<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): 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
<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 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
<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
SECURITY SYSTEMS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(UNAUDITED) (NOTE)
<S> <C> <C>
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
--------------- ------------------
--------------- ------------------
</TABLE>
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
<PAGE>
SECURITY SYSTEMS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH 31
-----------------------
1997 1996
------- ------
<S> <C> <C>
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
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
information.
5
<PAGE>
SECURITY SYSTEMS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH 31
----------------------
1997 1996
---- ----
<S> <C> <C>
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
---- ----
---- ----
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
information.
6
<PAGE>
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
<PAGE>
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
<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)
----------- ------------ ------------
----------- ------------ ------------
<CAPTION>
PRO FORMA
TRITON
PRO FORMA SSH AND
TRITON AND PROTECTIVE PRO FORMA AND PROECTIVE
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.
9
<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.
10
<PAGE>
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)
<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 JUSTMENTS 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 377 377 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.
11
<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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(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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(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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