cost (determined on an
average cost method) or market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost and are
depreciated for book purposes using the straight-line method over the
estimated useful lives of the assets. The modified accelerated cost
recovery system is used for tax purposes. Leasehold improvements are
amortized over the shorter of their useful lives or the related lease life.
The estimated useful lives by class of assets are as follows:
LIFE
Equipment, furniture and fixtures 5 to 7 years
Leasehold improvements 10 to 30 years
Leased equipment 5 years
Vehicles 5 years
Expenditures for maintenance and repairs are charged to expense as
incurred. Expenditures which materially increase value, improve
capacities, or extend useful lives are capitalized. Upon sale or
retirement, the costs and related accumulated depreciation or amortization
are eliminated from the respective accounts and any resulting gain or loss
is included in operations.
INTANGIBLES - Debt issuance costs are amortized over five years, the life
of the related debt agreement. Customer lists are stated at cost and are
amortized using the straight-line method over ten years, their estimated
useful life. During the year ended September 30, 1996 the Company
terminated an exclusive agreement to distribute fireproof clothing. As a
result, the remaining net costs of $217,500 which was expended in obtaining
the agreement was written off.
The Company periodically evaluates the recoverability of its intangible
assets by assessing whether the unamortized asset can be recovered over its
remaining life through estimated future cash flows. Except as noted above,
the years ended September 30, 1996 and 1995, there were no adjustments to
the carrying values of the intangible assets resulting from these
evaluations.
8
<PAGE>
REVENUE RECOGNITION - Revenue from sales and installation is recognized to
the extent service has been rendered. When the Company bills customers in
advance for maintenance agreements and monitoring fees, deferred revenue is
credited and recorded in income over the life of the agreement.
INCOME TAXES - The Company has adopted Financial Accounting Standards Board
Statement No. 109, ACCOUNTING FOR INCOME TAXES ("FASB 109"). Under FASB
109, the deferred tax provision is determined under the liability method.
Under this method, deferred tax assets and liabilities are recognized based
on differences between the book and tax basis of assets and liabilities
using presently enacted tax rates.
MANAGEMENT ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that 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.
CONCENTRATIONS OF CREDIT RISK - Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of
accounts receivable.
RECLASSIFICATIONS - Certain reclassifications have been made to the prior
year financial statements to conform to the current year's presentation.
3. SHORT-TERM DEBT
At September 30, 1996 and 1995, the Company had a line of credit facility
of up to $200,000 with a financial institution. The line of credit bears
interest at 2% above the bank's base rate (10.25% at September 30, 1996)
and was collateralized by substantially all of the assets of the Company.
Also included in short-term debt at September 30, 1996 is a demand note for
$96,550 payable to an investment company and bearing interest at the rate
equal to the greater of 12.5% and the prime rate of a certain financial
institution plus 3.5%. The line of credit facility expires and all amounts
outstanding are due on March 31, 1999.
Unused line of credit facilities at September 30, 1996 and 1995 amounted to
approximately $10,000 and $100,000, respectively. On April 30, 1997, all
amounts outstanding under the lines of credit were repaid (see Note 9).
9
<PAGE>
4. LONG-TERM DEBT
Long-term debt, including current portions consisted of the following, at
September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
State Street Bank and Trust Co. - with interest at the Bank's
prime rate plus 2% (prime rate at September 30, 1996 was
8.25%), payable in monthly installments to March 1999. $1,425,000 $1,974,996
Truck Loan - Ford Motor Company - with interest at 9.75%,
payable monthly to November 1996. 3,752 12,824
Truck Loan - General Motors Acceptance Company -
with interest at 15.5%, payable monthly to February 2000. 17,841 23,089
---------- ----------
Total long-term debt including current portion 1,446,593 2,010,909
Less current portion (including State Street Bank and Trust
Co. loan) 1,433,042 566,222
---------- ----------
Total long-term debt $ 13,551 $1,444,687
---------- ----------
---------- ----------
</TABLE>
The State Street Bank and Trust Company loan is secured by the corporate
assets of the Company as well as the personal guarantee of the directors.
At September 30, 1996, the Company was not in compliance with certain
covenants of the State Street Bank and Trust Company loan. On April 30,
1997, all amounts outstanding under the State Street Bank and Trust Company
loan were repaid in connection with the sale of the Company (see Note 9).
The State Street Bank and Trust Company loan has been included in current
maturities in the September 30, 1996 financial statements.
Truck loans are secured by the related assets.
10
<PAGE>
5. INCOME TAXES
The benefit for income taxes consists of the following:
September 30,
1996 1995
Federal:
Current $ 129,062 $ 39,341
Deferred (2,580) 28,650
---------- ----------
126,482 67,991
State:
Current 5,735 16,746
Deferred - -
---------- ----------
$ 132,217 $ 84,737
---------- ----------
---------- ----------
Deferred taxes resulted from temporary differences in the recognition of
revenue and expense for tax and financial statement purposes. The sources
of the temporary differences are primarily depreciation, accounts
receivable, and inventories . A valuation allowance of $14,612 and
$21,040 at September 30, 1996 and 1995, respectively, was recognized for
timing differences which are not considered probable of realization. At
September 30, 1996 and 1995, a current deferred tax asset of $26,070 and
$28,650, respectively, was included in other current assets net of the
valuation allowance.
6. EMPLOYEE BENEFIT PLAN
The Company maintains a Section 401(k) employee benefit plan. All
employees are eligible to participate after completing the earlier of 250
hours of service during a three-month consecutive period of employment or
at least 1,000 hours of service in a twelve-month period of employment and
having attained age 21. Employees may contribute up to 15% of their salary
to the plan. Under the plan, the Company matches a portion of the
contributions made by the participating employees. The Company's cost of
matching contributions under the plan totaled $14,045 and $15,337 for the
years ended September 30, 1996 and 1995, respectively.
7. RELATED PARTY TRANSACTIONS
The Company operates from a property which is leased from a real estate
partnership which has common ownership (see Note 8). Total rent expense
for the years ended September 30, 1996 and 1995 amounted to $163,943 and
$181,182, respectively. The Company believes that this transaction has
been on terms no less favorable to the Company than would have been
available from nonaffiliated parties.
For the years ended September 30, 1996 and 1995, a management fee of
$165,960 and $165,157, respectively, was paid to a director of the Company
for services rendered.
Outstanding balances on loans to and from directors at September 30, 1996
and 1995 were as follows:
11
<PAGE>
1996 1995
Loans to a director and shareholder $31,608 $20,507
------- -------
------- -------
Loans from a director $ - $20,000
------- -------
------- -------
8. CONTINGENCIES AND COMMITMENTS
The Company has various pending lawsuits arising in the ordinary course of
its business. Management believes that the ultimate liabilities, if any,
of these lawsuits will not have a material adverse effect on the financial
position or results of operations of the Company.
Operating Leases - The Company leases office space at its Greenwich,
Connecticut Headquarters under a noncancelable operating lease which
expires in June 1997 from the principal shareholder (see Note 7). The
Company also leases a sales office from an unrelated party. Total rent
expense was $167,377 and $181,182 at September 30, 1996 and 1995,
respectively. In addition the Company is obligated for various
noncancelable operating leases which expire at various dates through 2002.
Future minimum payments under noncancelable operating leases as of
September 30, 1996 are as follows:
1997 $ 245,524
1998 117,249
1999 80,131
2000 27,127
2001 4,225
Thereafter 1,056
----------
$ 475,312
----------
----------
9. SUBSEQUENT EVENTS
On April 30, 1997, 100% of the outstanding common stock of the Company was
sold to Security Systems Holdings, Inc. A portion of the proceeds from the
sale were used to repay the outstanding debt under the Company's existing
line of credit (Note 3) and the State Street Bank and Trust Co. loan
(Note 4).
* * * * * *
12
<PAGE>
ITEM 7. (b) PRO FORMA FINANCIAL INFORMATION
ALARMGUARD HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (P)
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
SECURITY
SYSTEMS
TRITON HOLDINGS
GROUP LTD. INC. PRO FORMA
("TRITON") ("SSH") ADJUSTMENTS
---------- ------- -----------
<S> <C> <C> <C>
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)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
TRITON,
PRO FORMA SSH AND
TRITON AND PROTECTIVE PRO FORMA AND PROTECTIVE
SSH ALARMS ADJUSTMENTS ALARMS
--- ------ ----------- ------
<S> <C> <C> <C> <C>
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
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
13
<PAGE>
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)
<TABLE>
<CAPTION>
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
-------- ----- ----------- --- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
14
<PAGE>
<TABLE>
<CAPTION>
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
---------- ------- ----------- --- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
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 0 377 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
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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<PAGE>
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.
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<PAGE>
(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.
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<PAGE>
(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.
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