<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-Q
(Mark One)
[ X ]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended
March 31, 1999
Commission file No. 0-20870
OR
[ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Security Associates International, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 87-0467198
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2101 South Arlington Heights Road, Suite 100, Arlington Heights, Illinois
60005-4142
(Address of principal executive office, including zip code)
(847) 956-8650
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
As of May 14, 1999 the Registrant had 6,573,165 issued and outstanding shares of
its $.001 par value Common Stock, not including 268,867 shares authorized but
not issued under our Supplemental Employees' Retirement Plan.
<PAGE> 2
Security Associates International, Inc.
Quarter Ended March 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1 Financial Statements...............................................................3
Consolidated Balance Sheets as of March 31, 1999
and December 31, 1998..............................................................3
Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998......................................................4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998......................................................5
Notes to Financial Statements......................................................6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................7
Item 3 Quantitative and Qualitative Disclosures About Market Risk.........................11
PART II - OTHER INFORMATION
Item 1 Legal Proceedings..................................................................12
Item 2 Changes in Securities and Use of Proceeds..........................................12
Item 3 Defaults Upon Senior Securities....................................................13
Item 4 Submission of Matters to a Vote of Security Holders................................13
Item 5 Other Information..................................................................13
Item 6 Exhibits and Reports on Form 8-K...................................................13
SIGNATURES ..................................................................14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SECURITY ASSOCIATES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited)
ASSETS MARCH 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
Current Assets:
Cash $ 2,171,945 $ 1,480,869
Accounts receivable, net 3,366,213 3,633,352
Other current assets 374,747 286,033
-------------------------------------
Total current assets 5,912,905 5,400,254
-------------------------------------
FIXED ASSETS, net $ 3,202,251 2,974,346
Contract rights to monitor security systems, net 15,190,158 15,252,814
Goodwill 22,549,689 23,123,820
Other assets, net 637,703 774,516
-------------------------------------
Total other assets 41,579,801 42,125,496
-------------------------------------
=====================================
TOTAL ASSETS $ 47,492,706 $ 47,525,750
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 494,406 $ 514,877
Current maturities of long-term notes payable 2,409,674 2,174,038
Accrued expenses 4,100,153 3,452,199
Unearned revenue 3,617,934 3,709,328
-------------------------------------
Total current liabilities 10,622,167 9,850,442
-------------------------------------
NOTES PAYABLE, net of current maturities 24,936,889 25,306,462
Subordinated Debt 9,400,000 8,500,000
-------------------------------------
Total liabilities 44,959,056 43,656,904
-------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock, $10.00 par value;
66,660 shares outstanding on March 31, 1999 and
December 31, 1998, respectively (liquidation value
of $16,665,000 at March 31, 1999 and December 31, 1998) 666,596 666,596
12% redeemable preferred stock, $10.00 par value;
500,000 shares outstanding on March 31, 1999 and
December 31, 1998 5,000,000
Common stock, $.001 par value; 50,000,000 shares
authorized; 6,842,032 and 6,771,807 shares outstanding
on March 31, 1999 and December 31, 1998, respectively 6,842 6,771
Warrants, net 73,483 60,748
Additional paid-in capital 16,434,185 16,360,092
Retained deficit (19,647,456) (18,225,361)
-------------------------------------
Total stockholders' equity (deficit) $ 2,533,650 $ 3,868,846
=====================================
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIT) $ 47,492,706 $ 47,525,750
=====================================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
SECURITY ASSOCIATES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
<TABLE>
<CAPTION>
(unaudited) (unaudited)
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
<S> <C> <C>
REVENUES:
Monitoring fees $ 6,282,913 $ 4,130,083
Membership fees and other
17,439 16,406
----------------------------------------------
Total revenues 6,300,352 4,146,489
----------------------------------------------
EXPENSES:
General, selling and administrative 5,051,104 3,298,852
Amortization and depreciation 1,638,727 1,226,061
Deferred compensation expense - 360,000
----------------------------------------------
Total expenses 6,689,831 4,884,913
----------------------------------------------
Loss from operations (389,479) (738,424)
Interest expense net 882,620 555,802
----------------------------------------------
Loss before taxes (1,272,099) (1,294,226)
PROVISION FOR INCOME TAXES - -
----------------------------------------------
Net loss (1,272,099) (1,294,226)
DIVIDENDS ACCRUED ON PREFERRED STOCK 150,000 103,250
----------------------------------------------
Net loss available to common stockholders $ (1,422,099) $ (1,397,476)
==============================================
NET LOSS PER SHARE ($0.21) ($0.22)
==============================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,773,638 6,273,095
==============================================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
SECURITY ASSOCIATES
INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited) (unaudited)
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,272,099) ($1,294,226)
Adjustments to reconcile net loss to net cash used
for operating activities-
Amortization and depreciation 1,226,061
1,638,727
Deferred compensation expense - 360,000
Issuance of common stock for services 4,500 2,598
Warrants and stock issued under dealer stock
incentive plan 68,979 -
Changes in assets and liabilities-
Accounts Receivables, net 267,139 75,660
Other current assets (88,714) (35,714)
Other long - term assets 92,322 (38,775)
Accounts payable (20,471) (115,583)
Accrued expenses 647,956 69,476
Unearned revenue (157,568) (101,129)
------------------------------------------
Net cash provided by
operating activities 1,180,771 148,368
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of contract rights to monitor security
systems, net (616,680) (822,708)
Purchase of fixed assets (364,501) (266,123)
Cash paid for acquisitions, net - (835,274)
------------------------------------------
Net cash used for investing
activities (981,181) (1,924,105)
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends accrued on preferred stock (150,000) (103,250)
Proceeds from notes receivable from stockholders - 50,000
Payment of notes payable (258,514) (160,776)
Proceeds from notes payable 900,000 -
------------------------------------------
Net cash provided by (used for)
financing activities 491,486 (214,026)
------------------------------------------
INCREASE (DECREASE) IN CASH 691,076 (1,989,763)
CASH, beginning of the period 1,480,869 5,521,633
------------------------------------------
CASH, end of period $2,171,945 $3,531,870
==========================================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
SECURITY ASSOCIATES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1. BASIS OF PRESENTATION:
The accompanying financial statements have been prepared by the
Company, without an audit, in accordance with generally accepted accounting
principles for interim financial information and in compliance with the rules
and regulations of the Securities and Exchange Commission. Accordingly they do
not include all of the information and footnotes required by generally accepted
accounting principles for financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring matters) considered
necessary for a fair presentation have been included.
The results of operations for the three-month period ended March 31,
1999, are not necessarily indicative of the results that may be expected for the
full year. These financial statements should be read in conjunction with the
Company's financial statements and related notes in the Company's 1998 annual
report on Form 10-K filed with the Securities and Exchange Commission.
NOTE 2. STATEMENTS OF CASH FLOWS
The supplemental schedule of noncash activities for the three months
ended March 31, 1999 and 1998, includes the following:
<TABLE>
<CAPTION>
1999 1998
------ ----
<S> <C> <C>
Supplemental schedule of cash flow information-
Cash paid during the period for interest $658,599 $441,722
Supplemental schedule of noncash activities-
Purchase of acquisitions for notes payable - 146,700
Purchase of contract rights with notes 124,577 257,065
Purchase of contract rights with deferred revenue 66,174 86,127
</TABLE>
NOTE 3. NET LOSS PER SHARE
Basic earnings per share are calculated using the weighted average
number of shares outstanding during each period. Stock options, warrants and
Convertible Preferred Stock have not been included in the calculation of net
loss per share as their effect would be antidilutive.
NOTE 4. SEGMENT REPORTING
The Company has identified two operating segments, based upon the types
of customers served. The Company has agreements with and provides electronic
alarm monitoring to residences and businesses, and invoices these subscribers
directly at retail
6
<PAGE> 7
rates ("Owned Accounts"). The Company also provides electronic alarm monitoring
to residences and businesses for alarm dealers through agreements with alarm
dealers and invoices the dealers at wholesale rates ("Central Station
Accounts"). The Company evaluates performance based upon operating income (or
loss) before interest and income taxes; and operating cash flow, defined as
operating income (or loss) plus depreciation and amortization. The Company does
not separately identify interest expense by operating segment, nor does it
allocate corporate general and administrative, selling and marketing expenses by
operating segment. Financial data by operating segment together with the items
necessary to reconcile these amounts to the consolidated financial statements
are shown below for the three months ended March 31, 1998 and 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
OWNED CENTRAL CORPORATE AND
ACCOUNTS STATIONS INTERCOMPANY CONSOLIDATED
- ------------------------------------ ----------------- ------------------ ----------------- -----------------
Three months ended March 31, 1998-
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues 1,710,718 2,780,506 (344,375) 4,146,489
- -------------------------------------------------------------------------------------------------------------
Selling and marketing expense - - 335,033 335,033
- -------------------------------------------------------------------------------------------------------------
Depreciation and amortization 903,653 322,408 - 1,226,061
- -------------------------------------------------------------------------------------------------------------
Operating income(loss) (117,041) 501,935 (1,123,318) (738,424)
- -------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1999
- -------------------------------------------------------------------------------------------------------------
Revenues 1,836,153 4,849,327 (385,128) 6,300,352
- -------------------------------------------------------------------------------------------------------------
Selling and marketing expense - 221,621 304,056 525,677
- -------------------------------------------------------------------------------------------------------------
Depreciation and amortization 962,271 676,456 - 1,638,727
- -------------------------------------------------------------------------------------------------------------
Operating income(loss) 22,551 495,147 (907,177) (389,479)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5. STOCK ISSUED
The Company issued a total of 118,316 shares of common stock during the
first quarter of 1999, 64,768 of which were issued to dealers in connection with
our Dealer Stock Incentive Program. The Company issued 35,160 shares of common
stock as a distribution to a former officer under its Supplemental Employee's
Retirement Plan. Other issuances of common stock include 12,931 shares issued as
1998 performance awards to eleven of our employees under the Company's
Management Incentive Plan; 4,052 shares issued in connection with an
acquisition; and 1,405 shares issued to an independent consultant as payment for
services. The Company did not receive any cash in exchange for these shares.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Some of the information in this Quarterly Report may be forward-looking
statements under the federal securities laws. Such statements can be identified
by the use of words such as "anticipates," "intends," "seeks," "believes,"
"estimates," and "expects." These statements discuss expectations for the
future, contain projections concerning the results of our operations or our
future financial condition or state other forward-looking information. Such
statements are subject to a number of risks and uncertainties. Our actual
results, performance or achievements could differ substantially from the results
expressed in, or implied by, those statements. We assume no responsibility for
revising forward-looking statements in light of future events or circumstances.
7
<PAGE> 8
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
For the three months ended March 31, 1999, revenues were $6,300,352
compared to $4,146,489 for the same period in the prior year, an increase of
51.94%. The increase was from central station acquisitions in 1998.
General, selling and administrative expenses for the three months ended
March 31, 1999, increased by $1,752,253 or 53.1% over the same period in the
prior year. The increase was primarily due to salary increases and related
expenses attributable to acquisitions of central stations.
The increase of $412,666 in amortization and depreciation expenses is
related to the increased amortization of goodwill due to acquisitions completed
over the previous twelve months.
As there are no new deferred compensation awards anticipated, there is
no expense to record. Expenses related to this plan were $360,000 in the first
quarter of 1998.
Interest expense increased from $555,802 in the first quarter of 1998
to $882,620 in the first quarter of 1999 as debt increased by approximately
$13,600,000 from the first quarter of 1998 to the first quarter of 1999.
Business Segment Operating Results
The following is a discussion of our industry segment operating
results. We define operating income as income or loss before interest and income
taxes. We do not allocate corporate general and administrative or corporate
selling expenses to our operating segments.
Central Station Operations. Operating income from wholesale monitoring decreased
from $501,935 to $495,147. This decrease reflects additional selling expenses
incurred of $221,621 and an increase of $354,048 in amortization expenses
related to acquisitions. Revenue increased by $2,068,821 or 74.4% and cash flow
increased by $347,260 or 42.1% compared to the first quarter of 1998.
Owned Accounts. Operating income increased by $139,592 primarily due to an
increase in revenue of $125,435 and small decreases in the overall cost to
service these accounts. Cash flow related to this segment increased by $198,210
or 25.2%.
Corporate Expenses. Corporate expenses overall decreased by $216,141 or 23.8%.
This decrease is related to reduced payroll expense and a decrease in
professional fees paid in the first quarter of 1999.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Since 1994, we have financed our operations and growth from a
combination of internally generated cash flow, borrowings under our credit
facilities and sales of stock. Our principal uses of cash are for the
acquisition of central monitoring stations.
We are implementing a strategy to attract new dealers to our wholesale
central station monitoring facilities. We intend to issue shares of common stock
and warrants throughout the remainder of the year consistent with our
Registration Statement on Form S-1, as amended from time to time, which was
declared effective on April 22, 1998. The number of shares of common stock and
warrants to be issued can not be estimated at this time, but may not exceed
2,000,000 shares, including those that may be issued upon exercise of the
warrants.
As of March 31, 1999, we had approximately $3.4 million of remaining
availability on our existing line of credit with FINOVA Capital Corporation and
$600,000 on our subordinated line of credit. We believe that these amounts will
be sufficient to meet our short-term needs. We are constantly evaluating
alternative sources of funding to accomplish our long-term business objectives.
INFLATION
Management does not believe that inflation had a significant impact on
the Company's results of operations for the periods presented.
THE YEAR 2000 ISSUE
Overview
Many computer programs were not originally written to recognize the
first two digits of any given year, assuming instead, that such digits are
always "19". As a result, on January 1, 2000, some computer programs may
incorrectly recognize the date as January 1, 1900. This would result in
incorrect results from calculations and processes using these dates, and in some
cases computer systems and applications may cease processing completely. This
may also effect programs before January 1, 2000 if the program is processing
calculations using dates after December 31, 1999. We are continuing to address
the effect of the Year 2000 issue on our information systems and operations.
We have established a formal written Year 2000 compliance program to
investigate and correct problems that may exist in our primary computer systems.
All departments and subsidiaries are participating in this program as described
below.
Current Initiatives
We have installed a new financial system and are in the process of
upgrading our central station monitoring systems. The purpose of these upgrades
is to allow for efficient financial management and to provide a standard
platform for all central stations and allow all of the central stations to be
linked electronically. In addition to verifying our internal compliance, we are
formally surveying outside vendors whose systems pose a significant Year 2000
risk. These companies include the principal telephone companies
9
<PAGE> 10
serving our central monitoring stations, central station software vendors,
telephone hardware and software vendors, financial institutions and payroll
companies. Vendors with material Year 2000 compliance issues will be replaced,
if a suitable alternative vendor is available.
Progress To Date
We completed the installation of a new financial accounting system in
February, 1999, which we believe is Year 2000 compliant. We have also made
substantial progress in bringing our central monitoring stations into
compliance. Our approach has been to investigate the capability of each system,
identify systems and components that need to be upgraded, install the upgraded
equipment, and finally test the entire system for Year 2000 compliance.
Event processing systems. We have upgraded and completed Year 2000
testing for our computerized event processing systems in our Texas, Illinois,
and Oregon central monitoring stations. In our Ohio central station, we have
completed the system upgrade, and plan to complete the Year 2000 testing of the
system by the end of the second quarter of 1999. Installation of a Year 2000
compliant system is also underway in our Florida central station, with testing
to be completed before the end of the third quarter of 1999. The Utah central
station is currently being assessed for a possible system upgrade, which, if
needed, would be completed and tested by the end of the third quarter of 1999.
Receivers. We are evaluating the Year 2000 compliance of our receiver
systems by surveying the vendors to assess their progress in achieving Year 2000
compliance and by replacing components whenever potential Year 2000 problems are
identified. This review and replacement process is currently 25% complete, and
we expect it to be finished by the end of the third quarter of 1999.
These upgrades should ensure that all of our computer systems will be
ready to process the Year 2000 date change without disruption. We are confident
that most of our systems already satisfy Year 2000 requirements and expect that
all internal systems will be in full compliance by the third quarter of 1999. We
have sent surveys to all of our principal vendors and have received responses
from three-quarters of the principal vendors whose products or services could
potentially affect our operations. The target date for completing the vendor
reviews is June 30, 1999.
Estimated Costs
The total cost of these upgrades is expected to be approximately
$2,000,000, of which approximately $1,300,000 has been expended through April,
1999. Our Board of Directors has approved the necessary capital expenditures to
complete the program.
Reasonable Worst Case Scenario
We have assessed our business exposures that would result from the
failure of our Year 2000 program, as well as those of our suppliers and
customers. Such failures would result in business consequences that could
include the failure to receive alarm signals and render the necessary service to
our customers, lost revenue, harm to our reputation, legal and regulatory
exposures, and the failure of management controls. Although we believe that our
internal systems are Year 2000 compliant, there can be no assurance that the
10
<PAGE> 11
Year 2000 problem will not have a material adverse affect on our business,
financial condition and results of operations.
Contingency Plans
We have begun to implement a contingency plan to mitigate the Year 2000
problem. This plan includes full redundancy of all central station operating
systems, so that in the event one central station cannot receive signals due to
power failure, the signals can be monitored by another central station providing
that the national telecommunications network remains functional. If the local
electrical systems were to fail, all of our central stations are equipped with
backup generators that are Year 2000 compliant, which would enable us to
continue to monitor at each location for an extended period of time. As our
industry is heavily dependent on the telecommunications providers, we would not
be able to operate if the telecommunications systems on which we depend fail. We
have entered into contracts with backup telecommunications providers to minimize
the impact of any failure by our primary carrier.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
We currently do not invest excess funds in derivative financial
instruments or other market rate sensitive instruments for the purpose of
managing interest rate or foreign currency exchange rate risk or for any other
purpose.
We incur debt from three sources: dealers from whom we acquire
subscriber accounts, senior debt from FINOVA and fixed rate subordinated debt
from principal stockholder, TJS Partners, L.P. Debt owed to dealers is in the
form of a "holdback note" which is collateral to a guaranty of the aggregate
revenue produced by subscriber accounts purchased from the dealer for a period
of time. These notes are non-interest bearing and comprise less than 2.5% of our
total debt. At March 31, 1999 we had $9,400,000 in subordinated debt due to our
principal stockholder, which is at a fixed rate of 12% and matures in January,
2003, and $26,609,730 in senior debt due to FINOVA at an interest rate of prime
plus 2%. The prime rate applicable to this debt was 7.75% at March 31, 1999. We
do not have exposure to foreign currency fluctuations and do not use derivatives
for trading purposes.
Interest Rate Risk. The table below provides information about our debt
obligations that are sensitive to changes in interest rates. For these debt
obligations, the table presents principal cash flows and related average
interest rates by expected maturity dates.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
(dollars in millions) Maturity Date
Year 2000 problem will not have a material adverse affect on our business,
- --------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 Total Fair Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt $9.400 $9.400 $9.400
- --------------------------------------------------------------------------------------------------------------
Average Interest Rate 12.0% 12.0%
- --------------------------------------------------------------------------------------------------------------
Variable Rate Debt $1.330 $ 3.459 $4.790 $17.030 $26.610 $26.610
- --------------------------------------------------------------------------------------------------------------
Average Interest Rate 9.75% 9.75% 9.75% 9.75% 9.75%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time we experience routine litigation in the normal
course of our business. We do not believe that any pending litigation will have
a material adverse affect on our financial condition or results of operations.
Item 2. Changes in Securities and use of Proceeds.
We issued the following securities under our Registration Statement on
Form S-1, File No. 33-49879, declared effective April 22, 1998.
On March 5, 1999, we issued a total of 22,048 shares of common stock to
seven alarm dealers, in connection with our Strategic Partner Program.
On March 12, 1999, we issued 4,052 shares of common stock to an alarm
dealer, in partial payment for substantially all of its alarm monitoring assets.
On March 31, 1999, we issued a total of 42,720 shares of common stock
to nine alarm dealers in connection with our Strategic Partner Program.
No warrants were issued or exercised during the first quarter.
We do not receive cash from our Selling Stockholders when they sell
their shares of common stock, nor do we receive cash from dealers for common
stock or warrants issued to them in connection with our dealer incentive
programs. We receive cash only when the warrants are exercised. We expect to use
any cash proceeds received from the exercise of warrants for general corporate
purposes, including working capital. Pending such use, the net cash proceeds
from the exercise of warrants will be deposited into our company's bank accounts
or invested in short-term, investment grade, interest-bearing securities. We can
not be sure of the number of warrants that will be issued, or the number that
will be exercised when issued.
In addition to the securities listed above, we issued the following
securities during the first quarter of 1999 that were not registered under the
federal Securities Act.
On March 31, 1999, we issued 1,405 shares of common stock to an
independent consultant in payment for services.
On March 31, 1999, we issued 35,160 shares of common stock to one of
our former officers as a distribution under our Supplemental Employees'
Retirement Plan.
On March 31, 1999, we issued a total of 12,931 shares of common stock
to a total of eleven (11) employees as awards for 1998 performance under our
Management Incentive Plan.
In addition to the securities listed above, we issued the following
securities during 1998 that were not registered under the federal Securities
Act.
12
<PAGE> 13
One June 17, 1998, we issued a warrant to purchase 25,000 shares of
common stock to an employee pursuant to the terms of an employment agreement.
The warrant is exercisable within five years of the issue date at an exercise
price of $6.00 per share, and it vests (becomes exercisable) at a rate of
one-third (8,333 shares) per year.
We did not receive any cash proceeds in exchange for these unregistered
shares of common stock. No underwriters were engaged in connection with these
securities. These sales were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act. Sales were made to
a very limited number of purchasers.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to the Company's security holders during the
first quarter of 1999.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the first quarter of 1999.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Security Associates International, Inc.
Date: May 10, 1999 By: /s/ JAMES S. BRANNEN
------------------------------------
James S. Brannen
President and Chief Executive Officer
Date: May 10, 1999 By: /s/ DANIEL S. ZITTNAN
------------------------------------
Daniel S. Zittnan
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> $2,171,945
<SECURITIES> 0
<RECEIVABLES> $4,012,093
<ALLOWANCES> ($645,880)
<INVENTORY> 0
<CURRENT-ASSETS> $5,912,905
<PP&E> $3,081,590
<DEPRECIATION> ($679,339)
<TOTAL-ASSETS> $47,492,706
<CURRENT-LIABILITIES> $10,622,167
<BONDS> 0
0
$5,666,596
<COMMON> $6,842
<OTHER-SE> ($3,139,788)
<TOTAL-LIABILITY-AND-EQUITY> $47,492,706
<SALES> 0
<TOTAL-REVENUES> $6,300,352
<CGS> 0
<TOTAL-COSTS> $6,689,831
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $882,620
<INCOME-PRETAX> ($1,272,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> ($1,272,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ($1,272,099)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> 0
</TABLE>
