<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended
September 30, 2000
OR
[x] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file No. 0-20870
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 November 13, 2000 the Registrant had outstanding, 7,719,355 shares of its
$.001 par value Common Stock.
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE> 2
Security Associates International, Inc.
Quarter Ended September 30, 2000
INDEX
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1 Financial Statements ................................................ 3
Consolidated Balance Sheets as of September 30, 2000
and December 31, 1999 ............................................... 3
Consolidated Statements of Operations for the three months
and nine months ended September 30, 2000 and 1999 ................... 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 ................................... 5
Notes to Financial Statements ....................................... 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................... 8
Item 3 Quantitative and Qualitative Disclosures About Market Risk .......... 10
Part II - OTHER INFORMATION
Item 1 Legal Proceedings ................................................... 11
Item 2 Changes in Securities ............................................... 11
Item 3 Defaults Upon Senior Securities ..................................... 12
Item 4 Submission of Matters to a Vote of Security Holders ................. 12
Item 5 Other Information ................................................... 12
Item 6 Exhibits and Reports on Form 8-K .................................... 12
SIGNATURES ................................................................. 13
</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 SEPTEMBER 30, 2000 DECEMBER 31, 1999
<S> <C> <C>
Current Assets:
Cash $ 510,302 $ 631,521
Accounts receivable, net 2,546,271 1,828,895
Other current assets 703,554 550,009
---------------- ----------------
Total current assets 3,760,127 3,010,425
---------------- ----------------
FIXED ASSETS, net $ 3,415,692 $ 4,045,524
Goodwill $ 24,036,911 $ 25,911,332
Other assets, net 698,103 373,369
---------------- ----------------
Total other assets 24,735,014 26,284,701
---------------- ----------------
TOTAL ASSETS $ 31,910,833 $ 33,340,650
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 962,835 $ 463,310
Current maturities of long - term notes payable 2,223,781 1,973,352
Accrued expenses 1,653,466 3,923,722
Unearned revenue 207,055 499,407
---------------- ----------------
Total current liabilities 5,047,137 6,859,791
---------------- ----------------
NOTES PAYABLE, net of current maturities 14,783,906 12,314,460
---------------- ----------------
Total liabilities $ 19,831,043 $ 19,174,251
---------------- ----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Series A convertible preferred stock, $10 par value,
137,686 shares authorized, 137,359 and 136,359 and
shares outstanding on September 30, 2000 and
December 31, 1999, respectively, liquidation
preference $350 per share 1,373,590 1,363,590
Common stock, $.001 par value; 50,000,000 shares
Common stock, $.001 par value; 50,000,000 shares
authorized; 7,719,354 and 7,145,287 shares outstanding
on September 30, 2000 and December 31, 1999,
respectively 7,719 7,145
Warrants, net 149,895 111,689
Additional paid-in capital 36,669,572 34,955,971
Retained deficit (26,120,986) (22,271,996)
---------------- ----------------
Total stockholders' equity $ 12,079,790 $ 14,166,399
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,910,833 $ 33,340,650
================ ================
</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) (UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
<S> <C> <C> <C> <C>
Net Revenue $ 5,541,865 $ 4,788,591 $ 16,809,191 $ 17,419,158
Operating Unit Expense 4,206,642 3,488,573 12,551,658 11,133,583
---------------- ---------------- ---------------- ----------------
Operating Unit Margin 1,335,223 1,300,018 4,257,533 6,285,575
---------------- ---------------- ---------------- ----------------
Amortization and depreciation 1,137,767 858,314 3,565,948 4,538,873
General and administrative 452,949 629,431 1,487,042 1,973,964
Business development 619,564 609,407 1,912,512 1,839,871
---------------- ---------------- ---------------- ----------------
Total expenses 2,210,280 2,097,152 6,965,502 8,763,985
---------------- ---------------- ---------------- ----------------
Loss from operations (875,057) (797,134) (2,707,969) (2,067,133)
Gain from sale of owned
subscriber accounts -- -- -- 2,649,184
Interest expense net (398,203) (475,870) (1,141,021) (2,272,895)
---------------- ---------------- ---------------- ----------------
Loss before taxes (1,273,260) (1,273,004) (3,848,990) (1,690,844)
PROVISION FOR INCOME TAXES -- -- -- --
---------------- ---------------- ---------------- ----------------
Net loss (1,273,260) (1,273,004) (3,848,990) (1,690,844)
DIVIDENDS ACCRUED ON PREFERRED STOCK
-- (150,000) -- (450,000)
---------------- ---------------- ---------------- ----------------
Net loss available to common $ (1,273,260) $ (1,423,004) $ (3,848,900) $ (2,140,844)
stockholders
================ ================ ================ ================
NET LOSS PER SHARE - Basic ($ .17) ($ .21) ($ .52) ($ .31)
================ ================ ================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - Basic
7,351,117 6,850,255 7,351,117 6,850,255
================ ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 5
SECURITY ASSOCIATE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,848,990) $ (1,690,844)
Adjustments to reconcile net loss to net cash used
For operating activities-
Amortization and depreciation 3,565,948 4,538,873
Gain on sale of contract rights to monitor security systems -- (2,649,184)
Issuance of common stock for services 63,673 62,728
Warrants and stock issued under dealer stock incentive plan 233,250 153,111
Changes in assets and liabilities-
Accounts Receivables, net (717,376) 1,480,876
Other current assets (153,545) (289,887)
Other long - term assets (393,875) 92,324
Accounts payable 499,525 56,083
Accrued expenses (2,270,256) 1,126,418
Unearned revenue (292,352) (2,486,541)
---------------- ----------------
Net cash provided by
(used in operating activities (3,313,998) (393,957)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of contract rights to monitor security
systems, net -- (1,517,537)
Proceeds from sale of contract
rights to monitor security systems -- 22,195,906
Purchase of fixed assets (624,010) (1,204,915)
Cash paid for acquisitions, net (240,333) --
---------------- ----------------
Net cash (used for) provided by investing
activities (864,343) 19,473,454
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of capital stock 1,337,247 50,000
Dividends earned on preferred stock -- (450,000)
Payment of deferred financing costs -- (393,020)
Payment of notes payable (176,683) (20,760,046)
Proceeds from notes payable 2,896,558 1,890,000
---------------- ----------------
Net cash provided by (used for)
financing activities 4,057,122 (19,663,066)
---------------- ----------------
INCREASE (DECREASE) IN CASH (121,219) 204,345
CASH, beginning of the period 631,521 1,480,869
---------------- ----------------
CASH, end of period $ 510,302 $ 1,685,214
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
5
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SECURITY ASSOCIATES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1. BASIS OF PRESENTATION:
The accompanying financial statements have been prepared by Security
Associates International, Inc. (SAI) 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 nine-month period ended September 30,
2000, are not necessarily indicative of the results that may be expected for the
full year. These financial statements should be read in conjunction with SAI's
financial statements and related notes in SAI's 1999 Annual Report on Form
10-KSB filed with the Securities and Exchange Commission.
The presentation of the statement of operations has been changed to
more clearly depict SAI's activities. Therefore, prior period results have been
reclassified to conform to the new presentation.
NOTE 2. STATEMENTS OF CASH FLOWS
The supplemental schedule of non-cash activities for the nine months
ended September 30, 2000 and 1999, includes the following:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Supplemental schedule of cash flow information-
Cash paid during the period for interest $1,068,808 $1,318,104
Supplemental schedule of noncash activities-
Acquisitions paid for with stock 128,111 33,273
Purchase of contract rights with notes -- 211,374
Purchase of contract rights with deferred revenue -- 149,710
Note payable from sale of contract rights -- 1,800,000
Accrued expenses incurred in sale of contract rights -- 2,347,728
Deferred revenue sold in sale of contract rights -- 604,094
</TABLE>
6
<PAGE> 7
NOTE 3. EARNINGS 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. Diluted earnings per share
is calculated by dividing net income by the weighted average number of shares
assuming dilutive stock options, warrants and convertible preferred stock
outstanding were exercised or converted during the year.
NOTE 4. SEGMENT REPORTING
SAI sold its owned accounts on June 30, 1999. SAI now has one line of
business which is to provide electronic alarm monitoring to residences and
businesses through agreements with alarm dealers which we invoice at wholesale
rates ("Central Stations"). SAI 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. SAI
does not separately identify interest expense by operating segment, nor does it
allocate corporate general and administrative, selling and marketing expenses by
operating segment.
<TABLE>
<CAPTION>
OWNED CENTRAL CORPORATE AND
ACCOUNTS STATIONS INTERCOMPANY CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Nine months ended September 30, 1999
Revenues 3,720,169 14,492,901 (793,911) 17,419,158
----------- ----------- ----------- -----------
Selling and marketing expense -- 809,388 1,029,983 1,839,871
----------- ----------- ----------- -----------
Depreciation and amortization 2,319,183 2,188,352 31,340 4,538,875
----------- ----------- ----------- -----------
Operating income(loss) (338,779) 833,660 (2,562,010) (2,067,129)
----------- ----------- ----------- -----------
</TABLE>
NOTE 5. STOCK AND OPTIONS ISSUED
SAI issued 574,067 shares of common stock during the first nine months
of 2000. Of these shares, 322,222 shares were issued upon the exercise of stock
options, 100,000 shares were issued in a private placement of unregistered
common stock, 35,071 shares were issued for acquisitions, 86,726 shares were
issued under our dealer incentive program, 23,013 shares were issued as 1999
performance awards to employees under SAI's Management Incentive Plan and 4,035
shares were issued to consultants as payment for services, and 3,000 shares were
issued to correct an entry error on our list of stockholders.
In January 2000, SAI issued options to purchase 815,000 shares of
common stock to its officers and directors under a stock option plan. Options to
purchase these shares have an exercise price of $2.75 per share, vest over a two
year period and expire 6 years from the date of the grant. Additional options to
purchase 100,000 shares at an exercise price of $2.88 per share were issued to
new officers of SAI and options to purchase 123,000 shares at an exercise price
of $3.13 per share were issued to key employees. These options expire 6 years
from the date of grant and vest over a three year period. The options are valued
at $1.62, $1.71 and $1.85 per share, respectively under the Black-Scholes option
pricing model. Had compensation costs for the options been determined based on
the fair value at their grant date, SAI's net loss for the nine-month period
would have been increased by $1,718,850. As a result, the loss per share would
have increased by $.24 per share to $.76 per share.
7
<PAGE> 8
In May 2000, SAI issued options to purchase 175,000 shares of common
stock at an exercise price of $3.625 per share to a director in return for his
services in connection with the SAI's merger with KC Acquisition. These options
vest immediately and expire 60 days from the date of the grant. The options are
valued at $0.32 each under the Black-Scholes option pricing model. The aggregate
value of the options ($56,000) will be capitalized as part of the purchase price
in SAI's merger with KC Acquisition. The options were exercised in June 2000.
In August 2000, SAI sold 100,000 shares of its common stock to a
director in a private placement of unregistered common stock.
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," "plans" 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.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
For the nine months ended September 30, 2000, revenues were $16,809,191
compared to $17,419,158 for the same period in the prior year, a decrease of
3.5%. The change in revenue was due to an increase in revenues from central
station operations of $ 3,110,202 or 22.7% and a decrease in revenue from the
retail operation of $3,720,169. The increase in central station revenues is due
to acquisitions completed in 1999. The decrease in revenue from the retail
operation is due to the sale of the owned accounts that occurred on June 30,
1999.
Operating unit expenses increased by $1,418,075 from $11,133,583 to
$12,551,658 or 12.7 %. The increase in operating unit cost attributable to
central station operations was $2,365,872 or 23.2%. The decrease in operating
unit cost attributable to retail operations was $947,797. The increase in
central station costs is due to acquisitions completed in 1999. The decrease in
retail costs is due to the sale of the owned accounts that occurred on June
30,1999.
General and administrative expenses for the nine months ended September
30, 2000, decreased by $486,922 or 24.7% from the same period in the prior year.
The decrease was primarily attributable to the sale of the owned accounts and a
realignment of management responsibilities in the central stations.
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<PAGE> 9
Business development expenses increased by $72,641 or 3.9%. Included in
these expenses were non-cash expenses related to the dealer stock incentive
program of $233,250 in 2000 and $153,111 in 1999.
The decrease of $972,925 in amortization and depreciation expenses is
related to the increased amortization of goodwill and depreciation expense of
$1,346,256 due to acquisitions of central stations completed over the previous
twelve months combined with a decrease in amortization related to the retail
operation of $2,319,183.
The gain from the sale of the owned accounts of $2,649,184 reported for
the nine months ended September 30, 1999 is the result of the sale of our owned
account portfolio, which occurred on June 30, 1999. The gain reflects the total
cash proceeds of $22,800,000 less the net book value of the account portfolio
and net book value of goodwill related to the purchase of the owned accounts.
Interest expense decreased from $2,272,895 in the third quarter of 1999
to $1,141,021 in the third quarter of 2000. Debt decreased by approximately
$22,114,000 since June 30, 1999 due to the reduction in the FINOVA debt by
$20,000,000 on June 30, 1999 and the conversion of $10,000,000 of subordinated
debt to preferred stock on September 30, 1999.
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 equity securities. Our principal uses of cash are for
capital expenditures to support internal growth, the acquisition of central
monitoring stations and operating expenses.
On April 21, 2000, SAI entered into a letter of intent, and
subsequently entered into a merger agreement, which commits SAI to combine with
KC Acquisition Corp., which owns Monital Signal Corporation. Both of these
companies operate wholesale monitoring stations in the United States. The
consideration for this transaction will include $5,000,000 cash, the equivalent
of 4,500,000 shares of SAI common stock and the assumption of approximately
$35,000,000 of debt. The letter of intent also calls for SAI to issue to
SecurityVillage.com the equivalent of 2,500,000 shares of common stock and
options to purchase approximately 2,800,000 shares of SAI common stock at $5 per
share in cash, as a fee in connection with the merger transactions, and for
entering into a series of put and call options between SAI and
SecurityVillage.com. The issuance of stock and options and the put and call
agreement require stockholder approval. We filed a definitive proxy statement on
October 6, 2000.
During the second quarter of 2000, we received $1,037,250 through the
exercise of options to purchase common stock. Of these options, $781,250 was
exercised by two directors and an officer/director and the balance by unrelated
parties. On August 9, 2000, we received an additional $250,000 from a director
in exchange for 100,000 shares of our common stock. These funds have been used
to pay approximately $370,000 for earn outs on acquisitions, repayment of
holdback notes, deferred acquisition costs and approximately $650,000 was used
for working capital. Additionally, in the third quarter we agreed to provide
marketing and sales services to SecurityVillage for $85,000 per month beginning
in September 2000. As of November 13, 2000 we have received payment for
September. The marketing and sales services agreement was to have expired
9
<PAGE> 10
on October 1, 2000 if we did not sign a merger agreement with
SecurityVillage.com by that date. Negotiations on the merger agreement are
continuing and the President of SecurityVillage.com has assured us that the
marketing sales and services agreement will continue.
In September, we paid $1,393,201 to SAFE to satisfy our attrition
guarantee obligation related to the sale of our retail account portfolio.
In November, we amended our loan with FINOVA. FINOVA agreed to waive
all covenant violations for March 31, 2000, June 30, 2000 and September 30, 2000
and to reset the interest coverage ratio covenant for the fourth quarter of year
2000. The maximum amount available under this loan facility is $17.5 million.
We currently have $16.2 million outstanding under the FINOVA loan.
We have obligations to SAFE which we estimate to range between $.3 and
$2.4 million which may be resolved and paid in the fourth quarter. In October
2000, SAFE demanded payment of $2.4 million to satisfy our obligations. We
believe that our obligations are substantially smaller and that any payment to
SAFE will be less than the maximum of $2.4 million. SAFE has indicated a
willingness to try to settle these matters without litigation. We cannot predict
the amount of any settlement at this time.
INFLATION
Management does not believe that inflation had a significant impact on
our company's results of operations for the periods presented.
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 two sources: senior debt from FINOVA and a note
related to the sale of our retail account portfolio. At September 30, 2000 we
had $15,201,960 in senior debt due to FINOVA at an interest rate of prime (9.5%)
plus 0.75%. We also have a note due currently of $1,800,000 at an 8% annual rate
related to the sale of the owned account portfolio. 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>
Maturity Date
------------------------------------------------------------
2000 2001 2002 2003 2004 Total Fair Value
(dollars in millions) -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt $ 1.8 $ 1.8 $ 1.80
Average Interest Rate 8% 8%
Variable Rate Debt $ .836 $ 2.242 $ 2.394 $ 9.73 $ 15.202 $ 15.202
Average Interest Rate 9.5% 9.5% 9.5% 9.5% 9.5%
</TABLE>
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On September 10, 1999, a Writ of Summons was issued against SAI North
Central Command Center, Inc., a wholly owned subsidiary of SAI, and Blair
Communications, Inc. (First Evangelical Lutheran Church vs. Blair
Communications, Inc. et al, No. 1999-04689 (Blair County, Pennsylvania)). The
case involves damages resulting from a fire at the First Evangelical Lutheran
Church. In June 2000, a complaint was filed asserting that SAI North Central was
liable for the damage to the church based on the theory that the installing
dealer was acting as SAI North Central's agent. Damages sought exceed $4.0
million. SAI believes it has no liability in this matter and will vigorously
defend its position.
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 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. Additionally, we
have issued options to purchase shares of our common stock, primarily to
directors, employees and key non-employees. We receive cash only when the
options are exercised. We expect to use any cash proceeds received from the
exercise of warrants and options for general corporate purposes, including
working capital. Pending such use, the net cash proceeds from the exercise of
warrants and options 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 and/or options that will be issued, or the
number that will be exercised when issued.
On July 18, 2000, we issued a total of 73,280 shares of common stock to
an alarm dealer pursuant to our dealer partnership program under our current
Registration Statement on Form S-1.
On August 14, 2000, we issued 8,815 shares of common stock as a
post-closing adjustment to the purchase price of alarm monitoring assets.
On September 29, 2000, we issued 25,000 shares of common stock pursuant
to the exercise of a stock option.
We did not receive any cash proceeds in exchange for the stock options
or the stock issued to dealers under our dealer partnership program. We received
$25,000 in aggregate cash proceeds as the exercise price of the option listed
above.
In addition to the securities listed above, we issued the following
securities during the third quarter of 2000 that were not registered under the
Securities Act.
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<PAGE> 12
On August 9, 2000, we issued 100,000 shares of common stock to a
director in a private placement.
On September 23, 2000 we issued 3,000 shares of common stock to correct
an entry error on our list of stockholders.
On September 29, 2000, we issued 250 shares of Series A Convertible
Preferred Stock pursuant to the exercise of standby options under a Standby
Option and Warrant Agreement between our company and the stockholder.
On September 29, 2000, we issued 1,335 shares of common stock to an
independent consultant in payment for services.
We did not receive any cash proceeds in exchange for the securities
issued to the independent consultant. The stockholder had advanced $25,000 on
February 25, 2000 in payment for the standby option. 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. The securities were issued to a very limited number of individuals.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of our security holders during the
third quarter of 2000.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(10.1) Lease between LaSalle Bank National Association, Successor
Trustee to American National Bank and Trust Company of Chicago As
Trustee Under Trust No. 59948 and Security Associates International,
Inc. dated August 12, 2000
(10.2) Waiver Letter between Security Associates International, Inc.
and FINOVA Capital Corporation dated November 8, 2000
(27) Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the third quarter of 2000.
12
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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: November 13, 2000 By: /s/ James S. Brannen
James S. Brannen
President and Chief Executive Officer
Date: November 13, 2000 By: /s/ Daniel S. Zittnan
Daniel S. Zittnan
Chief Financial Officer
13
