<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RADIANT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 7373 11-2749765
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30202
(770) 772-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN H. HEYMAN
EXECUTIVE VICE PRESIDENT
RADIANT SYSTEMS, INC.
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30202
(770) 772-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
ARTHUR JAY SCHWARTZ, ESQ. WILLIAM H. AVERY, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP ALSTON & BIRD LLP
SUITE 1800 ONE ATLANTIC CENTER
3343 PEACHTREE ROAD, N.E. 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30326 ATLANTA, GEORGIA 30309
(404) 264-2620 (404) 881-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO AGGREGATE AMOUNT OF
BE REGISTERED OFFERING PRICE (1)(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, no par value....... $78,900,000 $23,910
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</TABLE>
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(1) Includes 461,250 shares that may be sold by the Company upon exercise of
the Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JUNE 27, 1997
3,075,000 Shares
[LOGO OF RADIANT SYSTEMS APPEARS HERE]
Common Stock
--------
Of the 3,075,000 shares of Common Stock being offered hereby, 2,500,000
shares are being sold by Radiant Systems, Inc. ("Radiant" or the "Company") and
575,000 shares are being sold by certain shareholders of the Company (the
"Selling Shareholders"). The Company will not receive any proceeds from the
sale of shares by the Selling Shareholders. The Company's Common Stock is
quoted on The Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "RADS." On June 25, 1997, the last reported sale
price of the Company's Common Stock was $24.25 per share. See "Principal and
Selling Shareholders."
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
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Total(3)........................ $ $ $ $
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</TABLE>
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(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $350,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
461,250 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company will be $ , $ and $
respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
Alex. Brown & Sons
INCORPORATED
Deutsche Morgan Grenfell
The Robinson-Humphrey
Company, Inc.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
[inside front cover graphics]
TITLE: The Convenience Store Solution
GRAPHIC: A picture of a computer terminal and keyboard. Displayed on the
terminal is a screen from the Company's Core-Tech software
application entitled "6 Month Margin Summary by Department." The
screen displays financial data in tabular form, as well as
graphically on a pie chart and a bar chart.
A second picture shows one of the Company's Compu-Touch point of
sale terminals. The terminal screen shows a series of "buttons"
ranging from "Drawer Totals," "Tank Reading," and "Select Pump" to
"Lottery" and "Money Order." The touch screen capability of the
terminal is demonstrated by a human finger which is shown touching
the "Lottery" button.
SUPPORTING
TEXT: "Core-Tech Headquarters-Based Management System. Compu-Touch POS."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO
COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
2
<PAGE>
GATE
- ----
TITLE: The Radiant Solution
GRAPHIC: Diagram mapping the flow of information created by deploying the
Company's technology solution. The diagram begins with a depiction
of a consumer initiating a transaction at the Company's consumer-
activated system, which transmits data to a point of sale system,
which in turn is connected to a back office management system. The
back office system periodically transmits data to the Company's
headquarters based system, which has the capability to
communicate electronically with user's vendors and suppliers.
Each stage is depicted by a disc with a stylized picture of the
relevant device or object (a PC for back office systems, a
headquarters building for headquarters based systems, etc.) upon
that disc. Arrows connect those components of the system having
direct, online connections while jagged lines depict nonreal time,
batch connections. The discs are arranged in a semicircle with
stylized pictures of businesspeople toward the center, representing
the Company's consulting and implementation services, connected with
each disc with a dotted line.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and combined financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Except as otherwise specified herein, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
Radiant Systems, Inc. ("Radiant" or the "Company") provides enterprise-wide
technology solutions to selected vertical markets within the retail industry.
The Company offers fully integrated retail automation solutions including point
of sale ("POS") systems, consumer-activated ordering systems, back office
management systems and headquarters-based management systems. The Company's
products enable retailers to interact electronically with consumers, capture
data at the point of sale, manage site operations and logistics and communicate
electronically with their sites, vendors and credit networks. In addition, the
Company offers systems planning, design and implementation services that tailor
the automation solution to each retailer's specifications. The Company believes
that its site solutions are easy to implement, typically requiring less than a
week to install and a few hours to train individual users.
Radiant is currently a leading provider of integrated retail automation
solutions to the convenience store market and has a growing presence in the
restaurant and entertainment markets through its Radiant Hospitality Systems
and PrysmTech divisions, respectively. Since these markets require many of the
same product features and functionality, the Company believes it can leverage
its existing technology across these markets with limited incremental product
development efforts.
The Company's objective is to be the leading worldwide provider of
enterprise-wide technology solutions to the vertical markets it serves. In the
convenience store market, the Company offers a fully integrated retail
automation solution, including the site-based Compu-Touch product, an
integrated point of sale and back office solution; OrderPoint, a consumer-
activated ordering system with multimedia capabilities; and Core-Tech, a
headquarters-based, enterprise-wide management system. In the restaurant
market, the Company has recently expanded its presence through the acquisitions
of Restaurant Management and Control Systems, Inc. ("ReMACS") and RSI Merger
Corporation d/b/a Twenty/20 Visual Systems ("Twenty/20"). The Company is
developing a new suite of products for this market, combining acquired
technology with its core technologies and its recently introduced MediaClient
platform. The MediaClient platform allows multiple multimedia software
applications to operate on separate terminals simultaneously, all driven by a
single PC. In the entertainment market, the Company provides an integrated
site-based solution including BoxMan, a box-office POS system; ConcMan, a
concession stand POS system; OrderPoint, a consumer-activated ticket and
concession management and ordering system; and OfficeMan, a back office
solution. Radiant expects to introduce its headquarters-based Core-Tech
enterprise-wide management system to the entertainment market in the second
half of 1997. As of June 1, 1997, the Company's products have been installed in
or licensed for over 10,000 sites and the Company had over 50 customers in its
various vertical markets, including Amoco Oil Company, Boston Market, Conoco,
Inc., Dillon Companies, Inc., Emro Marketing Company (Speedway/Starvin'
Marvin), Loews Theatre Management Corporation, Regal Cinemas, Sheetz, Inc.,
Sizzler International, Inc., Ultramar Diamond Shamrock Corporation, and
Wawa, Inc.
The Company originally was organized under the laws of the state of New York
on August 1, 1985, and subsequently reincorporated under the laws of the state
of Georgia on October 27, 1995. The reincorporation was effected through a
merger of the New York corporation with and into the Georgia corporation. The
name of the Company was changed to Radiant Systems, Inc. from Softsense
Computer Products, Inc. on November 13, 1996. The Company's principal executive
offices are located at 1000 Alderman Drive, Alpharetta, Georgia 30202, and its
telephone number is (770) 772-3000.
3
<PAGE>
RECENT DEVELOPMENTS
In May 1997, the Company closed the acquisitions of ReMACS, based in
Pleasanton, California and Twenty/20, based in Dallas, Texas. ReMACS is a
leading provider of back office management systems to the restaurant industry
with over 8,000 installed or licensed sites. Twenty/20 is a provider of POS and
table management systems for full-service restaurants. The Company has combined
these two entities with its existing restaurant operations to form the Radiant
Hospitality Systems division, which will focus on providing an integrated
solution to the restaurant industry.
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which can be identified by the use of forward-looking
terminology such as "anticipate," "may," "will," "expect," "continue,"
"remains," "intend," "aim," "trend," "seek," "should" and "prospects," or the
negative thereof or other variations thereon or comparable terminology.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted with accuracy and some of which might not
even be anticipated. Future events and actual results, financial and otherwise,
may differ materially from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those discussed under the captions "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
herein.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company............. 2,500,000 shares
Common Stock offered by the Selling
Shareholders................................... 575,000 shares
Common Stock to be outstanding after the
offering....................................... 15,067,259 shares(1)
Use of proceeds................................. Repayment of indebtedness and
general corporate purposes,
including possible strategic
acquisitions and working
capital.
Nasdaq National Market symbol................... RADS
</TABLE>
- --------
(1) Excludes 4,189,828 shares of Common Stock issuable upon the exercise of
outstanding stock options, of which options to purchase 426,679 shares are
currently exercisable. See "Management--Stock Option Plan."
4
<PAGE>
SUMMARY COMBINED AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------ ---------------------------
PRO FORMA PRO FORMA
COMBINED COMBINED
1994 1995 1996 1996 (1) 1996 1997 1997 (1)
------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Systems sales.......... $13,529 $14,078 $35,888 $38,921 $ 3,849 $10,742 $11,291
Customer support,
maintenance and other
services.............. 919 1,804 5,055 7,670 698 1,818 2,286
------- ------- ------- ------- ------- ------- -------
Total revenues......... 14,448 15,882 40,943 46,591 4,547 12,560 13,577
Cost of revenues:
Systems sales.......... 9,459 9,863 22,270 22,908 2,768 6,278 6,325
Customer support,
maintenance and other
services.............. 1,208 2,300 5,465 6,872 1,003 1,749 2,073
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues.............. 10,667 12,163 27,735 29,780 3,771 8,027 8,398
------- ------- ------- ------- ------- ------- -------
Gross profit........... 3,781 3,719 13,208 16,811 776 4,533 5,179
Income (loss) from
operations before
purchased research and
development costs..... (94) (2,101) 1,781 (1,203) (1,414) 452 (63)
Purchased research and
development costs..... -- -- 3,930 30 -- -- --
Income (loss) from
operations............ (94) (2,101) (2,149) (1,233) (1,414) 452 (63)
Interest expense, net.. 82 166 712 1,237 39 209 281
Other (income)......... -- (406) -- -- -- -- --
Minority interest in
earnings of
PrysmTech............. -- -- 628 -- 55 -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary item and
pro forma income
provision............. (176) (1,861) (3,489) (2,470) (1,508) 243 (344)
Pro forma income tax
provision
(benefit)(2).......... (61) (709) (1,333) -- (576) (212) --
------- ------- ------- ------- ------- ------- -------
Pro forma net income
(loss) before
extraordinary
item(3)............... $ (115) $(1,152) $(2,156) $(2,470) $ (932) $ 455 $ (344)
======= ======= ======= ======= ======= ======= =======
Pro forma net income
(loss) per common and
common equivalent
share before
extraordinary
item(4)............... $ (0.19) $ (0.21) $ (0.08) $ 0.03 $ (0.03)
======= ======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding.... 11,100 11,727 11,150 13,125 13,753
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA (5) AS ADJUSTED(5)(6)
------- ------------- -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................... $14,989 $6,568 $60,467
Total assets.......................... 29,431 31,183 85,082
Long-term debt, including current
portion.............................. 760 4,210 960
Shareholders' equity.................. 19,347 11,132 68,281
</TABLE>
5
<PAGE>
- --------
(1) Pro forma combined data is presented assuming that the purchase of
PrysmTech and ReMACS had been consummated at the beginning of the
respective periods. Pro forma adjustments were recorded to include
increased interest and amortization expense, elimination of one-time
purchased research and development costs, elimination of minority interest
in earnings in PrysmTech, income tax effects and the effect of dilutive
common stock equivalents. See pro forma financial information included
elsewhere in this Prospectus.
(2) As a result of its election to be treated as an S Corporation for income
tax purposes, prior to completion of its initial public offering in
February 1997, the Company was not subject to federal or state income
taxes. For periods prior to the termination of the S Corporation status,
pro forma net income amounts include additional provisions for income taxes
determined by applying the Company's anticipated statutory tax rate to
pretax income (loss), adjusted for permanent tax differences.
(3) During the three months ended March 31, 1997, the Company incurred an
extraordinary charge of $131,000, net of taxes of $82,000, from early
extinguishment of debt.
(4) Pro forma net income (loss) per share is computed by dividing pro forma net
income (loss) available to common shareholders by weighted average shares
outstanding.
(5) These amounts give effect to the acquisition of ReMACS subsequent to March
31, 1997, as if such acquisition had occurred on March 31, 1997, and have
been derived from the unaudited Pro Forma Combined Balance Sheet as of
March 31, 1997 included elsewhere in this Prospectus. See pro forma
financial information included elsewhere in this Prospectus.
(6) These amounts have been derived from the unaudited Pro Forma Combined
Balance Sheet as of March 31, 1997 included elsewhere in this Prospectus
and have been adjusted to reflect the sale of 2,500,000 shares of Common
Stock offered by the Company hereby and the receipt of $57,000 upon the
exercise of options to purchase 36,000 shares of Common Stock being sold by
certain Selling Shareholders. See "Use of Proceeds" and pro forma financial
information included elsewhere in this Prospectus.
Softsense(R), Compu-Touch(R), OrderPoint(R) and Twenty/20(R) are registered
trademarks of the Company. The Company has applied for registration of its
Softsense(TM) design, Core-Tech(TM), MediaClient(TM), Radiant(TM) and design
and Twenty/20 Visual Systems(TM) and logo trademarks. The following trademarks
and tradenames used in this Prospectus are the property of owners other than
the Company: Smile Gas, Speedway/Starvin' Marvin, Panasonic, Novell, Microsoft
SQL Server, Windows NT, PowerBuilder, Pizzeria Uno, Arby's, Burger King,
Chick-fil-A, Dunkin Donuts, KFC, Taco Johns, Boston Market, La Madelleine,
Longhorn Steaks and Luby's.
6
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the shares of Common Stock offered by this Prospectus.
History of Operating Losses. The Company incurred net losses of $2.2
million, $1.2 million and $115,000 for fiscal 1996, 1995 and 1994,
respectively. There can be no assurance that the Company will be able to
achieve profitability for fiscal 1997 and beyond. The Company anticipates that
completing its products under development, including those purchased from
PrysmTech, ReMACS and Twenty/20, and marketing existing products and new
releases will require substantial expenditures. Accordingly, an investment in
the Common Stock is extremely speculative in nature and involves a high degree
of risk. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Management of Growth. The growth in the size and complexity of the Company's
business and the expansion of its product lines and its customer base will
place a significant strain on the Company's management and operations. An
increase in the demand for the Company's products could strain the Company's
resources or result in delivery problems, delayed software releases, slow
response time, or insufficient resources for assisting customers with
implementation of the Company's products and services, which could have a
material adverse effect on the Company's business, operating results and
financial condition. The Company anticipates that continued growth, if any,
will require it to recruit, hire and assimilate a substantial number of new
employees, including consulting, product development, sales and marketing
personnel. Since September 1995, the Company has hired a new President and
Chief Operating Officer, a new Chief Financial Officer and several other
members of senior management. There can be no assurance that the new
management can effectively manage the Company's operations.
The Company's ability to compete effectively and to manage future growth, if
any, also will depend on its ability to continue to implement and improve
operational, financial and management information systems on a timely basis
and to expand, train, motivate and manage its work force, particularly its
direct sales force and consulting services organization. There can be no
assurance that the Company will be able to manage any future growth, and any
failure to do so could have a material adverse effect on the Company's
business, operating results and financial condition.
The Company's ability to undertake new projects and increase revenues is
dependent on the availability of the Company's personnel to assist in the
development and implementation of the Company's technology solutions. The
Company currently is attempting to increase consulting capacity in
anticipation of future sales. Should the Company increase its consulting
capacity and such sales fail to materialize, the Company's business, operating
results and financial condition would be adversely affected.
Growth Through Acquisition. As part of its operating history and growth
strategy, the Company has consummated and may seek to consummate the
acquisition of other businesses. The Company continually seeks acquisition
candidates in selected markets and from time to time engages in exploratory
discussions with suitable candidates. There can be no assurance, however, that
the Company will be able to identify and acquire targeted businesses or obtain
financing for such acquisitions on satisfactory terms. The process of
integrating acquired businesses into the Company's operations may result in
unforeseen difficulties and may require a disproportionate amount of resources
and management attention. In particular, the integration of acquired
technologies with the Company's existing products could cause delays in the
introduction of new products. In connection with future acquisitions, the
Company may incur significant charges to earnings as a result of, among other
things, the write-off of purchased research and development. For instance, in
the second quarter of 1997, the Company will record one-time accounting
charges of approximately $19.8 million for the write-off of purchased research
and development and compensation expense in connection with its acquisitions
of ReMACS and Twenty/20. Future acquisitions may be financed through the
issuance of Common Stock, which may dilute the
7
<PAGE>
ownership of the Company's shareholders, or through the incurrence of
additional indebtedness. Furthermore, there can be no assurance that
competition for acquisition candidates will not escalate, thereby increasing
the costs of making acquisitions or making suitable acquisitions unattainable.
See "Business" and pro forma financial information included elsewhere in this
Prospectus.
Fluctuations in Quarterly Operating Results. The Company has experienced and
expects to continue to experience quarterly fluctuations in its operating
results. The Company's recent revenue growth should not be taken as indicative
of the rate of revenue growth, if any, that can be expected in the future. The
Company believes that period-to-period comparisons of its operating results
are not meaningful and that the results for any period should not be relied
upon as an indication of future performance. Moreover, a significant portion
of the Company's quarterly revenues has been derived from a limited number of
customers in the convenience store market. The Company currently anticipates
that this trend will continue. With a limited number of customers,
fluctuations in their purchasing patterns resulting from budgeting or other
considerations can have a significant effect on the Company's quarterly
results. For example, in the fourth quarter of 1995 a large customer
accelerated its purchase of the Company's products, which resulted in higher
revenues and earnings for the Company in that quarter. As a result, systems
sales to this customer were lower in the following quarter. Any significant
cancellation or deferral of customer orders could also have a material adverse
effect on the Company's operating results in any particular quarter.
The introduction of new research and development projects requires the
Company to significantly increase its operating expenses to fund greater
levels of product development and to develop and commercialize additional
products and services. To the extent that such expenses precede or are not
subsequently followed by increased revenues, the Company's business, results
of operations and financial condition will be materially and adversely
affected.
The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside the Company's
control. These factors include the level of usage of computer-based and
consumer-activated products and services, the size and timing of individual
customer orders, the introduction of new products or services by the Company
or its competitors, pricing changes in the industry, technical difficulties
with respect to the use of computer-based products and services developed by
the Company, general economic conditions and economic conditions specific to
the computer, convenience store, restaurant and entertainment markets. As a
strategic response to changes in the competitive environment, the Company may
from time to time make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on the Company's
business, results of operations and financial condition.
Due to all of the foregoing factors, in some future quarters the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's Common Stock
would likely be materially and adversely affected.
Industry Concentration and Cyclicality. All of the Company's total revenues
in 1995 and approximately 74.8% of the Company's total revenues in 1996 were
related to the convenience store market, which is dependent on the domestic
and international economy. The convenience store market is affected by a
variety of factors, including global and regional instability, governmental
policy and regulation, natural disasters, consumer buying habits,
consolidation in the petroleum industry, war and general economic conditions.
Adverse developments in the convenience store market could materially affect
the Company's business, operating results and financial condition. In
addition, the Company believes the purchase of its products is relatively
discretionary and generally involves a significant commitment of capital,
because purchases of the Company's products are often accompanied by large
scale hardware purchases. As a result, although the Company believes its
products can assist convenience stores in a competitive environment, demand
for the Company's products and services could be disproportionately affected
by instability or downturns in the convenience store market which may cause
customers to exit the industry or delay, cancel or reduce planned expenditures
for information management systems and software products.
8
<PAGE>
Concentration of Customers. The Company sells systems and services to a
number of major customers. During 1996, approximately 60.2% of the Company's
total revenues were derived from four customers. During 1995 and 1994,
approximately 59.4% and 75.9%, respectively, of the Company's total revenues
were derived from two customers. There can be no assurance that the loss of
one or more of these customers will not have a material adverse effect on the
Company's business, operating results and financial condition.
New Product Development and Rapid Technological Change. The Company has a
substantial ongoing commitment to research and development. In this regard,
the Company is currently designing, coding and testing a number of new
products and developing expanded functionality of its current products that
will be important for the Company to remain competitive. The cost of the
Company's research and development efforts are expected to be approximately
$7.1 million in 1997, including the costs of integrating and developing
products acquired from ReMACS and Twenty/20. The Company and its prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in the rapidly evolving market for computer-based
products and services. To address these risks, the Company must, among other
things, continue to respond to competitive developments; attract, retain and
motivate qualified personnel; implement and successfully execute its sales
strategy; develop and market additional products and services in present and
future markets; upgrade its technologies and commercialize products and
services incorporating such technologies. There can be no assurance that the
Company will be successful in addressing such risks.
The types of products sold by the Company are subject to rapid and continual
technological change. Products available from the Company, as well as from its
competitors, have increasingly offered a wider range of features and
capabilities. The Company believes that in order to compete effectively in
selected vertical markets, it must provide compatible systems incorporating
new technologies at competitive prices. There can be no assurance that the
Company will be able to continue funding research and development at levels
sufficient to enhance its current product offerings or will be able to develop
and introduce on a timely basis new products that keep pace with technological
developments and emerging industry standards and address the evolving needs of
customers. There can also be no assurance that the Company will not experience
difficulties that will result in delaying or preventing the successful
development, introduction and marketing of new products in its existing
markets or that its new products and product enhancements will adequately meet
the requirements of the marketplace or achieve any significant degree of
market acceptance. Likewise, there can be no assurance as to the acceptance of
Company products in new markets, nor can there be any assurance as to the
success of the Company's penetration of these markets, or to the revenue or
profit margins with respect to these products. The inability of the Company,
for any reason, to develop and introduce new products and product enhancements
in a timely manner in response to changing market conditions or customer
requirements could materially adversely affect the Company's business,
operating results and financial condition. See "Business--Product Development
and Technology Platform."
In addition, the Company strives to achieve compatibility between the
Company's products and retail systems the Company believes are or will become
popular and widely adopted. The Company invests substantial resources in
development efforts aimed at achieving such compatibility. Any failure by the
Company to anticipate or respond adequately to technology or market
developments could materially adversely affect the Company's business,
operating results and financial condition.
Competition. The market for retail information systems is intensely
competitive. The Company believes the principal competitive factors in such
market are product quality, reliability, performance and price, vendor and
product reputation, financial stability, features and functions, ease of use
and quality of support. A number of companies offer competitive products
addressing certain of the Company's target markets. The Company competes with
in-house systems developed by the Company's targeted customers and with third-
party suppliers such as Dresser Industries, Inc., CanMax Inc., Gilbarco, Inc.,
Verifone, Ltd., International Business Machines Corporation, NCR Corporation,
Matsushita Electric Corporation of
9
<PAGE>
America (Panasonic), JDA Software Group, Inc. and Tandem Computers, Inc.,
among others. In addition, the Company believes that new market entrants may
attempt to develop fully integrated systems targeting the retail industry. In
the market for consulting services, the Company competes with the consulting
divisions of the big six accounting firms, Electronic Data Systems, Inc. and
other systems integrators. Many of the Company's existing competitors, as well
as a number of potential new competitors, have significantly greater
financial, technical and marketing resources than the Company. There can be no
assurance that the Company will be able to compete successfully against its
current or future competitors or that competition will not have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business--Company Operations--Convenience Store Market--
Competition," "--Restaurant Market--Competition" and "--Entertainment Market--
Competition."
Broad Discretion over Use of Proceeds. A substantial portion of the net
proceeds of this offering ($53.9 million) are allocated to general corporate
purposes, including possible strategic acquisitions, product development and
working capital. The Company's management will have broad discretion over the
application of these funds. There can be no assurance that management will
make such application effectively or in a manner that will not result in a
material adverse effect on the Company or its results of operations. See "Use
of Proceeds."
Dependence on Key Personnel; Ability to Attract and Retain Technical
Personnel. The Company's future success depends in part on the performance of
its executive officers and key employees. The Company does not have in place
employment agreements with any of its executive officers other than H. Martin
Rice, who heads the PrysmTech division, and David H. Douglas, who heads the
Radiant Hospitality Systems division. The Company maintains a $1.0 million
"key person" life insurance policy on each of Erez Goren and Alon Goren, the
Chief Executive Officer and Chief Technology Officer, respectively, of the
Company. The loss of the services of any of its executive officers or other
key employees could have a material adverse effect on the business, operating
results and financial condition of the Company.
The Company is heavily dependent upon its ability to attract, retain and
motivate skilled technical and managerial personnel, especially highly skilled
engineers involved in ongoing product development and consulting personnel who
assist in the development and implementation of the Company's total business
solutions. The market for such individuals is intensely competitive. Due to
the critical role of the Company's product development and consulting staffs,
the inability to recruit successfully or the loss of a significant part of its
product development or consulting staffs would have a material adverse effect
on the Company. The software industry is characterized by a high level of
employee mobility and aggressive recruiting of skilled personnel. There can be
no assurance that the Company will be able to retain its current personnel, or
that it will be able to attract, assimilate or retain other highly qualified
technical and managerial personnel in the future. The inability to attract,
hire or retain the necessary technical and managerial personnel could have a
material adverse effect upon the Company's business, operating results and
financial condition. See "Business--Employees" and "Management."
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its ability to protect its proprietary
technology. The Company relies on a combination of patent, copyright and trade
secret laws and non-disclosure agreements to protect this proprietary
technology. The Company enters into confidentiality and non-compete agreements
with its employees and license agreements with its customers and potential
customers which limits access to and distribution of its software,
documentation and other proprietary information. There can be no assurance
that the steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. In addition, the laws of
some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States.
Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis. The
termination of any such licenses, or the failure of the third-party licensors
to adequately maintain or update their products, could result in delay in the
Company's ability
10
<PAGE>
to ship certain of its products while it seeks to implement technology offered
by alternative sources, and any required replacement licenses could prove
costly. While it may be necessary or desirable in the future to obtain other
licenses relating to one or more of the Company's products or relating to
current or future technologies, there can be no assurance that the Company
will be able to do so on commercially reasonable terms or at all. See
"Business--Proprietary Rights."
Ownership by Management. Upon completion of the offering, the Company's
executive officers will collectively own approximately 47.7% of the Common
Stock then outstanding (approximately 46.2% if the Underwriters' over-
allotment option is exercised in full). Consequently, together they will
continue to be able to exert significant influence over the election of the
Company's directors, the outcome of most corporate actions requiring
shareholder approval and the business of the Company. See "Principal and
Selling Shareholders."
Dilution. Investors in the offering will experience immediate and
substantial dilution of the net tangible book value of the Common Stock, and
current shareholders will receive a material increase in the net tangible book
value of their shares of Common Stock. See "Dilution."
Shares Eligible for Future Sale; Registration Rights. Upon completion of
this offering, the Company will have 15,067,259 shares of Common Stock
outstanding, assuming no exercise of the Underwriters' over-allotment option.
Of these shares, approximately 6,422,000 shares will be eligible for sale in
the open market without restriction. All of the remaining 8,645,259 shares of
Common Stock are "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). Of these restricted securities, approximately 7,535,000 shares are
currently eligible for sale in the public market. Additional shares of Common
Stock, including shares issuable upon exercise of options, will also become
eligible for sale in the public market pursuant to Rule 144 from time to time.
The Company has agreed, however, not to sell any shares of Common Stock (other
than the shares to be sold by the Company in this offering) for a period of 90
days from the date of this Prospectus without the prior written consent of the
Underwriters. Directors, executive officers and certain shareholders of the
Company, who will own upon completion of this offering an aggregate of
8,473,186 shares of Common Stock and options representing the right to
purchase 1,710,430 shares of Common Stock, have agreed not to offer, sell,
sell short or otherwise dispose of any such shares of Common Stock
beneficially owned by them or any shares issuable upon exercise of stock
options for a period of 120 days from the date of this Prospectus without the
prior written consent of Alex. Brown & Sons Incorporated; provided, however,
that the lockup period shall be 60 days from the date of this Prospectus for
up to one-third of such shares or options, and 90 days from the date of this
Prospectus for up to two-thirds of such shares or options.
Following this offering, sales and potential sales of substantial amounts of
the Company's Common Stock in the public market pursuant to Rule 144 or
otherwise could adversely affect the prevailing market prices for the Common
Stock and impair the Company's ability to raise additional capital through the
sale of equity securities. See "Principal and Selling Shareholders,"
"Description of Capital Stock," "Shares Eligible for Future Sale" and
"Underwriting."
Upon the completion of this offering, the holders of 602,199 shares of
Common Stock will be entitled to certain piggyback registration rights with
respect to such shares. If the Company were required to include in a Company-
initiated registration shares held by such holders pursuant to the exercise of
their piggyback registration rights, such sale might have an adverse effect on
the Company's ability to raise needed capital in the capital markets at a time
and price favorable to the Company. See "Description of Capital Stock" and
"Shares Eligible for Future Sale."
11
<PAGE>
Volatility of Market Price for Common Stock; Absence of Dividends. The
market price for the Company's Common Stock has risen substantially since its
initial public offering in February 1997. The Common Stock has experienced
substantial price volatility and such volatility may occur in the future.
Quarterly operating results of the Company or of other companies participating
in the computer-based products and services industry, changes in conditions in
the economy, the financial markets of the computer products and services
industries, natural disasters or other developments affecting the Company or
its competitors could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock market has experienced extreme price and
volume fluctuations that have affected the market price of many technology
stocks in particular and that have often been unrelated or disproportionate to
the operating performance of these companies. For the foreseeable future, it
is expected that earnings, if any, generated from the Company's operations
will be used to finance the growth of its business, and that no dividends will
be paid to holders of the Common Stock. See "Price Range of Common Stock" and
"Dividend Policy."
Anti-Takeover Provisions. The Company's Amended and Restated Articles of
Incorporation authorize the Board of Directors to issue up to 5,000,000 shares
of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of the preferred stock without further
vote or action by the Company's shareholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any preferred stock that may be issued in the future. While
the Company has no present intention to issue additional shares of preferred
stock, such issuance, while providing desired flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. See "Description of Capital Stock--
Preferred Stock." In addition, certain provisions of the Company's Articles of
Incorporation and Bylaws may discourage proposals or bids to acquire the
Company. This could limit the price that certain investors might be willing to
pay in the future for shares of Common Stock. The Company's Articles of
Incorporation divide the Board of Directors into three classes, as nearly
equal in size as possible, with staggered three-year terms. One class will be
elected each year. The classification of the Board of Directors could have the
effect of making it more difficult for a third party to acquire control of the
Company. The Company is also subject to certain provisions of the Georgia
Business Corporation Code which relate to business combinations with
interested shareholders. See "Description of Capital Stock--Certain Charter
and Bylaw Provisions."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company at an assumed public offering price of
$24.25 per share, are estimated to be approximately $57.1 million after
deducting the estimated underwriting discounts and offering expenses payable
by the Company. The Company will not receive any proceeds from the sale of
Common Stock by the Selling Shareholders.
The Company anticipates that the net proceeds of the offering will be used
to repay debt incurred in connection with the acquisition of ReMACS ($3.3
million at June 1, 1997) (the "ReMACS Debt"), and for general corporate
purposes, including research and development, sales and marketing, possible
strategic acquisitions and the increased working capital requirements of the
Company generated by its growth. The ReMACS debt is due April 2001 and bears
interest at the prime rate.
The Company has no current specific plan for the remaining estimated net
offering proceeds of approximately $53.9 million. The Company is raising such
monies at this time in order to increase the Company's working capital and for
general corporate purposes. Such general corporate purposes include funding
the development and enhancement of the Company's products and services, its
sales and marketing efforts and expanding customer support operations. The
Company also may use a portion of the net proceeds to acquire other
businesses, technologies, services or products complementary to the Company's
current business, although the Company currently has no agreements or
understandings with respect to any acquisition, and no portion of the net
proceeds has been allocated to specific acquisitions.
Pending such uses, the net proceeds of this offering will be invested in
short-term, interest-bearing investment grade securities.
PRICE RANGE OF COMMON STOCK
The Common Stock has been included for quotation on the Nasdaq National
Market under the symbol "RADS" since the Company's initial public offering on
February 13, 1997. Prior to that time, there was no public market for the
Common Stock. The following table sets forth the high and low sale prices per
share for the Common Stock for the periods indicated as reported by the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
First Quarter (from February 13, 1997)....................... $14 1/8 $8 1/4
Second Quarter (through June 25, 1997)....................... 26 1/4 7
</TABLE>
On February 19, 1997, the Company consummated the initial public offering of
2,500,000 shares of Common Stock at a price of $9.50 per share. On February
25, 1997, the Company consummated the sale of an additional 325,000 shares to
the underwriters of the initial public offering pursuant to the exercise of
the underwriters' over-allotment option. On June 25, 1997, the last sale price
of the Common Stock as reported on the Nasdaq National Market was $24.25 per
share. As of June 15, 1997, there were 43 holders of record of the Common
Stock. Management of the Company believes that there are in excess of 400
beneficial holders of its Common Stock.
DIVIDEND POLICY
The Company currently anticipates that all of its earnings will be retained
for development of the Company's business and does not anticipate paying any
cash dividends in the foreseeable future. Future cash dividends, if any, will
be at the discretion of the Company's Board of Directors and will depend upon,
among other things, the Company's future earnings, operations, capital
requirements and surplus, general financial condition, contractual
restrictions and such other factors as the Board of Directors may deem
relevant.
13
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual indebtedness and
capitalization of the Company as of March 31, 1997, (ii) pro forma to reflect
certain acquisitions, and (iii) pro forma as adjusted to reflect the sale by
the Company of 2,500,000 shares of Common Stock offered hereby (at an assumed
public offering price of $24.25 per share) and the application of the
estimated net proceeds therefrom as described under "Use of Proceeds," and the
exercise of options to purchase 36,000 shares of Common Stock being sold by
certain Selling Shareholders. The following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Company's combined financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED
------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt............ $ 528 $ 657 $ 657
------- ------- -------
Long-term debt............................... $ 232 $ 3,553 $ 303
Shareholders' equity:
Common stock, no par value per share,
30,000,000 shares authorized, 11,694,726
shares issued and outstanding; 12,322,226
pro forma shares issued and outstanding;
14,858,259 pro forma as adjusted shares is-
sued and outstanding(2).................... -- -- --
Additional paid-in capital.................. 18,685 25,920 83,069(3)
Retained earnings (deficit)................. 662 (14,788) (14,788)
------- ------- -------
Total shareholders' equity................ 19,347 11,132 68,281
------- ------- -------
Total capitalization..................... $19,579 $14,685 $68,584
======= ======= =======
</TABLE>
- --------
(1) Pro forma data give effect to the acquisition of ReMACS subsequent to
March 31, 1997 as if such acquisition had occurred on March 31, 1997. Such
data have been derived from the unaudited Pro Forma Combined Balance Sheet
included elsewhere in this Prospectus. See pro forma financial information
included elsewhere in this Prospectus.
(2) Actual, pro forma and pro forma as adjusted shares issued and outstanding
exclude (i) an aggregate of 4,000,000 shares of Common Stock reserved for
issuance under the Company's Amended and Restated 1995 Stock Option Plan,
of which 3,404,871 shares were subject to outstanding stock options as of
March 31, 1997, (ii) 264,000 shares of Common Stock issuable upon the
exercise of non-qualified stock options which were outstanding on March
31, 1997 and (iii) 199,074 shares of Common Stock issued by the Company
subsequent to March 31, 1997 and pro forma as adjusted shares includes
36,000 shares which are subject to outstanding options which will be
exercised and the shares sold by certain Selling Shareholders. Options to
purchase 366,342 shares of Common Stock were exercisable as of March 31,
1997. See "Management--Stock Option Plan" and Note 7 to the combined
financial statements of the Company.
(3) Includes $57,000 to be received upon the exercise of stock options by
certain Selling Shareholders.
14
<PAGE>
DILUTION
The net tangible book value of the Company at March 31, 1997, was
approximately $17.5 million or $1.50 per share of Common Stock. Net tangible
book value per share represents the amount of the Company's total assets less
intangible assets and total liabilities, divided by the total number of shares
of Common Stock outstanding. After giving effect to the sale by the Company of
2,500,000 shares of Common Stock offered hereby at an assumed public offering
price of $24.25 per share and the exercise of outstanding options to purchase
36,000 shares of Common Stock by certain Selling Shareholders (the "Options"),
the net tangible book value of the Company at March 31, 1997 would have been
$66.5 million or $4.47 per share of Common Stock. This represents an immediate
increase in net tangible book value of $2.97 per share to existing
shareholders and an immediate dilution in net tangible book value of $19.78
per share to investors purchasing shares of Common Stock in this offering. The
following table illustrates the resulting per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed public offering price per share........................ $24.25
Net tangible book value per share at March 31, 1997........... $1.50
Increase per share attributable to new investors.............. 2.97
-----
Pro forma net tangible book value per share after this
offering...................................................... 4.47
------
Net tangible book value dilution per share to new investors.... $19.78
======
</TABLE>
The following table summarizes, as of March 31, 1997, the number of shares
of Common Stock previously purchased from the Company, giving effect to the
exercise of the Options, the total consideration paid and the average price
per share paid to the Company by existing shareholders and by new investors
purchasing the shares of Common Stock offered hereby.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... 11,694,726 82.2% $27,787,397 31.4% $ 2.38
New investors.............. 2,536,000 17.8 60,682,000 68.6 $24.25
---------- ----- ----------- ----- ------
Total..................... 14,230,726 100.0% $88,469,397 100.0%
========== ===== =========== =====
</TABLE>
The sale of shares by the Selling Shareholders in this offering will cause
the number of shares held by all existing shareholders of March 31, 1997 to be
reduced to 11,155,726 shares, or 78.4% of total shares of Common Stock to be
outstanding after this offering, and the pro forma number of shares held by
new investors as of March 31, 1997 to be 3,075,000 shares, or 21.6% of the
total shares of Common Stock to be outstanding after this offering. See
"Principal and Selling Shareholders."
The foregoing discussion and tables assume no exercise of stock options
outstanding on March 31, 1997, other than the Options. In addition, the
foregoing does not reflect the issuance of 199,074 shares of Common Stock and
the grant of options to purchase an aggregate of 784,957 shares of Common
Stock subsequent to March 31, 1997. As of March 31, 1997 there were options
outstanding to purchase a total of 3,404,871 shares of Common Stock (including
options to purchase 264,000 shares issued outside of the 1995 Stock Option
Plan) at a weighted average exercise price of $2.98 per share and 595,129
additional shares were reserved for grant of future options under the
Company's 1995 Stock Option Plan. See "Management--Stock Option Plan" and Note
7 to the Company's combined financial statements.
15
<PAGE>
SELECTED COMBINED HISTORICAL FINANCIAL DATA
The following table sets forth selected combined financial data of the
Company for the periods indicated, which data has been derived from the
combined financial statements of the Company. The combined financial
statements of the Company as of December 31, 1994, 1995 and 1996, and for each
of the years in the four-year period ended December 31, 1996, have been
audited by Arthur Andersen LLP, independent public accountants. The selected
financial data set forth below as of and for the three months ended March 31,
1996 and 1997 have been derived from the unaudited financial statements of the
Company for such periods. In the opinion of management, the unaudited
financial statements from which these data have been derived include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information set forth therein. This selected combined
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the combined
financial statements of the Company and the notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------- ------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Systems sales.......... $1,079 $3,748 $13,529 $14,078 $35,888 $3,849 $10,742
Customer support,
maintenance and other
services.............. 412 552 919 1,804 5,055 698 1,818
------ ------ ------- ------- ------- ------ -------
Total revenues......... 1,491 4,300 14,448 15,882 40,943 4,547 12,560
Cost of revenues:
Systems sales.......... 462 2,307 9,459 9,863 22,270 2,768 6,278
Customer support,
maintenance and other
services.............. 366 588 1,208 2,300 5,465 1,003 1,749
------ ------ ------- ------- ------- ------ -------
Total cost of
revenues.............. 828 2,895 10,667 12,163 27,735 3,771 8,027
------ ------ ------- ------- ------- ------ -------
Gross profit............ 663 1,405 3,781 3,719 13,208 776 4,533
Operating expenses:
Product development.... 196 271 984 1,640 3,328 701 1,153
Purchased research and
development costs..... -- -- -- -- 3,930 -- --
Sales and marketing.... 203 209 470 607 1,487 285 872
Depreciation and
amortization.......... 19 46 178 583 948 194 367
General and
administrative........ 219 332 2,243 2,990 5,664 1,010 1,689
------ ------ ------- ------- ------- ------ -------
Income (loss) from
operations............. 26 547 (94) (2,101) (2,149) (1,414) 452
Interest expense, net... 3 19 82 166 712 39 209
Minority interest in
earnings of PrysmTech.. -- -- -- -- 628 55 --
Other (income).......... -- -- -- (406) -- -- --
------ ------ ------- ------- ------- ------ -------
Income (loss) before
extraordinary item and
provision
for pro forma income
taxes.................. 23 528 (176) (1,861) (3,489) (1,508) 243
Pro forma income tax
provision
(benefit)(1)........... 11 206 (61) (709) (1,333) (576) (212)
Extraordinary item(2)... -- -- -- -- -- -- 131
------ ------ ------- ------- ------- ------ -------
Pro forma net income
(loss)................. $ 12 $ 322 $ (115) $(1,152) $(2,156) $ (932) $ 324
====== ====== ======= ======= ======= ====== =======
Pro forma net income
(loss) per common and
common equivalent
shares(3).............. $ (0.19) $(0.08) $ 0.02
======= ====== =======
Weighted average common
and common equivalent
shares outstanding..... 11,100 11,150 13,125
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------- ---------
1992 1993 1994 1995 1996 1997
----- ----- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. $(310) $(102) $(1,027) $(3,664) $ 812 $14,989
Total assets................ 409 2,716 4,818 4,235 14,616 29,431
Long-term debt and
shareholder loan, including
current portion............ 7 89 1,067 970 9,174 760
Shareholders' equity
(deficit).................. (273) 145 (722) (3,154) (4,500) 19,347
</TABLE>
- -------
(1) As a result of its election to be treated as an S Corporation for income
tax purposes, prior to completion of its initial public offering in
February 1997, the Company was not subject to federal or state income
taxes. For periods prior to the termination of the S Corporation status,
pro forma net income amounts include additional provisions for income
taxes determined by applying the Company's anticipated statutory tax rate
to pretax income (loss), adjusted for permanent tax differences.
(2) Represents loss from early extinguishment of debt, net of income tax of
$82,000.
(3) Pro forma net income (loss) per share is computed by dividing pro forma
net income (loss) available to common shareholders by weighted average
shares outstanding.
16
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following table sets forth (i) selected pro forma combined statements of
operations data for the year ended December 31, 1996 and the three months
ended March 31, 1997 giving effect to the acquisitions of PrysmTech and ReMACS
as if it they had occurred at the beginning of the respective periods, and
(ii) selected pro forma combined balance sheet data as of March 31, 1997,
giving effect to the ReMACS acquisition as if it had occurred on that date.
The accompanying pro forma statements are not necessarily indicative of the
results of operations which would have been attained had the acquisitions been
consummated on the dates indicated or which may be attained in the future.
These pro forma statements should be read in conjunction with the pro forma
financial data and the historical combined financial statements of the Company
and related notes thereto, which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1996(1) 1997(2)
------------ ------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Systems sales....................................... $38,921 $11,291
Customer support, maintenance and other services.... 7,670 2,286
------- -------
Total revenues...................................... 46,591 13,577
Cost of revenues:
Systems sales....................................... 22,908 6,325
Customer support, maintenance and other services.... 6,872 2,073
------- -------
Total cost of revenues.............................. 29,780 8,398
------- -------
Gross profit......................................... 16,811 5,179
Operating expenses:
Product development................................. 5,386 1,406
Purchased research and development costs............ 30 --
Sales and marketing................................. 2,684 1,256
Depreciation and amortization....................... 1,957 579
General and administrative.......................... 7,987 2,002
------- -------
Income (loss) from operations........................ (1,233) (63)
Interest expense, net................................ 1,237 281
------- -------
Income (loss) before extraordinary item ............. (2,470) (344)
------- -------
Pro forma net income (loss) before extraordinary
items............................................... $(2,470) $ (344)
======= =======
Pro forma net income (loss) per common and common
equivalent shares before extraordinary items(3)..... $ (0.21) $ (0.03)
======= =======
Weighted average common and common equivalent shares
outstanding......................................... 11,727 13,753
======= =======
<CAPTION>
PRO FORMA
MARCH 31,
1997
------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................... $ 6,568
Total assets......................................... 31,183
Long-term debt and shareholder loan, including
current portion..................................... 4,210
Shareholders' equity................................. 11,132
</TABLE>
- --------
(1) Derived from the December 31, 1996 and October 31, 1996 financial
statements of the Company and ReMACS, respectively, appearing elsewhere in
this Prospectus.
(2) Derived from the March 31, 1997 unaudited financial statements of the
Company appearing elsewhere in this Prospectus, and derived from the three
months ended April 30, 1997 unaudited financial statements of ReMACS. For
purposes of the above presentation, the results of ReMACS for the three
months ended January 31, 1997 have been omitted.
(3) Pro forma net income (loss) per share is computed by dividing pro forma
net income (loss) available to common shareholders by weighted average
shares outstanding.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company historically has focused on providing integrated technology
solutions to selected vertical markets within the retail industry. The Company
derives its revenues primarily from the sale of integrated systems, including
software, hardware and related support and consulting services. The Company
plans to increase licensing of certain of its software products on a stand-
alone basis. In addition, the Company, through its Radiant Solutions Group,
offers implementation and integration services which are billed on a per diem
basis. The Company's revenues from its various technology solutions are, for
the most part, dependent on the number of installed sites a customer has.
Accordingly, while the typical sale is the result of a long, complex process,
the Company's customers usually continue installing additional sites over an
extended period of time. Revenues from systems sales are recognized as
products are shipped, provided that collection is probable and no significant
post shipment vendor obligations remain. Revenues from customer support,
maintenance and other services are generally recognized as the service is
performed.
Prior to 1993, the Company developed software solutions for the video rental
and car care markets. The Company entered the convenience store market in 1993
by establishing relationships with two customers. Sales to these two customers
represented approximately 75.9%, 59.4% and 18.3% of the Company's total
revenues in 1994, 1995 and 1996, respectively. In order to increase the
Company's focus on revenue growth and profitability, the Company expanded its
senior management team in 1995 and 1996. In addition, the Company responded to
strong demand for its technology solutions by investing heavily in new product
development. The Company also identified additional market opportunities for
its new products. As a result, the Company has substantially increased its
sales, marketing and product development activities.
Since November 1995, a number of events resulted in strong revenue growth
for the Company. The Company developed new products, established relationships
with new customers and increased sales to existing customers. The Company also
entered two new vertical markets--the restaurant market and the entertainment
market. The Company expanded its presence in the entertainment market in
November 1995 by entering into a joint venture (PrysmTech) to market
enterprise-wide technology solutions to this industry. On December 31, 1996,
the Company purchased the remaining interest in PrysmTech. Accordingly, the
operations of PrysmTech are reflected in the 1996 financial statements of the
Company. To accelerate its entry into the restaurant market, in May 1996 the
Company purchased Liberty Systems International, Inc. ("LSI"), a technology
solution provider to the QSR industry. To broaden its presence in the
restaurant market, in May 1997, the Company acquired ReMACS and Twenty/20.
During this period, the Company also expanded its sales force and continued to
add management, consulting and product development personnel. The revenue
growth of the Company has resulted in profitability since the second quarter
of 1996, before accounting for one-time, nonrecurring purchased research and
development costs.
As a result of its election to be treated as an S Corporation for income tax
purposes, the Company has not been subject to federal or state income taxes.
Pro forma net income amounts discussed herein include additional provisions
for income taxes determined by applying the Company's anticipated statutory
tax rate to pretax income (loss), adjusted for permanent tax differences. The
Company's S Corporation status terminated upon completion of its initial
public offering in February 1997.
18
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship of certain statement of operation items to total revenues:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Systems sales................. 93.6% 88.6% 87.7% 84.7% 85.5%
Customer support, maintenance
and other services........... 6.4 11.4 12.3 15.3 14.5
------- ------- ------- ------ ------
Total revenues.............. 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Systems sales................. 65.4 62.1 54.4 60.9 50.0
Customer support, maintenance
and other services........... 8.4 14.5 13.3 22.1 13.9
------- ------- ------- ------ ------
Total cost of revenues...... 73.8 76.6 67.7 83.0 63.9
Gross profit................... 26.2 23.4 32.3 17.0 36.1
Operating expenses:
Product development........... 6.8 10.3 8.1 15.4 9.2
Purchased research and
development costs............ -- -- 9.6 -- --
Sales and marketing........... 3.3 3.8 3.6 6.3 7.0
Depreciation and
amortization................. 1.3 3.7 2.3 4.2 2.9
General and administrative.... 15.5 18.8 13.9 22.2 13.4
------- ------- ------- ------ ------
Income (loss) from operations.. (0.7) (13.2) (5.2) (31.1) 3.6
Interest expense, net.......... 0.5 1.0 1.7 0.9 1.7
Minority interest.............. -- -- 1.6 1.2 --
Other (income)................. -- (2.5) -- -- --
------- ------- ------- ------ ------
Income (Loss) before pro forma
income taxes and extraordinary
item ......................... (1.2) (11.7) (8.5) (33.2) 1.9
Extraordinary item ............ -- -- -- -- 1.0
Pro forma income tax provision
(benefit)..................... (0.4) (4.4) (3.3) (12.7) 1.7
------- ------- ------- ------ ------
Pro forma net income (loss).... (0.8)% (7.3)% (5.2)% (20.5)% 2.6%
======= ======= ======= ====== ======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
Systems Sales. The Company derives the majority of its revenues from sales
and licensing fees for its headquarters and site-based solutions. Systems
sales increased 179.1% to $10.7 million for the three month period ended March
31, 1997, compared to $3.8 million for the prior year period. The increase
related to sales and license fees from new and existing customers, as well as
the continued growth within the cinema and entertainment division (PrysmTech).
Continued demand for the Company's products such as Core-Tech, OrderPoint, its
MediaClient platform and a Windows NT version of Compu-Touch, all of which
were introduced in 1996, contributed to the Company's increase in revenues.
Customer Support, Maintenance and Other Services. The Company also derives
revenues from customer support, maintenance and other services, which
increased 160.5% to $1.8 million for the three month period ended March 31,
1997, compared to $698,000 for the prior year period. The increase was due to
increased support, maintenance and services revenues, including those related
to PrysmTech, and the continued expansion of Company's Radiant Solutions
Group, which was established during the first quarter 1996.
19
<PAGE>
Cost of Systems Sales. Cost of systems sales consist primarily of hardware
and peripherals for site-based systems and labor. These costs are expensed as
products are shipped. Cost of systems sales increased 126.8% to $6.3 million
for the three month period ended March 31, 1997, compared to $2.8 million for
the prior year period. The increase was directly attributable to the increase
in systems sales, including PrysmTech's sales. Cost of systems sales as a
percentage of total revenues declined to 50.0% from 60.9%. Cost of systems
sales as a percentage of systems revenues declined to 58.4% from 71.9%. The
decreases were due to increased sales of existing and newly introduced and
acquired products, such as Core-Tech, which has higher margins than the site-
based systems sold by the Company.
Cost of Customer Support, Maintenance and Other Services. Cost of customer
support, maintenance and other services consists primarily of personnel and
other costs associated with the Company's services operations. Cost of
customer support, maintenance and other services increased 74.4% to $1.7
million for the three month period ended March 31, 1997 from $1.0 million for
the prior year period. The increase was due primarily to the Company's
decision to expand the Radiant Solutions Group and the related increase in
wages associated with this effort. Cost of customer support, maintenance and
other services as a percentage of total revenues declined to 13.9% from 22.1%.
Cost of customer support, maintenance and other services as a percentage of
customer support, maintenance and other services revenues declined to 96.2%
from 143.7%. These declines reflect higher service margins and higher capacity
utilization of the personnel within the Radiant Solutions Group.
Product Development Expenses. Product development expenses consist primarily
of wages and materials expended on product development efforts. Product
development expenses increased 64.5% to $1.2 million for the three month
period ended March 31, 1997, compared to $701,000 for the prior year period.
The increase was due to higher development costs associated with new product
development, including development activity associated with the Company's
quick service restaurant industry efforts and development of new credit card
network interfaces, as well as PrysmTech development efforts within the cinema
and entertainment industry. Product development expenses as a percentage of
total revenues declined to 9.2% from 15.4% as total revenues increased at a
faster pace than product development expenses. The Company capitalizes a
portion of its software development costs. In the three month period ended
March 31, 1997, software development costs of $202,000 were capitalized by the
Company, as compared to $64,000 for the prior year period. The Company
capitalized 14.9% of its product development costs in the three month period
ended March 31, 1997, as compared to 9.1% for the prior year period.
Sales and Marketing Expenses. Sales and marketing expenses increased 206.0%
to $872,000 during the three month period ended March 31, 1997, compared to
$285,000 for the prior year period. The increase was associated with the
Company's expansion of its sales activities and increased commission expense
attributable to higher sales. Sales and marketing expenses as a percentage of
total revenues increased to 7.0% from 6.3%.
Depreciation and Amortization. Depreciation and amortization expenses
increased 89.2% to $367,000 for the three month period ended March 31, 1997,
compared to $194,000 for the prior year period. The increase resulted from an
increase in computer equipment and other assets required to support an
increased number of employees. Depreciation and amortization as a percentage
of total revenues declined to 2.9% from 4.2% during the period, primarily
because revenues increased at a faster pace than associated personnel support
costs. Additionally, amortization of capitalized software development costs
increased 112.2% to $87,000 for the three month period ended March 31, 1997,
compared to $41,000 for the prior year period as a result of higher
capitalized software development costs.
General and Administrative Expenses. General and administrative expenses
increased 67.2% to $1.7 million for the three month period ended March 31,
1997, compared to $1.0 million for the prior
20
<PAGE>
year period. The increase was due primarily to personnel increases in the
first quarter of 1997. General and administrative expenses as a percentage of
total revenues declined to 13.4% from 22.2% as a result of higher sales
volumes.
Interest Expense. Interest expense increased 435.9% to $209,000 for the
three month period ended March 31, 1997, compared to $39,000 for the prior
year period. The increase resulted from the Company borrowing $4.5 million in
the second and third quarters of 1996 and the borrowing costs associated
therewith. Interest expense as a percentage of total revenues increased to
1.7% from 0.9% due to the increase in borrowings.
Minority interest in Earnings of PrysmTech. In the three month period ended
March 31, 1997, the Company recognized no minority interest in earnings of
PrysmTech compared to $55,000 in the prior year period. The remaining interest
in PrysmTech was acquired by the Company during the fourth quarter of 1996.
Pro Forma Income Tax Benefit. As a result of its election to be treated as
an S Corporation for income tax purposes, the Company, prior to the completion
of its initial public offering in February 1997, was not subject to federal or
state income taxes. Pro forma net income amounts include additional provisions
for income taxes determined by applying the Company's anticipated statutory
tax rate to pretax loss, adjusted for permanent tax differences. The Company's
S Corporation status was terminated upon completion of its initial public
offering in February 1997. The pro forma effective tax rate for the period
from January 1, 1997 through February 19, 1997, the date the Company
terminated its S Corporation status, was a benefit of 38.5%, compared to a
benefit of 38.2% for the prior year period.
Income Tax Provision. Upon the termination of its S Corporation election,
the Company recorded certain deferred tax assets in the amount of $592,000.
Simultaneously, with the recording of these deferred tax assets, the Company
recorded a tax benefit of $305,000 and a valuation allowance of $287,000. The
valuation allowance was recorded due to the uncertainty surrounding the future
utilization of such deferred tax assets. For the period subsequent to the
initial public offering, the Company recorded a tax provision of $305,000. As
a result, no income tax provision was recognized for the three months ended
March 31, 1997.
Extraordinary Item. A loss from early extinguishment of debt of $213,000,
net of taxes of $82,000 was recognized for the three month period ended March
31, 1997 primarily due to the write off of certain unamortized loan
origination costs and unamortized debt discount associated with the repayment
of outstanding indebtedness to Sirrom Capital Corporation of $4.5 million.
Pro Forma Net Income (Loss). For the three month period ended March 31,
1997, the Company recognized pro forma net income of $324,000 compared to a
pro forma net loss of $932,000 for the prior year period. The increase in
income resulted primarily from increased revenues and improved margins in the
three month period ended March 31, 1997 over the prior year period.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Systems Sales. Systems sales increased 154.9% to $35.9 million for the year
ended December 31, 1996 ("fiscal 1996"), compared to $14.1 million for the
year ended December 31, 1995 ("fiscal 1995"). The increase related to sales
and license fees from new and existing customers, as well as the acquisition
and consolidation of PrysmTech that contributed $9.1 million to system sales
in fiscal 1996. Additionally, the Company introduced several new products in
fiscal 1996, including Core-Tech, OrderPoint, its MediaClient platform and a
Windows NT version of Compu-Touch. Initial demand for these products
contributed to the Company's increase in revenues.
21
<PAGE>
Customer Support, Maintenance and Other Services. Customer support,
maintenance and other services increased 180.2% to $5.1 million for fiscal
1996, compared to $1.8 million for fiscal 1995. The increase was due to
increased support, maintenance and services revenues, including $1.1 million
related to PrysmTech, and the establishment and expansion of Company's Radiant
Solutions Group.
Cost of Systems Sales. Cost of systems sales increased 125.8% to $22.3
million for fiscal 1996, compared to $9.9 million for fiscal 1995. The
increase was directly attributable to the increase in systems sales, including
PrysmTech's sales. Cost of systems sales as a percentage of total revenues
declined to 54.4% from 62.1%. Cost of systems sales as a percentage of systems
revenues declined to 62.1% from 70.1%. The decreases were due to increased
sales of existing and newly introduced and acquired products, such as Core-
Tech and the PrysmTech product line, which have higher margins than site-based
systems sold by the Company in prior years.
Cost of Customer Support, Maintenance and Other Services. Cost of customer
support, maintenance and other services increased 137.6% to $5.5 million for
fiscal 1996 from $2.3 million for fiscal 1995. The increase was due primarily
to the Company's decision to establish the Radiant Solutions Group and the
related increase in wages associated with this effort, as well as the
inclusion of PrysmTech's results. Cost of customer support, maintenance and
other services as a percentage of total revenues declined to 13.3% from 14.5%.
Cost of customer support, maintenance and other services as a percentage of
customer support, maintenance and other services revenues declined to 108.1%
from 127.5%. These declines reflect higher service margins from PrysmTech
operations, partially offset by the Company's investment in the Radiant
Solutions Group.
Product Development Expenses. Product development expenses increased 102.9%
to $3.3 million for fiscal 1996, compared to $1.6 million for fiscal 1995. The
increase was due to higher development costs associated with new product
development, including development activity associated with the Company's QSR
industry efforts and development of new credit card network interfaces, as
well as the inclusion of PrysmTech's results. Product development expenses as
a percentage of total revenues declined to 8.1% from 10.3% because total
revenues increased at a faster pace than product development expenses. The
Company capitalizes a portion of its software development costs. In fiscal
1996, software development costs of $635,000 were capitalized by the Company,
as compared to $329,000 for fiscal 1995. The Company capitalized 16.0% of its
product development costs in fiscal 1996, as compared to 16.7% for fiscal
1995.
Purchased Research and Development Costs. Purchased research and development
costs were $3.9 million for fiscal 1996. These one-time, nonrecurring costs
represent in-process research and development costs expensed by the Company in
connection with its acquisition of PrysmTech.
Sales and Marketing Expenses. Sales and marketing expenses increased 145.1%
to $1.5 million during fiscal 1996, compared to $607,000 for fiscal 1995. The
increase was associated with the Company's expansion of its sales force, the
inclusion of PrysmTech's results and increased commission expense attributable
to higher sales. Sales and marketing expenses as a percentage of total
revenues declined to 3.6% from 3.8%.
Depreciation and Amortization. Depreciation and amortization expenses
increased 62.5% to $948,000 for fiscal 1996, compared to $583,000 for fiscal
1995. The increase resulted from an increase in computer equipment and other
assets required to support an increased number of employees, as well as the
inclusion of PrysmTech's results. Depreciation and amortization as a
percentage of total revenues declined to 2.3% from 3.7% during the period,
primarily because revenues increased at a faster pace than associated
personnel support costs. Additionally, amortization of capitalized software
development costs increased 140.8% to $239,000 for fiscal 1996, compared to
$99,000 for fiscal 1995 as a result of higher capitalized software development
costs.
22
<PAGE>
General and Administrative Expenses. General and administrative expenses
increased 89.4% to $5.7 million for fiscal 1996, compared to $3.0 million for
fiscal 1995. The increase was due primarily to personnel increases in fiscal
1996, as well as the inclusion of PrysmTech's results. General and
administrative expenses as a percentage of total revenues declined to 13.9%
from 18.8% as a result of higher sales volumes.
Interest Expense. Interest expense increased 327.6% to $712,000 for fiscal
1996, compared to $166,000 for fiscal 1995. The increase resulted from the
Company borrowing $4.5 million in the second and third quarters of fiscal 1996
and the borrowing costs associated therewith. Interest expense as a percentage
of total revenues increased to 1.7% from 1.0% due to the increase in
borrowings.
Minority Interest in Earnings of PrysmTech. In fiscal 1996, the minority
interest in earnings of PrysmTech was $628,000, compared to none in fiscal
1995. This amount reflects the pro rata ownership interest not owned by the
Company.
Other Income. In fiscal 1996, the Company recognized no other income. In
fiscal 1995, the Company recognized $406,000 in other income, which primarily
represented a gain on the sale of Company assets.
Pro Forma Income Tax Provision (Benefit). The pro forma effective tax rate
for fiscal 1996 was a benefit of 38.2%, compared to a benefit of 38.1% for
fiscal 1995.
Pro Forma Net Income (Loss). Pro forma net loss increased 87.2% to $2.2
million for fiscal 1996, compared to $1.2 million for fiscal 1995. The
increase in net loss resulted primarily from one-time, nonrecurring charges
for purchased research and development costs, partially offset by increased
revenues and improved margins in fiscal 1996 over fiscal 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Systems Sales. Systems sales increased 4.1% to $14.1 million for fiscal
1995, compared to $13.5 million for the year ended December 31, 1994 ("fiscal
1994"). The increase related to sales and license fees from new customers and
increased sales and license fees to existing customers.
Customer Support, Maintenance and Other Services. Customer support,
maintenance and other services increased 96.4% to $1.8 million for fiscal
1995, compared to $919,000 for fiscal 1994. The increase was due to a greater
number of customer sites supported by the Company.
Cost of Systems Sales. Cost of systems sales increased 4.3% to $9.9 million
for fiscal 1995, compared to $9.5 million for fiscal 1994. The increase was
directly attributable to increased systems sales. Cost of systems sales as a
percentage of total revenues declined to 62.1% from 65.5%. Cost of systems
sales as a percentage of systems sales increased to 70.1% from 69.9%.
Cost of Customer Support, Maintenance and Other Services. Cost of customer
support, maintenance and other services increased 90.5% to $2.3 million for
fiscal 1995 from $1.2 million for fiscal 1994. The increase was due primarily
to increased personnel costs associated with the support of more customers and
sites. Cost of customer support, maintenance and other services as a
percentage of total revenues increased to 14.5% from 8.4%. Cost of support,
maintenance and other services as a percentage of customer support,
maintenance and other services revenues declined to 127.5% from 131.4%, as
growth in support and maintenance revenues grew at a faster rate than
expenses.
Product Development Expenses. Product development expenses increased 66.6%
to $1.6 million for fiscal 1995, compared to $984,000 million for fiscal 1994.
The increase was associated with increased development costs associated with
new product development and new credit card network interfaces.
23
<PAGE>
Product development expenses as a percentage of total revenues increased to
10.3% from 6.8% due to the development efforts discussed above. In fiscal
1995, software development costs of $329,000 were capitalized by the Company,
as compared to $133,000 for fiscal 1994. The Company capitalized 16.7% of its
product development costs in fiscal 1995, as compared to 11.9% in fiscal 1994.
Sales and Marketing Expenses. Sales and marketing expenses increased 29.0%
to $607,000 during fiscal 1995, compared to $470,000 for fiscal 1994. The
increase was associated with increased salaries and commissions. Sales and
marketing expenses as a percentage of total revenues increased to 3.8% from
3.3% in fiscal 1995 primarily because of commission plans introduced during
the period.
Depreciation and Amortization. Depreciation and amortization expense
increased 228.2% to $583,000 for fiscal 1995, compared to $178,000 for fiscal
1994. The increase resulted from an increase in computer equipment and other
assets required to support a greater number of employees. Depreciation and
amortization as a percentage of total revenues increased to 3.7% from 1.3%
during the period due to the increased expense. Additionally, amortization of
capitalized software development costs increased 350.0% to $99,000 for fiscal
1995, compared to $22,000 for fiscal 1994 as a result of higher capitalized
software development costs.
General and Administrative Expenses. General and administrative expenses
increased 33.3% to $3.0 million for fiscal 1995, compared to $2.2 million for
fiscal 1994, due to the Company's investment in infrastructure. General and
administrative expenses as a percentage of total revenues increased to 18.8%
from 15.5%.
Interest Expense. Interest expense increased 103.6% to $166,000 for fiscal
1995, compared to $82,000 for fiscal 1994.
Other Income. Other income increased to $406,000 for fiscal 1995, compared
to none for fiscal 1994. Other income in 1995 primarily represented gain on
the sale of Company assets of $374,000 and equity in earnings of PrysmTech of
$32,000.
Pro Forma Income Tax Provision (Benefit). The pro forma effective tax rate
for fiscal 1995 was a benefit of 38.1%, compared to a benefit of 34.5% for
fiscal 1994. The increase in the benefit relates to a decrease in the relative
significance of permanent tax differences to pretax loss.
Pro Forma Net Income (Loss). Pro forma net loss increased 898.9% to $1.2
million for fiscal 1995, compared to $115,000 for fiscal 1994. The increase in
the loss was the result of increased research and development costs and
continued investments in infrastructure.
PRO FORMA MANAGEMENT'S DISCUSSION AND ANALYSIS
On May 23, 1997, the Company acquired ReMACS, a leading provider of back
office management systems for customers in the restaurant industry. The
following is a discussion of the pro forma results of operations of the
Company for the three months ended March 31, 1997 and the year ended December
31, 1996 as if the acquisition of ReMACS had been consummated at the beginning
of the respective periods. The following discussion should be read in
conjunction with the Company's combined financial statement and the pro forma
financial data included elsewhere in this Prospectus.
Revenues. On a pro forma basis, total revenues would have increased
approximately 8.1%, to $13.6 million for the three month period ended March
31, 1997, compared to actual total revenues of $12.6 million for the same
period. On a pro forma basis, total revenues would have increased 13.8%, to
$46.6 million for fiscal 1996, compared to actual total revenues of $40.9
million for the same period. Both increases are due principally to ReMACS'
software license fees and revenues from customer support, maintenance and
other services. At March 31, 1997 and December 31, 1996, ReMACS' recorded
customer deposits and unearned revenue of $5.7 million and $4.6 million,
respectively, primarily representing deposits and other payments received in
advance for products under development. Consequently, future recognition of
these unearned revenues will not result in additional cash inflows.
24
<PAGE>
Cost of Revenues. On a pro forma basis, total cost of revenues would have
increased approximately 4.6% to $8.4 million for the three month period ended
March 31, 1997, compared to actual total costs of revenues of $8.0 million for
the same period. As a percentage of revenues, cost of revenues would have
decreased to 61.9% on a pro forma basis compared to an actual 63.9% for the
same period. On a pro forma basis, total cost of revenues would have increased
7.4% to $29.8 million for fiscal 1996, compared to actual total cost of
revenues of $27.7 million for the same period. As a percentage of revenues,
cost of revenues would have decreased to 63.9% on a pro forma basis compared
to an actual 67.7% for the same period. Both increases in pro forma cost of
revenues are due principally to costs associated with ReMACS' personnel and
other costs associated with support, maintenance and other services.
Gross Profit. On a pro forma basis, gross profit would have increased
approximately 14.2% to $5.2 million for the three month period ended March 31,
1997, compared to actual gross profit of $4.5 million for the same period. As
a percentage of revenues, gross profit would have increased to 38.1% on a pro
forma basis compared to an actual 36.1% for the same period. On a pro forma
basis, gross profit would have increased 27.3% to $16.8 million for fiscal
1996, compared to actual gross profit of $13.2 million for the same period. As
a percentage of revenues, gross profit would have increased to 36.1% on a pro
forma basis compared to an actual 32.3% for the same period. Both increases in
gross profit are due principally to higher ReMACS' licensing and services
margins.
Income (Loss) from Operations. On a pro forma basis, income from operations
would have decreased approximately 114.0% to a loss of $63,000 for the three
month period ended March 31, 1997, compared to actual income from operations
of $452,000 for the same period. As a percentage of revenues, income from
operations would have decreased to a negative 0.5% on a pro forma basis
compared to an actual 3.6% for the same period. This decrease in income from
operations is due to ReMACS' loss from operations of $405,000 for the period.
Additionally, a pro forma adjustment of $110,000 was recorded to reflect the
amortization of goodwill for the period. On a pro forma basis, loss from
operations would have decreased 42.6% to $1.2 million for fiscal 1996,
compared to an actual loss from operations of $2.1 million for the same
period. This decrease in pro forma loss from operations is due primarily to
the elimination of $3.9 million in purchased research and development costs
related to the acquisition of PrysmTech. Excluding the effects of this
purchased research and development elimination, the pro forma loss from
operations for fiscal 1996 would have increased 138.1% to $5.1 million from an
actual loss from operations of $1.2 million for the same period. This increase
is primarily attributable to ReMACS' loss from operations of $2.4 million for
fiscal 1996. This amount is increased by the pro forma adjustment to record
amortization of goodwill for the year of $427,000.
Pro Forma Net Income (Loss). On a pro forma basis, net income before
extraordinary items would have decreased approximately 175.7% to a loss of
$344,000 for the three month period ended March 31, 1997, compared to actual
pro forma net income before extraordinary items of $455,000 for the same
period. On a pro forma basis, net loss before extraordinary items would have
increased 14.6% to $2.5 million for fiscal 1996, compared to actual pro forma
net loss before extraordinary items of $2.2 million for the same period.
25
<PAGE>
QUARTERLY INFORMATION
The following tables set forth certain unaudited financial data for each of
the Company's last nine calendar quarters and such data expressed as a
percentage of the Company's total revenues for the respective quarters. The
information has been derived from unaudited combined financial statements
that, in the opinion of management, reflect all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of such
quarterly information. The operating results for any quarter are not
necessarily indicative of the results to be expected for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems sales.......... $4,521 $2,377 $2,549 $4,631 $ 3,849 $9,752 $9,741 $12,546 $10,742
Customer support,
maintenance and other
services.............. 461 461 444 438 698 1,097 1,448 1,812 1,818
------ ------ ------ ------ ------- ------ ------ ------- -------
Total revenues........ 4,982 2,838 2,993 5,069 4,547 10,849 11,189 14,358 12,560
Cost of revenues:
Systems sales.......... 3,436 1,549 1,784 3,093 2,768 6,331 5,592 7,579 6,278
Customer support,
maintenance and other
services.............. 555 538 568 640 1,003 1,215 1,600 1,646 1,749
------ ------ ------ ------ ------- ------ ------ ------- -------
Total cost of
revenues............. 3,991 2,087 2,352 3,733 3,771 7,546 7,192 9,225 8,027
------ ------ ------ ------ ------- ------ ------ ------- -------
Gross profit............ 991 751 641 1,336 776 3,303 3,997 5,133 4,533
Operating expenses:
Product development.... 347 409 417 467 701 768 900 959 1,153
Purchased research and
development costs..... -- -- -- -- -- 30 -- 3,900 --
Sales and marketing.... 149 179 109 170 285 292 311 599 872
Depreciation and
amortization.......... 128 126 133 196 194 224 265 265 367
General and
administrative........ 706 719 738 827 1,010 1,407 1,394 1,854 1,689
------ ------ ------ ------ ------- ------ ------ ------- -------
Income (loss) from
operations............. (339) (682) (756) (324) (1,414) 582 1,127 (2,444) 452
Interest expense, net... 31 27 25 84 39 40 229 404 209
Other (income).......... -- (374) -- (33) -- -- -- -- --
Minority interest in
earnings of PrysmTech.. -- -- -- -- 55 215 206 152 --
------ ------ ------ ------ ------- ------ ------ ------- -------
Income (loss) before
extraordinary item and
pro forma income
taxes.................. (370) (335) (781) (375) (1,508) 327 692 (3,000) 243
Pro forma income tax
provision (benefit).... (141) (128) (297) (143) (576) 125 264 (1,146) (212)
Extraordinary item,
net.................... -- -- -- -- -- -- -- -- 131
------ ------ ------ ------ ------- ------ ------ ------- -------
Pro forma net income
(loss)................. $ (229) $ (207) $ (484) $ (232) $ (932) $ 202 $ 428 $(1,854) $ 324
====== ====== ====== ====== ======= ====== ====== ======= =======
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems sales.......... 90.7 % 83.8 % 85.2 % 91.4 % 84.7 % 89.9% 87.1% 87.4 % 85.5%
Customer support,
maintenance and other
services.............. 9.3 16.2 14.8 8.6 15.3 10.1 12.9 12.6 14.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Systems sales.......... 69.0 54.6 59.6 61.0 60.9 58.4 50.0 52.8 50.0
Customer support,
maintenance and other
services.............. 11.1 18.9 19.0 12.6 22.1 11.2 14.3 11.5 13.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Total cost of
revenues............. 80.1 73.5 78.6 73.6 83.0 69.6 64.3 64.3 63.9
Gross profit............ 19.9 26.5 21.4 26.4 17.0 30.4 35.7 35.7 36.1
Operating expenses:
Product development.... 7.0 14.5 13.9 9.2 15.4 7.1 8.0 6.7 9.2
Purchased research and
development costs..... -- -- -- -- -- 0.2 -- 27.2 --
Sales and marketing.... 3.0 6.3 3.6 3.4 6.3 2.7 2.8 4.1 7.0
Depreciation and
amortization.......... 2.5 4.4 4.5 3.9 4.2 2.1 2.4 1.8 2.9
General and
administrative........ 14.2 25.3 24.7 16.3 22.2 12.9 12.4 12.9 13.4
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............. (6.8) (24.0) (25.3) (6.4) (31.1) 5.4 10.1 (17.0) 3.6
Interest expense, net... 0.6 1.0 0.8 1.7 0.9 0.4 2.1 2.8 1.7
Other (income).......... -- (13.2) -- -- -- -- -- -- --
Minority interest....... -- -- -- -- 1.2 2.0 1.8 1.1 --
Income (loss) before
extraordinary item and
pro forma income
taxes.................. (7.4) (11.8) (26.1) (7.4) (33.2) 3.0 6.2 (20.9) 1.9
Pro forma income tax
provision (benefit).... (2.8) (4.5) (9.9) (2.8) (12.7) 1.1 2.4 (8.0) (1.7)
Extraordinary items,
net.................... -- -- -- -- -- -- -- -- 1.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Pro forma net income
(loss)................. (4.6)% (7.3)% (16.2)% (4.6)% (20.5)% 1.9% 3.8% (12.9)% 2.6%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
In February 1997, the Company completed its initial public offering, in
which the Company received net proceeds of approximately $24.3 million after
deducting underwriting discounts and offering expenses. The Company applied
the proceeds of the offering to (i) repay all of the Company's outstanding
indebtedness to Sirrom Capital Corporation ($4.5 million), (ii) repay debt
incurred in connection with its acquisition of PrysmTech ($3.1 million), (iii)
repay outstanding shareholder notes ($1.1 million) and (iv) to repurchase an
aggregate of 793,073 shares of Common Stock from two shareholders from whom
the Company had a right of repurchase at a substantial discount to the initial
public offering price ($2.1 million). In addition, in May 1997, the Company
paid approximately $4.6 million in cash as a portion of the purchase price in
connection with its acquisitions of ReMACS and Twenty/20.
The exercise of outstanding warrants to purchase 1,333,002 shares of Common
Stock in connection with the initial public offering in February 1997 provided
the Company with proceeds of approximately $960,000.
Prior to the initial public offering, the Company financed its operations
primarily through cash generated from operations and recently from financing
obtained during fiscal 1996. As of March 31, 1997, the Company had $12.5
million in cash and cash equivalents.
The Company's operating activities provided cash in fiscal 1994 and 1995 of
$844,000 and $841,000, respectively, while during fiscal 1996 the Company's
operating activities used cash of $1.4 million. In fiscal
27
<PAGE>
1993, cash flow from operating activities arose principally from the Company's
profitable operations, partially offset by an increase in accounts receivable.
Additionally, in fiscal 1994, cash from operating activities was significantly
increased due to customer deposits received in advance of product shipment. In
fiscal 1995, the Company's operating cash was the result of extended payment
terms with vendors. During fiscal 1996, the Company's uses of cash were the
result of increased accounts receivables due to increased sales somewhat
offset by continued receipt of customer deposits in advance of sales.
The Company's operating activities used cash in the three month period ended
March 31, 1997 of $3.5 million and provided cash of $77,000 in the prior year
period. In the three month period ended March 31, 1997, the Company's uses of
cash were the result of increased accounts receivables due to increased sales
and by receipt of customer deposits in advance of sales. During the prior year
period, the Company's cash from operations resulted primarily from payments
received from customers in advance of shipments, as well as from extended
payment terms with vendors.
Cash used in investing activities in fiscal 1994, 1995 and 1996 was
$537,000, $641,000 and $727,000, respectively. Such investing activities
primarily consisted of purchases of property and equipment and capitalized
software development costs.
Cash used in investing activities in the three month period ended March 31,
1997 and 1996 was $800,000 and $170,000 respectively. Such investing
activities primarily consisted of purchases of property and equipment and
capitalized software development costs. Purchases of property and equipment
were approximately $556,000 and $106,000 in the three month period ended March
31, 1997 and 1996, respectively. These expenditures were primarily for
purchases of computer equipment, furniture and fixtures.
Cash used in financing activities was $249,000 and $402,000 in fiscal 1994
and 1995, respectively, while $4.3 million was provided by financing
activities during fiscal 1996. Financing activities during fiscal 1994 and
1995 consisted of shareholder distributions and repayment of a shareholder
note beginning in fiscal 1995. Additionally, in fiscal 1994 and 1995 the
Company's repayment of borrowings under capital lease agreements increased as
the Company purchased equipment under capital lease agreements of $599,000 and
$218,000, respectively, in those years. Financing activities in fiscal 1996
consisted primarily of borrowings of $4.5 million from Sirrom Capital
Corporation and $3.2 million in connection with the PrysmTech acquisition.
These loan proceeds were offset somewhat by payment of loan origination fees
as well as continued repayments of borrowings under capital lease agreements.
See Note 5 of the combined financial statements of the Company.
Cash of $14.4 million was provided by financing activities during the three
month period ended March 31, 1997 due to the issuance of common stock in the
initial public offering offset by repayment of the Company's outstanding
indebtedness noted above. Cash of $64,000 used in financing activities during
the prior year period consisted primarily of principal payments of capital
lease obligations as well as principal payments made upon repayment of a
shareholder note.
Purchases of property and equipment were approximately $303,000, $312,000
and $493,000 in fiscal 1994, 1995 and 1996, respectively. These expenditures
were primarily for purchases of computer equipment, furniture and fixtures.
Total product development expenditures were $1.1 million, $2.0 million and
$4.0 million in fiscal 1994, 1995 and 1996, respectively. Including estimated
expenditures at ReMACS, the cost of research and development is expected to
approximate $7.1 million in 1997, while the cost of marketing new releases and
existing products is expected to approximate $4.8 million in 1997. These
expenditures are expected to be financed from operations and from the proceeds
of this offering.
In order to finance its recent growth, the Company in fiscal 1996 borrowed
$4.5 million from Sirrom Capital Corporation (the "Sirrom Debt"). Funds were
disbursed to the Company in two installments; the first in June 1996 ($3.0
million) and the second in September 1996 ($1.5 million), which borrowings
were
28
<PAGE>
utilized to finance the Company's working capital requirements. The Sirrom
Debt is secured by substantially all the assets of the Company, bears interest
at a fixed rate of 14.0% and is payable in equal monthly installments of
accrued interest to maturity (due June 2001 with respect to the $3.0 million
tranche and due September 2001 with respect to the $1.5 million tranche). As
of December 31, 1996, the Sirrom Debt had a balance of $4.5 million. The
Sirrom Debt was repaid from the proceeds of the Company's initial public
offering in February 1997.
In connection with the acquisition of PrysmTech in December 1996 the Company
issued promissory notes in the principal amount of $3.2 million. These notes
are due December 1998 and bear interest at a rate of 8.5%. Substantially all
of the PrysmTech debt was repaid from the proceeds of the Company's initial
public offering in February 1997.
In connection with the acquisition of ReMACS in May 1997, the Company issued
promissory notes in the principal amount of $3.3 million. These notes are due
April 2001 and bear interest at the prime rate. It is anticipated that the
ReMACS Debt will be repaid from the proceeds of this offering. See "Use of
Proceeds."
The Company believes that the net proceeds from this offering, together with
any remaining proceeds from the initial public offering, will provide adequate
liquidity to meet the Company's planned capital, research and development and
operating requirements for at least the twelve month period following this
offering. Thereafter, if the Company's spending plans change, the Company may
find it necessary to seek to obtain additional sources of financing to support
its operations. There can be no assurance that such financing will be
available on reasonable terms, if at all.
ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The Company's adoption of SFAS No. 121 in the first quarter of 1996 did not
have a significant impact on the Company's combined financial statements.
The American Institute of Certified Public Accountants has issued an
exposure draft to amend the provisions of Statement of Position ("SOP") 91-1,
"Software Revenue Recognition." The adoption of the standards in the current
version of the exposure draft is not expected to have a significant impact on
the Company's combined financial statements.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." SFAS 128 supersedes APB 15, "Earnings per Share"
and promulgates new accounting standards for the computation and manner of
presentation of the Company's loss per share. The Company is required to adopt
the provisions of SFAS 128 for the year ending December 31, 1997. Earlier
application is not permitted; however, upon adoption the Company will be
required to restate previously reported annual and interim loss per share in
accordance with the provisions of SFAS 128. See Note 2 to the combined
financial statements of the Company included elsewhere in this Prospectus for
disclosure of loss per share for the three months ended March 31, 1996 and
1997 using the provisions of SFAS 128.
29
<PAGE>
BUSINESS
Radiant provides enterprise-wide technology solutions to selected vertical
markets within the retail industry. The Company offers fully integrated retail
automation solutions including point of sale systems, consumer-activated
ordering systems, back office management systems and headquarters-based
management systems. The Company's products enable retailers to interact
electronically with consumers, capture data at the point of sale, manage site
operations and logistics and communicate electronically with their sites,
vendors and credit networks. In addition, the Company offers system planning,
design and implementation services that tailor the automation solution to each
retailer's specifications.
Radiant is currently a leading provider of integrated retail automation
solutions to the convenience store market and has a growing presence in the
restaurant and entertainment markets through its Radiant Hospitality Systems
and PrysmTech divisions, respectively. Since these markets require many of the
same product features and functionality, the Company believes it can leverage
its existing technology across these markets with limited incremental product
development efforts.
RECENT DEVELOPMENTS
In May, 1997, the Company closed the acquisitions of ReMACS, based in
Pleasanton, California, and Twenty/20, based in Dallas, Texas. ReMACS is a
leading provider of back office management systems for customers in the
restaurant industry with over 8,000 installed or licensed sites. Twenty/20 is
a provider of POS and table management systems for full-service restaurants.
The Company has combined these two entities with its existing restaurant
operations to form the Radiant Hospitality Systems division, which will focus
on providing an integrated solution to the restaurant industry.
INDUSTRY BACKGROUND
Successful retailers increasingly require information systems that capture a
detailed picture of consumer activity at the point of sale and store that data
in an accessible fashion. Early technology innovators in the retail industry
deployed robust, integrated information systems at the point of sale and used
the information to react rapidly to changing consumer preferences, ultimately
gaining market share in the process. In addition, these integrated information
systems helped retailers achieve operational efficiencies. Many large national
retailers have followed suit by investing in proprietary information systems.
For many types of retailers, however, this type of automation did not make
economic or business sense. In particular, merchants with a large number of
relatively small sites, such as convenience stores, petroleum retailers,
restaurants and entertainment venues, generally have not been able to cost-
effectively develop and deploy sophisticated, enterprise-wide information
systems. Economic and standardization problems for these markets are
exacerbated by the fact that many sites operate as franchises, dealerships or
other decentralized ownership and control structures. Without an investment in
technology, these retailers continue to depend on labor and paper to process
transactions. Management believes that high labor costs, lack of centralized
management control of remote sites and inadequate informational reporting,
together with emerging technology trends, have caused many of these retailers
to reexamine how technology solutions can benefit their operations.
A large number of retail sites face these challenges. At the end of 1995,
there were more than 90,000 convenience stores nationwide, while the cinema
industry had approximately 27,000 screens at 6,500 sites nationwide. As of
April 1997, the restaurant and food service industry had over 400,000 domestic
units, of which approximately 180,000 were classified as QSRs. Typically, the
existing systems in these industries consist of stand-alone devices such as
cash registers or other POS systems with little or no integration with either
the back office of the site or an enterprise-wide information system.
Implementation of such systems providing this functionality typically involves
three or more vendors and
30
<PAGE>
an independent systems integration firm. The resulting proprietary solutions
are often difficult to support and have inherently high risks associated with
implementation. Management believes that technology solutions that are highly
functional and scalable, relatively inexpensive, and easy to deploy are
critical for successful implementation in these retail markets.
In the absence of an integrated solution, retailers in these markets
typically rely on manual reporting to capture data on site activity and
disseminate it to different levels of management at the regional and national
headquarters. Basic information on consumers (i.e., who they are, when they
visit and what they buy) is not captured in sufficient detail, at the right
time or in a manner that can be communicated easily to others in the
organization. Similarly, information such as price changes does not flow from
headquarters to individual sites in a timely manner. In addition,
communications with vendors often remain manual, involving paperwork, delays
and related problems.
Recent trends in the retailing industry have accelerated the need for
enterprise-wide information and have heightened demand for integrated
retailing systems. Based in part upon industry association reports and other
studies, as well as the Company's experience in marketing its products, the
Company believes consumer preferences have shifted away from retailer loyalty
toward value and convenience, creating a greater need for timely data
concerning consumer buying patterns and preferences. Management also believes
that convenient consumer-activated ordering and payment systems, such as ATMs,
voice response units and "pay at the pump" systems, have become important to
retailers who wish to retain and build a customer base. Additionally,
retailers can improve operational and logistical efficiencies through better
management of inventory, purchasing, merchandising, pricing, promotions and
shrinkage control. Management believes that the constant flow of information
among the point of sale, the back office, headquarters and the supply chain
has become a key competitive advantage in the retail industry, causing
retailers to demand more sophisticated, integrated solutions from their
systems vendors.
In a parallel development, technological advances have improved the
capability of systems available to retailers. With the price of computing
power declining, technology investments have become economically feasible for
many retailers. Further, computing power has become increasingly flexible and
distributable, facilitating data capture and processing by applications
located at the point of sale. Also, new front-end graphical user interfaces
are making systems easier to use, which reduces training time and transaction
costs and facilitates more types of consumer-activated applications.
To meet increasing systems demands from retailers, providers of hardware and
software point of sale solutions are attempting to integrate existing
products. This process often requires independent systems integrators to
provide enterprise-wide data communications. These systems often are based on
proprietary, closed protocols and technology platforms from several different
vendors. As a result, the effort required to implement and maintain these
systems can be difficult, time consuming and expensive.
31
<PAGE>
THE RADIANT SOLUTION
The Company offers fully integrated technology solutions that enable
retailers to improve site operations, serve consumers better and route
information throughout their organization and supply chains. The Company
believes its core technology and solutions are applicable to a variety of
retail markets. The Company's suite of products links store level point of
sale information with centralized merchandising and financial functions that
ultimately drive replenishment communications with suppliers and vendors. The
Company believes that its site solutions are easy to implement, typically
requiring less than a week to install and a few hours to train individual
users. The following summarizes the solutions provided by Radiant:
CONSUMER-ACTIVATED HEADQUARTERS
- ------------------- ------------
Touch Screen Interactive Executive Information
Video, Graphics, Audio Electronic Price Book
Credit/Cash Payment Vendor EDI
Compact, Enclosed Terminals Centralized Menu Management
Suggestive Selling
POINT OF SALE BACK OFFICE
- ------------- -----------
Touch Screen Interactive Inventory Control
Transaction Auditing Vendor Management
Credit Processing Purchasing/Receiving
Data Capture Employee Management
Peripheral Integration Recipe Management
Cash Reconciliation Menu Management
Table Management
SERVICES
- --------
Consulting
Training
Maintenance
Technical Support
Integration
The Company's technology solutions enable retailers to: allow consumers to
place their own orders for items such as food, movie tickets and concessions
through graphical touch screen interfaces; capture transaction information and
communicate with credit card networks; manage and analyze in-store inventory
movement, including electronic ordering; schedule and manage staffing; and
connect headquarters to each of the retailer's local sites and vendors,
enabling management to quickly change pricing and review operating performance
in a timely and efficient manner. The Company's products have been deployed
successfully in retail operations ranging in size from one to more than 600
sites.
Retailers derive the following benefits from Radiant's solutions:
Integrated information flows. The Company's technology solutions provide
retailers with tools for monitoring and analyzing sales data, stock status,
vendor relationships, merchandising and other important activities, both at
their sites and headquarters. These products further enable retailers to
communicate electronically with their suppliers in order to exchange
purchase orders, invoices and payments.
32
<PAGE>
Centralized management of highly decentralized operations. Information
provided by the Company's solutions enables headquarters management to
monitor site performance in a consistent manner on a near-real time basis,
implement price changes simultaneously throughout the enterprise and
rapidly initiate targeted marketing programs.
Tighter on-site control over operations. The Company's back office systems
enable site managers to closely manage inventory, reconcile accounts and
control issues such as shift scheduling and hourly wage calculations. The
Company's solutions incorporate sophisticated inventory management
techniques to help a retailer optimize its merchandising strategy.
Improved labor productivity. The Company incorporates user friendly
graphics within its solutions, reducing employee training and order
processing times which are important benefits in retail environments due to
high employee turnover. The Company's back office solutions can alleviate
extensive paperwork required of site managers, allowing them more time to
focus on operations.
Improved customer service. The Company's consumer-activated ordering
systems permit customers to place their own orders, answer surveys and
electronically communicate with the retailer. These systems can improve
customer service, reduce site labor costs and, through automating
suggestive selling concepts, help the retailer implement revenue
enhancement opportunities.
Lower cost of technology deployment. In addition to the cost savings
realized through better site management, the actual cost of deploying the
Company's multimedia networking platform is less than networked PC systems
due to platform efficiencies. Software modification requirements are
limited due to the high degree of functionality inherent in the core
applications, and systems integration problems are minimized because the
Company offers an integrated solution based on an open-architecture design
which facilitates integration with other systems.
COMPANY STRATEGY
The Company's objective is to be the leading worldwide provider of
enterprise-wide technology solutions to the vertical retail markets it serves.
The Company is pursuing the following strategies to achieve this objective:
Expand existing position in selected markets. The Company believes that it
is in a strong position to expand its current market share in the
convenience store, restaurant and entertainment markets due to its highly
functional solutions and its practical experience in deploying and
implementing retail solutions. The Company has experience integrating all
aspects of its solutions into existing retail technology infrastructures.
In particular, the Company has developed interfaces with a number of the
widely-used electronic information and payment networks, including networks
of certain major petroleum retailers. The Company currently is developing
interfaces to credit networks of additional major petroleum retailers,
which if certified, will allow the Company access to a large number of
potential sites.
Introduce new products to current markets. The Company has introduced a
variety of new products and services since the beginning of 1996, including
consumer-activated systems, a headquarters-based, enterprise-wide
management system, a Windows NT version of its local site-based products,
consulting services and its multimedia networking platform. Additional
products and services, such as on-line consumer loyalty systems and
solutions utilizing the Internet, are in development or under review.
Continue to develop sales and services infrastructure. To meet the
anticipated requirements of growth in its business, the Company intends to
continue expanding its direct sales force and its professional services
organization. The Company also plans to develop relationships with
additional distributors.
Expand markets for the Company's solutions. The Company believes that its
core technology and solutions are applicable to a variety of retail
markets. The Company has made four acquisitions in
33
<PAGE>
the restaurant and entertainment markets, which combined with its existing
systems and technology, will enable it to broaden its presence in these
markets.
Attract and retain outstanding personnel. The Company believes its
strongest asset is its people. To attract and retain top talent, the
Company intends to maintain its entrepreneurial culture and to continue
offering competitive benefit programs. The Company has granted stock
options to a majority of its employees and will strive to continue to align
employee interests with those of the Company's shareholders.
Continue to make strategic acquisitions. The Company has accelerated its
entry into new vertical markets through acquisitions and joint venture
arrangements. To the extent the Company believes acquisitions can better
position it to serve its markets or penetrate others, it will pursue such
opportunities.
COMPANY OPERATIONS
The Company is a leading provider of integrated technology solutions to the
convenience store market and has a growing presence in the restaurant and
entertainment markets. Substantially all of the Company's total revenues in
1995 and approximately 74.8% of the Company's total revenues in 1996 were
related to the convenience store market. The Company believes that its core
technology may be adapted to provide solutions to a variety of vertical
markets, but it has concentrated its efforts to date in these three markets.
The Company's principal products, sales and marketing efforts, customers and
competitors are discussed below for each of these three markets. The following
table depicts the Company's main offerings and the vertical markets served by
those offerings:
<TABLE>
<CAPTION>
CONVENIENCE STORE RESTAURANT ENTERTAINMENT
---------------------------------------------------------------------------
<S> <C> <C> <C>
Software:
---------
Consumer-Activated Or-
dering OrderPoint OrderPoint OrderPoint
Point of Sale Compu-Touch(1) Twenty/20 Visual BoxMan, ConcMan
System(1); QuickByte
Back Office Compu-Touch(1) ReMACS(1) OfficeMan
Headquarters-Based Core-Tech Core-Tech(2) Core-Tech(2)
Services:
---------
Consulting and Training Radiant Solutions Group Radiant Solutions Group Radiant Solutions Group
Integration and Logis-
tics Integration Services Integration Services Integration Services
Platform: MediaClient MediaClient MediaClient
---------
</TABLE>
(1) Winners of Microsoft Retail Application Development Awards in their
respective categories.
(2) Modifications for these markets currently are under development.
CONVENIENCE STORE MARKET
In the United States, there currently are approximately 90,000 convenience
store sites which derive a significant portion of revenues from selling
products other than gasoline. The Company believes that the international
convenience store market represents a substantial opportunity for its
solutions. Management believes that the industry is currently under-invested
in technology. Only 16.1% of the industry's retail sites use scanning
equipment, compared to grocery stores, which have implemented scanning at
approximately 90.0% of their locations. Yet, in a recent convenience store
industry survey, 71.0% of respondents perceive integrated scanning and price
book management as being important for their operations, and a majority of
respondents indicated that they were investigating whether to implement
scanning at their retail locations. The same survey further reveals that 54.0%
of respondents
34
<PAGE>
plan to increase spending for technology solutions. The Company thus believes
that the demand for the Company's solutions for the foreseeable future will
remain strong.
This demand is fueled in part by the fact that many convenience store
operators are finding that their consumers prefer "pay at the pump" systems,
and many operators are upgrading their POS systems to interface with these
consumer-activated systems. Seventeen percent of convenience stores currently
utilize pay at the pump technology. Implementing this technology requires a
site to upgrade its system for controlling and managing fuel sales. Management
believes that installation of pay at the pump systems will remain strong for
the foreseeable future, encouraging additional investment in store automation.
The Company markets a variety of products and services as part of its
strategy to serve as an integrated solutions provider. From consumer-activated
ordering solutions to feature-rich, highly functional point of sale and back
office systems tied into headquarters through advanced client/server software,
the Company's enterprise-wide solutions interact with the consumer, site
employees and management and the senior management of a retailer's operations.
To help retailers optimize the impact these systems have on their operations,
the Company also offers a wide array of consulting, training and support
services provided by experienced professionals. The Company further provides
"ruggedized" hardware systems designed to cope with harsh retailing
environments.
Site-Based Products
Compu-Touch. Compu-Touch is the Company's principal product serving the
convenience store market. Compu-Touch, which can be licensed as modules or as
a complete system, is a comprehensive site-based solution that allows
retailers to process transactions and capture data at the point of sale, as
well as to manage other front and back office operations. Compu-Touch consists
of several modules, as described below. As of March 31, 1997, the Company has
licensed Compu-Touch systems to over 2,000 convenience store sites.
The following modules are offered with Compu-Touch:
CT POS -- provides point of sale functionality. Its PC-based architecture
allows non-POS functions (adding inventory and employees, changing fuel
prices, etc.) to be performed through a menu driven, user friendly
interface. In addition, CT POS produces reports that provide store managers
with valuable insight into their businesses. CT POS can be interfaced to
other systems using industry standard file formats.
CT Inventory -- allows convenience stores to manage inventory on an item
level basis, enabling two critical processes: item level audits and
electronic ordering. CT Inventory accepts sales data from either CT POS or
a third party system.
CT Fuel -- manages fuel inventory using the same closed loop approach as CT
Inventory. Real time fuel sales, received from CT POS, are combined with
deliveries, pump tests and stick readings, allowing for instant
reconciliation and analysis. CT Fuel includes a competitive survey feature
so fuel managers can set prices to maximize volume and margin.
CT Lottery -- utilizes the business logic embodied in CT Inventory. Lottery
sales, received from CT POS in real-time, are combined with deliveries
allowing for instant reconciliation.
CT Employee -- records and monitors key employee data such as hire date,
advanced payments and termination date. Operators can compare budgeted and
scheduled hours against actual hours worked with the labor schedule
feature. An electronic task list, complete with instructions, can be
scheduled to appear automatically on CT POS during an employee's shift.
CT Money -- allows store managers quickly to compare funds collected
against safe drops, pay-ins and pay-outs and make adjustments as necessary.
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Compu-Touch includes features such as a touch screen interface, user
friendly applications and flexibility in set-up and configuration to
accommodate operational variables at each site. The Compu-Touch system is
based on an open architecture and runs on either the Windows NT or Novell
platform. The application supports multiple POS terminals and a separate back
office system. The product is upgradable so that customers can phase in their
investment with additional hardware and software modules. It also offers
customers scalability, such that the same application can be run in chains
with widely varying numbers and sizes of sites; yet the enterprise solution
remains consistent and supportive of each site.
OrderPoint. Within the convenience store market, the trend toward increased
branded food service offerings has created a demand for consumer-activated
ordering systems. In response, the Company has developed its easy to use,
consumer-activated OrderPoint system. OrderPoint allows a consumer to place an
order, answer a survey, pay with a plastic card, make inquiries and view
promotions through the use of a touch screen. OrderPoint's development
environment and authoring tools allow various media, such as video clips,
logos, pictures and recordings, to be quickly integrated into a consumer-
friendly application.
Management believes OrderPoint allows a retailer to increase labor
productivity, increase revenues through suggestive selling, increase consumer
ordering speed and accuracy, capture consumer information at the point of sale
and respond quickly to changing consumer preferences. OrderPoint was
commercially released in the second quarter of 1996, and, to date, the Company
has sold systems or licensed software to a number of convenience store chains.
Headquarters-Based Product
Core-Tech. In 1996, the Company introduced Core-Tech, a client/server based
software application which allows retailers to better manage multiple
convenience store sites. As of March 31, 1997, the Company had installed Core-
Tech at several headquarters locations, including those at Wawa, Inc., Sheetz,
Inc., Conoco, Inc., Ultramar Diamond Shamrock Corporation and Petronas
Dagangan Berhad, the national petroleum company of Malaysia. The following is
a summary of the features and functionality of Core-Tech:
Price book--allows retailers to set prices for products in a timely manner
on a site-by-site, zone-by-zone or system wide basis. Price book also
allows retailers to target prices based on a variety of different factors,
including markups based on cost, gross margins, and target margins.
Site configuration and management--allows retailers to define and control
the parameters of site operations, such as prohibiting clerks from
authorizing fuel dispensing without prepayment.
Fuel management--allows retailers to manage fuel inventory movement and
pricing. Such features allow management to define and regulate site pricing
and strategies, including responding to price changes at competitors'
sites.
Executive Information System ("EIS")--supports headquarters analysis of
site operations, such as sales vs. cost analysis, sales vs. budget
analysis, labor productivity analysis and category management analysis. EIS
also facilitates "what if" analyses, allowing retailers to incorporate and
ascertain the sensitivities of operational variables such as price, cost
and volume.
Electronic Data Interchange--supports the routing and analysis of purchase
orders and vendor invoices.
The Company believes that Core-Tech is one of the most functional and
comprehensive headquarters management applications widely marketed to
convenience store chains. The Core-Tech product is built with state of the art
software tools and is flexible and expandable based on application
architecture and database structure. The application is written in
PowerBuilder, and the database, Microsoft SQL Server, is highly scalable. The
user interface is intuitive and easy to use.
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Sales and Marketing
The Company has independent sales efforts in each of its vertical markets.
The Company believes this strategy positions its sales force to understand its
customers' businesses, trends in the marketplace, competitive products and
opportunities for new product development and allows the Company to take a
consultative approach to working with customers.
Within the convenience store market, the Company has a staff of personnel
focusing on selling its solutions to major petroleum companies and other large
accounts, both domestically and internationally. Further, the Company is
building a telemarketing organization and distribution network to market its
solutions and provide service to chains with a limited number of sites. All
sales personnel are compensated with a base salary and commission based on
revenue quotas, gross margins and other profitability measures.
To date, the Company's primary marketing objective has been to increase
awareness of all of the Company's technology solutions. To this end, the
Company has attended industry trade shows and selectively advertised in
industry publications. The Company intends to increase its sales and marketing
activities both domestically and internationally, and will expand its
advertising in relevant industry publications. To direct these efforts, the
Company recently hired a Director of Marketing.
Customers
Convenience store customers who have selected the Company as their
technology solutions provider operate over 7,000 sites. As of December 31,
1996, the Company has installed its technology solutions in over 2,000 of
these sites. In 1994 and 1995, two customers accounted for 75.9% and 59.4% of
the Company's total revenues, respectively, as follows: Conoco, Inc. (52.1% in
1994 and 15.8% in 1995) and Emro Marketing Company (23.8% in 1994 and 43.6% in
1995). During 1996, four convenience store customers accounted for 51.5% of
the Company's total revenues, as follows: Ultramar Diamond Shamrock
Corporation (21.5%), Emro Marketing Company (13.2%), Sheetz, Inc. (11.7%) and
Conoco, Inc. (5.1%). The following is a partial list of major convenience
store customers who have licensed or purchased the Company's products and
services:
Amoco Oil Company Go-Mart, Inc.
Boardman Petroleum (Smile Gas) Petronas Dagangan Berhad
Conoco, Inc. Sheetz, Inc.
Dillon Companies, Inc. Ultramar Diamond Shamrock
Emro Marketing Company (Speedway/Starvin' Marvin) Corporation
Giant Industries, Inc. Wawa, Inc.
Competition
In marketing its technology solutions, the Company faces intense
competition, including internal efforts by potential customers. The Company
believes the principal competitive factors are product quality, reliability,
performance, price, vendor and product reputation, financial stability,
features and functions, ease of use, quality of support and degree of
integration effort required with other systems.
Within the convenience store market, the Company believes it is the only
integrated technology solution provider of POS, back office and headquarters
management systems. Within these product lines, the Company faces different
levels of competition. Verifone, Ltd., Dresser Industries, Inc., CanMax, Inc.,
Gilbarco, Inc., Tokheim Corporation, Stores Automated Software, Inc.,
Matsushita Electric Corporation of America (Panasonic), Auto-Gas Systems, Inc.
and others provide POS systems with varying degrees of functionality. Back
office and headquarters client/server software providers include The Software
Works!,
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Professional Datasolutions Inc. and JDA Software Group, Inc. In addition, the
Company faces competition from systems integrators and other companies such as
Tandem Computers, Inc. who offer an integrated technology solutions approach
by integrating other third party products.
The Company believes there are barriers to entry in the market for
convenience store automation solutions. The Company has invested a significant
amount of time and effort to create the functionality of Compu-Touch and Core-
Tech. The Company believes that the time required for a competitor to
duplicate the functionality of Compu-Touch or Core-Tech is substantial and
would require detailed knowledge of a retailer's operations at local sites and
headquarters. Also, developing a credit card network interface often can take
an additional six to nine months, as the certification process can be time
consuming. Moreover, the major petroleum companies are extremely selective
about which automation system providers are permitted to interface to their
credit networks. As of March 31, 1997, the Company was certified on seven
credit networks, and it currently has initiated the process to become
certified on four other major petroleum company credit networks.
RESTAURANT MARKET
The Company believes that its core technology and capabilities, combined
with those of the businesses it has recently acquired, will enable it to
become a leading provider of technology solutions to selected segments of the
restaurant market. The Company recently completed the ReMACS and Twenty/20
acquisitions. ReMACS is a leading provider of back office management systems
for customers in the restaurant industry, while Twenty/20 is a provider of POS
and table management systems for full service restaurants ("FSR"). The Company
has combined these two entities with its existing restaurant operations to
form the Radiant Hospitality Systems division, which will focus on providing
integrated solutions to the restaurant industry.
The domestic restaurant market includes approximately 425,000 sites
generating over $144.0 billion in annual sales as of April 1997. Restaurants
increasingly require sophisticated systems which integrate with evolving
headquarters information systems and enable more timely and accurate
management of site operations. At the site, managers seek real time
information access and management systems that permit employees to increase
the speed and accuracy with which they take an order, prepare the food, and
fill the order, often accommodating numerous concurrent consumer orders at
multiple table-top, counter-top and drive-through locations. Managers at all
levels are seeking solutions to better manage menu and pricing functions,
optimizing profitability and inventory management. The market for automated
information and transaction systems for restaurants is typically more advanced
than in the convenience store and entertainment markets but is highly
fragmented and includes a large number of proprietary, closed systems.
To date, the Company's installed base consists of back office sites which
have installed the ReMACS back office and headquarters product as well as the
Twenty/20 POS for the full service restaurant industry. The Company also has a
limited number of QSR pilot sites using its POS systems. The Company intends
to integrate both of its POS solutions and Core-Tech, its headquarters-based
product, with ReMACS' back office products to provide restaurant operators
with an integrated solution offering.
Site-based Products
QuickByte. The Company is currently piloting its point of sale product for
the QSR industry with certain customers. The highly graphical, touch-screen
product runs on the Windows NT platform and is based on an SQL database. As
with the Company's other products, the applications are highly configurable
and based on an open architecture. The software architecture is compliant with
Microsoft's Active Store standards.
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The product is designed for ease of use and training, which the Company
believes is critical given the labor demographics within the industry. The
product tracks real time sale information for QSR operators and is designed to
facilitate interfacing to the Company's as well as other's back office
systems.
Twenty/20 Visual System. The point of sale product acquired from Twenty/20
allows FSR operators to manage tables, menus, dining, service bars and check
out with a graphical, touch-screen based application. The software
architecture is open and runs on the Windows NT platform. The product is
designed for ease of use and training, which the Company believes are critical
given the labor demographics within the industry. The product tracks real time
sale information for FSR operators and is designed to facilitate interfacing
to the Company's as well as other's back office systems.
ReMACS Back Office. ReMACS back office software, including its recently
introduced ReMACS for Windows NT version, provides various types of restaurant
operators with the capabilities to manage employees, schedule labor, analyze
food and beverage costs and forecast results. Developed with a user friendly,
graphical interface, the product is based on open architecture and recently
won the Microsoft Retail Application Developer award in the hospitality
category. This product interfaces with a large number of leading POS products.
OrderPoint. The Company believes its OrderPoint solution has application in
the restaurant industry. OrderPoint allows a consumer to place an order,
answer a survey, pay with a plastic card, make inquiries and view promotions
through the use of a touch screen. OrderPoint's development environment and
authoring tools allow various media, such as video clips, logos, pictures and
recordings, to be quickly integrated into a consumer-friendly application.
Headquarters-Based Product
ReMACS' headquarters-based solution allows operators to configure sites with
information such as recipes, vendors, etc. To provide restaurant operators
with additional information and functionality at headquarters, the Company
plans to combine certain features and functions of its Core-Tech and ReMACS
product lines.
Sales and Marketing
The Vice President of Sales of Radiant Hospitality Systems manages two
distinct efforts: a direct sales force, generally focused on chains of over 50
sites, and an indirect channel consisting of a network of distributors,
generally focused on smaller entities. All sales personnel are compensated
with a base salary and commissions based on revenue quotas, gross margins and
other profitability measures.
To date, the Company's primary marketing objective has been to increase
awareness of all of the Company's technology solutions. To this end, the
Company has attended industry trade shows and selectively advertised in
industry publications. The Company intends to increase its sales and marketing
activities both domestically and internationally, and will expand its
advertising in relevant industry publications. Additionally, the Company
intends to continue developing an independent distribution network to sell and
service its products to certain segments of the domestic and international
markets.
Customers
The Company's customers are concentrated primarily in the QSR and casual
dining segments of the restaurant market. As of June 1, 1997, the Company has
installed its technology solutions in over 8,000
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of these sites. The following is a list of major restaurant customers or their
franchisees who have licensed or purchased the Company's products and
services:
<TABLE>
<CAPTION>
QSR CASUAL DINING
--- -------------
<S> <C>
Arby's Compass Group
Burger King La Madelleine
Chick-fil-A Longhorn Steaks
Dunkin' Donuts Luby's
KFC Sizzler
Taco Johns
Boston Market
</TABLE>
Competition
In marketing its technology solutions, the Company faces intense
competition, including internal efforts by potential customers. The Company
believes the principal competitive factors are product quality, reliability,
performance, price, vendor and product reputation, financial stability,
features and functions, ease of use, quality of support and degree of
integration effort required with other systems.
Within the restaurant market, the Company believes it is the only provider
of integrated POS, back office and headquarters management technology
solutions. Within these product lines, the Company faces different levels of
competition. International Business Machines Corporation, NCR Corporation,
Matsushita Electric Corporation of America (Panasonic), Par Technology
Corporation, Compris Technologies, Inc., Progressive Software, Inc., Micros
Systems, Inc., Fujitsu, Squirrel and others provide POS systems with varying
degrees of functionality, often incorporating software developed by
independent development companies. In addition, the Company faces competition
from systems integrators who offer integration of third-party products.
ENTERTAINMENT MARKET
Within the entertainment market, the Company has focused on the cinema
market and plans to expand into amusement parks and stadiums. The Company
markets its products to the cinema market through its PrysmTech division.
There are approximately 27,000 cinema screens in the United States. These
screens are operated at approximately 6,500 sites, with recent trends
emphasizing more screens per site.
The domestic cinema industry is concentrated, with the top six chains
operating approximately 33.0% of the cinema screens. In addition to increasing
screens per site, "megaplexes" have evolved, which combine restaurants, movies
and other forms of entertainment in one facility. While cinema sites typically
are operated in a decentralized manner, the Company believes cinema operators
are focused on implementing cost controls from headquarters.
The Company believes its core technology and products are easily adaptable
for other entertainment venues, such as amusement parks, stadiums and arenas.
To date, the Company has installed systems in one of these facilities and has
pilot installations scheduled for two other amusement parks. While fewer in
number than cinemas, these venues are typically much larger, and management
believes that technology solutions for such operators represents significant
revenue potential for the Company.
Site-Based Products
To date, a majority of the Company's sales to the entertainment market has
consisted of comprehensive site-based solutions that allow retailers to
process transactions and capture data at the
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point of sale and to manage other front and back office operations. As of
December 31, 1996, the Company had installed these products at approximately
175 sites. These site-based solutions are marketed under the "BoxMan,"
"ConcMan," "OrderPoint," and "OfficeMan" names. These systems include features
such as a touch screen interface, user-friendly applications and flexibility
in configuration to accommodate operational variables at each site.
These systems are based on an open architecture and run on the Windows NT or
Novell platform. The applications are made to be highly configurable,
typically supporting multiple POS terminals and a separate back office system.
The products are upgradable so that customers can phase in their investment
with additional hardware and software modules. These solutions offer customers
scalability, such that the same application can be run in chains with widely
varying numbers and sizes of sites; yet the enterprise solutions remain
consistent and supportive of each site.
BoxMan. BoxMan processes ticket sales, incorporating touch screen technology
at the point of sale. BoxMan provides for a variety of ticket alternatives and
payment options (such as cash, credit card or coupons). Individual sales and
performance are easily tracked, and all of the information gathered at the
point of sale can be communicated throughout the system on a real-time basis.
BoxMan also provides for advanced ticketing and teleticketing, as well as
will-call and self-service ticketing.
ConcMan. ConcMan processes concession sales, incorporating touch screen
technology at the point of sale. ConcMan communicates real-time information to
other POS and back office systems. In addition, ConcMan allows a number of
payment methods, such as cash, credit card or coupons, and tracks point of
sale performance data, such as average transaction value and rate of sales.
OrderPoint. OrderPoint is the Company's consumer-activated, multimedia
software. It utilizes graphics, full motion video and audio and allows
consumers to preview movies and purchase tickets and concessions by placing
orders through the use of a touch screen ordering system. It further allows
for remote ticketing and simple credit card purchases. By properly positioning
high profit items, retailers can use OrderPoint to promote combination sales
and implement suggestive selling programs. See "--Convenience Store Market--
Site-Based Products" for a further description of the OrderPoint system.
OfficeMan. OfficeMan is a back office manager that provides the means for
cinemas to readily gather point of sale and management information. OfficeMan
provides real-time sales monitoring, with automatic updates of point of sale
information, thereby allowing cinemas to manage multiple sites more
effectively. Additionally, OfficeMan permits a cinema operator to define an
employee's security level, manage changes in movie schedules and manage
inventory. OfficeMan also provides an interface to other open systems and
credit card networks.
Headquarters-Based Product
Core-Tech. Core-Tech is the Company's client/server based solution that
permits retailers to manage individual sites from headquarters. Management
believes that there is demand within the entertainment market for a solution
with Core-Tech's features. As a result, the Company currently is adapting
Core-Tech for this market. See "--Convenience Store Market--Headquarters-Based
Product" for a description of the Core-Tech system.
Sales and Marketing
To date, the Company's sales and marketing efforts have consisted primarily
of involvement of senior management of PrysmTech. The Company's primary
marketing objective has been to increase awareness of all of the Company's
technology solutions. In November 1996, the Company hired a manager to plan
and manage the Company's efforts in the amusement park market. The Company has
increased its sales and marketing efforts in 1997.
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Customers
As of March 31, 1997, the Company has installed its technology solutions in
over 175 sites. In 1996, Loews Theatre Management Corporation accounted for
13.8% of the Company's total revenues. The following is a partial list of
major cinema customers who have licensed or purchased the Company's products
and services:
Cobb Theatres The Marcus Corporation
General Cinemas National Amusements, Inc.
Loews Theatre Management Corporation Regal Cinemas
Mann Theatres
Competition
The market for the Company's technology solutions is intensely competitive
and includes internal efforts by potential customers. The Company believes the
principal competitive factors are product quality, reliability, performance,
price, vendor and product reputation, financial stability, features and
functions, ease of use, quality of support and degree of integration effort
required with other systems. Within the cinema market, the Company faces
competition from Pacer/CATS, a subsidiary of Ticketmaster, Inc., and several
smaller software providers.
PROFESSIONAL SERVICES
In 1995, the Company determined that the integration, design,
implementation, application and installation of technology solutions were
critical to its ability to effectively market its solutions. Consequently, in
early 1996, the Company established its Radiant Solutions Group to provide
these services to its customers. The Radiant Solutions Group operates as a
stand-alone profit center. The following is a summary of some of the
professional services the Company provides:
Consulting. Business consultants, systems analysts and technical personnel
assist retailers in all phases of systems development, including systems
planning and design, customer-specific configuration of application modules
and on-site implementation or conversion from existing systems. Directors
in the Company's consulting organization typically have significant
consulting or retail technology experience. The Company's consulting
personnel undergo extensive training in retail operations and the Company's
products. Consulting services typically are billed on a per diem basis.
Customization. The Company provides custom application development work for
customers billed on a project or per diem basis. Such enhancements remain
the property of the Company.
Training. The Company has a formalized training program available to its
customers, which is provided on a per diem rate at the Company's offices or
at the customer's site.
Integration. Typically, as part of its site solution, the Company
integrates standard PC components for its customers. This is done as part
of the overall technology solution for the customers to protect the quality
of the overall site solution and to provide the customers with a system
that is easy to support over the long term.
The market for the Company's professional services is intensively
competitive. The Company believes the principal competitive factors are the
professional qualifications, expertise and experience of individual
consultants. In the market for professional services, the Company competes
with the consulting divisions of the big six accounting firms, Electronic Data
Systems, Inc. and other systems integrators.
MAINTENANCE AND CUSTOMER SUPPORT
The Company offers customer support on a 24-hour basis, a service which
historically has been purchased by a majority of its customers and also
entitles the customer to product upgrades. In some
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<PAGE>
cases, hardware support is provided by third parties. The Company can remotely
access its customers' systems in order to perform quick diagnostics and
provide on-line assistance. The annual support option is typically priced at a
percentage of the software and hardware cost.
PRODUCT DEVELOPMENT AND TECHNOLOGY PLATFORM
The Company's product development strategy is focused on creating common
technology elements that can be leveraged in applications across various
vertical retail markets. The base technology architecture is designed so that
it can be integrated with products developed by other vendors and can be
phased into a retailer's operations. The Company has developed numerous
applications running on a Windows NT platform. The software architecture
incorporates Microsoft's Component Object Model, providing an efficient
environment for application development.
Management believes that the acquisition of ReMACS will accelerate the
development of the Company's next generation back office products. ReMACS'
Microsoft NT-based back office application suite is currently under
development for the restaurant market. The Company intends to use the ReMACS
back office technology platform to develop its Microsoft NT-based convenience
store and entertainment back office products. The Company is currently
integrating its POS products with ReMACS' back office product. Additionally,
the Company will integrate Twenty/20's restaurant POS products with its
restaurant products.
To implement its strategy, the Company has created Radiant Labs ("Labs"),
with responsibility for developing common technology elements intended for use
across the Company's vertical markets. In addition, the Company maintains
development groups for each of the convenience store, restaurant and
entertainment markets. The vertical market development efforts focus on
developing industry-specific applications that leverage the common technology
elements developed by Labs. To facilitate new product development, teams are
formed to combine technical expertise from Labs and industry knowledge from
the vertical groups.
The Company's MediaClient platform, graphically depicted below, was
developed for use across the Company's various vertical markets. It allows
multiple, multimedia software applications to run on separate workstation
clients simultaneously, all driven by a single PC acting as a server. With a
MediaClient platform, only one PC is required--functionality is duplicated
through specialty peripherals ("MediaClient Nodes") connected by a fiber optic
ring. The server is responsible for almost all data processing and
functionality and serves as a repository for multimedia data.
TITLE: DESCRIPTION OF RADIANT SYSTEMS, INC.
RADIANT PLATFORM DIAGRAM
STRUCTURE: Diagram illustrating the operating system of the Company's Radiant
platform. The diagram depicts a personal computer acting as a host
to nine nodes, all connected by a solid line representing a fiber
optic connection. The nodes are depicted as rectangular boxes
arranged in a loop to the right of the depiction of the personal
computer.
The diagram is meant to illustrate the fact that as many as 50
nodes may operate as specialty peripherals or workstations when
connected to the personal computer acting as a server. A brief
description is included of the host personal computer, the nodes
and the fibre optic line. Each of these descriptions point to
the relevant component with an arrow.
SUPPORTING
TEXT: Connected by an arrow to the personal computer:
"MediaClient Host
. IBM PC compatible
. Windows NT
. Serves in excess of 50 nodes
. Second host provides redundancy"
Connected by an arrow to the nodes:
"MediaClient Nodes
. Solid-state multimedia device
. MPEG I & II, SVGA
. Stereo/mono sound
. Intercom
. Mag stripe reader
. 8 Serial devices
. Compact, enclosed design"
Connected by an arrow to the line:
"Bidirectional
Fault-tolerant
Fiber-optic loop"
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<PAGE>
The Company's MediaClient platform offers a number of advantages to the
retailer. Principally, it extends the processing power and functionality of a
PC throughout a dedicated network. A MediaClient platform is highly scalable,
depending on the requirements of the customer. It reduces software and network
maintenance costs because the retailer only manages applications on one
server. Moreover, MediaClient Nodes require substantially less space than a
PC, improve reliability and reduce cost of ownership.
PROPRIETARY RIGHTS
The Company's success and ability to compete is dependent in part upon its
proprietary technology, including its software source code. To protect its
proprietary technology, the Company relies on a combination of trade secret,
nondisclosure, copyright and patent law, which may afford only limited
protection. In addition, effective copyright and trade secret protection may
be unavailable or limited in certain foreign countries. Although the Company
relies on the limited protection afforded by such intellectual property laws,
it also believes that factors such as the technological and creative skills of
its personnel, new product developments, frequent product enhancements, name
recognition and reliable maintenance are essential to establishing and
maintaining a technology leadership position. The Company presently has one
patent and one patent pending. The source code for the Company's proprietary
software is protected both as a trade secret and as a copyrighted work. The
Company generally enters into confidentiality or license agreements with its
employees, consultants and customers and generally controls access to and
distribution of its software, documentation and other proprietary information.
Although the Company restricts the use by the customer of the Company's
software and does not permit the re-sale, sublicense or other transfer of such
software, there can be no assurance that unauthorized use of the Company's
technology will not occur.
Despite the measures taken by the Company to protect its proprietary rights,
unauthorized parties may attempt to reverse engineer or copy aspects of the
Company's products or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's products is
difficult. In addition, litigation may be necessary in the future to enforce
the Company's intellectual property rights, to protect the Company's trade
secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition.
Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis. These
licenses usually require the Company to pay royalties and fulfill
confidentiality obligations. The Company believes that there are alternative
resources for each of the material components of technology licensed by the
Company from third parties. However, the termination of any such licenses, or
the failure of the third-party licensors to adequately maintain or update
their products, could result in delay in the Company's ability to ship certain
of its products while it seeks to implement technology offered by alternative
sources. Any required replacement licenses could prove costly. Also, any such
delay, to the extent it becomes extended or occurs at or near the end of a
fiscal quarter, could result in a material adverse effect on the Company's
results of operations. While it may be necessary or desirable in the future to
obtain other licenses relating to one or more of the Company's products or
relating to current or future technologies, there can be no assurance that the
Company will be able to do so on commercially reasonable terms or at all.
In the future, the Company may receive notices claiming that it is
infringing on the proprietary rights of third parties, and there can be no
assurance that the Company will not become the subject of infringement claims
or legal proceedings by third parties with respect to current or future
products. In addition, the Company may initiate claims or litigation against
third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. Any such claim
could be time consuming, result in costly litigation, cause product shipment
delays or force the
44
<PAGE>
Company to enter into royalty or license agreements rather than dispute the
merits of such claims. Moreover, an adverse outcome in litigation or similar
adversarial proceedings could subject the Company to significant liabilities
to third parties, require the expenditure of significant resources to develop
non- infringing technology, require disputed rights to be licensed from others
or require the Company to cease the marketing or use of certain products, any
of which could have a material adverse effect on the Company's business,
operating results and financial condition. To the extent the Company desires
or is required to obtain licenses to patents or proprietary rights of others,
there can be no assurance that any such licenses will be made available on
terms acceptable to the Company, if at all. As the number of software products
in the industry increases and the functionality of these products further
overlaps, the Company believes that software developers may become
increasingly subject to infringement claims. Any such claims against the
Company, with or without merit, as well as claims initiated by the Company
against third parties, can be time consuming and expensive to defend,
prosecute or resolve.
EMPLOYEES
As of June 26, 1997 the Company employed 413 persons. None of the Company's
employees is represented by a collective bargaining agreement nor has the
Company experienced any work stoppage. The Company considers its relations
with its employees to be good.
The Company's future operating results depend in significant part upon the
continued service of its key technical, consulting and senior management
personnel and its continuing ability to attract and retain highly qualified
technical and managerial personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will retain its key managerial
or technical personnel or attract such personnel in the future. The Company
has at times experienced and continues to experience difficulty recruiting
qualified personnel, and there can be no assurance that the Company will not
experience such difficulties in the future. The Company, either directly or
through personnel search firms, actively recruits qualified product
development, consulting and sales and marketing personnel. If the Company is
unable to hire and retain qualified personnel in the future, such inability
could have a material adverse effect on the Company's business, operating
results and financial condition.
PROPERTIES
The Company's principal facility occupies approximately 60,000 square feet
in Alpharetta, Georgia, under two lease agreements. These lease agreements
expire on January 31, 2000 and August 31, 2000, respectively. In January 1997,
the Company leased additional space at its current location, which increased
the square footage leased by the Company from 43,000 to 60,000 square feet.
The Company also has regional offices in Dallas, Texas and in Pleasanton,
California.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority. There are no material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of the Company, or any associate of any of the foregoing is a
party or has an interest adverse to the Company.
45
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
June 1, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Erez Goren........................ 33 Co-Chairman of the Board and Chief
Executive Officer
Alon Goren........................ 31 Co-Chairman of the Board and Chief
Technology Officer
Eric B. Hinkle.................... 37 President, Chief Operating Officer and
Director
John H. Heyman.................... 36 Executive Vice President, Chief
Financial Officer and Director
Andrew S. Heyman.................. 33 Vice President--Convenience Store
Division and Managing Director of
Radiant Solutions Group
Carlyle M. Taylor................. 43 Vice President--Integration and
Support
H. Martin Rice.................... 45 Vice President and Managing Director
of PrysmTech Division
David H. Douglas.................. 41 Vice President and Managing Director
of Radiant Hospitality Systems
Division
Christopher Lybeer................ 35 Vice President--Convenience Store
Division
James S. Balloun.................. 58 Director
Evan O. Grossman.................. 32 Director
</TABLE>
Mr. Erez Goren has served as Co-Chairman of the Board and Chief Executive
Officer of the Company since its inception in 1985 and as its President from
1985 to October 1996. Mr. Goren attended State University of New York at Stony
Brook prior to devoting his full time and energy to the Company. He is the
brother of Alon Goren.
Mr. Alon Goren has served as Co-Chairman of the Board and Chief Technology
Officer of the Company since its inception in 1985. Mr. Goren has a B.S. in
Computer Systems Engineering from Rensselaer Polytechnic Institute. He is the
brother of Erez Goren.
Mr. Hinkle has served as President, Chief Operating Officer and a Director
of the Company since October 1996. Mr. Hinkle served in various capacities
with the Avionics Divisions of AlliedSignal Corporation from January 1994 to
October 1996, including most recently as Vice President of Communications and
Navigation Products. From 1991 to January 1994, Mr. Hinkle was employed by
McKinsey & Company, Inc., a consulting firm, including most recently as Senior
Engagement Manager. Mr. Hinkle has an M.B.A. from Harvard Business School, a
M.S. degree in Electrical Engineering from Stanford University, and a B.S.
degree in Computer Engineering from Brown University.
Mr. John H. Heyman has served as Executive Vice President, Chief Financial
Officer of the Company since September 1995 and as a director of the Company
since June 1996. Mr. Heyman served as Vice President and Chief Financial
Officer of Phoenix Communications, Inc., a commercial printer, from March 1991
to August 1995. From 1989 to 1991, Mr. Heyman served as Vice President,
Acquisitions of Forsch Corporation, a diversified manufacturing company. From
1983 to 1987, Mr. Heyman served in a variety of capacities with Arthur
Andersen LLP, where he worked primarily with middle market companies and
technology firms. Mr. Heyman has an M.B.A. from Harvard Business School and a
B.B.A. degree in Accounting from the University of Georgia. He is the brother
of Andrew S. Heyman.
Mr. Andrew S. Heyman has served as Vice President--Convenience Store
Division and Managing Director of the Radiant Solutions Group of the Company
since January 1996. Mr. Heyman served as a senior manager with Andersen
Consulting from 1987 to December 1995. He holds a M.S. degree in
46
<PAGE>
Computer Information Systems from Georgia State University and a B.B.A. in
Finance from the University of Georgia. He is the brother of John H. Heyman.
Mr. Taylor has served as Vice President--Integration and Support of the
Company since September 1995. Mr. Taylor served in various capacities with NCR
Corporation (formerly AT&T Global Information Solutions) in the retail
information systems area from 1978 to September 1995, including most recently
as Assistant Vice President of the scanner business unit. Mr. Taylor received
a B.S. degree in Mathematics from North Carolina Wesleyan College.
Mr. Rice has served as Vice President of the Company and the Managing
Director of its PrysmTech division since December 1996. From September 1994
until its acquisition by the Company in December 1996, Mr. Rice served as
President and Chief Executive Officer of PrysmTech, LLC. From 1989 to
September 1994, Mr. Rice served as President of The R.L. Sterling Company, a
consulting company. Prior to 1989, Mr. Rice served as Chief Financial Officer
of Maryland Realty Trust, a publicly traded REIT, and as a staff accountant
for Price Waterhouse LLP.
Mr. Douglas has served as Vice President of the Company and President of its
Radiant Hospitality Systems division since May 1997. Since the inception of
ReMACS in 1983 until its acquisition by the Company in May 1997, Mr. Douglas
served as President of ReMACS.
Mr. Lybeer has served as Vice President--Convenience Store division of the
Company since January 1996. From 1993 to 1995, Mr. Lybeer served as Assistant
Vice President--Software Solutions of NCR Corporation (formerly AT&T Global
Information Solutions), a telecommunications company. From 1991 to 1993, Mr.
Lybeer served as a Director of Product Development of NCR Corporation, in the
retail information systems area. Mr. Lybeer received a B.S.E. in Computer
Engineering from the University of Michigan.
Mr. Balloun has served as Chairman of the Board and Chief Executive Officer
of National Service Industries, Inc., a diversified service and manufacturing
company, since February 1996, and as its President since October 1996. He was
previously affiliated with the management consulting firm McKinsey & Company,
Inc., which he served as a Director from June 1976 until January 1996. Mr.
Balloun has been a director of the Company since April 1997.
Mr. Grossman has served as President of Share Group, Inc., a teleservices
company, since July 1993. Mr. Grossman was previously affiliated with the
management consulting firm of McKinsey & Company, Inc. from October 1990 to
January 1993. Mr. Grossman has been a director of the Company since May 1997.
BOARD OF DIRECTORS
The number of directors of the Company is currently fixed at six. The
Company's Board of Directors is divided into three classes, with members of
each class of directors serving for staggered three-year terms. The Board
consists of two Class I Directors (Mr. Erez Goren and Mr. Alon Goren), two
Class II Directors (Mr. John H. Heyman and Mr. Balloun) and two Class III
Directors (Mr. Hinkle and Mr. Grossman), whose initial terms shall expire at
the 1997, 1998 and 1999 annual meetings of the shareholders, respectively.
There are two standing Committees of the Board of Directors: the
Compensation Committee and the Audit Committee. The Compensation Committee is
composed of Messrs. Balloun and Grossman reviews and makes recommendations to
the Board of Directors regarding salaries, compensation and benefits of
executive officers and key employees of the Company. In addition, the
Compensation Committee administers the Company's 1995 Stock Option Plan. The
Audit Committee is composed of Messrs. Balloun and Grossman. Among other
duties, the Audit Committee reviews the internal and external financial
reporting of the Company, reviews the scope of the independent audit and
considers comments by the auditors regarding internal controls and accounting
procedures and management's response to these comments. The Board of Directors
does not have a nominating committee.
47
<PAGE>
EXECUTIVE COMPENSATION
The following table presents certain information concerning compensation
earned for services rendered in all capacities by the Company's Chief
Executive Officer and the two other executive officers of the Company whose
total annual salary and bonus exceeded $100,000 during fiscal 1996 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND --------------------- -----------------------------
PRINCIPAL POSITION SALARY($) BONUS($) SECURITIES UNDERLYING OPTIONS
------------------ ---------- --------- -----------------------------
<S> <C> <C> <C>
Erez Goren.................. $ 80,769 $ 11,197 --
Co-Chairman and Chief Exec-
utive Officer
Carlyle M. Taylor........... 80,000 28,000 --
Vice President
H. Martin Rice.............. 100,000 98,504 137,500
Vice President
</TABLE>
DIRECTORS' FEES
The Company's present policy is not to pay any cash compensation to its
directors. Each non-employee director of the Company receives an automatic
grant of options to purchase 5,000 shares of Common Stock on the last business
day of each fiscal year of the Company. Each non-employee director of the
Company is also reimbursed for travel and other expenses incurred in
connection with the performance of their duties.
In addition, all new non-employee directors of the Company receive a one-
time grant of an option to purchase 15,000 shares of Common Stock at an
exercise price equal to the fair market value of such stock on the date of
grant, which options vest over a period of three years. All such options
expire, unless previously exercised or terminated, ten years from the date of
grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is currently comprised
of Messrs. Balloun and Grossman. None of the members of the Compensation
Committee served as an officer or employee of the Company or any of its
subsidiaries during fiscal 1996. There were no material transactions between
the Company and any of the members of the Compensation Committee during fiscal
1996.
STOCK OPTION PLAN
On December 20, 1995, the Company's directors and shareholders adopted the
1995 Stock Option Plan (the "Plan") for employees who are contributing
significantly to the business of the Company or its subsidiaries as determined
by the Company's Board of Directors or the committee administering the Plan.
The Plan currently provides for the grant of incentive and non-qualified stock
options to purchase up to 4,000,000 shares of Common Stock at the discretion
of the Board of Directors of the Company or a committee designated by the
Board of Directors to administer the Plan. In June 1997, the Plan was amended
by the Board of Directors, subject to shareholder approval, to increase the
number of shares of Common Stock reserved for issuance under the 1995 Stock
Option Plan to 5,000,000 shares. The option exercise price of incentive stock
options must be at least 100.0% (110.0% in the case of a holder of 10.0% or
more of the Common Stock) of the fair market value of the stock on the date
the option is granted and the options are exercisable by the holder thereof in
full at any time prior to their expiration in accordance with the terms of the
Plan. Incentive stock options granted pursuant to the Plan will expire on or
before (1) the date which is the tenth anniversary of the date the option is
granted, or (2) the date which is the
48
<PAGE>
fifth anniversary of the date the option is granted in the event that the
option is granted to a key employee who owns more than 10.0% of the total
combined voting power of all classes of stock of the Company or any subsidiary
of the Company. Options granted under the Plan typically vest over a period of
four to five years. As of June 15, 1997, options to purchase 3,925,828 shares
of Common Stock were outstanding pursuant to the Plan. In addition, non-
qualified options to purchase 264,000 shares of Common Stock have been granted
by the Company outside of the Plan as of June 15, 1997.
The following table provides certain information concerning individual
grants of stock options made during fiscal 1996 to each of the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR OPTION TERM (2)
OPTIONS EMPLOYEES BASE EXPIRATION ---------------------
NAME GRANTED IN FISCAL YEAR PRICE DATE 5% 10%
- ---- ---------- -------------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Erez Goren.............. -- -- -- -- -- --
Carlyle M. Taylor....... -- -- -- -- -- --
H. Martin Rice(1)....... 137,500 8.5% $7.00 2006 $ 605,311 $ 1,533,977
</TABLE>
- --------
(1) Of the total, 57,140 are incentive stock options and 80,360 are non-
qualified stock options. Subject to acceleration upon the occurrence of
certain events, the incentive stock options vest in increments of 14,285
on each of the first, second, third and fourth anniversaries of the date
of grant, December 31, 1996. The non-qualified stock options vest on
December 31, 2004, subject to acceleration upon the attainment of certain
performance targets. See "--Employment Agreement."
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of option assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the
5.0% and 10.0% annual rates prescribed by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the price of
the Company's Common Stock.
The following table provides certain information concerning the value of
unexercised options held by the Named Executive Officers under the Company's
1995 Stock Option Plan as of December 31, 1996. No stock options were
exercised during fiscal 1996 by the Named Executive Officers.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END (1)
------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------------- ----------- -------------
<S> <C> <C> <C> <C>
Erez Goren........ -- -- -- --
Carlyle M. Tay-
lor.............. -- 200,000 -- $1,700,000
H. Martin Rice.... -- 137,500 -- $ 343,750
</TABLE>
- --------
(1) Dollar values were calculated by determining the difference between the
public offering price of $9.50 per share and the exercise price of the
options.
EMPLOYMENT AGREEMENT
On December 31, 1996, in connection with the acquisition of PrysmTech, the
Company entered into an Employment Agreement with H. Martin Rice to serve as
Managing Director of the PrysmTech Division of the Company (the "Agreement").
The term of the Agreement is four years subject to a one-year automatic
extension under certain circumstances. Under the Agreement, Mr. Rice will be
entitled to a base
49
<PAGE>
salary of $100,000 per year or a higher amount equal to that of the Company's
highest paid executive officer plus a bonus based upon the PrysmTech
division's net income (as defined in the Agreement), provided that the base
compensation and bonus payable to Mr. Rice under the Agreement is limited to
the greater of $200,000 and the maximum non-contingent and potential
contingent compensation available to any other executive officer of the
Company. The Agreement also provides (i) that Mr. Rice receive a loan from the
Company in the amount of $165,000 which is payable, together with interest at
the rate of 7.0% per annum, on December 31, 2001 or earlier out of the
proceeds of the sale of shares of the Company's Common Stock received by Mr.
Rice in the PrysmTech acquisition and (ii) certain insurance, automobile
allowance and other benefits. Under the Agreement, Mr. Rice has been granted
options to purchase 137,500 shares of the Company's Common Stock (the "Stock
Options"). See "--Stock Option Plan."
Upon termination of the Agreement (other than voluntarily by Mr. Rice, or by
the Company for cause or upon the death of Mr. Rice), Mr. Rice will be
entitled to a termination payment equal to $16,666 for each partial and full
calendar month then remaining in the term of the Agreement, less any amount
payable to Mr. Rice under any long-term disability insurance maintained by the
Company.
The Agreement provides that if Mr. Rice's employment is terminated during
the term of the Agreement (other than voluntarily by Mr. Rice, or by the
Company for cause or upon the death of Mr. Rice) the Stock Options shall fully
vest on the date of such termination. Also upon such termination Mr. Rice may
require the Company to pay an income tax related bonus and to lend him the
amount payable upon the exercise of his remaining Stock Options.
The Agreement also contains provisions restricting Mr. Rice's ability to
compete with the Company and solicit its customers and employees and
obligating him to protect the confidentiality of the Company's information
following termination of his employment.
AGREEMENTS WITH EMPLOYEES
All employees of the Company, including executive officers, are required to
sign a confidentiality and noncompete agreement with the Company restricting
the ability of the employee to compete with the Company during his or her
employment and for a period ranging from six months to two years thereafter,
restricting solicitation of customers and employees following employment with
the Company, and providing for ownership and assignment of intellectual
property rights to the Company. The agreements have an indefinite term, but
the employee may terminate employment with the Company at any time.
401(K) PROFIT SHARING PLAN
The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan") which
is intended to be a tax-qualified defined contribution plan under Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). In
general, all employees of the Company who have completed six months of service
and have attained age 21 are eligible to participate. The 401(k) Plan includes
a salary deferral arrangement pursuant to which participants may contribute,
subject to certain Code limitations, a minimum of 3.0% and a maximum of 15.0%
of their salary on a pre-tax basis (up to $9,500 per year). Subject to certain
Code limitations, the Company may make both matching and additional
contributions at the discretion of the Board of Directors of the Company each
year. To date, no contributions have been made by the Company to the 401(k)
Plan. A separate account is maintained for each participant in the 401(k)
Plan. The portion of a participant's account attributable to his or her own
contributions is 100.0% vested. Distributions from the 401(k) Plan may be made
in the form of a lump-sum cash payment or in installment payments.
50
<PAGE>
CERTAIN TRANSACTIONS
On May 29, 1995, the Company repurchased 2,628,523 shares of Common Stock
(representing 24.7% of the Company's then outstanding shares of Common Stock)
from Thomas J. Barrella in exchange for certain assets and technology. In
connection therewith, Mr. Barrella resigned his positions as an executive
officer and director of the Company. The transferred assets and technology had
a value of approximately $616,000. As part of the transaction, Mr. Barrella
issued to the Company a note in the amount of $61,000 due in May 1997 and
bearing interest at a rate of 8.0%. As of June 1, 1997, $2,900 remained
outstanding under this note.
On June 7, 1996, Mr. Barrella granted to Erez Goren, the Chief Executive
Officer of the Company, an option to purchase all 600,033 remaining shares of
Common Stock held by Mr. Barrella. This option, exercisable for a period of
one year thereafter at an exercise price of $1.875 per share, was assigned to
the Company by Mr. Goren for nominal consideration prior to the completion of
this offering. The Company utilized a portion of the proceeds of its initial
public offering to repurchase all of such shares from Mr. Barrella in February
1997.
On October 31, 1994, the Company repurchased 3,085,700 shares of Common
Stock (representing 22.5% of the Company's then outstanding shares of Common
Stock) from Lawrence D. Parker in exchange for a note in the amount of
$473,000 due December 31, 1997, and bearing interest at a rate of 8.0%. As of
December 31, 1996, $170,000 remained outstanding under this note. The Company
utilized a portion of the proceeds of its initial public offering to repay
this note in March 1997. In connection with this transaction, Mr. Parker
resigned his positions as an executive officer and director of the Company and
entered into a five-year consulting agreement with the Company. In October
1995, the monthly consulting fees payable to Mr. Parker were reduced to $2,500
from $14,000. Consulting fees totaling $150,000, $131,000 and $28,000 were
paid by the Company to Mr. Parker in 1994, 1995 and 1996, respectively.
On May 27, 1994, the Company entered into a Software License, Support and
Equipment Purchase Agreement (the "Emro License Agreement") with Emro
Marketing Company (Speedway/Starvin' Marvin) ("Emro") pursuant to which Emro
agreed to purchase licenses for Compu-Touch systems. The Emro License
Agreement includes price discounts on certain of the Company's products,
rebates and extended warranty coverage on products purchased thereunder, and
credits (based on the number of systems purchased by Emro) for technical
support services. Although the rebates, the extended warranty terms and the
credits for technical support services are not currently available to other
customers of the Company, the price discounts are based on the number of
potential sites to be installed by Emro and are no more favorable than those
given to the only other customer of the Company who has a comparable number of
potential sites.
Under the terms of the Emro License Agreement, Emro is to receive a cash
rebate upon purchasing a defined number of software licenses. In the event the
Company is unable to pay the rebates when due, Emro has the option of applying
the rebate to the purchase of additional licenses or requiring the Company to
deliver a promissory note therefor. Accordingly, on March 27, 1996, the
Company issued to Emro a promissory note for accrued rebates in the amount of
$873,000 due March 2001, and bearing interest at a rate of 6.0%. As of
December 31, 1996, $918,000, including accrued interest, remained outstanding
under this note. The Company utilized a portion of the proceeds of its initial
public offering to repay this note in February 1997.
Emro will continue to receive the preferential terms described above with
respect to purchases of Compu-Touch systems in the future for as long as Emro
purchases such products from the Company under the Emro License Agreement.
Revenues of $3.4 million, $6.9 million and $5.4 million were recorded by the
Company for systems sales and customer support, maintenance and other services
pursuant to the Emro License Agreement in 1994, 1995 and 1996, respectively.
In connection with the Emro License Agreement, the Company granted to Emro a
stock purchase warrant (the "Emro Warrant") to purchase 10.0% of the
outstanding shares of Common Stock of the Company at an exercise price of
$80,000 per percentage unit exercised. The Emro Warrant was subsequently
amended to increase the number of shares of Common Stock issuable thereunder
to 12.0%
51
<PAGE>
of the outstanding shares of Common Stock of the Company and to provide the
Company with the right to repurchase 2.0% upon the exercise of the Emro
Warrant at a price equal to the average of the exercise price of the Emro
Warrant and the fair market value of the Common Stock. The Emro Warrant was
exercised in full prior to the completion of the Company's initial public
offering in February 1997, whereupon 318,996 shares of Common Stock were sold
by Emro in the initial public offering, 193,060 shares of Common Stock were
repurchased by the Company for $1.0 million from the proceeds of the initial
public offering and 646,304 shares of Common Stock were retained by Emro.
On December 31, 1996, the Company, which previously owned a 50.0% interest
in PrysmTech, acquired the remaining 50.0% interest of PrysmTech from its
owners, including H. Martin Rice, a Vice President of the Company and the
Managing Director of the Company's PrysmTech division. In connection
therewith, Mr. Rice received 150,000 shares of Common Stock of the Company and
the Company issued to Mr. Rice and his affiliates promissory notes totaling
$1.5 million. The Company utilized a portion of the proceeds of its initial
public offering to repay these notes in February 1997. The Company has also
entered into an employment agreement with Mr. Rice. See "--Employment
Agreement."
On May 23, 1997, the Company acquired ReMACS, which was 72.9% owned by David
H. Douglas, currently a Vice President of the Company and the Managing
Director of the Company's Radiant Hospitality Systems division. In connection
therewith, Mr. Douglas received 457,196 shares of Common Stock of the Company
and $2.4 million in cash, and the Company issued to Mr. Douglas a promissory
note in the amount of $2.4 million. This note is due April 2001 and bears
interest at the prime rate. The Company will utilize a portion of the proceeds
of this offering to repay the note. See "Use of Proceeds." In connection with
the acquisition of ReMACS, the Company also entered into a five year
employment agreement with Mr. Douglas which provides for an annual base salary
of $100,000 plus a performance bonus determined in accordance with the terms
of the employment agreement.
52
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of shares of the Company's Common Stock as of June 15, 1997, and as
adjusted to reflect the sale of the shares offered hereby, by: (i) the Selling
Shareholders; (ii) each director of the Company; (iii) each Named Executive
Officer; (iv) each person known by the Company to own beneficially more than
5.0% of the outstanding shares of the Common Stock; and (v) all executive
officers and directors of the Company as a group. Unless otherwise indicated,
each shareholder has sole voting and investment power with respect to the
indicated shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(1)
-------------------------- SHARES --------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------ ------------ ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Erez Goren(2)........... 3,303,556 26.4% 100,000 3,203,556 21.3%
Alon Goren(2)........... 3,303,556 26.4 100,000 3,203,556 21.3
Eric B. Hinkle.......... 87,800(3) * 6,000 81,800(3) *
John H. Heyman.......... 340,000(4) 2.7 34,546 305,454(4) 2.0
James S. Balloun........ 10,000 * -- 10,000 *
Evan O. Grossman........ 1,200 * -- 1,200 *
Carlyle M. Taylor....... -- -- -- -- --
H. Martin Rice(5)....... 150,000 1.1 15,000 135,000 *
Emro Marketing
Company(6)............. 646,304 5.2 200,000 446,304 3.0
Sirrom Capital
Corporation............ 93,454 * 68,454 25,000 *
William Budwitz(7)...... 150,000 1.1 15,000 135,000 *
Michael Finley(7)....... 50,000(8) * 30,000 20,000(8) *
J. Hamilton Coleman(7).. 82,138 * 3,000 79,138 *
J. Charles Davis(7)..... 82,138 * 1,000 81,138 *
Richard L. Morgan(7).... 17,399 * 1,000 16,399 *
Christopher A.
Seber(7)............... 17,399 * 1,000 16,399 *
Executive officers and
directors as
a group (11 persons)... 7,699,738(9) 60.0 255,546 7,444,192(9) 48.6
</TABLE>
- --------
* Less than 1.0% of outstanding shares.
(1) Pursuant to the rules of the Commission, certain shares of the Company's
Common Stock that a beneficial owner has the right to acquire within 60
days pursuant to the exercise of stock options or warrants are deemed to
be outstanding for the purpose of computing the percentage ownership of
such owner but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person.
(2) The business address of Erez Goren and Alon Goren is 1000 Alderman Drive,
Alpharetta, Georgia 30202. Erez Goren serves as the Co-Chairman of the
Board and Chief Executive Officer of the Company. Alon Goren serves as the
Co-Chairman of the Board and Chief Technology Officer of the Company.
(3) Represents shares of Common Stock subject to stock options exercisable
within the next 60 days. Mr. Hinkle serves as President and Chief
Operating Officer of the Company.
(4) Includes 165,000 shares of Common Stock subject to stock options
exercisable within the next 60 days. Mr. Heyman serves as Executive Vice
President, Chief Financial Officer and a director of the Company.
(5) Mr. Rice serves as Vice President of the Company and as Managing Director
of its PrysmTech Division.
(6) The address of Emro Marketing Company is P.O. Box 1500, Springfield, Ohio
45501.
(7) Employees of the Company.
(8) Represents shares of Common Stock subject to stock options exercisable
within the next 60 days.
(9) Includes 299,230 shares of Common Stock (263,230 shares of Common Stock
after the offering) subject to stock options exercisable within the next
60 days.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, no par value per share. The following description is qualified
in its entirety by reference to the Company's Amended and Restated Articles of
Incorporation (the "Articles"), and Amended and Restated Bylaws (the
"Bylaws"), which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders and shall vote with
all other shares of Common Stock as a single class. Cumulative voting in the
election of directors is not permitted. Holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, holders of Common Stock shall
possess equal rights and privileges on a share-for-share basis. Holders of
Common Stock have no conversion, preemptive or other rights to subscribe for
additional shares or other securities, and there are no redemption or sinking
fund provisions with respect to such shares. The issued and outstanding shares
of Common Stock are, and the shares offered hereby will be upon payment
therefor, fully paid and nonassessable.
PREFERRED STOCK
The Articles authorize the Board of Directors, subject to certain
limitations prescribed by law, without further shareholder approval, to issue
from time to time up to an aggregate of 5,000,000 shares of preferred stock in
one or more series and to fix or alter the designations, preferences, rights
and any qualifications, limitations or restrictions on the shares of each such
series thereof, including the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption (including sinking fund
provisions), redemption price or prices, liquidation preferences and the
number of shares constituting any series or designations of such series. The
issuance of preferred stock may have the effect of delaying, deferring or
preventing a change of control of the Company. No shares of Preferred Stock
are presently outstanding.
CERTAIN CHARTER AND BYLAW PROVISIONS
Shareholders' rights and related matters are governed by the Georgia
Business Corporation Code and the Company's Articles and Bylaws. Certain
provisions of the Articles and Bylaws, which are summarized below, could,
either alone or in combination with each other, have the effect of preventing
a change in control of the Company or making changes in management more
difficult.
Corporate Takeover Provisions. The Company's Bylaws make applicable to the
Company provisions authorized by the Georgia Business Corporation Code
relating to business combinations with interested shareholders ("Corporate
Takeover Provisions"). The Corporate Takeover Provisions are designed to
encourage any person, before acquiring 10.0% of the Company's voting shares,
to seek approval of the Board of Directors for the terms of any contemplated
business combination. The Corporate Takeover Provisions will prevent for five
years certain business combinations with an "interested shareholder" (as
defined in the Corporate Takeover Provisions) unless (i) prior to the time
such shareholder became an interested shareholder the Board of Directors
approved either the business combination or the transaction that resulted in
the shareholder becoming an interested shareholder, (ii) in the transaction
that resulted in the shareholder becoming an interested shareholder, the
interested shareholder became the beneficial owner of at least 90.0% of the
outstanding voting shares of the Company excluding, however, shares owned by
the Company's officers, directors, affiliates, subsidiaries and certain
employee stock plans or (iii) subsequent to becoming an interested
shareholder, such shareholder acquired additional shares resulting in the
interested shareholder becoming the owner of at
54
<PAGE>
least 90% of the Company's outstanding voting shares and the business
combination is approved by the holders of majority of the Company's voting
shares, excluding from said vote the stock owned by the interested shareholder
or by the Company's officers, directors, affiliates, subsidiaries and certain
employee stock plans. Shareholders of the Company who became interested
shareholders prior to the time of the adoption of the Corporate Takeover
Provisions are not subject to such provisions.
The Board of Directors is divided into three classes, as nearly equal in
size as possible, with staggered three-year terms. One class is elected each
year. The classification of the Board of Directors could have the effect of
making it more difficult for a third party to acquire control of the Company.
The Articles provide for the affirmative vote of holders of at least 75.0%
of shares of Common Stock entitled to vote generally in the election of
directors, voting as a single voting group, to alter or amend the provisions
of the Articles providing for a staggered board of directors, or to alter or
amend the Bylaws.
Constituency Considerations. The Company's Articles provide for the right of
the Board of Directors to consider the interests of various constituencies,
including employees, customers, suppliers and creditors of the Company, as
well as the communities in which the Company is located, in addition to the
interest of the Company and its shareholders, in discharging their duties in
determining what is in the Company's best interests.
Limitation of Directors' Liability. The Company's Articles eliminate,
subject to certain exceptions, the personal liability of directors to the
Company or its shareholders for monetary damages for breaches of such
directors' duty of care or other duties as a director. The Articles do not
provide for the elimination of or any limitation on the personal liability of
a director for (i) any appropriation, in violation of the director's duties,
of any business opportunity of the Company, (ii) acts or omissions that
involve intentional misconduct or a knowing violation of law, (iii) unlawful
corporate distributions or (iv) any transaction from which the director
received an improper benefit. In addition, the Company's Bylaws provide broad
indemnification rights to directors and officers so long as the director or
officer acted in a manner believed in good faith to be in or not opposed to
the best interests of the Company, and with respect to criminal proceedings,
if the director has no reasonable cause to believe his or her conduct was
unlawful. These provisions of the Articles and Bylaws limit the remedies
available to a shareholder who is dissatisfied with a Board decision protected
by these provisions.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 602,199 shares of Common
Stock will be entitled to piggyback registration rights with respect to such
shares.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is SunTrust Bank,
Atlanta.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
15,067,259 shares of Common Stock, assuming no exercise of the Underwriters'
over-allotment option. See "Underwriting." Of these shares, approximately
6,422,000 shares of Common Stock will be freely transferable without
restriction or limitation under the Securities Act. The remaining 8,645,259
shares are "restricted" shares within the meaning of Rule 144 adopted under
the Securities Act (the "Restricted Shares"). The Restricted Shares were
issued and sold by the Company in private transactions in reliance upon
exemptions from registration under the Securities Act and may not be sold
except in compliance with the registration requirements of the Securities Act
or pursuant to an exemption from registration, such as the exemption provided
by Rule 144 under the Securities Act.
55
<PAGE>
Approximately 7,535,000 Restricted Shares are eligible for sale in the
public market pursuant to Rule 144. No other Restricted Shares will be
eligible for sale under Rule 144 at this time. In general, under Rule 144 as
currently in effect, any person (or persons whose shares are aggregated),
including an affiliate of the Company, who has held shares for at least a one-
year period (as computed under Rule 144) is entitled to sell within any three-
month period a number of shares that does not exceed the greater of (i) 1.0%
of the then outstanding shares of the Company's Common Stock (approximately
150,000 shares after giving effect to this offering) and (ii) the average
weekly trading volume in the Company's Common Stock during the four calendar
weeks immediately preceding the date on which the notice of sale is filed with
the Securities and Exchange Commission. Sales under Rule 144 are also subject
to certain provisions relating to the manner of sale, the filing of a notice
of sale and the availability of current public information about the Company.
A person (or persons whose shares are aggregated) who is not deemed an
affiliate of the Company at any time during the 90 days immediately preceding
a sale, and who has held shares for at least a two-year period (as computed
under Rule 144), would be entitled to sell such shares under Rule 144(k)
without regard to the volume limitation and other conditions described above.
Rule 144A under the Securities Act permits the immediate sale by the current
holders of Restricted Shares of all or a portion of their shares to certain
qualified institutional buyers as defined in Rule 144A.
Upon completion of this offering, the holders of 602,199 shares of Common
Stock will be entitled to piggyback registration rights with respect to such
shares.
No prediction can be made as to the effect, if any, that market sales of
shares or the availability of such shares for sale will have on the market
price of the Common Stock. Nevertheless, sales of substantial amounts of
Common Stock in the public market may have an adverse impact on such market
price.
The Company has agreed not to offer, sell, sell short or otherwise dispose
of any shares of Common Stock (other than the shares offered by the Company in
this offering) in the public market for a period of 90 days after the date of
this Prospectus without the prior consent of the Representatives of the
Underwriters. Directors, executive officers and certain shareholders of the
Company, who will own upon completion of this offering an aggregate of
8,473,186 shares of Common Stock and options representing the right to
purchase 1,710,430 shares of Common Stock, have agreed not to offer, sell,
sell short or otherwise dispose of any such shares of Common Stock
beneficially owned by them or any shares issuable upon exercise of stock
options for a period of 120 days from the date of this Prospectus without the
prior written consent of Alex. Brown & Sons Incorporated; provided, however,
that the lockup period shall be 60 days from the date of this Prospectus for
up to one-third of such shares or options, and 90 days from the date of this
Prospectus for up to two-thirds of such shares or options.
56
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their representatives,
Alex. Brown & Sons Incorporated, Deutsche Morgan Grenfell Inc. and The
Robinson-Humphrey Company, Inc. (the "Representatives"), have severally agreed
to purchase from the Company and the Selling Shareholders the following
respective numbers of shares of Common Stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated....................................
Deutsche Morgan Grenfell Inc.......................................
The Robinson-Humphrey Company, Inc.................................
---------
Total............................................................ 3,075,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company and the Selling Shareholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the public offering, the public offering price
and other selling terms may be changed by the Representatives of the
Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 461,250
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by each of them shown in the above table bears to 3,075,000, and the
Company will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of the Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on
the same terms as those on which the 3,075,000 shares are being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed not to offer, sell, sell short or otherwise dispose
of any shares of Common Stock for a period of 90 days from the date of this
Prospectus without the prior consent of Alex. Brown & Sons Incorporated,
except that the Company may issue and may grant options representing the right
to purchase shares of Common Stock under its current stock option plan and may
issue shares of Common Stock upon exercise of currently outstanding employee
stock options. Directors, executive officers and certain shareholders of the
Company, who will own upon the completion of this offering an aggregate of
8,473,186 shares of Common Stock and options representing the right to
purchase 1,710,430 shares of Common Stock, have agreed not to offer, sell,
sell short or otherwise dispose of any such shares of Common Stock
57
<PAGE>
beneficially owned by them or any shares issuable upon exercise of stock
options for a period of 120 days from the date of this Prospectus without the
prior written consent of Alex. Brown & Sons Incorporated; provided, however,
that the lockup period shall be 60 days from the date of this Prospectus for
up to one-third of such shares or options, and 90 days from the date of this
Prospectus for up to two-thirds of such shares or options. See "Shares
Eligible for Future Sale."
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
From time to time in the ordinary course of their respective businesses, the
Representatives have provided and may in the future provide investment banking
or other services to the Company. In February 1997, the Company issued to The
Robinson-Humphrey Company, Inc. 20,000 shares of Common Stock as compensation
for investment banking services rendered in connection with financing provided
to the Company by Sirrom Capital Corporation in June 1996. The shares of
Common Stock received by The Robinson-Humphrey Company, Inc. are restricted
from sale, transfer, assignment or hypothecation until February 1998.
In general, the rules of the Securities and Exchange Commission (the
"Commission") will prohibit the Underwriters from making a market in the
Common Stock during the restricted period immediately preceding the pricing of
the Common Stock offered hereby. The Commission has, however, adopted
exemptions from its rules that permit passive market making under certain
conditions. The rules permit an Underwriter to continue to make a market
subject to certain conditions, including that its bid not exceed the highest
bid by a market maker not connected with the offering and that its net
purchases on any one trading day not exceed prescribed limits. Pursuant to
these exemptions, certain Underwriters, selling group members (if any) or
their respective affiliates intend to engage to passive market making in the
Common Stock during the restricted period.
In connection with the offering, the Underwriters and other persons
participating in the offering may engage in transactions that stabilize,
maintain or otherwise affect the price of Common Stock. Specifically, the
Underwriters may over-allot in connection with the offering, creating a short
position in Common Stock for their own account. To cover over-allotments or to
stabilize the price of Common Stock the Underwriters may bid for, and
purchase, shares of Common Stock in the open market. The Underwriters may also
impose a penalty bid whereby they may reclaim selling concessions allowed to
an underwriter or a dealer for distributing Common Stock in the offering, if
the Underwriters repurchase previously distributed Common Stock in
transactions to cover their short position, in stabilization transactions or
otherwise. Finally, the Underwriters may bid for, and purchase, shares of
Common Stock in market making transactions. These activities may stabilize or
maintain the market price of Common Stock above market levels that may
otherwise prevail. The Underwriters are not required to engage in these
activities and may end any of these activities at any time.
The public offering price of the Common Stock will be determined by
negotiations among the Underwriters and the Company, and will be based largely
upon the market price for the Common Stock as reported on the Nasdaq National
Market.
The Common Stock is traded on the Nasdaq National Market under the symbol
RADS.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Smith, Gambrell & Russell, LLP, Atlanta, Georgia.
Certain legal matters in connection with this offering are being passed upon
for the Underwriters by Alston & Bird LLP, Atlanta, Georgia.
58
<PAGE>
EXPERTS
The combined financial statements of the Company as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
included herein have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon included herein in reliance
upon the authority of such firm as experts in accounting and auditing in
giving said report.
The financial statements of Restaurant Management and Control Systems, Inc.
as of October 31, 1995 and 1996 and for the years then ended included herein
have been audited by Arthur Andersen LLP, independent public accountants, as
set forth in their report thereon included herein in reliance upon the
authority of such firm as experts in accounting and auditing in giving said
report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which is part of the Registration Statement, does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain items of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement and such exhibits and schedules
filed as a part thereof. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are necessarily
summaries of such documents. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company with the Commission may be inspected, without
charge, at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the Registration Statement may
be obtained from the Public Reference Section of the Commission, upon payment
of prescribed fees. Such material also may be accessed electronically by means
of the Commission's home page on the Internet at http://www.sec.gov.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RADIANT SYSTEMS, INC.
Report of Independent Public Accountants................................ F- 2
Combined Balance Sheets--December 31, 1995 and 1996 and pro forma share-
holders' deficit at December 31, 1996 and March 31, 1997 (unaudited)... F- 3
Combined Statements of Operations for the years ended December 31, 1994,
1995 and 1996 and for the three months ended March 31, 1996 and 1997
(unaudited)............................................................ F- 4
Combined Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1994, 1995 and 1996 and the three months ended March
31, 1997 (unaudited)................................................... F- 5
Combined Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996 and for the three months ended March 31, 1996 and 1997
(unaudited)............................................................ F- 6
Notes to Combined Financial Statements.................................. F- 7
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
Report of Independent Public Accountants................................ F-20
Balance Sheets--October 31, 1995 and 1996 and April 30, 1997 (unau-
dited)................................................................. F-21
Statements of Operations for the years ended October 31, 1995 and 1996
and for the six months ended April 30, 1996 and 1997 (unaudited)....... F-22
Statements of Shareholders' Deficit for the years ended October 31, 1995
and 1996 and for the six months ended April 30, 1997 (unaudited)....... F-23
Statements of Cash Flows for the years ended October 31, 1995 and 1996
and for the six months ended April 30, 1996 and 1997 (unaudited)....... F-24
Notes to Financial Statements........................................... F-25
PRO FORMA FINANCIAL STATEMENTS
Unaudited Pro Forma Combined Financial Information...................... F-30
Unaudited Pro Forma Combined Balance Sheet as of March 31, 1997 ........ F-31
Unaudited Pro Forma Combined Statements of Operations for the three
month period ended March 31, 1997 ..................................... F-32
Unaudited Pro Forma Combined Statements of Operations for the year ended
December 31, 1996 ..................................................... F-33
Notes to Unaudited Pro Forma Combined Statements of Operations.......... F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Radiant Systems, Inc.:
We have audited the accompanying combined balance sheets of RADIANT SYSTEMS,
INC. (a Georgia corporation) and LIBERTY SYSTEMS INTERNATIONAL, INC. (a
Georgia corporation) as of December 31, 1995 and 1996 and the related
statements of operations, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1996. 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 Radiant Systems, Inc. and
Liberty Systems International, Inc. as of December 31, 1995 and 1996 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 15, 1997
F-2
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DECEMBER 31, DEFICIT AT
------------------------ DECEMBER 31, MARCH 31,
1995 1996 1996 1997
----------- ----------- ------------- -----------
(NOTE 10)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents........... $ 164,550 $ 2,342,079 $12,487,487
Accounts receivable,
net of allowances for
doubtful accounts of
$41,500, $120,000 and
$150,000 in 1995, 1996
and 1997,
respectively.......... 624,179 4,885,209 7,141,465
Inventories............ 1,802,716 3,304,933 4,767,021
Other.................. 116,971 417,351 445,311
----------- ----------- -----------
Total current
assets.............. 2,708,416 10,949,572 24,841,284
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $670,266
and $1,438,681 in 1995
and 1996, respectively.. 1,030,669 1,517,902 1,821,225
SOFTWARE DEVELOPMENT
COSTS, net of
accumulated amortization
of $121,365, and
$360,203 in 1995 and
1996, respectively...... 340,630 736,418 852,261
INTANGIBLES.............. 0 957,405 957,255
DEFERRED INCOME TAXES.... 0 0 397,180
OTHER ASSETS............. 155,224 454,579 561,306
----------- ----------- -----------
$ 4,234,939 $14,615,876 $29,430,511
=========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable....... $ 2,298,068 $ 4,400,654 $ 3,228,665
Accrued liabilities.... 1,264,465 1,975,909 3,579,177
Customer deposits and
deferred revenue...... 2,399,596 3,052,518 2,516,295
Current portion of
shareholder loans..... 157,361 126,536 0
Current portion of long
term debt............. 252,979 582,230 528,231
----------- ----------- -----------
Total current
liabilities......... 6,372,469 10,137,847 9,852,368
Accrued customer
rebates............... 457,317 0 0
Shareholder loans, less
current portion....... 170,423 3,193,888 0
Long term debt, less
current portion....... 389,044 5,271,368 231,601
----------- ----------- -----------
Total liabilities.... 7,389,253 18,603,103 10,083,969
----------- ----------- -----------
COMMITMENTS
PUT WARRANTS............. 0 513,200 0
----------- ----------- -----------
SHAREHOLDERS' EQUITY
(DEFICIT):
Common stock, no par
value; 20,000,000
shares authorized;
6,857,112, 6,857,112
and 11,694,726 shares
issued and outstanding
in 1995, 1996 and
1997, respectively.... 63 63 76 110
Class A common stock,
no par value;
10,000,000 shares
authorized; 1,142,889
shares issued and
outstanding in 1995
and 1,442,889 shares
issued and outstanding
in 1996............... 10 13 0
Additional paid-in
capital............... 0 2,099,997 4,204,997 18,684,567
Warrants............... 240,000 1,185,000 40,000 0
Deferred sales
discount.............. (111,900) (132,105) 0 0
Retained earnings
(deficit)............. (3,282,487) (7,653,395) (7,653,395) 661,865
----------- ----------- ------------ -----------
(3,154,314) (4,500,427) $ (3,408,322) 19,346,542
----------- ----------- ============ ===========
$ 4,234,939 $14,615,876 $29,430,511
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-3
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Systems sales.......... $13,528,808 $14,077,704 $35,888,342 $3,848,550 $10,742,270
Customer support,
maintenance, and other
services.............. 918,801 1,804,291 5,054,979 698,084 1,818,057
----------- ----------- ----------- ---------- -----------
Total revenues......... 14,447,609 15,881,995 40,943,321 4,546,634 12,560,327
----------- ----------- ----------- ---------- -----------
COST OF REVENUES:
Systems sales.......... 9,459,034 9,862,477 22,270,161 2,768,106 6,278,136
Customer support,
maintenance, and other
services.............. 1,207,684 2,300,239 5,464,533 1,002,764 1,748,773
----------- ----------- ----------- ---------- -----------
Total cost of
revenues.............. 10,666,718 12,162,716 27,734,694 3,770,870 8,026,909
----------- ----------- ----------- ---------- -----------
GROSS PROFIT............ 3,780,891 3,719,279 13,208,627 775,764 4,533,418
----------- ----------- ----------- ---------- -----------
OPERATING EXPENSES:
Product development.... 983,999 1,639,669 3,327,630 700,567 1,153,155
Purchased research and
development costs..... 0 0 3,930,000 0 0
Sales and marketing.... 470,177 606,658 1,487,087 284,867 871,334
Depreciation and
amortization.......... 177,790 583,483 948,385 193,570 367,211
General and
administrative........ 2,243,097 2,990,039 5,664,246 1,010,497 1,689,318
----------- ----------- ----------- ---------- -----------
Total operating
expenses.............. 3,875,063 5,819,849 15,357,348 2,189,501 4,081,018
----------- ----------- ----------- ---------- -----------
(LOSS) INCOME FROM
OPERATIONS............. (94,172) (2,100,570) (2,148,721) (1,413,737) 452,400
INTEREST EXPENSE, net... 81,748 166,478 711,848 38,629 209,165
MINORITY INTEREST IN
EARNINGS OF PRYSMTECH.. 0 0 628,137 55,302 0
OTHER (INCOME).......... 0 (406,292) 0 0 0
----------- ----------- ----------- ---------- -----------
(LOSS) INCOME BEFORE PRO
FORMA INCOME TAXES AND
EXTRAORDINARY ITEM..... (175,920) (1,860,756) (3,488,706) (1,507,668) 243,235
PRO FORMA INCOME TAX
(BENEFIT).............. (60,632) (709,165) (1,333,142) (575,501) (211,750)
INCOME TAX PROVISION.... 0 0 0 0 0
----------- ----------- ----------- ---------- -----------
PRO FORMA NET (LOSS)
INCOME BEFORE
EXTRAORDINARY ITEM..... (115,288) (1,151,591) (2,155,564) (932,167) 454,985
----------- ----------- ----------- ---------- -----------
EXTRAORDINARY LOSS FROM
EARLY EXTINGUISHMENT OF
DEBT, NET OF TAXES OF
$82,270................ 0 0 0 0 131,370
----------- ----------- ----------- ---------- -----------
PRO FORMA NET INCOME
(LOSS)................. $ (115,288) $(1,151,591) $(2,155,569) (932,167) 323,615
=========== =========== =========== ========== ===========
EARNINGS PER COMMON AND
COMMON EQUIVALENT
SHARE:
Income (loss) before
extraordinary item.... $ (0.19) $ (0.08) $ 0.03
Extraordinary loss on
early extinguishment
of debt............... 0.00 0.00 (0.01)
----------- ---------- -----------
PRO FORMA NET (LOSS)
INCOME PER COMMON AND
COMMON EQUIVALENT
SHARE.................. $ (0.19) $ (0.08) $ 0.02
=========== ========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING..... 11,099,532 11,149,532 13,125,239
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-4
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK DEFERRED ACCUMULATED
------------------ ------------------ SALES EARNINGS
SHARES AMOUNT SHARES AMOUNT APIC WARRANTS DISCOUNT (DEFICIT) TOTAL
---------- ------ ---------- ------ ----------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993.................. 13,714,224 $125 0 $ 0 $ 0 $ 0 $ 0 $ 145,215 $ 145,340
Issuance of customer
warrant.............. 0 0 0 0 0 240,000 (240,000) 0 0
Sales of software
licenses under
customer warrant..... 0 0 0 0 0 0 37,500 0 37,500
Treasury stock
purchase............. (3,428,556) (31) 342,856 3 0 0 0 (573,057) (573,085)
Distributions to
shareholders......... 0 0 0 0 0 0 0 (156,266) (156,266)
Loss before pro forma
income taxes......... 0 0 0 0 0 0 0 (175,920) (175,920)
---------- ---- ---------- ---- ----------- ---------- --------- ---------- -----------
BALANCE, December 31,
1994.................. 10,285,668 94 342,856 3 0 240,000 (202,500) (760,028) (722,431)
Sales of software
licenses under
customer warrants.... 0 0 0 0 0 0 90,600 0 90,600
Treasury stock
purchase............. (3,428,556) (31) 800,033 7 0 0 0 (616,000) (616,024)
Distributions to
shareholders......... 0 0 0 0 0 0 0 (45,703) (45,703)
Loss before pro forma
income taxes......... 0 0 0 0 0 0 0 (1,860,756) (1,860,756)
---------- ---- ---------- ---- ----------- ---------- --------- ---------- -----------
BALANCE, December 31,
1995.................. 6,857,112 63 1,142,889 10 0 240,000 (111,900) (3,282,487) (3,154,314)
Issuance of customer
warrant.............. 0 0 0 0 0 79,000 (79,000) 0 0
Sales of software
licenses under
customer warrants.... 0 0 0 0 0 0 58,795 0 58,795
Shares issued in
PrysmTech
acquisition.......... 0 0 300,000 3 2,099,997 0 0 0 2,100,000
Issuance of warrant
for loan origination
fees................. 0 0 0 0 0 40,000 0 0 40,000
Accretion of put
warrants............. 0 0 0 0 0 0 (45,200) (45,200)
Accretion of customer
warrant.............. 0 0 0 0 0 826,000 0 (826,000) 0
Distributions to
shareholders......... 0 0 0 0 0 0 0 (11,002) (11,002)
Loss before pro forma
income taxes......... 0 0 0 0 0 0 0 (3,488,706) (3,488,706)
---------- ---- ---------- ---- ----------- ---------- --------- ---------- -----------
BALANCE, December 31,
1996 ................. 6,857,112 63 1,442,889 13 2,099,997 1,185,000 (132,105) (7,653,395) (4,500,427)
Issuance of common
stock................ 2,825,000 28 0 0 24,241,874 0 0 0 24,241,902
Automatic conversion
of Series A common
stock................ 1,442,889 13 (1,442,889) (13) 0 0 0 0 0
Exercise of stock
purchase warrants.... 1,352,818 14 0 0 2,658,186 (1,185,000) 0 0 1,473,200
Exercise of employee
stock options........ 10,000 0 0 0 10,000 0 0 0 10,000
Repurchase of common
stock from a
shareholder.......... (600,033) (6) 0 0 (1,125,062) 0 0 0 (1,125,068)
Repurchase of common
stock from a
customer............. (193,060) (2) 0 0 (997,033) 0 0 0 (997,035)
Sales of software
licenses under
warrant.............. 0 0 0 0 0 0 4,113 0 4,113
Reclassification of
deferred sales
discount to other
assets............... 0 0 0 0 0 0 127,992 0 127,992
Reclassification of S
Corporation
accumulated deficit.. 0 0 0 0 (8,203,395) 0 0 8,203,395 0
Income before pro
forma income taxes
and extraordinary
item................. 0 0 0 0 0 0 0 243,235 243,235
Extraordinary item,
net of tax........... 0 0 0 0 0 0 0 (131,370) (131,370)
---------- ---- ---------- ---- ----------- ---------- --------- ---------- -----------
BALANCE, March 31, 1997
(Unaudited) .......... 11,694,726 $110 0 $ 0 $18,684,567 $ 0 $ 0 $ 661,865 $19,346,542
========== ==== ========== ==== =========== ========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-5
<PAGE>
RADIANT SYSTEMS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Pro forma net income
(loss)................ $ (115,288) $(1,151,591) $(2,155,564) $ (932,167) $ 323,615
Adjustments to
reconcile pro forma
net income (loss) to
net cash provided by
(used in) operating
activities:
Pro forma income tax
(benefit)............ (60,632) (709,165) (1,333,142) (575,501) (211,750)
Deferred income
taxes................ 0 0 0 0 (397,180)
Depreciation and
amortization......... 177,790 583,483 948,385 185,017 367,212
Amortization of debt
discount............. 0 0 305,731 11,700 0
Gain on disposition
of assets............ 0 (374,018) 0 0 0
Discounts earned on
software license
sales................ 37,500 90,600 58,795 0 51,923
Purchased research
and development
costs................ 0 0 3,930,000 0 0
Minority interest in
earnings of
PrysmTech............ 0 0 (628,137) (55,302) 0
Amortization and
write-off of loan
discount and
origination fee...... 0 0 0 0 331,908
Changes in assets and
liabilities:
Accounts receivable.. 294,010 255,303 (3,229,660) (2,051,555) (2,256,256)
Inventories.......... (1,443,175) 287,754 (774,048) (17,461) (1,462,088)
Other assets......... (37,618) (132,587) (502,992) (6,702) (103,745)
Accounts payable..... 539,560 1,177,653 562,634 (738,209) (1,171,989)
Accrued liabilities.. 116,744 1,147,721 711,444 78,254 1,603,268
Accrued customer
rebates............. 132,804 324,513 57,834 57,834 0
Customer deposits and
deferred revenue.... 1,201,922 (659,111) 673,790 4,120,755 (536,223)
----------- ----------- ----------- ---------- -----------
Net cash provided by
(used in) operating
activities.......... 843,617 840,555 (1,374,930) 76,663 (3,461,305)
----------- ----------- ----------- ---------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment......... (303,499) (312,104) (492,650) (105,735) (555,936)
Capitalized software
development costs..... (133,095) (328,900) (634,642) (63,903) (202,347)
Purchase of treasury
stock................. (100,000) 0 0 0 0
Net cash acquired upon
purchase of
PrysmTech............. 0 0 369,950 0 0
Increase in goodwill
attributed to
PrysmTech purchase.... 0 0 0 0 (42,028)
Purchase of LSI, net of
$30,919 cash
acquired.............. 0 0 30,819 0 0
----------- ----------- ----------- ---------- -----------
Net cash used in
investing
activities.......... (536,594) (641,004) (726,523) (169,638) (800,311)
----------- ----------- ----------- ---------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from the
issuance of common
stock, net of issuance
costs................. 0 0 0 0 24,251,896
Repurchase of common
stock from
shareholders.......... 0 0 0 0 (2,122,097)
Proceeds from the
exercise of common
stock warrants........ 0 0 0 0 960,000
Repayments of
shareholder loans..... 0 (145,302) (157,361) (38,172) (4,093,429)
Borrowings of long-term
debt.................. 0 0 4,594,203 38,958 0
Repayments of long-term
debt.................. (92,928) (169,878) (328,072) (72,224) (4,597,700)
Dividends received from
PrysmTech............. 0 0 255,355 0 0
Payment of loan
origination fees...... 0 0 (129,639) 0 0
Distributions to
shareholders.......... (156,266) (45,703) (11,002) 0 0
Repayments of note from
shareholder........... 0 13,628 30,500 7,204 8,354
Other.................. 0 (55,000) 25,000 0 0
----------- ----------- ----------- ---------- -----------
Net cash (used in)
provided by
financing
activities.......... (249,194) (402,255) 4,278,982 (64,234) 14,407,024
----------- ----------- ----------- ---------- -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ 57,829 (202,704) 2,177,529 (157,209) 10,145,408
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 309,425 367,254 164,550 164,550 2,342,079
----------- ----------- ----------- ---------- -----------
CASH AND CASH
EQUIVALENTS, end of
period................. $ 367,254 $ 164,550 $ 2,342,079 $ 7,341 $12,487,487
=========== =========== =========== ========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest... $ 81,748 $ 166,478 $ 432,042 $ 141,489 $ 122,382
=========== =========== =========== ========== ===========
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment purchases
under capital lease
obligations........... $ 598,538 $ 217,568 $ 306,945 $ 66,593 $42,949
=========== =========== =========== ========== ===========
Note issued for
treasury stock
purchase.............. $ 473,085 $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ========== ===========
Treasury stock acquired
on sale of noncash
assets................ $ 0 $ 616,024 $ 0 $ 0 $ 0
=========== =========== =========== ========== ===========
Warrants issued to
customer.............. $ 240,000 $ 0 $ 79,000 $ 79,000 $ 0
=========== =========== =========== ========== ===========
Note payable issued for
customer rebates...... $ 0 $ 0 $ 872,501 $ 872,501 $ 0
=========== =========== =========== ========== ===========
Put warrants issued in
connection with Sirrom
Notes................. $ 0 $ 0 $ 468,000 $ 0 $ 0
=========== =========== =========== ========== ===========
Warrant issued for loan
origination fees...... $ 0 $ 0 $ 40,000 $ 0 $ 0
=========== =========== =========== ========== ===========
Accretion of Put
Warrants.............. $ 0 $ 0 $ 45,200 $ 0 $ 0
=========== =========== =========== ========== ===========
Assumption of net
liabilities in
connection with LSI
purchase.............. $ 0 $ 0 $ 78,349 $ 0 $ 0
=========== =========== =========== ========== ===========
Notes payable issued on
purchase of
PrysmTech............. $ 0 $ 0 $ 3,150,000 $ 0 $ 0
=========== =========== =========== ========== ===========
Stock issued on
purchase of
PrysmTech............. $ 0 $ 0 $ 2,100,000 $ 0 $ 0
=========== =========== =========== ========== ===========
Reclassification of S
Corporation retained
earnings to additional
paid-in capital....... $ 0 $ 0 $ 0 $ 0 $8,203,395
=========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-6
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 AND MARCH 31, 1997 (UNAUDITED)
1. ORGANIZATION AND BACKGROUND
Radiant Systems, Inc. (the "Company") provides enterprise-wide technology
solutions to selected vertical markets within the retail industry. The Company
offers fully integrated retail automation solutions, including point of sale
systems, consumer-activated order systems, back office management systems and
headquarters-based management systems. The Company's products enable retailers
to interact electronically with consumers, capture data at the point of sale,
manage site operations and logistics and communicate electronically with their
sites, vendors and credit networks. In addition, the Company offers system
planning, design and implementation services that tailor the automation
solution to each retailer's specifications.
The Company originally was organized under the laws of the state of New York
on August 1, 1985 and subsequently reincorporated under the laws of the state
of Georgia on October 27, 1995. The name of the company was changed to Radiant
Systems, Inc. from Softsense Computer Products, Inc. on November 13, 1996. In
connection with the reincorporation of the Company in October 1995, each
outstanding share of Common Stock and Class A Common Stock of the Company was
exchanged for 109,714 shares of Common Stock and Class A Common Stock, as
applicable. The shares outstanding and all other references to shares of
Common Stock and Class A Common Stock reported have been restated to give
effect to the reincorporation.
Upon completion of the initial public offering in February 1997, the Company
converted from an S corporation to a C corporation and one of the Company's
principal shareholders contributed his 21% ownership in Liberty Systems
International, Inc. ("LSI") to the Company, whereby LSI became a wholly owned
subsidiary of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The accompanying combined financial statements include the accounts of
Radiant Systems, Inc. and, since May 1996, its 79%-owned subsidiary, LSI. The
remaining 21% ownership of LSI has been combined with the Company's financial
statements since it was contributed to the Company in connection with the
initial public offering. All significant intercompany accounts have been
eliminated.
Presentation
The preparation of the 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
disclosures 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.
Unaudited Interim Financial Information
The accompanying financial statements and footnote data as of March 31, 1997
and for the three-month periods ended March 31, 1996 and 1997 are unaudited.
In the opinion of the management of the Company, these financial statements
reflect all adjustments, consisting only of normal and recurring adjustments,
necessary for a fair presentation of the financial statements. The results of
operations for the three-month period ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the full year.
F-7
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
The Company's revenue is generated primarily through software and system
sales, support and maintenance, and installation and training:
. Software and System Sales. The Company sells its products, which include
both hardware and software licenses, directly to end users. Revenue from
software licenses and system sales is generally recognized as products
are shipped, provided that no significant vendor and post-contract
support obligations remain, and the collection of the related receivable
is probable.
. Support and Maintenance. The Company offers to its customers post-
contract support in the form of maintenance, telephone support, and
unspecified software enhancements. Revenue from support and maintenance
is generally recognized as the service is performed.
. Installation and Training. The Company offers installation and training
services to its customers through its Radiant Solutions Group. Revenues
from installation and training is generally recognized at the time the
service is performed.
Payments received in advance are recorded as customer deposits and deferred
revenue in the accompanying balance sheets and are recognized as revenue when
the related product is shipped or related revenue is earned.
Inventories
Inventories consist principally of computer hardware and software media and
are stated at the lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method over estimated useful lives of three to five years.
Property and equipment at December 31, 1995 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Computers and office equipment...................... $1,201,747 $ 2,295,579
Furniture and fixtures.............................. 383,869 488,961
Purchased software.................................. 115,319 172,043
---------- -----------
1,700,935 2,956,583
Less accumulated depreciation and amortization...... (670,266) (1,438,681)
---------- -----------
$1,030,669 $ 1,517,902
========== ===========
</TABLE>
Software Development Costs
Capitalized software development costs consist principally of salaries and
certain other expenses directly related to development and modification of
software products. Capitalization of such costs begins when a working model
has been produced as evidenced by the completion of design, planning, coding
and testing such that the product meets its design specifications and has
thereby established technological feasibility. Capitalization of such costs
ends when the resulting product is available for general release to the
public. Amortization of capitalized software development costs is provided at
the greater of the ratio of current product revenue to the total of current
and anticipated product revenue or on a straight-line
F-8
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
basis over the estimated economic life of the software, which the Company has
determined is not more than three years.
Purchased Research and Development Costs
In connection with the acquisition of LSI in May 1996 and PrysmTech, L.L.C.
("PrysmTech") in December 1996 (Note 4), the Company allocated $30,000 and
$3,900,000, respectively, of the purchase prices to incomplete research and
development projects as determined by independent appraisal. Accordingly,
these costs were expensed as of the acquisition dates. These allocations
represent the estimated fair value based on risk adjusted cash flows (assuming
a 40% discount rate) related to incomplete projects. The development of these
projects had not yet reached technological feasibility, and the technology has
no alternative future use. The technology acquired in these acquisitions will
require substantial additional development by the Company.
Income Taxes
Prior to completion of the initial public offering in February 1997, the
Company elected to be treated as an S corporation for federal and state income
tax purposes. As a result, the income tax effects of the Company accrued
directly to its shareholders. Amounts were distributed to shareholders for
making applicable tax payments.
The accompanying combined financial statements reflect a provision for
income taxes on a pro forma basis as if the Company were liable for federal
and state income taxes as a taxable corporate entity throughout the years
presented. The pro forma income tax provision has been computed by applying
the Company's anticipated statutory tax rate to pretax income (loss), adjusted
for permanent tax differences.
Pro Forma Net Income (Loss) Per Share
Pro forma net income (loss) per share is computed using the weighted average
number of shares of Common Stock and dilutive Common Stock equivalent shares
("CSEs") from stock options and warrants (using the treasury stock method).
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
Common Stock and CSEs issued at prices below the initial public offering price
during the 12-month period prior to the Company's initial public offering have
been included in the calculation as if they were outstanding for all periods
prior to the initial public offering presented, regardless of whether they are
dilutive. Net income is not reduced by the $45,200 provision for accretion of
Put Warrants redemption values because the calculation assumes the related
Common Stock was outstanding in lieu of the Put Warrants (Notes 5 and 7).
Historical net income per share has not been presented in view of the S
corporation status in prior periods and the anticipated change in capital
structure upon closing of the initial public offering.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade accounts payable,
and other financial instruments approximate their fair values principally
because of the short-term maturities of these instruments. The fair value of
the Company's long-term debt is estimated based on the current rates offered
to the Company for debt of similar terms and maturities. Under this method,
the Company's fair value of long-term debt was not significantly different
than the stated value at December 31, 1996.
Statement of Cash Flows
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash.
F-9
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Significant Customer Concentration
A majority of the Company's customers operate within the convenience store
market, and a significant portion of the Company's revenues are derived from a
limited number of customers. During the years ended December 31, 1994, 1995,
and 1996, the following clients individually accounted for more than 10% of
the Company's revenue:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A............................................... 52.1% 15.8% * %
Customer B............................................... 23.8 43.6 13.2
Customer C............................................... * * 21.5
Customer D............................................... * * 11.7
Customer E............................................... * * 13.8
</TABLE>
- --------
* Accounted for less than 10% of total revenues for the period indicated.
At December 31, 1996, 57.2% of the Company's accounts receivable related to
these 5 customers.
New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The Company's adoption of SFAS No. 121 in the first quarter of 1996 did not
have a significant impact on the Company's combined financial statements.
The American Institute of Certified Public Accountants has issued an
exposure draft to amend the provisions of Statement of Position ("SOP") 91-1,
"Software Revenue Recognition." The adoption of the standards in the current
version of the exposure draft is not expected to have a significant impact on
the Company's combined financial statements.
Accounting Pronouncements
During the first quarter 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share". This statement establishes new guidelines for the
calculation and presentation of earnings per share. The following table
represents a reconciliation of basic and dilutive weighted average shares and
pro forma calculation of earnings per share using the guidelines of SFAS 128.
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS
ENDED MARCH 31,
----------------
1996 1997
------- -------
(UNAUDITED IN
THOUSANDS,
EXCEPT
PER SHARE DATA)
<S> <C> <C>
Basic weighted average shares outstanding................ 8,300 9,847
Shares of common stock assumed issued upon exercise of
common stock equivalents using the "treasury stock"
method as it applies to the computation of diluted
earnings per share...................................... 2,850 3,368
------- -------
Diluted weighted average shares outstanding.............. 11,150 13,125
======= =======
Pro forma net earnings (loss) used in the computation of
basic and diluted earnings per share.................... $ (932) $ 324
======= =======
Earnings per share:
Basic.................................................. $ (0.11) $ 0.03
======= =======
Diluted................................................ $ (0.08) $ 0.02
======= =======
</TABLE>
Reclassifications
Certain reclassifications have been made to prior year financial statements
to conform the current year presentation.
F-10
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. PRODUCT DEVELOPMENT EXPENDITURES
Product development expenditures for the years ended December 31, 1995 and
1996 are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Total development expenditures..................... $1,968,569 $3,962,272
Less additions to capitalized software development
costs prior to amortization.................... 328,900 634,642
---------- ----------
Product development expense........................ $1,639,669 $3,327,630
========== ==========
The activity in the capitalized software development account during 1995 and
1996 is summarized as follows:
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Balance at beginning of period, net................ $ 110,912 $ 340,630
Additions......................................... 328,900 634,642
Amortization expense.............................. (99,182) (238,854)
---------- ----------
Balance at end of period, net...................... $ 340,630 $ 736,418
========== ==========
</TABLE>
4. ACQUISITIONS
PrysmTech
In November 1995, the Company and Billmart, L.L.C. ("Billmart") formed
PrysmTech to pursue the development and sale of integrated site solutions to
the entertainment market. The Company contributed an exclusive license to
market its software to the entertainment market while Billmart contributed net
assets of $143,253 and an exclusive license to modify and market the Billmart
software. Each party received a 50% interest for its contribution.
On December 31, 1996, the Company acquired Billmart's interest in PrysmTech
for 300,000 shares of Common Stock and $3,150,000 in notes. Total
consideration, including transaction costs of approximately $100,000, was
$5,350,000. The transaction was accounted for as a purchase. Based on the
preliminary purchase price allocation, intangibles of $869,000 were recorded,
after adjusting for purchased research and development costs (Note 2), which
are being amortized over five years. The accompanying financial statements
include the operating results of PrysmTech since January 1, 1995 with
deductions for minority interest earnings. Results for 1995 include $32,274 of
earnings from the Company's investment in PrysmTech, which is included in
other income.
The Company's unaudited pro forma results of operations are presented
assuming that the purchase of PrysmTech had been consummated January 1, 1996
and are not necessarily indicative of the results of operations which would
have actually been attained during the year ended December 31, 1996.
<TABLE>
<S> <C>
Pro forma revenue............................................ $40,943,321
===========
Pro forma net income......................................... $ 364,745
===========
Pro forma earnings per share................................. $ 0.03
===========
</TABLE>
F-11
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Pro forma adjustments were recorded to include (i) increased interest
expense to reflect interest expense on long-term debt that would have been
incurred to finance the purchase and (ii) increased amortization expense as a
result of the excess of the purchase price over the book value (iii)
elimination of minority interest in earnings (iv) elimination of the one-time,
non-recurring charge for purchased research and development costs of
$3,900,000 (v) income taxes for the tax effect of pro forma adjustments and a
pro forma tax provision for PrysmTech as if PrysmTech were liable for federal
and state income taxes using the Company's effective tax rate of 39%. Weighted
average shares were adjusted to give effect to the 300,000 shares issued and
the dilutive effect of CSEs outstanding before the 12-month period prior to
the initial public offering.
LSI
On May 17, 1996, the Company acquired LSI for $100 cash and assumed net
liabilities of $78,349. The transaction was accounted for as a purchase.
Intangibles of $48,349 were recorded, after adjusting for purchased research
and development costs (Note 2), which are being amortized over seven years.
The financial statements include the operating results of LSI from the date of
acquisition. Pro forma results of operations have not been presented because
the effect of this acquisition is not significant.
5. LONG-TERM DEBT
Long-term debt, including obligations under capital leases, consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
--------- ----------
<S> <C> <C>
Notes payable to Sirrom Capital Corporation
("Sirrom") ("Sirrom Notes"), interest at 14%,
$3,000,000 principal due June 2001, $1,500,000 due
September 2001, secured by all of the assets of
the Company and all shares of the Company's
principal shareholders............................ $ 0 $4,266,000
Note payable to Emro Marketing Corporation,
interest at 6%, due in five annual installments of
$174,500 through 2001............................. 0 872,501
Capital lease obligations, interest ranging from 5%
to 31%, payable monthly through 2000, secured by
equipment......................................... 642,023 715,097
--------- ----------
642,023 5,853,598
Less current portion............................... (252,979) (582,230)
--------- ----------
$389,044 $5,271,368
========= ==========
</TABLE>
At December 31, 1996, aggregate maturities of long-term debt, including
obligations under capital leases, are as follows:
<TABLE>
<S> <C>
1997........................................ $ 582,230
1998........................................ 410,559
1999........................................ 226,496
2000........................................ 193,813
2001........................................ 4,440,500
----------
$5,853,598
==========
</TABLE>
The Sirrom Notes were issued in June 1996 and September 1996 for $3,000,000
and $1,500,000, respectively. As discussed in Note 7, warrants ("Put
Warrants") to purchase 174,642 shares at $.01 per share were issued with the
notes. The value of these warrants was determined to be $468,000 based on
F-12
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
the relative fair value of the warrants to the notes. A corresponding amount
of the proceeds that has been allocated to the warrants has been accounted for
as a debt discount and is being amortized over the expected life of the
related notes using the effective interest method. At December 31, 1996, the
unamortized debt discount amounted to $234,000.
On May 27, 1994, the Company entered into an agreement with a customer
whereby the customer would receive a cash rebate upon purchasing a defined
number of software licenses. In the event the Company was unable to pay the
rebates when due, the agreement provided the customer the option of applying
the rebate to the purchase of additional licenses or requiring the Company to
deliver a promissory note for any remaining portion of the rebate. At December
31, 1995, the Company had recorded a customer rebate accrual of $457,317, as
it was probable that such purchase criteria would ultimately be met. During
1996, the customer met the purchase criteria, at which time the Company
delivered a promissory note in the amount of $872,501.
6. INCOME TAXES
The following summarizes the components of the pro forma income tax
(benefit):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Current taxes:
Federal............................. $ 0 $ 0 $ 0
State............................... 0 0 0
Deferred.............................. (60,632) (709,165) (1,333,142)
-------- --------- -----------
Pro forma income tax (benefit)........ $(60,632) $(709,166) $(1,333,142)
======== ========= ===========
A reconciliation from the federal statutory rate to the pro forma tax
provision (benefit) is as follows:
<CAPTION>
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Statutory federal tax rate............ (34.0)% (34.0)% (34.0)%
State income taxes, net of federal tax
benefit............................... (4.5) (4.5) (4.5)
Other................................. 4.0 0.4 0.3
-------- --------- -----------
(34.5)% (38.1)% (38.2)%
======== ========= ===========
</TABLE>
In connection with the initial public offering, the Company will convert
from an S corporation to a C corporation and, accordingly, will be subject to
future federal and state income taxes. Upon conversion to C corporation
status, the Company will record deferred taxes for which it will be
responsible following termination of S corporation status. The components of
the pro forma net deferred tax asset as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts.............................. $ 46,200
Intangibles.................................................. 1,027,565
Other........................................................ 9,593
----------
Total deferred tax assets.................................. $1,083,358
----------
Deferred tax liabilities:
Depreciation................................................. $ (78,376)
Capitalized software......................................... (283,521)
----------
Total deferred tax liabilities............................. (361,897)
----------
Net pro forma deferred tax asset............................... $ 721,461
==========
</TABLE>
F-13
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
March 31, 1997 (Unaudited)
Upon termination of the Company's S Corporation election in February 1997,
the Company recorded net deferred tax assets of $592,000. Simultaneously, with
the recording of these deferred tax assets, the Company recorded a tax benefit
of $305,000 and a valuation allowance of $287,000. The valuation allowance was
recorded due to the uncertainty surrounding the future utilization of certain
deferred tax assets. For the period subsequent to the initial public offering
to March 31, 1997, the Company recorded a tax provision of $305,000. As a
result, no net income tax provision was recognized for the three months ended
March 31, 1997.
7. SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock
As of January 15, 1997, the authorized capital of the Company consists of
40,000,000 shares of capital stock comprised of 30,000,000 shares of no par
Common Stock and 10,000,000 shares of no par Class A Common Stock. Both
classes of stock have a stated value of $.00001 per share. The Class A Common
Stock is nonvoting and is automatically convertible into Common Stock without
further action on the part of the Company or its shareholders, at a rate of
one share of Common Stock for one share of Class A Common Stock on the earlier
of (i) the closing time of an initial public offering by the Company, as
defined, or (ii) the closing time of a change in control of the Company, as
defined. Upon completion of the initial public offering, the Class A Common
Stock will cease to be authorized.
Options
In December 1995, the Company adopted the 1995 Stock Option Plan, as amended
(the "Plan"), under which the Company may grant up to 4,000,000 incentive
Class A Common Stock options to key employees. Options are granted at an
exercise price which is not less than fair value as estimated by the Board of
Directors and become exercisable as determined by the Board of Directors,
generally over a period of four to five years. Options granted under the Plan
expire ten years from the date of grant. At December 31, 1996, options to
purchase 928,250 of Class A Common Stock were available for future grant under
the Plan.
The Company has granted 264,000 nonqualified stock options outside the Plan.
Of these options, 164,000 vest over four years. The remaining 100,000 options
vest at the end of eight years, subject to acceleration based on specified
terms within the agreement.
Transactions related to stock options for the years ended December 31, 1995
and 1996 are as follows:
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE
--------- ----------
<S> <C> <C>
Options outstanding at December 31, 1994............. 0 $ 0.00
Granted............................................. 1,774,000 1.00
Exercised........................................... 0 0.00
---------
Options outstanding at December 31, 1995............. 1,774,000 1.00
Granted............................................. 1,625,750 1.00-7.00
Canceled............................................ (64,000) 1.00-4.50
Exercised........................................... 0 0.00
--------- ----------
Options outstanding at December 31, 1996............. 3,335,750 $1.00-7.00
========= ==========
Exercisable December 31, 1996........................
337,500
=========
</TABLE>
F-14
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
During 1995, the Financial Accounting Standards Board issued SFAS No. 123
("Accounting for Stock-Based Compensation") which defines a fair value-based
method of accounting for an employee stock option plan or similar equity
instrument. However, it also allows an entity to continue to measure
compensation cost for those plans using the method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Entities electing to remain with the accounting in APB
No. 25 must make pro forma disclosures of net income and, if presented,
earnings per share, as if the fair value-based method of accounting defined in
the statement had been applied.
The Company has elected to account for its stock-based compensation plan
under APB No. 25; however, the Company has computed for pro forma disclosure
purposes the value of all options granted during 1995 and 1996 using the Black
Scholes option pricing model as prescribed by SFAS No. 123 using the following
weighted average assumptions used for grants in 1995 and 1996:
<TABLE>
<S> <C>
Risk free interest rate........................................... 5.8%
Expected dividend yield........................................... 0.0%
Expected lives.................................................... 4 years
Expected volatility............................................... 56.0%
</TABLE>
The total value of the options granted during the years ended December 31,
1995 and 1996 were computed as approximately $867,000 and $3,527,000,
respectively, which would be amortized over the vesting period of the options.
If the Company had accounted for these plans in accordance with SFAS No. 123,
the Company's reported pro forma net loss and pro forma net loss per share for
the years ended December 31, 1995 and 1996 would have increased to the
following pro forma amounts:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
Net loss:
As reported...................................... $(1,151,591) $(2,155,564)
Pro forma........................................ (1,202,028) (2,984,410)
Primary EPS:
As reported...................................... -- $ (0.19)
Pro forma........................................ -- (0.27)
</TABLE>
Warrants
Customer Warrants
In May 1994, the Company and one of its major customers (the "Customer")
entered into an agreement (the "Agreement") whereby the Customer was granted
the right (the "Customer Warrant") to acquire 10% of the Company's outstanding
Class A Common Stock for $800,000, provided the Customer meets certain
purchase criteria. The Customer Warrant may be exercised at any time on or
after May 27, 1999 or at the earlier of (i) the closing time of an initial
public offering or (ii) the closing time of a change in control of the
Company. The Customer Warrant terminates on the earlier of (i) May 27, 1999 in
the event the specified purchase criteria are not met, (ii) the closing time
of an initial public offering by the Company, or (iii) 5:00 p.m. eastern time
on May 27, 2014, the twentieth anniversary of the Agreement. A deferred sales
discount of $240,000 was charged on the date of grant, which represented the
fair market value of the Customer Warrant on such date, and is being amortized
as a reduction of sales as the Customer makes purchases under the Agreement.
F-15
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In February 1996, the Company amended the Agreement such that the Customer
Warrant was increased to 12% of the Company's outstanding common shares. An
additional deferred sales discount of $79,000 was charged on the date of
grant, which represented the fair market value on the date of the increase of
the Customer Warrant. The Company has the option to repurchase one-sixth of
the shares issuable under the Customer Warrant at a price midway between the
Customer's exercise price and the fair market value of the shares. The Company
is accreting to the expected redemption value of the shares, subject to the
call option. For the year ended December 31, 1996, accretion of $826,000 was
recorded.
Put Warrants
In connection with issuance of the Sirrom Notes (Note 5), the Company issued
Put Warrants to purchase 1.5% of the Company's outstanding Common Stock at an
exercise price of $.01. In the event that the notes remain outstanding on
March 31, 1997, Sirrom receives an additional warrant to purchase .5% of the
Company's shares, and if the notes remain outstanding on July 1, 1997, Sirrom
receives an additional warrant to purchase 1.5% of the Company's Common Stock.
Beginning July 1, 1998, warrants to purchase additional shares of Common Stock
accrue at 2% per year until prepayment or maturity of the notes.
Sirrom also has the option to require the Company to redeem the warrants
beginning in 2001 for fair value, as defined. The excess of the redemption
value over the carrying value is being accrued by periodic charges to retained
earnings in the absence of additional paid-in capital over the redemption
period. This accretion amounted to $45,200 for the year ended December 31,
1996.
Loan Origination Warrant
In 1996, the Company issued warrants to purchase 20,000 shares of Class A
Common Stock at an exercise price of $.01 for payment of loan origination fees
("Loan Origination Warrant"). The fair value of the warrant was determined to
be $40,000 and has been capitalized as loan origination fees.
A summary of the warrants to purchase shares of Class A Common Stock which
remain outstanding (and for which shares of Common Stock and Class A Common
Stock are reserved for issuance) is as follows as of December 31, 1996:
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE EXPIRATION
--------- --------- ----------
<S> <C> <C> <C>
Customer warrants............................. 1,158,360 $.83 2014
Put warrants.................................. 174,642 .01 2001
Loan origination warrant...................... 20,000 .01 2001
</TABLE>
8. COMMITMENTS
Leases
The Company leases office space, equipment, and certain vehicles under
noncancelable operating lease agreements expiring on various dates through
2000. At December 31, 1996, future minimum rental payments for noncancelable
leases with terms in excess of one year were as follows:
<TABLE>
<S> <C>
1997................................ $490,242
1998................................ 466,883
1999................................ 460,979
2000................................ 201,589
</TABLE>
F-16
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Total rent expense under operating leases was $227,267, $374,206, and
$503,530 for the years ended December 31, 1994, 1995, and 1996, respectively.
Benefit Plan
The Company has a 401(k) profit-sharing plan (the "Plan") available to all
employees of the company who have completed six months of service and have
attained age 21. The Plan includes a salary deferral arrangement pursuant to
which employees may contribute a minimum of 3% and a maximum of 15% of their
salary on a pretax basis. The Company may make both matching and additional
contributions at the discretion of the board of directors. The Company made no
such contributions during 1994, 1995, or 1996.
Employment Agreements
The Company has entered into employment agreements with two employees. Under
each agreement, in the event employment is terminated (other than voluntarily
by the employee or by the Company for cause or upon the death of the
employee), the Company is committed to pay certain benefits, including $16,666
per month from the date of termination to December 31, 2000.
9. RELATED-PARTY TRANSACTIONS
In October 1994, the Company repurchased 3,085,700 shares of Common Stock
for a note in the amount of $473,086. The note is unsecured, bears interest at
8% per annum, and is payable in monthly installments of $14,825 through
December 31, 1997.
In connection with the share repurchase, the Company entered into an
agreement with the shareholder whereby the Company would pay the shareholder
an initial payment of $150,000 and a monthly payment of $14,000 for five years
in return for certain consulting services, as defined. In October 1995, this
agreement was amended in order to reduce the quantity of services and related
monthly payment. Fees paid under the consulting agreement were $131,000 and
$27,500 in 1995 and 1996, respectively.
In May 1995, the Company entered into an agreement with a shareholder to
transfer certain assets and technology to the shareholder in a tax-free
exchange in return for 2,628,523 shares of Common Stock. A gain of $374,018,
included in other income, was recorded in connection with the transaction
which represents the excess of the fair market value of the stock acquired
over the net assets distributed. As part of the transaction, the Company
recorded a note receivable in the amount of $61,171, which is payable in
monthly installments of $2,966 through May 1997.
In June 1996, a shareholder sold 200,000 shares of Class A Common Stock for
$1.875 per share. The shareholder also issued to one of the Company's
principal shareholders an option to repurchase the remaining 600,033 shares of
Class A Common Stock for $1.875 per share through June 1997. The principal
shareholder intends to assign this option to the Company prior to the initial
public offering.
In connection with the acquisition of Billmart's interest in PrysmTech, the
Company issued notes in the amount of $3,150,000 to the former owners of
Billmart (Note 4). These notes are secured by the assets of PrysmTech, bear
interest at 8.5% per annum, and are payable on the earlier of December 31,
1998 or the tenth day following the closing of a stock offering, as defined.
F-17
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. SUBSEQUENT EVENTS
Initial Public Offering
In February 1997, the Company completed an initial public offering of its
Common Stock. The Company issued 2,825,000 shares, including the underwriters
over-allotment of 325,000 shares, at an initial public offering price of
$9.50. The total proceeds of the initial public offering, net of underwriting
discounts and offering expenses, were approximately $24.3 million. Subsequent
to the public offering of Common Stock, the Company repaid outstanding debt of
$8.7 million and repurchased and subsequently retired 793,093 shares of common
stock from two shareholders for a total of $2.1 million.
Pro Forma Shareholders' Equity (Deficit)
The pro forma shareholders' equity (deficit) at December 31, 1996, gives
effect to the conversion of 1,442,889 shares of Class A Common Stock and
1,158,360 shares issuable under Customer Warrants into Common Stock upon the
close of the Company's initial public offering.
Preferred Stock
In January 1997, the Company authorized 5,000,000 shares of preferred stock
with no par value. The Board of Directors has the authority to issue these
shares and to fix dividends, voting and conversion rights, redemption
provisions, liquidation preferences, and other rights and restrictions.
11. ACQUISITIONS AND POTENTIAL STOCK OFFERING SUBSEQUENT TO MARCH 31, 1997
(UNAUDITED)
On May 23, 1997, the Company purchased all of the outstanding common stock
of Restaurant Management and Control Systems, Inc. ("ReMACS") for 627,500
shares of Common Stock, $3.3 million in cash $3.3 million in notes and
assumption of net liabilities of $4.5 million. Total consideration (subject to
adjustment), including transaction costs of approximately $150,000, was $18.5
million. The transaction was accounted for as a purchase. Based on the
preliminary purchase price allocation, intangibles of $3.1 million were
recorded, after adjusting for purchased research and development costs of
$15.5 million, which are being amortized over four to ten years. In connection
with the acquisition, the Company entered into employment agreements with five
employees for terms expiring June 2002. The agreements provide for severance,
up to the longer of the remaining term of the agreement or two years, for
termination of employment for any reason other than good cause. Immediately
following the effectiveness of the merger, the Company granted options to
purchase 310,000 shares of the Company's Common Stock to employees of ReMACS
at an exercise price equal to the fair market value of the Company's Common
Stock on the date of such grant.
On May 30, 1997, the Company purchased all of the outstanding common stock
of RSI Merger Corporation (d.b.a. Twenty/20 Visual Systems) for 199,074 shares
of Common Stock and $1.3 million in cash. Total consideration (subject to
adjustment), including transaction costs of approximately $100,000, was $3.7
million. The transaction was accounted for as a purchase. Based on the
preliminary purchase price allocation, intangibles of $400,000 were recorded,
after adjusting for purchased research and development costs of $3.3 million,
which are being amortized over four to ten years. In connection with the
acquisition, the Company entered into employment agreements with two employees
for terms expiring May 2001. The agreements provide for severance, for the
remaining term of the agreement, for termination of employment for any reason
other than good cause. Immediately following the effectiveness of the merger,
the Company granted the two employees options to purchase 140,000 shares of
the Company's Common Stock of which 40,000 where issued at an exercise price
equal to the fair market
F-18
<PAGE>
RADIANT SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
value of the Company's Common Stock on the date of such grant and which
100,000 were issued at an exercise price of $5.50. In connection with the
issuance of the 100,000 options, the Company will record a nonrecurring
compensation charge of $1,000,000 for 80,000 options that vested immediately
and $250,000 as deferred compensation for 20,000 options, for the excess of
the fair market value of the Company's Common Stock on the date of grant over
the aggregate exercise price of such options. The deferred compensation will
be amortized ratably over a four year vesting period.
In June 1997, the Company is planning an offering of its Common Stock to
finance the ReMACS acquisition and meet general expansion and working capital
requirements (the "Offering"). The Company plans to issue 2,500,000 shares in
the Offering. There can, however, be no assurance that the Offering will be
completed.
In June 1997, the Company's 1995 Stock Option Plan (the "Plan") was amended
by the Board of Directors, subject to shareholder approval, to increase the
number of shares of Common Stock reserved for issuance under the Plan to
5,000,000 shares.
F-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Restaurant Management and Controls Systems, Inc.:
We have audited the accompanying balance sheets of RESTAURANT MANAGEMENT AND
CONTROL SYSTEMS, INC. (a California corporation) as of October 31, 1995 and
1996 and the related statements of operations, shareholders' deficit, and cash
flows for each of 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 Restaurant Management and
Control Systems, Inc. as of October 31, 1995 and 1996 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
June 20, 1997
F-20
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31,
------------------------
APRIL 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 819,329 $ 1,192,288 $ 391,404
Accounts receivable, net of allowances
for doubtful accounts of $112,500,
$125,000, and $125,000 in 1995, 1996,
and 1997, respectively............... 1,080,140 1,172,632 864,735
Inventories........................... 61,045 222,714 172,099
Other................................. 16,221 42,790 45,942
----------- ----------- -----------
Total current assets................ 1,976,735 2,630,424 1,474,990
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $347,293,
$435,482, and $506,323 in 1995, 1996,
and 1997, respectively................. 340,586 411,345 430,555
SOFTWARE DEVELOPMENT COSTS, net of
accumulated amortization of $104,053,
$321,433, and $442,886 in 1995, 1996,
and 1997, respectively................. 164,451 363,840 358,734
OTHER ASSETS............................ 16,001 0 0
----------- ----------- -----------
$ 2,497,773 $ 3,405,609 $ 2,263,469
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable...................... $ 207,299 $ 378,825 $ 122,418
Accrued liabilities................... 848,412 1,689,333 718,222
Customer deposits and deferred
revenue.............................. 2,465,086 4,582,064 5,706,064
Current portion of long-term debt..... 66,364 124,500 128,288
----------- ----------- -----------
Total current liabilities........... 3,587,161 6,774,722 6,674,992
Long-term debt, less current portion.. 102,288 171,288 71,641
----------- ----------- -----------
Total liabilities................... 3,689,449 6,946,010 6,746,633
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, no par value; 100,000
shares authorized; 1,050 shares
issued and outstanding in 1995 and
1996................................. 1,050 1,050 1,050
Accumulated deficit................... (1,192,726) (3,541,451) (4,484,214)
----------- ----------- -----------
(1,191,676) (3,540,401) (4,483,164)
----------- ----------- -----------
$ 2,497,773 $ 3,405,609 $ 2,263,469
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-21
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS FOR THE SIX MONTHS
ENDED OCTOBER 31, ENDED APRIL 30,
----------------------- ----------------------
1995 1996 1996 1997
---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Software sales............... $1,955,898 $ 3,032,431 $1,502,629 $1,080,206
Customer support,
maintenance, and other
services.................... 2,325,772 2,615,307 1,581,688 907,991
---------- ----------- ---------- ----------
Total revenues............. 4,281,670 5,647,738 3,084,317 1,988,197
---------- ----------- ---------- ----------
COST OF REVENUES:
Software sales............... 250,801 638,264 372,113 114,283
Customer support,
maintenance, and other
services.................... 1,508,779 1,407,517 794,696 657,288
---------- ----------- ---------- ----------
Total cost of revenues..... 1,759,580 2,045,781 1,166,809 771,571
---------- ----------- ---------- ----------
GROSS PROFIT.................. 2,522,090 3,601,957 1,917,508 1,216,626
---------- ----------- ---------- ----------
OPERATING EXPENSES:
Product development.......... 1,052,186 2,057,998 958,172 699,345
Sales and marketing.......... 1,202,452 1,196,403 515,790 685,108
Depreciation and
amortization................ 154,145 392,228 186,527 185,262
General and administrative... 1,019,130 2,323,180 638,566 591,903
---------- ----------- ---------- ----------
Total operating expenses... 3,427,913 5,969,809 2,299,055 2,161,618
---------- ----------- ---------- ----------
LOSS FROM OPERATIONS.......... (905,823) (2,367,852) (381,547) (944,992)
INTEREST EXPENSE (INCOME),
NET.......................... 22,763 (19,127) (14,462) (2,229)
---------- ----------- ---------- ----------
NET LOSS...................... $ (928,586) $(2,348,725) $ (367,085) $ (942,763)
========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK
------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
------ ------ ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, October 31, 1994.............. 1,050 $1,050 $ (264,140) $ (263,090)
Net loss.............................. 0 0 (928,586) (928,586)
----- ------ ----------- -----------
BALANCE, October 31, 1995.............. 1,050 1,050 (1,192,726) (1,191,676)
Net loss.............................. 0 0 (2,348,725) (2,348,725)
----- ------ ----------- -----------
BALANCE, October 31, 1996.............. 1,050 1,050 (3,541,451) (3,540,401)
Net loss.............................. 0 0 (942,763) (942,763)
----- ------ ----------- -----------
BALANCE, April 30, 1997 (Unaudited).... 1,050 $1,050 $(4,484,214) $(4,483,164)
===== ====== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
OCTOBER 31 APRIL 30
----------------------- --------------------------
1995 1996 1996 1997
---------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss................ $ (928,586) $(2,348,725) $ (367,085) $ (942,763)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization.......... 154,145 392,228 186,527 185,262
Changes in assets and
liabilities:
Accounts receivable... (892,243) (84,054) (188,228) 307,897
Inventories........... (37,455) 45,797 10,565 50,615
Other assets.......... (8,844) (19,006) (29,678) (3,152)
Accounts payable...... 117,806 171,526 41,889 (212,796)
Accrued liabilities... 677,990 840,921 (500,554) (971,113)
Customer deposits and
deferred revenue..... 1,996,787 2,116,978 1,129,253 1,124,002
---------- ----------- ------------ ------------
Net cash provided by
(used in) operating
activities.......... 1,079,600 1,115,665 282,689 (462,048)
---------- ----------- ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property
and equipment.......... (247,910) (245,326) (58,537) (86,051)
Capitalized software
development costs...... (23,098) (417,050) (253,294) (113,315)
---------- ----------- ------------ ------------
Net cash used in
investing
activities.......... (271,008) (662,376) (311,831) (199,366)
---------- ----------- ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under long-
term debt.............. 4,482 0 0 0
Repayments of long-term
debt................... (53,400) (80,330) (31,447) (139,470)
---------- ----------- ------------ ------------
Net cash used in
financing
activities.......... (48,918) (80,330) (31,447) (139,470)
---------- ----------- ------------ ------------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............. 759,674 372,959 (60,589) (800,884)
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD............... 59,655 819,329 819,329 1,192,288
---------- ----------- ------------ ------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD.................. $ 819,329 $ 1,192,288 $ 758,740 $ 391,404
========== =========== ============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest.... $ 22,763 $ 12,908 $ 6,454 $ 11,382
========== =========== ============ ============
Cash paid during the
period for income
taxes.................. $ 0 $ 0 $ 0 $ 0
========== =========== ============ ============
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Inventory purchase under
note payable
obligation............. $ 0 $ 207,466 $ 0 $ 0
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995 AND 1996 AND APRIL 30, 1997
1. ORGANIZATION AND BACKGROUND
Restaurant Management and Control Systems, Inc. ("ReMACS") provides a full
suite of management and control technology solutions to the restaurant
industry throughout the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation
The preparation of the 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
disclosures 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.
Revenue Recognition
ReMACS's revenue is generated primarily through software, support and
maintenance, and installation and training:
. Software Sales. Revenue from software licenses sales is generally
recognized as products are shipped, provided that no significant vendor
and postcontract support obligations remain, and the collection of the
related receivable is probable.
. Support and Maintenance. ReMACS offers to its customers postcontract
support in the form of maintenance, telephone support, and unspecified
software enhancements. Revenue from support and maintenance is generally
recognized as the service is performed.
. Installation and Training. ReMACS offers installation and training
services to its customers. Revenue from installation and training is
generally recognized at the time the service is performed.
As discussed in Note 6, the Company entered into a custom development
arrangement during fiscal 1995. Revenue under the arrangement is being
recognized based on percentage-of-completion method using cost-to-cost
measures. Payments received in advance are recorded as customer deposits and
deferred revenue in the accompanying balance sheets and are recognized as
revenue when the related product is shipped or related revenue is earned.
Inventories
Inventories consist principally of software media and are stated at the
lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method over estimated useful lives of three to five years.
F-25
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and equipment at October 31, 1995 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Computers and office equipment......................... $ 600,644 $ 750,740
Furniture and fixtures................................. 87,235 96,087
--------- ---------
687,879 846,827
Less accumulated depreciation and amortization......... (347,293) (435,482)
--------- ---------
$ 340,586 $ 411,345
========= =========
</TABLE>
Software Development Costs
Capitalized software development costs consist principally of salaries and
certain other expenses directly related to development and modification of
software products. Capitalization of such costs begins when a working model
has been produced as evidenced by the completion of design, planning, coding,
and testing such that the product meets its design specifications and has
thereby established technological feasibility. Capitalization of such costs
ends when the resulting product is available for general release to the
public. Amortization of capitalized software development costs is provided at
the greater of the ratio of current product revenue to the total of current
and anticipated product revenue or on a straight-line basis over the estimated
economic life of the software, which ReMACS has determined is not more than
three years.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade accounts payable,
and other financial instruments approximate their fair values principally
because of the short-term maturities of these instruments. The fair value of
ReMACS's long-term debt is estimated based on the current rates offered to
ReMACS for debt of similar terms and maturities. Under this method, ReMACS's
fair value of long-term debt was not significantly different than the stated
value at October 31, 1996.
Statement of Cash Flows
ReMACS considers all highly liquid investments purchased with a maturity of
three months or less to be cash.
Significant Customer Concentration
A majority of ReMACS's customers operate within the food service industry,
and a significant portion of the net sales of ReMACS is made to a limited
number of customers. During the years ended October 31, 1995 and 1996, the
following clients individually accounted for more than 10% of the ReMAC's
revenue:
<TABLE>
<CAPTION>
OCTOBER 31,
------------
1995 1996
----- -----
<S> <C> <C>
Customer A..................................................... 24.8% 44.0%
Customer B..................................................... 12.4% *
</TABLE>
* Accounted for less than 10% of total revenues for the period indicated.
At October 31, 1996, 15.1% of ReMAC's accounts receivable related to
Customer A.
F-26
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Long-Lived Assets
ReMACS periodically reviews the values assigned to long-lived assets, such
as property and equipment and software development costs, to determine if any
impairments are other than temporary. Management believes that the long-lived
assets in the accompanying balance sheets are appropriately valued.
Interim Financial Information
The accompanying financial statements as of April 30, 1997 and for the six-
month periods ended April 30, 1996 and 1997 are unaudited. In the opinion of
the management of ReMACS, these financial statements reflect all adjustments,
consisting only of normal and recurring adjustments, necessary for a fair
presentation of the financial statements. The results of operations for the
six-month period ended April 30, 1997 are not necessarily indicative of the
results that may be expected for the full year.
3. PRODUCT DEVELOPMENT EXPENDITURES
Product development expenditures for the years ended October 31, 1995 and
1996 are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Total development expenditures..................... $1,075,284 $2,475,048
Less additions to capitalized software development
costs prior to amortization....................... (23,098) (417,050)
---------- ----------
Product development expense........................ $1,052,186 $2,057,998
========== ==========
The activity in the capitalized software development account during 1995 and
1996 is summarized as follows:
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Balance at beginning of period, net................ $ 196,006 $ 164,451
Additions.......................................... 23,098 417,050
Amortization expense............................... (54,653) (217,661)
---------- ----------
Balance at end of period, net...................... $ 164,451 $ 363,840
========== ==========
All capitalized software development costs at October 31, 1996, were subject
to amortization as products were available for general release.
4. LONG-TERM DEBT
Long-term debt, including obligations under capital leases, consists of the
following:
<CAPTION>
OCTOBER 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Note payable to vendor, interest at 7%, due in
quarterly installments of $5,000 to $21,500
through January 1999, secured by certain
inventory......................................... $ 0 $ 193,500
Capital lease obligations, interest at 10.25%,
payable monthly through 1998, secured by
equipment......................................... 168,652 102,288
---------- ----------
168,652 295,788
Less current portion............................... 66,364 124,500
---------- ----------
$ 102,288 $ 171,288
========== ==========
</TABLE>
F-27
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
ReMACS has a $500,000 line of credit that bears interest at the prime rate
plus 1% (8.25% at October 31, 1996). The line of credit expires in July 1997
and is secured by substantially all of ReMACS's assets and is personally
guaranteed by ReMACS's shareholders. At October 31, 1996, $0 was outstanding
and $500,000 was available under the facility.
At October 31, 1996, aggregate maturities of long-term debt are as follows:
<TABLE>
<S> <C> <C>
1997.................................................... $ 124,500
1998.................................................... 128,288
1999.................................................... 43,000
-----------
$ 295,788
===========
5. INCOME TAXES
The sources of the difference between the financial accounting and the tax
bases of ReMACS's assets and liabilities which give rise to the deferred tax
assets and liabilities and the tax effects of each are as follows as of
October 31, 1995 and 1996:
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Deferred tax asset (liability):
Net operating loss ("NOL") carryforwards.... $ 455,457 $ 1,222,429
Accrued liabilities......................... 89,600 215,600
Allowance for doubtful accounts............. 45,000 60,000
Capitalized software........................ (65,780) (145,536)
--------- -----------
Net deferred tax assets................... 524,277 1,352,493
Valuation allowance........................... (524,277) (1,352,493)
--------- -----------
$ 0 $ 0
========= ===========
ReMACS's NOL carryforwards expire beginning 2007. For financial reporting
purposes, a valuation allowance has been recognized to offset the deferred tax
assets at October 31, 1995 and 1996, as realization of these assets is
uncertain. Utilization of existing NOL carryforwards may be limited in future
years, if significant ownership changes occur (see Note 7). The following
summarizes the components of the income tax provision (benefit):
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
-----------------------
1995 1996
--------- -----------
<S> <C> <C>
Current..................................... $ 0 $ 0
Deferred.................................... (355,112) (828,216)
Valuation allowance......................... 355,112 828,216
--------- -----------
Income tax provision (benefit).............. $ 0 $ 0
========= ===========
A reconciliation from the federal statutory rate to the tax provision
(benefit) is as follows:
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Statutory federal tax rate.................... (34.0)% (34.0)%
State income taxes, net of federal tax bene-
fit.......................................... (6.1) (6.1)
Other......................................... .5 .3
Valuation allowance........................... 39.6 39.8
--------- -----------
0% 0%
========= ===========
</TABLE>
F-28
<PAGE>
RESTAURANT MANAGEMENT AND CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
Leases
ReMACS leases office space, equipment, and certain vehicles under
noncancelable operating lease agreements expiring on various dates through
July 2001. At October 31, 1996, future minimum rental payments for
noncancelable leases with terms in excess of one year were as follows:
<TABLE>
<S> <C>
1997............................................................. $144,678
1998............................................................. 100,806
1999............................................................. 21,568
2000............................................................. 15,048
2001............................................................. 9,232
</TABLE>
Total rent expense under operating leases was $119,026 and $95,122 for the
years ended October 31, 1995 and 1996, respectively.
Benefit Plan
ReMACS has a 401(k) profit-sharing Plan (the "Plan") available to all
employees of ReMACS who have completed three months of service and have
attained age 21. The Plan includes a salary deferral arrangement pursuant to
which employees may contribute a minimum of 2% and a maximum of 15% of their
salary on a pretax basis. ReMACS may make both matching and additional
contributions at the discretion of the board of directors. During 1995 and
1996, ReMACS made contributions of $5,839 and $24,664, respectively.
Legal Proceedings
ReMACS is subject to legal proceedings and claims that arise in the ordinary
course of business. In the opinion of management, there are no such claims
outstanding that would have a material adverse effect on ReMACS's financial
position or results of operations.
Long Term Contract
In 1995, ReMACS entered into an agreement whereby ReMACS was advanced
approximately $3.0 million during fiscal years 1995 and 1996 in custom
development fees. The Company is using the percentage-of-completion method of
accounting to recognize revenue under this agreement. At October 31, 1996,
ReMACS has deferred approximately $1.7 million based on its estimates of total
costs to complete the contract development.
7. SUBSEQUENT EVENT
On May 23, 1997, Radiant Systems, Inc. ("Radiant") purchased all of the
outstanding common stock of ReMACS for 627,500 shares of Radiant common stock,
$3.25 million in cash and $3.25 million in notes.
F-29
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed combined balance sheet as of
March 31, 1997, gives effect to the ReMACS acquisition as if it had occurred
on that date. The accompanying unaudited pro forma combined statements of
operations for the years ended December 31, 1996 and the three months ended
March 31, 1997 have been prepared to reflect adjustments to the Company's
historical results of operations to give effect to the acquisitions of
PrsymTech and ReMACS as if it they had occurred at the beginning of the
respective periods. The accompanying pro forma combined balance sheet as of
March 31, 1997 has been prepared as if the ReMACS acquisition had occurred as
of that date. The pro forma adjustments are based upon available information
and certain assumptions that management believes to be reasonable. Final
purchase adjustments may differ from the pro forma adjustments herein.
The accompanying pro forma statements are not necessarily indicative of the
results of operations which would have been attained had the acquisitions been
consummated on the dates indicated or which may be attained in the future.
These pro forma statements should be read in conjunction with the historical
combined financial statements of the Company and related notes thereto, which
are included elsewhere in this Prospectus.
F-30
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
RADIANT(A) REMACS(B) ADJUSTMENTS COMBINED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equiva-
lents................. $12,487,487 $ 391,404 $ (3,250,000)(2) $ 9,628,891
Accounts receivable,
net of allowance for
doubtful accounts .... 7,141,465 864,735 -- 8,006,200
Inventories............ 4,767,021 172,099 -- 4,939,120
Other short-term as-
sets.................. 445,311 45,942 -- 491,253
----------- ----------- ------------ ------------
Total current assets... 24,841,284 1,474,180 (3,250,000) 23,065,464
Property and equipment,
net.................... 1,821,225 430,555 -- 2,251,780
Software development
costs, net............. 852,261 358,734 (358,734)(1) 852,261
Intangibles, net........ 957,255 -- -- 957,255
18,547,757 (1) 18,547,757
(15,450,282)(1) (15,450,282)
Deferred income tax as-
sets................... 397,180 -- -- 397,180
Other assets............ 561,306 -- -- 561,306
----------- ----------- ------------ ------------
$29,430,511 $ 2,263,469 $ (511,259) $ 31,182,721
=========== =========== ============ ============
LIABILITIES AND SHARE-
HOLDERS' EQUITY (DEFI-
CIT)
Current liabilities
Accounts payable and
accrued liabilities... $ 6,807,842 $ 840,640 $ 150,000 (2) 7,798,482
Customer deposits and
unearned revenue...... 2,516,295 5,706,064 (180,000)(1) 8,042,359
Current portion of
shareholder loans..... -- -- -- --
Current portion of long
term debt............. 528,231 128,288 -- 656,519
----------- ----------- ------------ ------------
Total current liabili-
ties.................. 9,852,368 6,674,992 150,000 16,497,360
Shareholder loans, less
current portion........ -- -- 3,250,000 (2) 3,250,000
Long term debt, less
current portion........ 231,601 71,641 -- 303,242
----------- ----------- ------------ ------------
Total liabilities...... 10,083,969 6,746,633 3,400,000 20,050,602
----------- ----------- ------------ ------------
Shareholders' equity
(deficit).............. 19,346,542 (4,483,164) -- 14,863,378
(15,450,282)(4) (15,450,282)
4,483,164 (4) 4,483,164
7,235,859 (2) 7,235,859
----------- ----------- ------------ ------------
$29,430,511 $ 2,263,469 $ (511,259) $ 31,182,721
=========== =========== ============ ============
</TABLE>
- --------
(A) Derived from the March 31, 1997 unaudited financial statements of the
Company appearing elsewhere in this Prospectus.
(B) Derived from the April 30, 1997 unaudited financial statements of ReMACS
appearing elsewhere in this Prospectus.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET--REMACS
(1) Reflects adjustments to record the fair market value of the identifiable
intangible assets acquired plus the resulting goodwill related to the
excess purchase price over the fair value of net assets acquired. The
value associated with the purchased research and development costs is
written-off immediately (in thousands).
<TABLE>
<S> <C>
Total consideration and transaction costs........................ $13,886
Fair value of net liabilities assumed............................ 4,303
-------
Excess of purchase price over fair value of net liabilities as-
sumed........................................................... 18,548
Value associated with purchased research and development costs... 15,450
-------
Adjustments to goodwill.......................................... $ 3,098
=======
</TABLE>
Reflects deferred maintenance revenue of $300,000 at its cost (the cost to
service remaining commitment) of $120,000. Remaining amounts in customer
deposits and unearned revenue primarily relate to deposits and other
payments received in advance for products under development.
(2) Reflects (i) issuance of 627,500 shares of Common Stock with an estimated
fair value of approximately $7.2 million as of the acquisition date of May
23, 1997, adjusted to reflect a discount from market value to account for
restrictions common to large holdings of unregistered securities, (ii)
issuance of $3.25 million in notes, (iii) issuance of $3.25 million in
cash, and (iv) transaction related expenses of $150,000.
(3) Reflects the elimination of ReMAC's shareholder deficit of $4.5 million
and the immediate write-off of purchased research and development costs of
$15.4 million.
F-31
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE FIRST QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
RADIANT (A) REMACS (B) ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Systems sales.......... $10,742,270 $ 548,838 -- $11,291,108
Customer support,
maintenance and other
services.............. 1,818,057 468,227 -- 2,286,284
----------- ---------- ----------- -----------
Total revenues......... 12,560,327 1,017,065 -- 13,577,392
COST OF REVENUES:
Systems sales.......... 6,278,136 47,117 -- 6,325,253
Customer support,
maintenance and other
services.............. 1,748,773 324,369 -- 2,073,142
----------- ---------- ----------- -----------
Total cost of
revenues.............. 8,026,909 371,486 -- 8,398,395
GROSS PROFIT............ 4,533,418 645,579 -- 5,178,997
OPERATING EXPENSES:
Product development.... 1,153,155 252,590 -- 1,405,745
Purchased research and -- -- (15,450,282)(10) (15,450,282)
development costs..... 15,450,282 (9) 15,450,282
Sales and marketing.... 871,334 384,409 -- 1,255,743
Depreciation and
amortization.......... 367,211 101,115 110,624 (8) 578,950
General and
administrative........ 1,689,318 312,554 -- 2,001,872
----------- ---------- ----------- -----------
Total operating
expenses.............. 4,081,018 1,050,668 110,624 5,242,310
INCOME (LOSS) FROM
OPERATIONS............. 452,400 (405,089) (110,624) (63,313)
Interest expense, net... 209,165 2,752 69,063 (7) 280,980
----------- ---------- ----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM AND
PROVISION (BENEFIT) FOR
INCOME TAXES........... 243,236 (407,841) (179,687) (344,293)
Pro forma income tax
benefit................ (211,750) -- 211,750 (11) --
----------- ---------- ----------- -----------
PRO FORMA INCOME (LOSS)
BEFORE EXTRAORDINARY
ITEM................... 454,986 (407,841) (391,437) (344,293)
=========== ========== =========== ===========
PRO FORMA NET INCOME
(LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE
BEFORE EXTRAORDINARY
ITEM................... $ 0.03 $ (0.03)
=========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING..... 13,125,239 13,752,739(12)
=========== ===========
</TABLE>
- --------
(A) Derived from March 31, 1997 unaudited financial statements of the Company
appearing elsewhere in this Prospectus.
(B) Derived from the three months ended April 30, 1997 unaudited financial
statements of ReMACS. For purposes of the above presentation, the results
for the three months ended January 31, 1997 have been omitted. Revenues and
net loss for the three months ended January 31, 1997 were approximately
$971,000 and $535,000, respectively.
F-32
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRYSMTECH REMACS
PRO FORMA PRO FORMA PRO FORMA
RADIANT(A) ADJUSTMENTS REMACS(B) ADJUSTMENTS COMBINED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Systems sales........... $35,888,342 $ -- $ 3,032,431 $ -- $ 38,920,773
Customer support,
maintenance and other
services............... 5,054,979 -- 2,615,307 -- 7,670,286
----------- ----------- ----------- ------------ ------------
Total revenues......... 40,943,321 -- 5,647,738 -- 46,591,059
COST OF REVENUES:
Systems sales........... 22,270,161 -- 638,264 -- 22,908,425
Customer support,
maintenance and other
services............... 5,464,533 -- 1,407,517 -- 6,872,050
----------- ----------- ----------- ------------ ------------
Total cost of
revenues.............. 27,734,694 -- 2,045,781 -- 29,780,475
GROSS PROFIT............ 13,208,627 -- 3,601,957 -- 16,810,584
OPERATING EXPENSES:
Product development..... 3,327,630 -- 2,057,998 -- 5,385,628
Purchased research and
development costs...... 3,930,000 (3,900,000)(4) -- -- 30,000
(15,450,282)(10) (15,450,282)
15,450,282 (9) 15,450,282
--
Sales and marketing..... 1,487,087 -- 1,196,403 -- 2,683,490
Depreciation and
amortization........... 948,385 173,800 (2) 392,228 442,496 (8) 1,956,909
General and
administrative......... 5,664,246 -- 2,323,180 -- 7,987,426
----------- ----------- ----------- ------------ ------------
Total operating
expenses.............. 15,357,348 (3,726,200) 5,969,809 442,496 18,043,453
----------- ----------- ----------- ------------ ------------
INCOME (LOSS) FROM
OPERATIONS............. (2,148,721) 3,726,200 (2,367,852) (442,496) (1,232,869)
Interest expense, net... 711,848 267,750 (1) (19,127) 276,250 (7) 1,236,721
Minority interest in
earnings of PrysmTech.. 628,137 (628,137)(3) -- -- --
----------- ----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
PROVISION (BENEFIT) FOR
INCOME TAXES........... (3,488,706) 4,086,587 (2,348,725) (718,746) (2,469,590)
Pro forma income tax
(benefit) provision ... (1,333,142) 1,566,278(5) -- (233,136)(11) --
----------- ----------- ----------- ------------ ------------
PRO FORMA NET INCOME
(LOSS)................. $(2,155,564) $ 2,520,309 $(2,348,725) $ (485,610) $ (2,469,590)
=========== =========== =========== ============ ============
PRO FORMA NET INCOME
(LOSS) PER COMMON AND
COMMON EQUIVALENT
SHARE.................. $ (0.19) $ (0.21)
=========== ============
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING..... 11,099,532 11,727,032 (6)(12)
=========== ============
</TABLE>
(A) Derived from the December 31, 1996 financial statements of the Company
appearing elsewhere in this Prospectus.
(B) Derived from the October 31, 1996 financial statements of ReMACS appearing
elsewhere in this Prospectus.
F-33
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--PRYSMTECH LLC
(1) Reflects interest expense on the $3.15 million in notes at an annual rate
of 8.5%
(2) Reflects additional amortization of goodwill of $869,000 over 5 years.
(3) Reflects elimination of minority interest in earnings of PrysmTech.
(4) Reflects elimination from the pro forma information of one-time, non-
recurring charges for purchased research and development costs of $3.9
million.
(5) Reflects provision for income taxes for the tax effect of the pro forma
adjustments.
(6) Weighted average common shares outstanding assumes that the 300,000
shares of Common Stock issued occurred January 1, 1996. In addition, the
weighted average common shares outstanding include the dilutive effect of
options to purchase 275,000 shares of Common Stock granted to certain
employees of PrysmTech below the initial public offering price.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS--REMACS
(7) Reflects interest expense on the $3.25 million in notes at an annual rate
of 8.5%
(8) Reflects additional amortization of goodwill of $3.1 million over 7
years.
(9) Reflects charge of $15.5 million related to the write-off of purchased
research and development costs. The allocation to purchased research and
development costs represents the estimated fair value related to
incomplete projects, determined by an independent appraisal. The
development of these projects had not yet reached technology feasibility
and the technology has no alternative future use. The technology acquired
in the acquisition will require substantial additional development by the
Company.
(10) Reflects elimination from the pro forma information of one-time, non-
recurring charges for purchased research and development costs of $15.5
million which will be recorded by the Company when the acquisition is
consummated.
(11) Reflects adjustment to provision (benefit) for income taxes, to eliminate
any pro forma income tax benefit related to the combined pro forma loss
due to the uncertainty regarding realization of deferred tax assets
created by the loss.
(12) Weighted average common shares outstanding assumes that the 627,500
shares of Common Stock issued occurred at the beginning of the respective
periods.
F-34
<PAGE>
INSIDE BACK COVER GRAPHICS
Graphic: A picture of one of the Company's Order Point point of sale terminals
designed for use in the cinema market. The terminal shows a screen for
ordering popcorn, with touch screen "buttons" for "Large," "Medium,"
"Small," and "Collector Tub."
A second picture shows one of the Company's BoxMan point of sale
terminals in use in the ticketing booth of a movie theater. The
terminal screen shows a series of touch screen "buttons" including
buttons for movie titles offered and a number key pad, as well as a
display of the customer's movie order. The touch screen capability
of the terminal is demonstrated by a human hand shown touching a
"button" for a specific movie in response to an order from a customer
shown through the booth's glass front.
A third picture shows one of the Company's Order Point point of sale
terminals designed for use in the quick service restaurant industry.
The terminal shows a series of "buttons" ranging from "Entrees,"
"Salads," "Drinks," and "Deserts" to "Cancel Item" and "Complete
Order," as well as a display of a customer's order by item and price.
Supporting
Text: "Order Point/Cinema. BoxMan Ticketing System. Order
Point/Quick Service Restaurant.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 13
Price Range of Common Stock.............................................. 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Combined Historical Financial Data.............................. 16
Selected Pro Forma Financial Data........................................ 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 30
Management............................................................... 46
Certain Transactions..................................................... 51
Principal and Selling Shareholders....................................... 53
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 55
Underwriting............................................................. 57
Legal Matters............................................................ 58
Experts.................................................................. 59
Additional Information................................................... 59
Index to Financial Statements............................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,075,000 Shares
[LOGO OF RADIANT SYSTEMS APPEARS HERE]
Common Stock
-----------
PROSPECTUS
-----------
Alex. Brown & Sons
INCORPORATED
Deutsche Morgan Grenfell
The Robinson-Humphrey
Company, Inc.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All of the
amounts shown are estimated except for the registration fees of the Securities
and Exchange Commission and the National Association of Securities Dealers,
Inc.:
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY COMPANY
---------------
<S> <C>
SEC registration fee..................................... $ 23,910
NASD filing fee.......................................... 8,390
Nasdaq National Market listing fee....................... 17,500
Blue sky qualification fees and expenses................. 5,000
Printing and engraving expenses.......................... 80,000
Legal fees and expenses.................................. 100,000
Accounting fees and expenses............................. 100,000
Transfer agent and registrar fees........................ 5,000
Miscellaneous............................................ 10,200
--------
Total................................................... $350,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As provided under Georgia law, the Company's Amended and Restated Articles
of Incorporation provide that a Director shall not be personally liable to the
Company or its shareholders for monetary damages, for breach of duty of care
or any other fiduciary duty owed to the Company as a Director, except that
such provisions shall not eliminate or limit the liability of a Director (a)
for any appropriation, in violation of his or her duties, of any business
opportunity of the Company; (b) for acts or omissions which involve
intentional misconduct or knowing violation of law; (c) for unlawful corporate
distributions; or (d) for any transaction from which the Director received an
improper personal benefit. If applicable law is amended to authorize corporate
action further eliminating or limiting the liability of Directors, the
liability of each Director of the Company shall be eliminated or limited to
the fullest extent permitted by applicable law. These provisions apply to
claims against officers, employees, and agents of the Company as well. Article
VI of the Company's Amended and Restated Bylaws provides that the Company
shall indemnify a Director who has been successful in the defense of any
proceeding to which he or she was a party or in defense of any claim, issue or
matter therein because he or she is or was a Director of the Company, against
reasonable expenses incurred by him or her in connection with such defense.
The Company's Amended and Restated Bylaws also provide that the Company may
indemnify any Director, officer, employee or agent made a party to a
proceeding because he or she is or was a Director, officer, employee or agent
against liability incurred in the proceeding if he or she conducted himself or
herself in good faith and reasonably believed, in the case of conduct in his
or her official capacity, that such conduct was in to the best interests of
the Company; and in the case of any criminal proceeding, he or she had no
reasonable call to believe his or her conduct was unlawful. An officer who is
not a director, or an officer who is also a director and is made a party to a
proceeding on the sole basis of an act or omission in his or her capacity as
an officer, may be indemnified as provided by the Articles, Bylaws, a
resolution of the Board or contract; except for liability arising out of
conduct that constitutes (i) an appropriation, in violation of his or her
duties, of any business opportunity of the Company, (ii) acts or omissions
that involve intentional misconduct or a knowing violation of law, (iii)
unlawful corporate distributions, or (iv) any transaction from which the
officer received an improper personal benefit. Determination concerning
whether or not the applicable standard of conduct has been met can be made
II-1
<PAGE>
by (a) a majority of all of the disinterested members of the Board; (b) a
majority of a committee of disinterested Directors; (c) independent legal
counsel; or (d) the shareholders. No indemnification may be made to or on
behalf of a Director, officer, employee or agent (1) in connection with a
proceeding by or in the right of the Company in which such person was adjudged
liable to the Company, except for reasonable expenses incurred in connection
with the proceeding if it is determined that the Director has met the relevant
standard of conduct, or (2) in connection with any other proceeding with
respect to conduct for which such person was adjudged liable on the basis that
personal benefit was improperly received by him or her, whether or not
involving action in his or her official capacity.
The Company may, if authorized by its stockholders by a majority of votes
which would be entitled to be cast in a vote to amend the Company's Amended
and Restated Articles of Incorporation, indemnify or obligate itself to
indemnify a Director, officer, employee or agent made a party to a proceeding,
including a proceeding brought by or in the right of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 30, 1997, the Registrant issued 199,074 shares of Common Stock to the
four shareholders of RSI Merger Corporation in connection with the acquisition
of that company by the Registrant.
On May 23, 1997, the Registrant issued 627,500 shares of Common Stock to the
four shareholders of Restaurant Management and Control Systems, Inc. in
connection with the acquisition of that company by the Registrant.
On February 19, 1997, the Registrant issued 1,158,360 shares of Common Stock
to Emro Marketing Company ("Emro") upon the exercise by Emro of a stock
purchase warrant at an exercise price of $960,000.
On February 19, 1997, the Registrant issued 174,642 shares of Common Stock
to Sirrom Capital Corporation ("Sirrom") upon the exercise by Sirrom of a
stock purchase warrant at an exercise price of $1,746.
On February 6, 1997 the Registrant issued to The Robinson-Humphrey Company,
Inc. 20,000 shares of Common Stock in consideration for services rendered in a
recent financing by the Company. The shares of Common Stock received by The
Robinson-Humphrey Company, Inc. are restricted from sale, transfer, assignment
or hypothecation until February 1998.
On December 31, 1996, the Registrant issued 300,000 shares of Common Stock
to the two principals of Billmart, LLC in connection with the acquisition by
the Registrant of Billmart's interest in PrysmTech, LLC.
On October 27, 1995, the Registrant issued 6,857,112 shares of Common Stock
and 1,142,889 shares of Class A Common Stock to the four shareholders of
Softsense Computer Products, Inc., a New York corporation. These shares were
issued in connection with the reincorporation of the Registrant from the State
of New York to the State of Georgia.
Except as otherwise noted, all issuances of securities described above were
made in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933 as transactions by an issuer not involving a
public offering. All of the securities were acquired by the recipients thereof
for investment and with no view toward the resale or distribution thereof. In
each instance, the offers and sales were made without any public solicitation,
the certificates bear restrictive legends and appropriate stop transfer
instructions have been or will be given to the transfer agent. No underwriter
was involved in the transactions and no commissions were paid.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(i) Exhibits.
The following exhibits are filed with or incorporated by reference into this
Registration Statement. The exhibits which are denominated by an asterisk (*)
were previously filed as a part of, and are hereby incorporated by reference
from (i) a Registration Statement on Form S-1 under the Securities Act of 1933
for the Registrant, Registration No. 333-17723, initially filed with the
Securities Exchange Commission on December 12, 1996, as amended (referred to
as "S-1"); (ii) the Company's Current Report on Form 8-K dated May 23, 1997
(referred to as "5/27/97 8-K"); (iii) the Company's Current Report on Form 8-K
dated May 30, 1997 (referred to as "5/30/97 8-K"); and (iv) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (referred
to as Form "10-Q"). Except as otherwise indicated, the exhibit number
corresponds to the exhibit number in the referenced document.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement
*2.1 Agreement and Plan of Merger, dated as of May 15, 1997, by and
among Radiant Systems, Inc., ReMACS Acquisition Corporation,
Restaurant Management and Control Systems, Inc. and each of the
shareholders of Restaurant Management and Control Systems, Inc.
(5/27/97 8-K)
*2.2 Agreement and Plan of Merger, dated as of May 16, 1997, by and
among Radiant Systems, Inc., RSI Acquisition Corporation, RSI
Merger Corporation and each of the shareholders of RSI Merger
Corporation. (5/30/97 8-K, Exhibit 2.1)
*3.(i) Amended and Restated Articles of Incorporation (S-1)
*3.(ii) Amended and Restated Bylaws (S-1)
*4.1 Specimen Certificate of Common Stock (S-1)
5.1 Opinion of Smith, Gambrell & Russell, LLP
*10.1 Form of License, Support and Equipment Purchase Agreement (S-1)
*10.2 Stock Transfer and Redemption Agreement dated May 29, 1995 by and
between the Registrant and Thomas Barrella (S-1)
*10.3 Amended and Restated 1995 Stock Option Plan (S-1)
*10.5 Promissory Note dated March 27, 1996 from the Registrant to Emro
Marketing Company in the principal amount of $872,501 (S-1)
*10.6 Promissory Note dated October 31, 1994 from the Registrant to
Lawrence D. Parker in the principal amount of $473,086 (S-1)
*10.7 Consulting Agreement dated October 31, 1994, as amended on
October 24, 1995, by and between the Registrant and LP
Technologies, Inc. (S-1)
*10.8 Commercial Lease Agreement dated December 19, 1994 by and between
the Registrant and Digital Communications Associates, Inc. for
lease of office space in Alpharetta, Georgia (S-1)
*10.9 Office Lease dated June 30, 1995 by and between the Registrant
and Attachmate Corporation for lease of office space in
Alpharetta, Georgia (S-1)
*10.9.1 Office Lease Amendment dated January 15, 1997 by and between the
Registrant and Equifax, Inc. for lease of office space in
Alpharetta, Georgia (S-1)
*10.10 Software License, Support and Equipment Purchase Agreement dated
May 27, 1994, as amended, by and between the Registrant and Emro
Marketing Company (S-1)
*10.11 Acquisition Agreement and Plan of Merger dated December 31, 1996
regarding acquisition of PrysmTech, LLC by the Registrant (S-1)
*10.12 Employment Agreement dated December 31, 1996 by and between the
Registrant and H. Martin Rice (S-1)
10.13 Non-Management Directors' Stock Option Plan
11.1 Statement regarding computation of per share earnings
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Smith, Gambrell & Russell, LLP (included as part of
Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page of this
Registration Statement)
27.1 Financial Data Schedule (10-K and 10-Q)
</TABLE>
II-3
<PAGE>
(ii) The financial statements and schedules filed as a part of this
Registration Statement are as follows:
1. FINANCIAL STATEMENTS. See Index to Financial Statements on page F-1
of the Prospectus included in this Registration Statement.
2. FINANCIAL STATEMENT SCHEDULES. Financial statement schedules have
been omitted because they are not applicable or are not required, as
the information required to be set forth therein is included in the
combined financial statements of the registrant.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alpharetta, Georgia on
June 27, 1997.
Radiant Systems, Inc.
/s/ Erez Goren
By: _________________________________
EREZ GOREN, CO-CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Erez Goren and John H. Heyman and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him, in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, including a
Registration Statement filed under Rule 462(b) of the Securities Act of 1933,
as amended, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Erez Goren Co-Chairman of the June 27, 1997
- ------------------------------------- Board, President
EREZ GOREN and Chief Executive
Officer
/s/ Alon Goren Co-Chairman of the June 27, 1997
- ------------------------------------- Board and Chief
ALON GOREN Technology Officer
/s/ Eric B. Hinkle President, Chief June 27, 1997
- ------------------------------------- Operating Officer
ERIC B. HINKLE and Director
/s/ John H. Heyman Executive Vice June 27, 1997
- ------------------------------------- President, Chief
JOHN H. HEYMAN Financial Officer
and Director
/s/ Paul Ilse Controller June 27, 1997
- ------------------------------------- (Principal
PAUL ILSE Accounting Officer)
/s/ James S. Balloun Director June 27, 1997
- -------------------------------------
JAMES S. BALLOUN
/s/ Evan Grossman Director June 27, 1997
- -------------------------------------
EVAN GROSSMAN
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBIT PAGE NUMBER
------- ---------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
5.1 Opinion of Smith, Gambrell & Russell, LLP
10.13 Non-Management Directors' Stock Option Plan
11.1 Statement regarding Competition of per share earnings
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
</TABLE>
<PAGE>
3,075,000 Shares
Radiant Systems, Inc.
Common Stock
(No Par Value)
UNDERWRITING AGREEMENT
----------------------
_______________, 1997
Alex. Brown & Sons Incorporated
Deutsche Morgan Grenfell Inc.
The Robinson-Humphrey Company, Inc.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Radiant Systems, Inc., a Georgia corporation (the "Company"), and certain
shareholders of the Company (the "Selling Shareholders") propose to sell to the
several underwriters (the "Underwriters") named in Schedule I hereto for whom
you are acting as representatives (the "Representatives") an aggregate of
3,075,000 shares of the Company's Common Stock, no par value (the "Firm
Shares"), of which 2,500,000 shares will be sold by the Company and 575,000
shares will be sold by the Selling Shareholders. The respective amounts of the
Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts to be sold
by the Selling Shareholders are set forth opposite their names in Schedule II
hereto. The Company and the Selling Shareholders are sometimes referred to
herein collectively as the "Sellers." The Company also proposes to sell at the
Underwriters' option an aggregate of up to 461,250 additional shares of the
Company's Common Stock (the "Option Shares") as set forth below.
<PAGE>
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the accounts of the several Underwriters. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
-------------------------------------------------------------
Shareholders.
-------------
(a) The Company represents and warrants to each of the Underwriters
as follows:
(i) A registration statement on Form S-1 (File No. 333-
_________) with respect to the Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements of
the Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or (b) the last
preliminary prospectus included in the Registration Statement filed prior to the
time it becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus." Any reference herein to any
Prospectus shall be deemed to include any supplements or amendments thereto,
filed with the Commission after the date of filing of the Prospectus under Rules
424(b) or 430A, and prior to the termination of the offering of the Shares by
the Underwriters.
-2-
<PAGE>
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Georgia, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Each of the
subsidiaries of the Company as listed in Exhibit 21 to Item 16(a) of the
Registration Statement (collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement. The Subsidiaries are the only subsidiaries,
direct or indirect, of the Company. The Company and each of the Subsidiaries are
duly qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification and in which the failure to qualify
would have a materially adverse effect upon the business of the Company and the
Subsidiaries taken as a whole. The outstanding shares of capital stock of each
of the Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and are owned by the Company or another Subsidiary free and
clear of all liens, encumbrances and equities and claims; and no options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in the Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid and non-
assessable; the portion of the Shares to be issued and sold by the Company have
been duly authorized and when issued and paid for as contemplated herein will be
validly issued, fully paid and non-assessable; and no preemptive rights of
shareholders exist with respect to any of the Shares or the issue and sale
thereof. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the Shares
conform to the description thereof contained in the Registration Statement. The
form of certificates for the Shares conforms to the corporate law of the State
of Georgia.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and will
conform in all material respects, to the requirements of the Act and the Rules
and Regulations. The Registration Statement and any amendment thereto do not
contain, and will not contain, any untrue statement of a material fact and do
not omit, and will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus
-3-
<PAGE>
and any amendments and supplements thereto do not contain, and will not contain,
any untrue statement of material fact and do not omit, and will not omit, to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representatives,
specifically for use in the preparation thereof.
(vi) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company and the consolidated Subsidiaries, at
the indicated dates and for the indicated periods. Such financial statements and
related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and records of the
Company. The pro forma financial statements and other pro forma financial
information included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(vii) Arthur Andersen LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or prevent the consummation
of the transactions contemplated hereby, except as set forth in the Registration
Statement.
(ix) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial statements
(or
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<PAGE>
as described in the Registration Statement) hereinabove described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those reflected
in such financial statements (or as described in the Registration Statement) or
which are not material in amount. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration Statement.
(x) The Company and the Subsidiaries have filed all federal,
state, local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments received
by them or any of them to the extent that such taxes have become due. All tax
liabilities have been adequately provided for in the financial statements of the
Company.
(xi) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as a whole,
whether or not occurring in the ordinary course of business, and there has not
been any material transaction entered into or any material transaction that is
probable of being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and the Subsidiaries have no material contingent obligations which
are not disclosed in the Company's financial statements which are included in
the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or
with the giving of notice or lapse of time or both, will be, in violation of or
in default under its Articles of Incorporation or by-laws or under any
agreement, lease, contract, indenture or other instrument or obligation to which
it is a party or by which it, or any of its properties, is bound and which
violation or default is of material significance in respect of the condition,
financial or otherwise of the Company and its Subsidiaries taken as a whole or
the business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Subsidiaries taken
as a whole. The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated and the fulfillment of the terms hereof
will not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any Subsidiary is a party,
or of the Articles of Incorporation or by-laws of the Company or any order, rule
or regulation applicable to the Company or any Subsidiary of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction.
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<PAGE>
(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses; and, to the Company's
knowledge, neither the Company nor any of the Subsidiaries has infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company and the Subsidiaries
taken as a whole. The Company knows of no material infringement by others of
patents, patent rights, trade names, trademarks or copyrights owned by or
licensed to the Company or any Subsidiary.
(xv) Neither the Company, nor to the Company's knowledge, any
of its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares.
(xvi) Neither the Company nor any Subsidiary is, and, giving
effect to the Offering will not be, an "investment company" within the meaning
of such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xviii) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
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<PAGE>
(xix) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(xx) The Shares have been approved for listing, subject to
notice of issuance, on the Nasdaq National Market.
(xxi) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times duly registered under the Act or
exempt from the registration requirement of the Act by reason of Sections 3(b),
4(3) or 4(6) thereof and were duly registered or the subject of an available
exemption from the registration requirements of the applicable state securities
or blue sky laws.
(xxii) The Company's software systems include design,
performance and functionality so that the Company does not reasonably expect to
experience invalid or incorrect results or abnormal software operation related
to calendar year 2000. The Company's software systems include calendar year 2000
date conversion and compatibility capabilities, including, but not limited to,
date data century recognition, same century and multiple century formula and
date value calculations, and user interface date data values that reflect the
century.
(b) Each of the Selling Shareholders severally represents and
warrants as follows:
(i) Such Selling Shareholder, at the Closing Date (as such
date is hereinafter defined) will have good and valid title to the Firm Shares
to be sold by such Selling Shareholder, without notice of any adverse claim,
free and clear of any liens, encumbrances, equities and claims, and full right,
power and authority to effect the sale and delivery of such Firm Shares; and
upon the delivery of, against payment for, such Firm Shares pursuant to this
Agreement, the Underwriters will acquire good and valid title thereto, free and
clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and
authority to execute and deliver this Agreement, the Power of Attorney, and the
Custodian
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<PAGE>
Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement and the consummation by
such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require any
consent, approval, authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be required
under the Act, state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a default under,
organizational documents of such Selling Shareholder, if not an individual, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
such Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
(iv) The information pertaining to such Selling Shareholder
under the caption "Principal and Selling Shareholders" in the Prospectus is
complete and accurate in all material respects.
(v) The Power of Attorney appointing certain individuals as
such Selling Shareholders' attorney-in-fact to the extent set forth therein and
the Custodian Agreement (as defined in Section 2) have been duly executed and
delivered by such Selling Shareholder and are the valid and binding agreements
of such Selling Shareholder.
(vi) This Agreement has been duly authorized, executed and
delivered by such Selling Shareholder and constitutes the valid and binding
agreement of such Selling Shareholder enforceable against such Selling
Shareholder in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws relating to or affecting the enforcement of creditors' rights generally and
to general equitable principles.
(c) Each of the Selling Shareholders listed on Schedule III severally
------------
represents and warrants that, without having undertaken to determine
independently the accuracy or completeness of either the representations and
warranties of the Company contained herein or the information contained in the
Registration Statement, such Selling Shareholder has no reason to believe that
the representations and warranties of the Company contained in this Section 1
are not true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or
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<PAGE>
information not disclosed in the Registration Statement which has adversely
affected or may adversely affect the business of the Company or any of the
Subsidiaries.
2. Purchase, Sale and Delivery of the Firm Shares.
-----------------------------------------------
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Sellers
agree to sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $__________ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof. The number of Firm
Shares to be purchased by each Underwriter from each Seller shall be as nearly
as practicable in the same proportion to the total number of Firm Shares being
sold by each Seller as the number of Firm Shares being purchased by each
Underwriter bears to the total number of Firm Shares to be sold hereunder. The
obligations of the Company and of each of the Selling Shareholders shall be
several and not joint.
(b) Certificates in negotiable form for the total number of the
Shares to be sold hereunder by the Selling Shareholders have been placed in
custody with the Company as custodian (the "Custodian") pursuant to the
Custodian Agreement executed by each Selling Shareholder for delivery of all
Firm Shares to be sold hereunder by the Selling Shareholders. Each of the
Selling Shareholders specifically agrees that the Firm Shares represented by the
certificates held in custody for the Selling Shareholders under the Custodian
Agreement are subject to the interests of the Underwriters hereunder, that the
arrangements made by the Selling Shareholders for such custody are to that
extent irrevocable, and that the obligations of the Selling Shareholders
hereunder shall not be terminable by any act or deed of the Selling Shareholders
(or by any other person, firm or corporation including the Company, the
Custodian or the Underwriters) or by operation of law (including the death of an
individual Selling Shareholder or the dissolution of a corporate Selling
Shareholder) or by the occurrence of any other event or events, except as set
forth in the Custodian Agreement. If any such event should occur prior to the
delivery to the Underwriters of the Firm Shares hereunder, certificates for the
Firm Shares shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such event has not occurred. The Custodian is
authorized to receive and acknowledge receipt of the proceeds of sale of the
Shares held by it against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made by
wire transfer of same day funds to the order of the Company for the shares to be
sold by it and to the order of the Company as Custodian for the Selling
Shareholders for the shares to be sold by such Selling Shareholders, in each
case against delivery of certificates therefor to the Representatives for the
several accounts of the Underwriters. Such payment and delivery are to be made
at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, Maryland, at 10:00 a.m., Baltimore time, on
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<PAGE>
________________, 1997, or at such other time and date not later than five
business days thereafter as you and the Company shall agree upon, such time and
date being herein referred to as the "Closing Date." (As used herein, "business
day" means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will be
delivered in such denominations and in such registrations as the Representatives
request in writing not later than the second full business day prior to the
Closing Date, and will be made available for inspection by the Representatives
at least one business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company, setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
nor later than 5 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the Closing
Date as the Option Closing Date. The number of Option Shares to be purchased by
each Underwriter shall be in the same proportion to the total number of Option
Shares being purchased as the number of Firm Shares being purchased by such
Underwriter bears to the total number of Firm Shares, adjusted by you in such
manner as to avoid fractional shares. The option with respect to the Option
Shares granted hereunder may be exercised only to cover over-allotments in the
sale of the Firm Shares by the Underwriters. You, as Representatives of the
several Underwriters, may cancel such option at any time prior to its expiration
by giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall be made
on the Option Closing Date in New York Clearing House funds by certified or bank
cashier's check drawn to the order of the Company against delivery of
certificates therefor at the offices of Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland.
3. Offering by the Underwriters.
-----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in
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<PAGE>
the Prospectus. The Representatives may from time to time thereafter change the
public offering price and other selling terms. To the extent, if at all, that
any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms in accordance with Section
2(a) hereof.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company and the Selling Shareholders.
------------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(ii) The Company will advise the Representatives promptly (A)
when the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution of
any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are
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<PAGE>
or may be required to continue such qualifications in effect for so long a
period as the Representatives may reasonably request for distribution of the
Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"), and
the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations.
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<PAGE>
(vii) The Company will, for a period of three years from the
Closing Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended. The Company will deliver to the
Representatives similar reports with respect to significant subsidiaries, as
that term is defined in the Rules and Regulations, which are not consolidated in
the Company's financial statements.
(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or a derivative of Common
Stock (or agreement for such) will be made for a period of 90 days after the
date of this Agreement, directly or indirectly, by the Company except pursuant
to the Company's 1995 Stock Option Plan, or as otherwise provided hereunder or
with the prior written consent of Alex. Brown & Sons Incorporated.
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director and
specific shareholders of the Company to furnish to you, on or prior to the date
of this agreement, a letter or letters, in form and substance satisfactory to
the Underwriters, pursuant to which each such person shall agree not to offer,
sell, sell short or otherwise dispose of any shares of Common Stock of the
Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Common Stock or a derivative of
Common Stock owned by such person ("Company Securities") or request the
registration for the offer or sale of any of the foregoing (or as to which such
person has the right to direct the disposition of) for a period of 120 days
after the date of this Agreement, directly or indirectly, except with the prior
written consent of Alex. Brown & Sons Incorporated ("Lockup Agreements");
provided, however, that with respect to Company Securities held by such persons
as of the date hereof, such lockup period shall be limited to 60 days after the
date of this Agreement for up to one-third of such Company Securities, and 90
days after the date of this Agreement for up to two-thirds of such Company
Securities.
(xi) The Company shall apply the net proceeds of its sale of
the Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a manner as
would
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<PAGE>
require the Company or any of the Subsidiaries to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock.
(xiv) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax Compliance Act of
1983 with respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
(ii) Such Selling Shareholder will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(c) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that no offering, sale, short sale or other disposition of
any shares of Company Securities owned by the Selling Shareholder and no request
for registration for the offer or sale of any of the foregoing (or as to which
the Selling Shareholder has the right to direct the disposition of) will be made
for a period of 120 days after the date of this Agreement, directly or
indirectly, by such Selling Shareholder except as otherwise provided hereunder
or with the prior written consent of Alex. Brown & Sons Incorporated; provided,
however, that with respect to Company Securities held by such persons as of the
date hereof, such lockup period shall be limited to 60 days after the date of
this Agreement for up to one-third of such Company Securities, and 90 days after
the date of this Agreement for up to two-thirds of such Company Securities.
5. Costs and Expenses.
-------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company;
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<PAGE>
the fees and disbursements of counsel for the Company and the Selling
Shareholders listed on Schedule IV; the cost of printing and delivering to, or
------------
as requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters'
Invitation Letter, the Listing Application, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fees incident to securing any required review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Shares;
the Listing Fee of the Nasdaq National Market; and the expenses, including the
fees and disbursements of counsel for the Underwriters, incurred in connection
with the qualification of the Shares under State securities or Blue Sky laws and
the laws of Canada. To the extent, if at all, that any of the Selling
Shareholders engage special legal counsel to represent them in connection with
this offering, the fees and expenses of such counsel shall be borne by such
Selling Shareholder. Any transfer taxes imposed on the sale of the Shares to the
several Underwriters will be paid by the Sellers pro rata. The Company agrees to
pay all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, incident to the offer and sale of
directed shares of the Common Stock by the Underwriters to employees and persons
having business relationships with the Company and its Subsidiaries. The Company
shall not, however, be required to pay for any of the Underwriters expenses
(other than the filing fees incident to securing any required review by the NASD
and those related to qualification and State securities or Blue Sky laws and the
laws of Canada) except that, if this Agreement shall not be consummated because
the conditions in Section 6 hereof are not satisfied, or because this Agreement
is terminated by the Representatives pursuant to Section 11 hereof, or by reason
of any failure, refusal or inability on the part of the Company or the Selling
Shareholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company shall
not in any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters.
----------------------------------------------
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the Company
and the Selling Shareholders contained herein, and to the performance by the
Company and the Selling Shareholders of their covenants and obligations
hereunder and to the following additional conditions:
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(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company or the Selling Shareholders, shall be
contemplated by the Commission and no injunction, restraining order, or order of
any nature by a Federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Smith, Gambrell &
Russell, LLP, counsel for the Company and those Selling Shareholders indicated
on Schedule V, dated the Closing Date or the Option Closing Date, as the case
may be, addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that:
(i) The Company is duly organized and is validly existing as
a corporation in good standing under the laws of the State of Georgia, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of the Subsidiaries
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the business of
the Company and the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by the Company or a
Subsidiary; and, to such counsel's knowledge, the outstanding shares of capital
stock of each of the Subsidiaries is owned free and clear of all liens,
encumbrances and equities and claims, and no options, warrants or other rights
to purchase, agreements or other obligations to issue or other rights to convert
any obligations into any shares of capital stock or of ownership interests in
the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly authorized; the
outstanding shares of the Company's Common Stock, including the Shares to be
sold by the Selling Shareholders, have been duly authorized and validly issued
and are fully paid and non-assessable; all of the Shares conform to the
description thereof contained in the Prospectus; the certificates
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<PAGE>
for the Shares, assuming they are in the form filed with the Commission, are in
due and proper form; the shares of Common Stock, including the Option Shares, if
any, to be sold by the Company pursuant to this Agreement have been duly
authorized and will be validly issued, fully paid and non-assessable when issued
and paid for in accordance with this Agreement; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue or sale
thereof.
(iii) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become effective under the
Act and, to the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein).
(vi) The statements under the captions "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein or matters of
law, fairly summarize in all material respects the information called for with
respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
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<PAGE>
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Articles of Incorporation or by-laws of the
Company, or any agreement or instrument known to such counsel to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries may be bound.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws, as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.
(xii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
(xiii) This Agreement has been duly authorized, executed and
delivered on behalf of such Selling Shareholders.
(xiv) Each such Selling Shareholder has full legal right, power
and authority, and any approval required by law (other than as required by State
securities and Blue Sky laws, as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Shares to be sold by
such Selling Shareholder.
(xv) The Custodian Agreement and the Power of Attorney
executed and delivered by each such Selling Shareholder is a legal, valid and
binding obligation of such Selling Shareholder, enforceable in accordance with
their respective terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally and to the exercise of judicial discretion in accordance with general
principles of equity.
(xvi) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code as adopted in the
State of Georgia) have acquired good and valid title to the Shares being sold by
each such Selling
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<PAGE>
Shareholder on the Closing Date, and the Option Closing Date, as the case may
be, free and clear of all liens, encumbrances, equities and claims.
In rendering such opinion Smith, Gambrell & Russell, LLP may rely as
to matters governed by the laws of states other than Georgia or federal laws on
local counsel in such jurisdictions, provided that in each case Smith, Gambrell
& Russell, LLP shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, at the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading (except that with
respect to each of clause (i) and (ii) above such counsel need express no view
as to financial statements, schedules and statistical information therein). With
respect to such statement, Smith, Gambrell & Russell, LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of counsel for each of
the Selling Shareholders indicated on Schedule VI, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that:
(i) This Agreement has been duly authorized, executed and
delivered on behalf of such Selling Shareholder.
(ii) Such Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by State
securities and Blue Sky laws as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Shares to be sold by
such Selling Shareholder.
(iii) The Custodian Agreement and the Power of Attorney
executed and delivered by such Selling Shareholder is a legal, valid and binding
obligation of such Selling Shareholder, enforceable in accordance with their
respective terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally and
to the exercise of judicial discretion in accordance with general principles of
equity.
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(iv) Upon payment of the purchase price, the Underwriters
(assuming that they are bona fide purchasers within the meaning of the Uniform
Commercial Code as adopted in the State of Georgia) will have acquired good and
valid title to the Shares being sold by such Selling Shareholder on the Closing
Date, and the Option Closing Date, as the case may be, free and clear of all
liens, encumbrances, equities and claims.
(d) The Representatives shall have received from Alston & Bird LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, with respect to the incorporation of the
Company and the validity of the Shares being delivered at the Closing Date or
the Option Close Date. In rendering such opinion Alston & Bird LLP may rely as
to all matters governed other than by the laws of the State of Georgia or
federal laws on the opinion of counsel referred to in Paragraph (b) of this
Section 6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement thereto, on
the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact, necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading (except that such counsel need express no
view as to financial statements, schedules and statistical information therein).
With respect to such statement, Alston & Bird LLP may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification.
(e) The Representatives shall have received at or prior to the
Closing Date from Alston & Bird LLP a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the State
securities or Blue Sky laws of such jurisdictions as the Representatives may
reasonably have designated to the Company.
(f) You shall have received, on each of the dates hereof, the
Closing Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing Date or the Option Closing Date, as the case may be, in
form and substance satisfactory to you, of Arthur Andersen LLP confirming that
they are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form in
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all material respects with the applicable accounting requirements of the Act and
the related published Rules and Regulations; and containing such other
statements and information as is ordinarily included in accountants' "comfort
letters" to Underwriters with respect to the financial statements and certain
financial and statistical information contained in the Registration Statement
and Prospectus.
(g) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that, as of the Closing Date or the Option Closing Date, as the case
may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and Prospectus
did not omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business.
(h) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations
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and warranties, covenants and conditions contained herein and related matters as
the Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved
for designation upon notice of issuance on the Nasdaq National Market.
(j) The Lockup Agreements described in Section 4(x) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Representatives and to Alston &
Bird llp, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company and the Selling Shareholders of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Sellers.
---------------------------------------------
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
----------------
(a) The Company and the Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, against any losses,
claims, damages or liabilities to which such Underwriter or any such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading;
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<PAGE>
and will reimburse each Underwriter and each such controlling person upon demand
for any legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage or liability, action or proceeding or in responding to a subpoena
or governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or proceeding;
provided, however, that the Company and the Selling Shareholders will not be
- -------- -------
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof; and, provided, further, that the Selling Shareholders
-------- -------
indicated on Schedule II shall be liable in any such case only to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement, or omission or alleged omission
made in the Registration Statement, any Preliminary Prospectus, the Prospectus,
or such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through such Selling Shareholders
specifically for use in the preparation thereof . In no event, however, shall
the liability of any Selling Shareholder for indemnification under this Section
8(a) exceed the proceeds received by such Selling Shareholder from the
Underwriters in the offering. This indemnity agreement will be in addition to
any liability which the Company or the Selling Shareholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders, and each person, if
any, who controls the Company or the Selling Shareholders within the meaning of
the Act, against any losses, claims, damages or liabilities to which the Company
or any such director, officer, Selling Shareholder or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by
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or through the Representatives specifically for use in the preparation thereof.
This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to this Section 8, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing. No indemnification provided for in Section 8(a) or (b)
shall be available to any party who shall fail to give notice as provided in
this Section 8(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially prejudiced
by the failure to give such notice, but the failure to give such notice shall
not relieve the indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than on
account of the provisions of Section 8(a) or (b). In case any such proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred (or within 30 days of presentation) the fees and
expenses of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company and the Selling Shareholders in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
of which indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement,
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<PAGE>
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under Section 8(a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Shareholders on
the one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Shareholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Shareholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
8(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 8(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation,
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<PAGE>
and (iii) no Selling Shareholder shall be required to contribute any amount in
excess of the lesser of (A) that proportion of the total of such losses, claims,
damages or liabilities indemnified or contributed against equal to the
proportion of the total Shares sold hereunder which is being sold by such
Selling Shareholder, or (B) the proceeds received by such Selling Shareholder
from the Underwriters in the offering. The Underwriters' obligations in this
Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, any Selling Shareholder listed on Schedule II, or to the Company,
-----------
its directors or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
------------------------
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or a Selling
Shareholder), you, as Representatives of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the Selling
Shareholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased
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<PAGE>
by the defaulting Underwriter or Underwriters, then (a) if the aggregate number
of shares with respect to which such default shall occur does not exceed 10% of
the Firm Shares or Option Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
numbers of Firm Shares or Option Shares, as the case may be, which they are
obligated to purchase hereunder, to purchase the Firm Shares or Option Shares,
as the case may be, which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company and the Selling Shareholders or you as the Representatives
of the Underwriters will have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company or of the Selling Shareholders except to the extent provided in Section
8 hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. NOTICES.
--------
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
David W. Weaver; with a copy to Alex. Brown & Sons Incorporated, 135 East
Baltimore Street, Baltimore, Maryland 21202. Attention: General Counsel; if to
the Company or the Selling Shareholders indicated on Schedule V, to: Radiant
Systems, Inc., 1000 Alderman Drive, Suite A, Alpharetta, Georgia 30302,
Attention: John H. Heyman; if to the Selling Shareholder listed on Schedule VI,
utilizing the name and address of such Selling Shareholders and their counsel
indicated thereon.
11. TERMINATION.
------------
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by the Company for trading on the Nasdaq National Market, or (ii) 11:30
a.m. on the first business day following the date of this Agreement;
-27-
<PAGE>
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business, (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares, or (iii) suspension of trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt securities
by any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading
of the Company's common stock by the Commission on the Nasdaq National Market or
(viii) the taking of any action by any governmental body or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
-----------
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
---------------------------------------
The Company, the Selling Shareholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the Registration
Statement consists of the
-28-
<PAGE>
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. MISCELLANEOUS.
--------------
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholders, the
Company and the several Underwriters in accordance with its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
Radiant Systems, Inc.
By
-----------------------------------------
EREZ GOREN, CHIEF EXECUTIVE OFFICER
-29-
<PAGE>
Selling Shareholders
By
-------------------------------------------
JOHN H. HEYMAN
JOHN H. HEYMAN, as Attorney-in-Fact for the Selling Shareholders
-30-
<PAGE>
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
DEUTSCHE MORGAN GRENFELL INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By:
-----------------------------------
Authorized Officer
-31-
<PAGE>
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm
Shares
Underwriter to be Purchased
----------- ---------------
<S> <C>
Alex. Brown & Sons Incorporated......
Deutsche Morgan Grenfell Inc.........
The Robinson-Humphrey Company, Inc...
</TABLE>
<PAGE>
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
Number of Firm
Shares
Selling Shareholder to be Sold
- ------------------- ----------
<S> <C>
Erez Goren.................. 100,000
Alon Goren.................. 100,000
Eric B. Hinkle.............. 6,000
John H. Heyman.............. 34,546
H. Martin Rice.............. 15,000
Emro Marketing Company...... 200,000
Sirrom Capital Corporation.. 68,454
William Budwitz............. 15,000
Michael Finley.............. 30,000
J. Hamilton Coleman......... 3,000
J. Charles Davis............ 1,000
Richard L. Morgan........... 1,000
Christopher A. Seber........ 1,000
Total............. 575,000
=======
</TABLE>
<PAGE>
SCHEDULE III
SCHEDULE OF SELLING SHAREHOLDERS SUBJECT TO SECTION 1(C)
Name of Selling
- ---------------
Shareholder
- -----------
Erez Goren
Alon Goren
John H. Heyman
Eric B. Hinkle
<PAGE>
SCHEDULE V
SCHEDULE OF SELLING SHAREHOLDERS SUBJECT TO SECTION 6(b)
NAME
- ----
<PAGE>
SCHEDULE VI
SCHEDULE OF SELLING SHAREHOLDERS SUBJECT TO SECTION 6(c)
NAME
- ----
<PAGE>
Exhibit 5.1
[LETTERHEAD OF SMITH, GAMBRELL & RUSSELL, LLP APPEARS HERE]
June 27, 1997
Board of Directors
Radiant Systems, Inc.
1000 Alderman Drive
Alpharetta, Georgia 30202
Re: Radiant Systems, Inc.
Registration Statement on Form S-1
3,536,250 Shares of Common Stock
--------------------------------
Gentlemen:
We have acted as counsel for Radiant Systems, Inc. (the "Company") in
connection with the proposed public offering of the shares of its Common Stock
covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Georgia;
(2) The Bylaws of the Company, certified as complete and correct by
the Secretary of the Company;
(3) The minute book of the Company, certified as correct and complete by
the Secretary of the Company; and
(4) The Registration Statement on Form S-1 to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Registration Statement").
<PAGE>
Board of Directors
Radiant Systems, Inc.
June 27, 1997
Page 2
Based upon such examination and upon examination of such other instruments
and records as we have deemed necessary, we are of the opinion that:
(A) The 2,961,250 shares of Common Stock covered by the Registration
Statement to be sold by the Company have been legally authorized and,
when issued in accordance with the terms described in said
Registration Statement, will be validly issued, fully paid and
nonassessable.
(B) The 575,000 shares of Common Stock covered by the Registration
Statement to be sold by the selling shareholders referenced therein
have been legally authorized by the Company and, when sold in
accordance with the terms described in said Registration Statement,
will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Prospectus. In giving this consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, or the rules and regulations of the Securities and
Exchange Commission thereunder.
Sincerely,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ Robert T. Molinet
Robert T. Molinet
<PAGE>
Exhibit No. 10.13
RADIANT SYSTEMS, INC.
NON-MANAGEMENT DIRECTORS' STOCK OPTION PLAN
1. Purpose.
-------
Radiant Systems, Inc., a Georgia corporation (the "Company"), adopts the
Radiant Systems, Inc. Non-Management Directors' Stock Option Plan (the "Plan")
to secure and retain the services of those directors of the Company who are not
employed by the Company or any of its affiliates (the "Eligible Optionees") by
giving them an opportunity to invest in the future success of the Company.
2. Administration.
--------------
The Plan shall be administered by the Board of Directors of the Company
(the "Board of Directors") or a committee consisting of at least two of its
members (the "Committee").
Each member of the Committee shall serve at the pleasure of the Board of
Directors, which may fill any vacancy, however caused, in the Committee. The
Committee shall select one of its members as a chairman and shall hold meetings
at the times and in the places as it may deem advisable. All actions the
Committee takes shall be made by majority decision. Any action evidenced by a
written instrument signed by all of the members of the Committee shall be as
fully effective as if the Committee had taken the action by majority vote at a
meeting duly called and held.
The Board of Directors or the Committee shall have complete and conclusive
authority to (1) interpret the Plan, (2) prescribe, amend and rescind rules and
regulations relating to it, and (3) make all other determinations necessary or
advisable for the administration of the Plan. The Board of Directors' or the
Committee's determinations on these matters shall be conclusive.
In addition to any other rights of indemnification that they may have as
directors of the Company or as members of the Committee, the directors of the
Company and members of the Committee shall be indemnified by the Company against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of action taken or failure to act under or in connection with the Plan
or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided the settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in the action, suit or proceeding that the director or
Committee member is liable for negligence or misconduct in the performance of
his duties.
<PAGE>
3. Grant of Options.
----------------
(a) Initial Grants. Each Eligible Optionee serving as a member of the
--------------
Board of Directors on the Effective Date (as defined in Section 6 below) shall
be granted an option as of the Effective Date to purchase 15,000 shares of
common stock, no par value per share, of the Company (the "Stock").
(b) Initial Grants Upon Appointment to the Board of Directors. Each
---------------------------------------------------------
Eligible Optionee who is first elected or appointed to serve as a member of the
Board of Directors following the Effective Date shall be granted an option as of
the first business day following the Eligible Optionee's first day of service as
a member of the Board of Directors to purchase 15,000 shares of Stock.
(c) Subsequent Grants During Tenure as a Director. Each Eligible Optionee
---------------------------------------------
shall be granted as of the last business day of each fiscal year of the Company
following the Effective Date an option to purchase 5,000 shares of Stock;
provided the Eligible Optionee continues to serve as a member of the Board of
Directors as of the last business day of that fiscal year.
(d) Conditions to Grants. No options under the Plan shall be granted to
--------------------
an Eligible Optionee who is otherwise precluded from receiving a grant of the
Company's equity securities. In the event the remaining number of shares of
Stock reserved for issuance under the Plan are insufficient to grant options for
the appropriate number of shares of Stock to all Eligible Optionees as of any
grant date, then no options shall be granted as of that grant date.
4. Stock Subject to Plan.
---------------------
The Company has authorized and reserved for issuance upon the exercise of
options pursuant to the Plan an aggregate of one hundred thousand (100,000)
shares of Stock. If any option is canceled, expires or terminates without the
respective optionee exercising it in full, options with respect to those
unpurchased shares of Stock may be granted to that same optionee or to another
eligible individual or individuals under the terms of this Plan.
The Committee shall adjust the total number of shares of Stock reserved for
issuance under the Plan and any outstanding options, both as to the number of
shares of Stock and the option price, for any increase or decrease in the number
of outstanding shares of Stock resulting from a stock split or a payment of a
stock dividend on the Stock, a subdivision or combination of the Stock, a
reclassification of the Stock, a merger or consolidation of the Stock or any
other like changes in the Stock or in their value; provided that any such
adjustment shall be made in a manner consistent with the reason for the
adjustment and shall be effected uniformly among optionees. Outstanding options
shall not be adjusted for cash dividends or the issuance of rights to subscribe
for additional stock or securities of the Company.
2
<PAGE>
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any
adjustment may provide for the elimination of any fractional share of Stock
which might otherwise become subject to an option.
The grant of an option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
in its capital or business structure, or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or assets.
5. Terms and Conditions of All Options.
-----------------------------------
Each option granted pursuant to the Plan shall be evidenced by a stock
option agreement or other appropriate documentation (the "Agreement") in the
form and containing the terms and conditions as the Committee from time to time
may determine, provided that each Agreement will:
(a) state an exercise price per share which will be the Average Market
Price of a share of stock on the date of the grant. "Average Market Price" shall
mean the mean between the high "bid" and low "ask" prices as of the close of
business for the Company's shares of Common Stock in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System (or other national quotation service). If the
Company's Common Stock is not regularly traded in the over-the-counter market
but is listed on The Nasdaq Stock Market or is registered on a national
securities exchange, "Average Market Price" shall mean the closing price of the
Company's Common Stock on such stock market or national securities exchange. In
the event there shall be no public market for the shares of Common Stock on such
date, the fair market value of the shares of Common Stock shall be determined in
good faith by the Board of Directors;
(b) state the terms and conditions for payment, except as otherwise
provided by Plan Section 7;
(c) state that the option shall expire on the earlier of the tenth
anniversary of the date of grant or the first anniversary of the date that the
optionee ceases to serve as a member of the Board of Directors;
(d) provide that an option granted pursuant to Section 3(a) or (b) above
shall become exercisable as to the shares subject thereto in equal one-third
increments as of the first, second and third anniversaries following the date of
grant; provided, however, any such option shall become exercisable immediately
in full upon the later of: (1) six (6) months following the date of grant; or
(2) the earlier of (i) the death of the optionee, or (ii) the disability (as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended
(the "Code")) of the optionee;
(e) provide that an option granted pursuant to Section 3(c) above shall
become exercisable in full six (6) months following the date of grant;
3
<PAGE>
(f) provide that the option is not transferrable by the optionee other than
as provided by (1) the will of the optionee, or (2) the applicable laws of
descent and distribution, and is exercisable during the optionee's lifetime only
by the optionee except as provided in Subsection (g) below; and
(g) provide that if an optionee dies or becomes disabled (as defined in
Code Section 72(m)(7)) during the term of the option, the option may be
exercised by the optionee or (to the extent the optionee would have been
entitled to do so) by a legatee or legatees of the optionee under his last will,
or by his guardian.
6. Term of Plan.
------------
The effective date of the Plan (the "Effective Date") shall be the date the
Plan is adopted by the Board of Directors or the date the Plan is approved by
the shareholders of the Company, whichever is earlier. The Plan must be approved
by the affirmative vote of not less than a majority of the votes entitled to be
cast thereon, which shareholder vote must be taken within twelve (12) months
after the date the Plan is adopted by the Board of Directors. Such shareholder
vote shall not alter the Effective Date of the Plan. In the event shareholder
approval of the adoption of the Plan is not obtained within the aforesaid twelve
(12) month period, then any options granted in the intervening period shall be
void.
The Plan shall remain in effect until all shares subject to or which may
become subject to the Plan shall have been purchased pursuant to Options granted
under the Plan; provided that Options under the Plan must be granted within ten
(10) years from the Effective Date.
7. Exercise of Option.
------------------
The optionee may purchase shares of Stock subject to an option (the
"Shares") only upon receipt by the Company of a notice in writing from the
optionee of his intent to purchase a specific number of Shares and which notice
contains such representations regarding compliance with the federal and state
securities laws as the Committee may reasonably request. The purchase price
shall be paid in full upon the exercise of an option and no Shares shall be
issued or delivered until full payment therefor has been made. Payment of the
purchase price for all Shares purchased pursuant to the exercise of an option
shall be made, at the discretion of the optionee, as follows:
(a) by payment of cash or certified check;
(b) by delivery to the Company of a number of shares of common stock of the
Company which have been owned by the optionee for at least six months prior to
the date of the option's exercise, having a fair market value on the date of
exercise, as determined by the Committee in its sole discretion, either equal to
the purchase price or in combination with cash to equal the purchase price; or
(c) by receipt of the purchase price in cash from a broker, dealer or other
"creditor" as defined by Regulation T issued by the Board of Governors of the
Federal Reserve System following
4
<PAGE>
delivery by the optionee to the Committee of instructions in a form acceptable
to the Committee regarding delivery of such broker, dealer or other creditor of
that number of shares of common stock with respect to which the option is
exercised.
Until stock certificates reflecting the Shares accruing to the optionee
upon the exercise of the option are issued to the optionee, the optionee shall
have no rights as a shareholder with respect to the Shares. The Company shall
make no adjustment to the Shares for any dividends or distributions or other
rights for which the record date is prior to the issuance of that stock
certificate, except as the Plan otherwise provides.
8. Assignability.
-------------
Except as Plan Section 5 permits, no option or any of the rights and
privileges thereof accruing to an optionee shall be transferred, assigned,
pledged or hypothecated in any way whether by operation of law or otherwise, and
no option, right or privilege shall be subject to execution, attachment or
similar process.
9. No Right to Continued Service.
-----------------------------
No provision in the Plan or any option shall confer upon any optionee any
right to continue performing services for or to interfere in any way with the
right of the shareholders of the Company to remove such optionee as a director
of the Board of Directors at any time for any reason.
10. Amendment and Termination.
-------------------------
The Board of Directors at any time may amend or terminate the Plan without
shareholder approval; provided, however, that the Board of Directors may
condition any amendment on the approval of the shareholders of the Company if
such approval is necessary or advisable with respect to tax, securities (which
require such approval for a material increase of the number of shares of Stock
subject to options, and for material modifications to the eligibility
requirements of the Plan, among others) or other applicable laws to which the
Company, the Plan, optionees or Eligible Optionees are subject. Notwithstanding
the foregoing, in no event shall the Board of Directors amend the Plan more than
once every six (6) months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder. No
amendment or termination of the Plan shall adversely affect the rights of an
optionee with regard to his options without his consent.
11. General Restriction.
-------------------
Each option is subject to the condition that if at any time the Company, in
its discretion, shall determine that the listing, registration or qualification
of the shares of Stock covered by such option upon any securities exchange or
under any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such option or the purchase or delivery of
shares of Stock thereunder, the delivery of any or all shares of Stock pursuant
to such option may be
5
<PAGE>
withheld unless and until such listing, registration or qualification shall have
been effected. If a registration statement is not in effect under the Securities
Act of 1933 or any applicable state securities laws with respect to the shares
of Stock purchasable or otherwise deliverable under the option then outstanding,
the Company may require, as a condition of exercise of any option or as a
condition to any other delivery of shares of Stock pursuant thereto, that the
optionee or the optionee's representative represent, in writing, that the shares
of Stock received pursuant to the option are being acquired for investment and
not with a view to distribution and agree that the shares of Stock will not be
disposed of except pursuant to an effective registration statement, unless the
Company shall have received an opinion of counsel that such disposition is
exempt from such requirement under the Securities Act of 1933 and any applicable
state securities laws. The Company may endorse on certificates representing
shares of Stock delivered pursuant to an option such legends referring to the
foregoing representations or restrictions or any other applicable restrictions
on resale as the Company, in its discretion, shall deem appropriate.
Options granted to persons subject to Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") must comply with Rule 16b-3 and shall
contain such additional conditions or restrictions as may be required thereunder
to qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
12. Reorganization.
--------------
In case the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or in case the property or stock
of the Company is acquired by another corporation, or in case of a separation,
reorganization, recapitalization or liquidation of the Company, the Board of
Directors of the Company, or the Board of Directors of any corporation assuming
the obligations of the Company hereunder, shall either (i) make appropriate
provision for the protection of any outstanding Options by the substitution on
an equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be issuable in
respect to the shares of Common Stock of the Company, provided only that the
excess of the aggregate fair market value of the shares subject to option
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to
option immediately before such substitution over the purchase price thereof, or
(ii) upon written notice to the Optionee provide that the Option (including the
shares not then exercisable) must be exercised within sixty (60) days of the
date of such notice or it will be terminated.
13. Choice of Law.
-------------
The laws of the State of Georgia shall govern the Plan.
6
<PAGE>
EXHIBIT 11.1
RADIANT SYSTEMS, INC.
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------ ---------------------------
PRO FORMA PRO FORMA
COMBINED COMBINED
1996 1996 1996 1997 1997
------- --------- ------- ------- ---------
PRIMARY AND FULLY DILUTED
<S> <C> <C> <C> <C> <C>
Pro forma net income (loss) be-
fore extraordinary item....... $(2,156) $(2,470) $ (932) $ 455 $ (344)
======= ======= ======= ======= =======
Pro forma net income (loss).... $(2,156) $(2,470) $ (932) $ 324 $ (476)
======= ======= ======= ======= =======
Weighted average Common Stock
outstanding during the
period........................ 8,300 8,927 8,300 9,847 10,475
Cheap Stock(1)................. 2,800 2,800 2,850 3,278 3,278
------- ------- ------- ------- -------
Total......................... 11,100 11,727 11,150 13,125 13,753
======= ======= ======= ======= =======
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Income (loss) before extraordi-
nary item..................... $ (0.19) $ (0.21) $ (0.08) $ 0.03 $ (0.02)
Extraordinary loss on early ex-
tinguishment of debt.......... 0 0 0 (0.01) (0.01)
------- ------- ------- ------- -------
Per share amount............... $ (0.19) $ (0.21) $ (0.08) $ 0.02 $ (0.03)
======= ======= ======= ======= =======
</TABLE>
- --------
(1) Pursuant to Securities and Exchange Commission Accounting Bulletin No. 83,
common stock and common stock equivalents issued at prices below the
assumed initial public offering price per share ("cheap stock") during the
twelve months immediately preceding the initial filing date of the
Company's Registration Statement for its public offering have been included
as outstanding for all periods presented, regardless of whether they are
antidilutive.
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Registrant
Restaurant Management and Control Systems, Inc., a Georgia Corporation.
RSI Merger Corporation, a Georgia Corporation.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
June 27, 1997
