SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
AMENDMENT NO. 1 TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 14, 1996
Response USA, INC.
Exact name of registrant as specified in charter
Delaware 0-20770 52-1441922
(State or other jurisdiction (Commission (IRS Employer)
of incorporation) File Number) Identification No.)
11-K Princess Road, Lawrenceville, NJ 08648
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (609) 896-4500
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On March 14, 1996, Response USA, Inc. (the "Company"), through
its wholly-owned subsidiary, United Security Systems, Inc. ("USS"), completed
the acquisition of all of the outstanding capital stock of Shelton Security,
Inc., a New Jersey corporation ("SSI"), in exchange for $1,453,052
(of which $231,435 was paid by the issuance of a promissory note bearing
interest at the rate of 10% per annum, payable on October 21, 1996).
SSI is engaged in the installation, servicing and monitoring of electronic
security systems. Substantially all of SSI's assets and liabilities except
its monitoring accounts were retained by the former stockholders of SSI.
EXHIBITS
Exhibit 1 Stock Purchase Agreement by and among United Security
Systems, Inc., and Michael Schleimer (previously filed).
Exhibit 3 Financial Statements
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma combined statement of operations for the
nine months ended March 31, 1996 and 1995, give effect to the Company's
acquisition of Shelton Security, Inc. as of March 14, 1996 (SSI), MSG Security
Systems,Inc. as of February 26, 1996 (MSG) and Monitoring Acquisition Corp.
as of February 29, 1996 (MAC) as if such acquisitions had been completed at
July 1, 1994. The historical information pertaining to SSI, MSG and MAC is
for the period prior to its date of acquisition. The pro forma information
is based on the historical financial statements of the Company, SSI, MSG, and
MAC, giving effect to the transactions under the purchase method of accounting
and the assumptions and adjustments described in the accompanying notes to
the unaudited pro forma financial statements. The following unaudited pro
forma combined balance sheet gives effect to the Company's acquisition of
SSI, MSG and MAC as if such acquisitions had been completed at March 31, 1996.
In the preparation of the pro forma combined balance sheet, the columns
pertaining to SSI, MSG, and MAC contain information as to the assets and the
liabilities acquired as of their respective dates of acquisition.
These pro forma statements of operations may not be indicative of the results
that actually would have occurred if the acquisitions had occurred on
July 1, 1994.
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1995
<CAPTION>
Historical Pro Forma
------------------------------------------- ----------------------------
Response SSI MSG MAC Adjustments Combined
------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Product sales $3,785,543 $282,545 $68,774 $4,136,862
Services 2,412,469 715,744 110,015 140,548 3,378,776
Finance and rentals 745,243 7,192 23,625 776,060
------------------------------------------- ------------ -------------
6,943,255 1,005,481 202,414 140,548 0 8,291,698
------------------------------------------- ------------ -------------
COST OF REVENUES
Product sales 2,375,608 189,305 37,003 2,601,916
Services and rentals 626,933 413,984 30,216 22,148 (201,847)(G) 891,434
------------------------------------------- ------------ -------------
3,002,541 603,289 67,219 22,148 (201,847) 3,493,350
------------------------------------------- ------------ -------------
GROSS PROFIT 3,940,714 402,192 135,195 118,400 201,847 4,798,348
------------------------------------------- ------------ -------------
OPERATING EXPENSES
Selling, general and administrative 5,110,309 368,913 118,413 96,594 5,694,229
Depreciation and amortization 834,172 2,679 1,163 72,775 (72,775)(A) 1,162,369
324,355 (B)
Termination benefits cost (392,699) (392,699)
Interest 703,356 1,130 1,310 69,838 (72,278)(C) 1,224,069
520,713 (D)
------------------------------------------- ------------ -------------
6,255,138 372,722 120,886 239,207 700,015 7,687,968
------------------------------------------- ------------ -------------
INCOME (LOSS) FROM OPERATIONS (2,314,424) 29,470 14,309 (120,807) (498,168) (2,889,620)
INTEREST INCOME 33,082 2,405 630 (18,525)(E) 17,592
------------------------------------------- ------------ -------------
NET INCOME (LOSS) BEFORE INCOME TAXES (2,281,342) 31,875 14,309 (120,177) (516,693) (2,872,028)
INCOME TAXES 3,825 3,125 (6,950)(F) 0
------------------------------------------- ------------ -------------
NET INCOME (LOSS) ($2,281,342) $28,050 $11,184 ($120,177) ($509,743) ($2,872,028)
=========================================== ============ =============
LOSS PER COMMON SHARE ($4.00) ($4.92)
============ =============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 570,742 12,787 (H) 583,529
============ ============ =============
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(A) To eliminate amortization of monitoring contracts and organization costs purchased from MAC.
(B) To provide for amortization on the net increase of purchased monitoring contracts. Monitoring contracts
purchased from SSI, MSG, and MAC are amortized using the straight-line method over the ten-year
estimated lives.
(C) To eliminate interest expense on debt not acquired
(D) To record additional interest expense on debt incurred in acquisitions.
(E) To reduce the Company's interest income due to the use of funds for the acquisitions.
(F) To eliminate the current tax provision for SSI and MSG.
(G) To reduce expenses to contracted amounts under a monitoring agreement.
(H) In calculating earnings per share, effect has been given to the shares issued in the acquisition of MAC.
</TABLE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<CAPTION>
Historical Pro Forma
----------------------------------------- ----------------------------
Response SSI MSG MAC Adjustments Combined
----------------------------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $840,097 $95,260 $1,635 $0 (96,895)(A) $840,097
Marketable securities 118,750 118,750
Accounts receivable 1,839,400 72,398 19,727 55,920 (148,045)(A) 1,839,400
Note receivable 99,338 99,338
Loan receivable 60,000 (60,000)(A) 0
Inventory 730,315 13,000 3,500 (16,500)(A) 730,315
Prepaid expenses and other
current assets 231,891 8,900 525 (9,425)(A) 231,891
----------------------------------------- ------------ -------------
Total current assets 3,859,791 189,558 25,387 115,920 (330,865) 3,859,791
----------------------------------------- ------------ -------------
MONITORING CONTRACT COSTS - Net of
accumulated amortization 16,944,084 1,228,786 (1,228,786)(A) 16,944,084
----------------------------------------- ------------ -------------
PROPERTY AND EQUIPMENT - Net of
accumulated amortization and
depreciation 1,222,162 15,711 5,660 (21,371)(A) 1,222,162
----------------------------------------- ------------ -------------
OTHER ASSETS
Accounts receivable 341,648 341,648
Note receivable 85,142 85,142
Loan to shareholder 99,464 (99,464)(A) 0
Deposits 32,535 32,535
Organization costs 570 (570)(A) 0
Deferred financing costs - Net of
accumulated amortization 356,866 356,866
----------------------------------------- ------------ -------------
816,191 99,464 0 570 (100,034) 816,191
----------------------------------------- ------------ -------------
$22,842,228 $304,733 $31,047 $1,345,276 ($1,681,056) $22,842,228
========================================= ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $3,572,154 $40,000 $298,426 ($338,426)(A) $3,572,154
N/P - Related party 120,000 (120,000)(A) 0
Accounts payable 545,995 121,735 3,515 (125,250)(A) 545,995
Purchase holdbacks 609,507 609,507
Accrued expenses and other current
liabilities 1,281,165 63,034 15,997 36,283 (115,314)(A) 1,281,165
Deferred revenue 1,515,254 28,253 16,055 49,821 (94,129)(A) 1,515,254
----------------------------------------- ------------ -------------
Total current liabilities 7,524,075 213,022 75,567 504,530 (793,119) 7,524,075
----------------------------------------- ------------ -------------
LONG-TERM LIABILITIES - Net of current
portion
Long-term debt 12,525,179 905,667 (905,667)(A) 12,525,179
Purchase holdbacks 72,619 72,619
Deferred revenue 10,252 10,252
----------------------------------------- ------------ -------------
12,608,050 0 0 905,667 (905,667) 12,608,050
----------------------------------------- ------------ -------------
STOCKHOLDERS' EQUITY
Common stock 15,516 2,000 100 500 (2,600)(A) 15,516
Additional paid-in capital 14,513,160 14,513,160
Unrealized holding loss on available-
for-sale securities (174,593) (174,593)
Accumulated deficit (11,643,980) 89,711 (44,620) (65,421) 20,330 (A) (11,643,980)
----------------------------------------- ------------ -------------
2,710,103 91,711 (44,520) (64,921) 17,730 2,710,103
----------------------------------------- ------------ -------------
$22,842,228 $304,733 $31,047 $1,345,276 ($1,681,056) $22,842,228
========================================= ============ =============
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(A) To reflect the acquisitions of SSI, MSG and MAC.
</TABLE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996
<CAPTION>
Historical Pro Forma
----------------------------------------- ----------------------------
Response SSI MSG MAC Adjustments Combined
----------------------------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Product sales $1,984,146 $149,418 $38,015 $2,171,579
Services 4,689,132 657,744 113,810 332,820 5,793,506
Finance and rentals 1,361,762 7,968 19,007 1,388,737
----------------------------------------- ------------ -------------
8,035,040 815,130 170,832 332,820 0 9,353,822
----------------------------------------- ------------ -------------
COST OF REVENUES
Product sales 1,409,579 100,110 22,441 1,532,130
Services and rentals 1,098,089 388,968 25,058 53,900 (188,467)(G) 1,377,548
----------------------------------------- ------------ -------------
2,507,668 489,078 47,499 53,900 (188,467) 2,909,678
----------------------------------------- ------------ -------------
GROSS PROFIT 5,527,372 326,052 123,333 278,920 188,467 6,444,144
----------------------------------------- ------------ -------------
OPERATING EXPENSES
Selling, general and administrative 4,329,022 306,684 116,762 50,068 4,802,536
Depreciation and amortization 1,602,071 3,065 1,162 100,357 (100,357)(A) 1,894,614
288,316 (B)
Interest 2,282,864 1,200 1,300 114,116 (116,616)(C) 2,743,415
460,551 (D)
----------------------------------------- ------------ -------------
8,213,957 310,949 119,224 264,541 531,894 9,440,565
----------------------------------------- ------------ -------------
INCOME (LOSS) FROM OPERATIONS (2,686,585) 15,103 4,109 14,379 (343,427) (2,996,421)
INTEREST INCOME 18,512 3,010 (9,839)(E) 11,683
----------------------------------------- ------------ -------------
NET INCOME (LOSS) BEFORE INCOME TAXES (2,668,073) 18,113 4,109 14,379 (353,266) (2,984,738)
INCOME TAXES 2,200 800 (3,000)(F) 0
----------------------------------------- ------------ -------------
NET LOSS ($2,668,073) $15,913 $3,309 $14,379 ($350,266) ($2,984,738)
========================================= ============ =============
LOSS PER COMMON SHARE ($2.37) ($2.41)
============ =============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,123,536 112,989 (H) 1,236,525
============ ============ =============
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(A) To eliminate amortization of monitoring contracts and organization costs purchased from MAC.
(B) To provide for amortization on the net increase of purchased monitoring contracts. Monitoring contracts
purchased from SSI, MSG, and MAC are amortized using the straight-line method over the ten-year
estimated lives.
(C) To eliminate interest expense on debt not acquired
(D) To record additional interest expense on debt incurred in acquisitions.
(E) To reduce the Company's interest income due to the use of funds for the acquisitions.
(F) To eliminate the current tax provision for SSI and MSG.
(G) To reduce expenses to contracted amounts under a monitoring agreement.
(H) In calculating earnings per share, effect has been given to the shares issued in the acquisition of MAC.
</TABLE>
SHELTON SECURITY, INC.
----------------------
FINANCIAL STATEMENTS
--------------------
SEPTEMBER 30, 1995
------------------
TABLE OF CONTENTS
-----------------
PAGE
----
INDEPENDENT AUDITOR'S REPORT F-2
FINANCIAL STATEMENTS
Balance sheets as of September 30, 1994 and 1995 F-3
Statements of income for the years ended
September 30, 1994 and 1995 F-4
Statements of stockholder's equity for the years
ended September 30, 1994 and 1995 F-5
Statements of cash flows for the years ended
September 30, 1994 and 1995 F-6
Notes to financial statements F-7-9
Stockholder and Director
Shelton Security, Inc.
Old Bridge, New Jersey
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of SHELTON SECURITY,
INC. as of September 30, 1994 and 1995, and the related statements of income,
stockholder's equity and cash flows for each of the two years in the period
ended September 30, 1995. 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 audits 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 Shelton Security,
Inc. as of September 30, 1994 and 1995, and the results of its operations and
its cash flows for each of the two years in the period ended September 30,
1995, in conformity with generally accepted accounting principles.
As described in Note 8, in March, 1996, the Company distributed to its
stockholder substantially all of its net assets other than monitoring and
service contracts, and, all of the outstanding common stock of the Company was
sold.
By:/S/ Fishbein and Company P.C.
Elkins Park, Pennsylvania
May 9, 1996
SHELTON SECURITY, INC.
----------------------
BALANCE SHEETS
--------------
ASSETS
------
September 30,
---------------------
1994 1995
---------- ----------
CURRENT ASSETS
Cash $ 42,727 $ 69,233
Accounts receivable 54,882 10,362
Due from affiliate 47,443 24,295
Due from stockholder 83,437
Inventory 8,513 9,441
Prepaid expenses 8,507 8,500
Deferred taxes 9,165 2,217
--------- ----------
Total current assets 171,237 207,485
PROPERTY AND EQUIPMENT - Net of accumulated
depreciation 6,842 9,528
--------- ----------
$ 178,079 $ 217,013
========= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES
Demand note payable - bank $ 15,000 $
Accounts payable 123,205 126,683
Accrued expenses and other current liabilities 20,698 39,756
Income taxes payable 4,559 2,362
Due to stockholder 9,964
Deferred taxes 1,033
---------- ---------
Total current liabilities 173,426 169,834
---------- ---------
CONTINGENT LIABILITIES (Note 6)
STOCKHOLDER'S EQUITY
Common stock - No par value
Authorized, issued and outstanding
2,500 shares 2,000 2,000
Retained earnings 2,653 45,179
--------- ---------
4,653 47,179
--------- ---------
$ 178,079 $ 217,013
========= =========
See notes to financial statements.
F-3
SHELTON SECURITY, INC.
----------------------
STATEMENTS OF INCOME
--------------------
Year Ended September 30,
------------------------
1994 1995
------------ ----------
OPERATING REVENUES
Services $ 473,751 $ 650,102
Product sales 675,577 627,118
---------- ----------
1,149,328 1,277,220
DIRECT COSTS 390,302 421,904
---------- ----------
GROSS PROFIT 759,026 855,316
---------- ----------
OPERATING EXPENSES
Selling, general and administrative 684,447 800,865
Interest - Net of interest income of $1,356 -
1994 and $4,132 - 1995 622 ( 2,890)
---------- ----------
685,069 797,975
---------- ----------
INCOME BEFORE INCOME TAXES 73,957 57,341
---------- ----------
INCOME TAXES
Current 4,559 6,834
Deferred 12,107 7,981
---------- ----------
16,666 14,815
---------- ----------
NET INCOME $ 57,291 $ 42,526
========== ==========
See notes to financial statements.
F-4
SHELTON SECURITY, INC.
----------------------
STATEMENTS OF STOCKHOLDER'S EQUITY
----------------------------------
Retained
Common Earnings
Stock (Deficit) Total
--------- ---------- ---------
BALANCE - SEPTEMBER 30, 1993 $ 2,000 ($ 54,638) ($ 52,638)
Net income 57,291 57,291
--------- ---------- ----------
BALANCE - SEPTEMBER 30, 1994 2,000 2,653 4,653
Net income 42,526 42,526
--------- ---------- ---------
BALANCE - SEPTEMBER 30, 1995 $ 2,000 $ 45,179 $ 47,179
========= ========= =========
See notes to financial statements.
F-5
SHELTON SECURITY, INC.
----------------------
STATEMENTS OF CASH FLOWS
------------------------
Increase (Decrease) in Cash
Year Ended September 30,
------------------------
1994 1995
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 57,291 $ 42,526
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities
Depreciation 1,710 2,809
Deferred taxes 12,107 7,981
(Increase) decrease in accounts receivable ( 3,992) 44,520
(Increase) decrease in due form affiliate ( 47,443) 23,148
(Increase) decrease in inventory ( 521) ( 928)
(Increase) decrease in prepaid expenses ( 7,903) 7
Increase (decrease) in accounts payable ( 26,720) 3,478
Increase in accrued expenses and other
current liabilities 7,845 19,058
Increase (decrease) in income taxes payable 1,014 ( 2,197)
--------- ----------
Net cash provided by (used in) operating
activities ( 6,612) 140,402
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - Net cash
used in investing activities ( 5,495)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in demand note payable - bank ( 15,000) ( 15,000)
(Increase) decrease in change in due
from/to stockholder 3,000 ( 93,401)
--------- ----------
Net cash used in financing activities ( 12,000) ( 108,401)
--------- ----------
NET INCREASE (DECREASE) IN CASH ( 18,612) 26,506
CASH - BEGINNING 61,339 42,727
-------- ----------
CASH - ENDING $ 42,727 $ 69,233
======== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,978 $ 1,242
Income taxes 3,545 9,031
See notes to financial statements.
F-6
SHELTON SECURITY, INC.
----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1995
------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Concentration of Credit Risk
---------------------------------------------------
The Company's operations consist principally of the sale, installation and
monitoring and maintenance services of security and fire alarm systems for
residential and commercial properties in the Northern New Jersey area. Accounts
receivable are from a large number of customers.
Use of Estimates
----------------
The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
-------------------
Revenues under contracts for monitoring and service are deferred and recognized
ratably over the contract period. The Company recognizes revenue on the sale
of alarm systems when installed.
Allowance for Doubtful Accounts
-------------------------------
An allowance for doubtful accounts is provided by the Company, if necessary,
based on historical collection experience and a review of the current status of
accounts receivable. At September 30, 1994 and 1995, all uncollectible
accounts had been written off and, in the opinion of management, no allowance
is necessary.
Inventory
---------
Inventory, consisting of alarm systems and parts, is stated at the lower of
cost (first-in, first-out method) or market.
Property and Equipment and Depreciation
---------------------------------------
Property and equipment are stated at cost. Expenditures for additions,
renewals and betterments are capitalized; expenditures for maintenance and
repairs are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation are eliminated from the accounts
and any resulting gain or loss is credited or charged to operations.
Depreciation is provided using the straight-line and declining balance methods
over the estimated useful lives of the assets.
F-7
SHELTON SECURITY, INC.
----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1995
------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
------------
The liability method is used in accounting for income taxes. Under this
method,deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The principal differences between the Company's financial reporting and tax
bases include accounts receivable and property and equipment.
2. PROPERTY AND EQUIPMENT
1994 1995
-------- --------
Equipment $ 42,581 $ 43,237
Vehicles 4,839
-------- --------
42,581 48,076
Less accumulated depreciation 35,739 38,548
-------- --------
$ 6,842 $ 9,528
======== ========
3. DEMAND NOTE PAYABLE - BANK
The Company has a $30,000 line of credit. Loans outstanding, if any, bear
interest at 1-1/2% over the prime rate, payable monthly, and are collateralized
by all assets of the Company and certain personal assets of the Company's
stockholder.
4. INCOME TAXES
The differences between the provision for income taxes and income taxes
computed using the federal income statutory tax rate are as follows:
Year Ended September 30,
------------------------
1994 1995
----------- -----------
Amount computed using the statutory rate $ 11,094 $ 8,601
Increase (decrease) in taxes resulting from:
State taxes - Net of federal taxes 5,970 5,037
Other ( 398) 1,177
--------- --------
Income tax expense $ 16,666 $ 14,815
========= ========
F-8
SHELTON SECURITY, INC.
----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1995
------------------
4. INCOME TAXES (Continued)
At September 30, 1994 and 1995, the cumulative temporary differences resulted
in a deferred tax asset of $9,165 and $2,217, respectively, as a result of
accounts receivable and a deferred tax liability of $1,033 as of September 30,
1995 as a result of depreciation.
5. RELATED PARTY TRANSACTIONS
The Company leases office space from its stockholder under a month-to-month
operating lease. Rent expense under the lease was $8,021 - 1994 and $6,654 -
1995.
The Company also makes and receives noninterest-bearing advances to and from
its stockholder and a Company affiliated by common ownership and management,
and the balances are due on demand. Management fees of $10,200 were charged to
this affiliate for the year ended September 30, 1995.
6. CONTINGENT LIABILITIES
The Company is a defendant in lawsuits incurred in the normal course of
business. The outcome of the suits is not anticipated to have a material
effect on the financial position, results of operations or cash flows of the
Company. The Company anticipates to be fully covered by insurance for these
lawsuits.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires disclosure of estimated fair value
of all financial instruments for which it is practicable to estimate fair
value.
The carrying amount of cash approximates its fair value because of its short
maturity.
It was not deemed practicable to estimate the fair value of the amounts due
from and due to stockholder and due from affiliate, since these financial
instruments are not readily marketable.
8. SUBSEQUENT EVENT
On March 29, 1996, the Company distributed to its stockholder substantially
all of its net assets other than monitoring and service contracts, and,
simultaneously, all of the outstanding common stock of the Company was sold.
F-9
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
RESPONSE USA, INC.
--------------------
(registrant)
Dated: May 29, 1996 By: /s/RICHARD M. BROOKS
---------------------
Richard M. Brooks,
President
