SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
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FORM 10-K
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(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 2000
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
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Commission File Number: 1-5513
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TRIDEX CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0682273
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
61 WILTON ROAD
WESTPORT, CT 06880
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 226-1144
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12(g) of
the Act:
Title of each class
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COMMON STOCK, WITHOUT PAR VALUE
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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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any other amendment
to this Form 10-K. [ ]
As of March 16, 2001 the aggregate market value of the registrant's issued and
outstanding voting stock held by non-affiliates of the registrant was
$1,357,029.
As of March 16, 2001 the registrant had outstanding 5,654,289 shares of common
stock, without par value.
Exhibit Index appears on page 17
TABLE OF CONTENTS
PART I....................................................................................................................1
ITEM 1. BUSINESS...................................................................................................1
ITEM 2. PROPERTIES.................................................................................................3
ITEM 3. LEGAL PROCEEDINGS..........................................................................................3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................................4
PART II...................................................................................................................5
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................................5
ITEM 6. SELECTED FINANCIAL DATA....................................................................................5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....................6
ITEM 7A. QUANTITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK................................................9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................................................9
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................10
PART III.................................................................................................................10
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................................................10
ITEM 11. EXECUTIVE COMPENSATION....................................................................................11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION.............................................................14
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K..........................................14
PART I
ITEM 1. BUSINESS
GENERAL
Tridex Corporation ("Tridex" or the "Company"), through its wholly owned
operating subsidiary Progressive Software, Inc. ("Progressive"), is a leading
designer, developer and marketer of specialized point-of-sale ("POS"),
back-office and enterprise technology for the food service industry. All dollar
amounts within this report, unless otherwise indicated, exclude results of
discontinued operations.
(a) GENERAL DEVELOPMENT OF BUSINESS
On April 17, 1998, the Company acquired all of the outstanding common stock of
Progressive for a total purchase price of $47,594,000, consisting of 714,000
shares of Tridex common stock, valued at $4,998,000, and the balance in cash.
Through the acquisition of Progressive, the Company had anticipated potential
synergies between Progressive and the Company's Ultimate Technology Corporation
("Ultimate") subsidiary, a leading developer, manufacturer and marketer of
hardware systems and components for the retail POS industry, that would enable
the Company to provide customers with customized hardware and software
solutions. Those synergies never materialized. In the absence of such synergies,
and in view of the Company's substantial debt burden, the Company determined
that it would be difficult to adequately support the cost of fully developing
and sustaining both software and hardware operations. Consequently, management
decided to concentrate its efforts on the software segment of its business
represented by Progressive. Accordingly, on February 18, 2000, Tridex sold
Ultimate to UTC Holding Company, Inc., an affiliate of Capital Formation Group
II, L.P., a private investment partnership, for a purchase price of
approximately $12,544,000 in cash. Tridex used the proceeds from the sale
primarily to pay down debt.
(b) FINANCIAL INFORMATION ABOUT SEGMENTS
The Company operates in one segment.
(c) NARRATIVE DESCRIPTION OF BUSINESS
(i) PRINCIPAL PRODUCTS AND SERVICES
Progressive offers the following POS, back office, and enterprise
technology solutions for the food service industry:
o IRIS Full Serve (Windows(R) NT(R)-based application)
o IRIS Quick Serve (Windows(R) NT(R)-based application)
o IRIS Connect (DOS-based application on a Windows(R) NT(R)
platform)
o SMART 2 (DOS-based application on a Windows(R) NT(R)
platform)
Progressive's integrated restaurant information system, IRIS, is a
32-bit Microsoft Windows(R) NT(R)-based system for quick service
and table service operators that combines advanced POS
capabilities and powerful back office resource planning services
to manage every aspect of operations. This includes an intuitive
touchscreen POS for order entry, drive-thru and kitchen display
management, cost and general accounting, time and attendance,
purchasing and inventory control, and demand forecasting. IRIS
Connect is a centralized management system designed to provide
consolidated information on an enterprise-wide basis.
IRIS Full Serve, currently installed only in the United States and
IRIS Quick Serve, currently installed in the United States,
Australia, Japan, Taiwan and the United Kingdom, are both year
2000 and Euro compliant and Unicode-enabled. Building on its
legacy DOS product, Progressive also offers SMART 2 for customers
who want to continue to use Progressive's DOS systems on a
Windows(R) NT(R) platform. Progressive currently has more than
15,000 licensed installations of its DOS and Windows(R) NT(R)
products.
Progressive sells its software systems through direct and indirect
sales forces and, when requested by customers, provides hardware
and system integration services in connection with software sales.
In addition, Progressive offers help desk, on-site technical and
consulting support and project management services.
(ii) SOURCES AND AVAILABILITY OF LABOR
As of December 31, 2000, Progressive employed 11 full time
programmers. The ready availability of computer programmers is
crucial to Progressive's product development efforts. To date,
Progressive development programs have not been materially affected
by a shortage of qualified programmers. There can be no assurance,
however, that such a shortage will not occur in the future.
The availability of raw materials is not a significant factor in
the Company's business.
(iii) INTELLECTUAL PROPERTY
Progressive owns proprietary rights in two principal software
programs it developed, and has common law rights in related trade
and service marks. It also has a pending trademark application
relating to one of its proprietary programs. The Company regards
its software designs and code incorporated into its products as
proprietary and protects them by relying on a combination of
copyright, trademark and trade secret laws and employee and third
party nondisclosure agreements. It may be possible for
unauthorized third parties to copy certain portions of the
Company's products or to reverse engineer or otherwise obtain and
use, to the Company's detriment, information that the Company
regards as proprietary. Moreover, the laws of some foreign
countries do not afford the same protection to the Company's
proprietary rights as do United States laws. There can be no
assurance that legal and contractual protections relied upon by
the Company to protect its proprietary rights will be adequate or
that the Company's competitors will not independently develop
products that are substantially equivalent or technologically
superior to the Company's products.
(iv) SEASONALITY AND PRACTICES RELATING TO WORKING CAPITAL ITEMS
Sales of the Company's products are not subject to material
seasonal variations. The Company's operations, as presently
constituted, do not require inventories of raw materials or
finished goods.
(v) CERTAIN CUSTOMERS
The Company has certain customers, the loss of which, if not
replaced by sales to other customers, could have an adverse effect
on the Company. In the year ended December 31, 2000, three
customers accounted for approximately 32%, 18% and 9%,
respectively, of the Company's net sales. As customers complete
the installation of new software systems, sales to these customers
typically decline. Accordingly, the identity of Progressive's
largest customers changes in the ordinary course of business.
There can be no assurance that Progressive will not experience the
loss of a customer which, in any given year or sequential years,
accounted for a significant portion of Progressive's net sales, or
that such loss will not have an adverse effect on the Company.
(vi) BACKLOG
Substantially all of the Company's business results from orders
that can be modified or canceled prior to shipment without
penalty. Accordingly, the Company believes that backlog cannot be
considered a meaningful indicator of future financial performance.
(vii) COMPETITION
The Company faces aggressive competition in its markets. Many of
the Company's current and potential competitors are large
multi-national enterprises with extensive experience and resources
in designing, manufacturing and marketing similar software
products. Competitors in the POS marketplace include Eltrax
(Squirrel POS), Panasonic, Restaurant Data Concepts, Inc.
(Positouch), Infogenesis, Ibertech (Aloha POS), Hospitality
Solutions International, GEAC, NCR (Compris POS), Radiant Systems,
Par Technology and hardware providers such as IBM, NCR, and
Javelin, who market their products in conjunction with independent
2
software vendors. There are also smaller companies that license
their POS-oriented software with PC-based systems in regional
markets.
In certain markets, the Company's competitors sometimes offer
prices lower than those offered by Tridex in part, management
believes, because of lower overhead attributable to higher volume
production. Many of the Company's competitors, particularly those
that are divisions of substantially larger companies, have greater
financial and other resources than Tridex.
(viii) RESEARCH AND DEVELOPMENT ACTIVITIES
The Company spent approximately $4.3 million in 2000 and $4.7
million in 1999 on engineering, design and product development.
Research and development expenditures in 1999 included $725,000 of
software development costs which were capitalized. There were no
such costs capitalized in 2000. During 1999 and 2000, the Company
provided certain custom software development to RetailDNA, LLC
("RetailDNA" f/k/a Digital Restaurant Solutions, LLC), a privately
held company involved in the development of specialty software
products for the restaurant industry. The Company received
6,750,000 shares in RetailDNA as compensation. The Company has
estimated the value of these shares at $850,000 and has reduced
development expenses during 1999 and 2000 by $500,000 and $350,000
respectively. (See Note 1 to the Company's 2000 consolidated
financial statements).
(ix) EMPLOYEES
As of March 16, 2001, the Company employed approximately 61 full
time and 2 part time employees, 59 of whom were employed by
Progressive.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Sales for the Company's wholly owned United Kingdom sales and
distribution subsidiary, Retail Resource Solutions Limited, ("RRS") for
the years ended December 31, 2000 and 1999 were $70,787 and $1.7 million,
respectively.
ITEM 2. PROPERTIES
The Company's operations are currently conducted at the facilities described
below:
Owned or
Location Operations Conducted Size - Approx. Sq. Ft. Leased Lease Expiration Date
- ----------------------------------------------------------------------------------------------------------------------------
Westport, Connecticut Principal executive offices 5,000 Leased July 31, 2001
(Tridex) (net of sublease)
Charlotte, North Carolina Product Development & Sales 30,600 Leased September 14, 2005
(Progressive)
Effective November 1, 1999, 50% of the Westport office was subleased through
July 31, 2001. In addition, the Company sold a non-operating facility of 23,000
square feet located in Bloomfield, Connecticut on January 24, 2000 for a
purchase price of $133,000. The Company believes that its existing leased
facilities generally are in good condition, adequately maintained and suitable
for their present and contemplated uses.
ITEM 3. LEGAL PROCEEDINGS
In April 1998, the Company acquired all of the common stock of Progressive
Software, Inc. from Paul J. Smith ("Smith"), for a total purchase price of
$47,594,000 consisting of 714,000 shares of the Company's common stock, valued
at $4,998,000, and the balance in cash. As a part of the transaction, the
parties entered into an Escrow Agreement with respect to possible future
liabilities related to sales taxes in various jurisdictions where Progressive
had done business. Additionally, the Company entered into a three-year lease
(the "Lease") with a partnership in which Smith is a principal to occupy the
primary office facility used by Progressive. Subsequent to the acquisition, the
Company filed for arbitration against Smith
3
seeking a reduction in the purchase price paid by the Company. In January
1999, Smith filed a complaint seeking damages up to $5,000,000 for the
refusal by the Company to register the shares of Company common stock
received by him as a part of the purchase price.
On October 31, 2000, the Company and Smith entered into a Settlement Agreement
pursuant to which all of the claims pending between the parties were resolved.
Pursuant to the Settlement Agreement, Smith returned to the Company the 714,000
shares of the Company's common stock issued to him, originally valued at $7 per
share, as well as $1,226,000 in cash. The Settlement Agreement further provided
that effective October 1, 2000, no further rent would be due under the Lease,
that the Lease would terminate on December 31, 2000 and that the Company had no
further obligation pursuant to the Escrow Agreement. Effective upon Smith's
returning the 714,000 shares of common stock, the Company's outstanding shares
of common stock decreased to 5,654,289. This settlement is reflected in the
Company's financial statements in the quarter ending December 31, 2000 as other
income in the amount of $1,440,200, of which amount $214,200 has been attributed
to the value of the stock received.
Allu Realty ("Allu"), a Massachusetts business trust owned by the Company, is
the former owner of land located at 100 Foley Street, Somerville, Massachusetts
(the "Site"). Allu sold the Site to 100 Foley Street Incorporated ("Foley"), an
unrelated entity.
In 1984, Allu and the Company disclosed to the Massachusetts Department of the
Attorney General the existence of chromium, oil and grease at the Site. As a
result, the Environmental Protection Division of the Department of the Attorney
General and the Massachusetts Department of Environmental Protection conducted
an investigation of the Site. In 1993, the Company entered into an agreement
with Foley pursuant to which the Company and Foley agreed to pay 75% and 25%,
respectively, of the costs incurred after January 1, 1992 in connection with the
investigation and remediation of the Site (the "Site Participation Agreement").
The Site Participation Agreement also provided that, to the extent there are
available proceeds from the sale of the Site, the Company would be reimbursed
approximately $200,000 of the $250,000 it expended in connection with the Site
prior to January 1, 1992. As of December 31, 1999, the Company had spent
approximately $766,000 in connection with the Site. In 1997, Foley sold the Site
to an affiliate of Stop & Shop, Inc. ("Stop & Shop"). As part of the sale
transaction, Foley was required to place approximately $875,000 in escrow (the
"Stop & Shop Escrow") to cover the costs of remediation, which was completed in
1999. In 1997, Foley brought suit in the United States District Court, District
of Massachusetts, against the Company claiming that the Company failed to
contribute its shares of the remediation costs pursuant to the Site
Participation Agreement. Foley asserted that Allu and the Company remain liable
for payment of certain costs associated with the remediation of the Site after
its sale to Stop & Shop and claimed that it is entitled to reimbursement from
the Company of a portion of the Stop & Shop Escrow. The Company filed a
counterclaim, and sought reimbursement of funds previously expended in
accordance with the Site Participation Agreement. Mediation between the parties
was not successful and in July 2000, after a trial, a jury made certain factual
findings upholding the parties' obligations under the Site Participation
Agreement, including the Company's obligation to pay 75% of the remediation
costs and the obligation of Foley to reimburse the Company out of sale proceeds.
On October 16, 2000, the United States District Court for Massachusetts entered
judgment against the Company in the amount of approximately $791,000, of which
approximately $156,000 represented legal fees awarded to the opposing party and
approximately $108,000 represented interest. The Company has filed various
post-trial motions seeking to vacate the judgment or to have it modified. If
these motions are unsuccessful, the Company intends to appeal the decision of
the Court. As of December 31, 2000, the Company had accrued $791,000 the amount
of the judgment. Subsequently, Foley attached $791,000 in cash being held for
the account of the Company by a third party. The Company has moved to discharge
the attachment which motion has not yet been heard by the Court. The Company is
unable to forecast when this litigation will finally be resolved or the amount
of its ultimate exposure with respect thereto.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 2000, no matters were submitted to a vote of
security holders.
4
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the Over-the-Counter Bulletin Board under
the symbol "TRDX.OB." As of March 16, 2001 there were 1,109 holders of record of
the common stock. The following table lists the high and low sales prices of the
common stock reported during the years ended December 31, 2000 and 1999.
Year Ended December 31,
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2000 1999
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High Low High Low
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January - March $ 2.8125 $ 1.3750 $ 3.5000 $ 1.8750
April - June 2.1250 .05312 3.0000 2.000
July - September .8750 .3438 3.8750 1.6250
October - December .4375 .1094 2.2500 1.2500
No dividends or other distributions on the common stock have been declared in
the past two years. The Company does not anticipate declaring dividends in the
foreseeable future. The Company's credit agreement with its senior lender
prohibits the payment of cash dividends.
The Company does not meet the net tangible asset or price per share requirements
for listing on the Nasdaq Stock Market(R) ("Nasdaq"). Accordingly, during 2000,
the Company's common stock was delisted from Nasdaq. As a result of delisting,
current information regarding bid and asked prices for the common stock may
become less readily available to brokers, dealers, and/or their customers which
may reduce the liquidity of the market for the common stock which, in turn,
could result in decreased demand for the common stock, a decrease in the stock
price, and an increase in the spread between the bid and asked prices for the
common stock.
ITEM 6. SELECTED FINANCIAL DATA
On February 18, 2000 the Company completed the sale of Ultimate. The Selected
Financial Data are derived from the Company's consolidated financial
statements, which have been adjusted from historical financial statements to
present the results of operations of Ultimate as a discontinued operation for
all periods presented.
Years Ended December 31,
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2000 1999 1998 1997 1996
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(Dollars in thousands, except share amounts)
Statement of Operations Data:
Net sales from
continuing operations $ 16,950 $ 31,256 $ 17,896 $ 936 $ 859
=============================================================================
Income (loss) from
continuing operations $(22,025) $ (16,271) $ (14,943) $ (902) $ 4,487
============================================================================
Income (loss) from
continuing operations
per common - basic $ (3.53) $ (2.56) $ (2.46) $ (0.18) $ 1.15
============================================================================
Cash dividends per
common share $ 0 $ 0 $ 0 $ 0 $ 0
============================================================================
As of December 31,
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2000 1999 1998 1997 1996
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(Dollars in thousands)
Balance Sheet Data:
Total assets $ 12,214 $ 36,896 $ 50,081 $ 25,655 $ 31,051
Current portion of
long-term debt $ 14,100 $ 20,691 $ 1,650 $ 0 $ 740
Long-term debt $ 0 $ 0 $ 19,341 $ 0 $ 0
5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE STATEMENTS CONTAINED HEREIN NOT BASED ON HISTORIC FACTS ARE FORWARD-LOOKING
STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
THAT INVOLVE RISKS AND UNCERTAINTIES. PAST PERFORMANCE IS NOT NECESSARILY A
STRONG OR RELIABLE INDICATOR OF FUTURE PERFORMANCE. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM PAST RESULTS, ESTIMATES, PROJECTIONS, OR FORWARD LOOKING
STATEMENTS MADE BY, OR ON BEHALF OF, THE COMPANY, INCLUDING, BUT NOT LIMITED TO,
THE COMPANY'S EXPECTATIONS REGARDING NET SALES, GROSS PROFIT, OPERATING INCOME
AND FINANCIAL CONDITION.
(a) RESULTS OF OPERATIONS
(i) YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED
DECEMBER 31, 1999
Consolidated net sales for 2000 decreased $14.3 million (46%) to
$17.0 million from $31.3 million in the comparable 1999 period.
Management believes that the decrease results from several causes.
Beginning in the second quarter, the Company outsourced the
hardware components for a major customer's expansion and, as a
result, did not recognize hardware revenue on these shipments. The
value of these outsourced hardware components was approximately
$2.9 million during the period. Prior to this arrangement, the
Company supplied these components directly. There were no
comparable transactions during the same period in 1999. Also, the
Company experienced a delay in shipments caused by protracted
negotiations of a new credit arrangement between the Company's
lenders and a major vendor as more fully described in the
Company's Quarterly Report on Form 10-Q for the period ended March
31, 2000. Management also believes that the decrease in hardware,
software and service sales is an industry-wide trend inasmuch as
revenues of many of the Company's competitors were also adversely
affected, when compared to prior periods.
As a result of a reduction in revenues, consolidated gross profit
decreased $3.2 million (35%) to $6.0 million from $9.2 million in
the prior year. Consolidated gross profit margin increased to 35%
of sales from 29% last year. Before giving effect to the
outsourcing arrangement referred to above, the gross profit margin
for 2000 was 30%.
Consolidated engineering, design and product development costs
increased $428,000 to $3.9 million from $3.5 million last year.
The increase was principally the result of efforts directed toward
final enhancements of the new version of the Company's IRIS
software product that was released in early July. Expenses during
2000 and 1999 were reduced by approximately $350,000 and $500,000,
respectively, representing the value assigned to the shares of
RetailDNA for development services provided. Expenses in 1999 are
exclusive of $725,000 of development costs that were capitalized.
Consolidated selling, administrative and general expenses
decreased $2.0 million (26%) to $5.8 million from $7.8 million a
year ago. The overall decrease results from substantial reductions
in staff and related expenses both at corporate headquarters and
at Progressive.
Consolidated depreciation and amortization for the current period
was $3.5 million, substantially unchanged from last year.
A $12.3 million impairment charge was recorded by the Company in
2000. The Company periodically reviews goodwill, intangibles and
other long-term assets to assess recoverability based upon
expectations of non-discounted cash flows from operations. As
noted in the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 2000, the operating results of
Progressive during fiscal 2000 have been below previous
expectations. As a result, in August 2000, management instituted a
reduction-in-force at Progressive, revised its operating forecasts
and initiated an evaluation of the carrying value of long-lived
assets. The evaluation commenced with estimates of the future cash
flows, on an undiscounted basis, expected to result from the
assets and their eventual disposition. Based on this evaluation,
management concluded that an impairment of the acquired assets had
occurred and recorded a write down of such assets to fair value.
The fair values of the long-lived assets were estimated using the
present value of expected future cash flows expected from such
assets, discounted at a rate of return of 18%. Considerable
management judgment was involved in estimating fair value and,
therefore, operating results could vary significantly from
management's estimates. In accordance
6
with the provisions of the Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", the Company,
recorded an impairment charge of $12,300,000, consisting of
$9,847,000 of goodwill, $2,159,000 of purchased technology and
internally developed software costs and $294,000 of plant and
equipment.
Consolidated continuing operating losses for the period were $19.5
million compared to losses of $5.7 million in the comparable
period last year. Increased losses in the current period were
primarily the result of the $12.3 million impairment charge
recorded in the quarter ended September 30, 2000 as discussed
above, decreased sales and gross profits and increased costs of
depreciation, engineering, design and product development,
partially offset by reduced selling, administrative, and general
expenses.
Net interest expense for the current period was $2.9 million
compared to $3.4 million a year ago. The decrease is the result a
reduction in the amount of outstanding bank debt through the use
of a portion of the proceeds from the Ultimate sale, as described
in Note 2 to the Company's financial statements, partially offset
by increases in prevailing interest rates during the current
period compared with rates in effect in 1999. Interest expense is
net of interest income of $126,000 in 2000 and $104,000 in 1999.
Other expense consists principally of an additional provision of
$582,000 related to the 100 Foley Street litigation as described
in Item 3. In addition, the Company recognized a loss on disposal
of plant and equipment of $294,000. In 1999, the Company reported
other income of $50,000 representing a gain of $180,000 on the
sale of the assets of an operating division offset by provisions
for costs also associated with the 100 Foley Street matter and
non-operating property held for sale. Also during 2000, the
Company recognized other income of $1.4 million relating to the
Smith settlement. See Note 7 to the Company's consolidated
financial statements.
Provision for income taxes reflects state tax provisions. The
provision recorded in the prior year reflects the increase in
valuation allowance. The loss during 2000 was $17.2 million or
$2.75 per share, compared to $14.8 million, or a loss of $2.32 per
share, for 1999.
Net earnings related to discontinued operations, including gain on
the sale of Ultimate in February 2000, was $5.6 million, or $0.89
per share.
(ii) YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED
DECEMBER 31, 1998
Consolidated net sales for the year ended December 31, 1999
increased $13.4 million (75%) to $31.3 from $17.9 million for the
prior year. The increase reflects a full year of sales of
Progressive, which was acquired on April 17, 1998 as well as an
increase in volume at Progressive.
Consolidated gross profit increased $3.3 million (57%) to $9.2
from $5.8 million in the prior year, as a result of the full year
contribution of Progressive and an increase in overall volume
associated with Progressive. Consolidated gross profit margin
decreased to 29.3% of sales from 32.6% of sales in the prior year
as a result of the change in product mix at Progressive.
Consolidated engineering, design and product development costs
(net of capitalized software development costs) increased $1.6
million (83%) to $3.5 million in 1999 from $1.9 million in the
prior year. The increase is primarily due to the inclusion of the
full year of such costs for Progressive and to expenditures for
Progressive's software development initiatives, including IRIS
related costs. As a percentage of revenue, total engineering,
design and product development costs decreased to 15% in 1999
compared to 20% for 1998. Consolidated engineering, design and
product development costs are reported net of capitalized software
development costs of $725,000 in 1999 ($1.7 million in 1998) and
$500,000 in 1999 representing the estimated value of equity in
Retail DNA received in return for having provided certain custom
software development.
Consolidated selling, administrative and general expenses for the
current year increased $1.6 million (27%) to $7.8 million from
$6.2 million in the prior year. The increase in selling,
administrative and general expenses is primarily the result of the
inclusion of a full year of such costs for Progressive partially
offset by $500,000 for the reversal of an accrual resulting from a
previously recorded pension obligation. Prior year's expenses
reflect the inclusion of a non-recurring charge of approximately
$310,000 associated with the due diligence review for a
transaction that was not completed. Operating expenses in 1998
include the $17.6 million write-off of in-process software
technology acquired as part of the purchase of Progressive.
7
Depreciation and amortization for the current year increased $1.2
million to $3.6 million from $2.4 million in the prior year. The
increase in amortization is primarily the result of a full year of
amortizing goodwill, intangibles and existing and core
technologies acquired with Progressive.
Consolidated operating loss for the current year was a loss of
$5.7 million compared to a loss of $4.6 million in the prior year
(exclusive of the $17.6 million write-off of in-process software
technology). The loss in the current year was primarily the result
of the increase in selling, administrative and general expenses
and engineering, design and development costs associated with new
products.
Net interest expense for the current year was $3.4 million
compared to $1.7 million in the prior year. Interest expense
increased primarily due to the debt incurred to acquire
Progressive being outstanding for a full year versus eight months
in the prior year and to additional net borrowings in 1999.
Interest expense is net of interest income of $104,000 in 1999 and
$348,000 in the prior year.
Other non-operating income of $50,000 includes a gain of $180,000
on the sale of the Company's Ribbons Division and a provision of
$105,000 for costs associated with additional remediation at the
100 Foley Street Site. See "Item 3 - Legal Proceedings" Other
non-operating expenses in the prior year's period include a
provision for costs of real estate held for sale.
Provision for income taxes in the current year primarily reflects
the increase in valuation allowances on certain deferred tax
assets for which a tax benefit will not likely be realized.
Management has concluded that realization of deferred tax assets
related to net operating loss carryforwards and deductible
in-process research and development through future taxable
earnings or alternative tax strategies in no linger more likely
than not, and accordingly has increased the valuation allowance.
The benefit recorded in the prior year reflects the recognition of
deferred taxes of approximately $5,814,000 related to the
write-off of in-process software technology.
Income from discontinued operations, net of income taxes, in 1999
and 1998 represents the earnings of Ultimate.
Net loss for the current year was $14.8 million (or $2.32 per
share) as compared to net loss of $14.1 million (or $2.33 per
share) for the prior year. The average number of common shares
outstanding increased to 6,368,000 shares from 6,077,000 shares in
the prior year.
(iii) LIQUIDITY AND CAPITAL RESOURCES
The Company's negative working capital (current assets less
current liabilities) at December 31, 2000 was $20.3 million
compared with negative working capital of $18.7 million at
December 31, 1999. At December 31, 2000, the Company had no
material commitments for capital expenditures. The Company's
December 31, 2000 negative working capital resulted primarily from
net losses and the maturity on December 31, 2000 of the Company's
existing debt.
In April 1998, the Company entered into a Credit Agreement with
Fleet National Bank that provided a $12.0 million Senior Term Loan
(the "Term Loan") with a maturity of March 31, 2003 and an $8.0
million Working Capital Facility. At the same time, the Company
sold Senior Subordinated Notes due April 17, 2005 (the "Notes") in
the principal amount of $11.0 million to Massachusetts Mutual Life
Insurance Company and affiliates. The proceeds of the Term Loan
and the Notes were used in the acquisition of Progressive. In
February 2000, the Company used a portion of the proceeds from the
sale of Ultimate to retire $8.0 million principal amount of the
Term Loan and paydown of $3.0 million of the Working Capital
Facility.
As reported previously, the Company, at various times, has been in
violation of the covenants of both the Term Loan and the Notes
resulting in several modifications of the terms of each including
an acceleration of the maturities of both to December 31, 2000.
Currently, the Company does not have the capability to repay or
replace either the Term Loan or the Notes. As a result, both
credit facilities are due upon demand and that fact raises
substantial doubt about the Company's ability to continue as a
going concern The outstanding amount of both are reflected as
current liabilities in the Company's financial statements.
8
The Company has been advised that, in December 2000, Fleet
National Bank sold its interest in the Term Loan and Working
Capital Facility to ARK CLO 2000-1, Limited. Inasmuch as the
Company, at present, still lacks the capability to repay or
replace these credit facilities, it intends to seek accommodation
with its lenders that will allow it to continue operating while
seeking either modification to, or replacement of, the facilities.
However, there can be no assurance that the Company will be
successful in such efforts or as to what form such modification or
replacement might be.
(b) IMPACT OF INFLATION
Tridex believes that its business has not been affected to a significant
degree by inflationary trends.
ITEM 7A. QUANTITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
NUMBER
Report of Independent Accountants F-1
Tridex Corporation and Subsidiaries consolidated financial statements: F-2
Consolidated balance sheets as of December 31, 2000 and 1999. F-2
Consolidated statements of operations for the years ended December 31, 2000, 1999
and 1998. F-3
Consolidated statements of shareholders' (deficit) equity for the years ended
December 31, 2000, 1999 and 1998. F-4
Consolidated statements of cash flows for the years ended December 31, 2000, 1999
and 1998 . F-5
Notes to consolidated financial statements. F-6
Financial Statement Schedules - All schedules are omitted since the
required information is either (a) not present or not present in
amounts sufficient to require submission of the schedule or (b)
included in the financial statements or notes thereto.
9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Tridex Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, shareholders' (deficit)
equity and cash flows present fairly, in all material respects, the
financial position of Tridex Corporation and its subsidiaries at
December 31, 2000 and 1999, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally
accepted in the United States. 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 of these statements in accordance with auditing
standards generally accepted in the United States, which 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, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
The accompanying consolidated financial statements have been prepared
assuming Tridex Corporation will continue as a going concern. The
Company is not in compliance with various terms of its debt agreements
and all the debt is currently due. As more fully described in Note 1,
these conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
PricewaterhouseCoopers LLP
Hartford, Connecticut
April 9, 2001
F-1
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
---------------------------------------------------------
2000 1999
---------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 397 $ 367
Restricted cash (Note 1) 1,440 0
Receivables (Note 3) 1,967 5,352
Inventories 393 1,945
Investment in discontinued operations (Note 2) 0 5,881
Other current assets 387 353
---------------------------------------------------------
Total current assets 4,584 13,898
---------------------------------------------------------
Plant and equipment:
Machinery, furniture and equipment 1,131 2,275
Leasehold improvements 254 388
---------------------------------------------------------
1,385 2,663
Less accumulated depreciation (690) (1,046)
---------------------------------------------------------
695 1,617
---------------------------------------------------------
Goodwill, net of accumulated amortization
of $0 in 2000 and $2,183 in 1999 (Note 2) 0 10,822
Purchased and capitalized software costs, net of
accumulated amortization of
$431 in 2000 and $3,400 in 1999 (Note 2) 5,587 9,856
Investments and other assets 1,348 703
---------------------------------------------------------
$ 12,214 $ 36,896
=========================================================
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Bank loan payable (Note 5) $ 3,017 $ 5,740
Current portion of long-term debt (Note 5) 14,100 20,691
Accounts payable 2,990 3,592
Accrued liabilities 4,469 2,411
Deferred revenue 347 199
--------------------------------------------------------
Total current liabilities 24,923 32,633
--------------------------------------------------------
Commitments and contingencies (Note 7)
Shareholders' (deficit) equity (Notes 1 and 8):
Preferred stock, $1 par value; authorized 2,000,000 shares;
Issued none 0 0
Common stock, no par value, stated value $.25; authorized
10,000,000 shares; issued 5,812,187 and 6,526,187 shares,
respectively 1,455 1,634
Additional paid-in capital 33,893 33,928
Accumulated deficit (46,742) (29,584)
Receivable from sale of stock (350) (750)
Common stock held in treasury, at cost, 157,898 shares (965) (965)
--------------------------------------------------------
Total shareholders' (deficit) equity (12,709) 4,263
--------------------------------------------------------
$12,214 $ 36,896
========================================================
See notes to consolidated financial statements.
F-2
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share amounts)
Year Ended December 31,
------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------
Net sales:
Hardware $ 11,478 $ 25,429 $ 15,850
Software and service 5,472 5,827 2,046
------------------------------------------------------------------
16,950 31,256 17,896
Operating costs and expenses:
Cost of hardware sales 9,708 20,202 10,778
Cost of software and services sales 1,291 1,889 1,291
Engineering, design and product development costs 3,887 3,459 1,887
Selling, administrative and general expenses 5,761 7,793 6,150
Depreciation and amortization 3,520 3,581 2,402
Purchased in-process software technology (Note 2) 0 0 17,600
Impairment charge (Note 1) 12,300 0 0
------------------------------------------------------------------
36,467 36,924 40,108
------------------------------------------------------------------
Operating loss (19,517) (5,668) (22,212)
Other charges (income):
Interest expense, net 2,896 3,377 1,735
Settlement (Note 7) (1,440) 0 0
Other, net 893 (50) 22
------------------------------------------------------------------
2,349 3,327 1,757
------------------------------------------------------------------
Loss from continuing operations before income taxes (21,866) (8,995) (23,969)
Provision (benefit) for income taxes 159 7,276 (9,026)
------------------------------------------------------------------
Net loss from continuing operations (22,025) (16,271) (14,943)
Discontinued operations (Note 2):
Income (loss) from discontinued operations, net of
income taxes of $0, $1,232 and $851 (26) 1,506 797
Gain on sale of discontinued operations 5,588 0 0
------------------------------------------------------------------
Net loss before extraordinary item (16,463) (14,765) (14,146)
Extraordinary loss due to debt modification (Note 5) (695) 0 0
------------------------------------------------------------------
Net loss $(17,158) $(14,765) $(14,146)
------------------------------------------------------------------
Loss per share - basic and diluted:
Loss from continuing operations $ (3.53) $ (2.56) $ (2.46)
Income from discontinued operations 0.89 0.24 0.13
Extraordinary loss (0.11) 0 0
------------------------------------------------------------------
Net loss $ (2.75) $ (2.32) $ (2.33)
==================================================================
Weighted average shares outstanding:
Basic and diluted 6,249,000 6,368,000 6,077,000
==================================================================
See notes to consolidated financial statements.
F-3
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
(Dollars in thousands)
Common Stock Held Additional Receivable
Common Stock In Treasury Paid-In Accumulated From Sale
Shares Amount Shares Amount Capital Deficit Of Stock
-------------- ----------- ------------- ------------ ------------ -------------- -------------
Balance, December 31, 1997 5,497,808 $1,377 146,398 $(942) $25,273 $(673) $(816)
Exercise of stock options 28,665 7 74 15
Issuance of acquisition
shares 714,000 179 4,819
Sale of shares 285,714 71 1,929
Forfeiture of stock incentive
compensation shares 11,500 (23)
Tax benefit related to
employee stock sales 5
Warrants issued 1,228
Net loss (14,146)
-----------------------------------------------------------------------------------------------
Balance, December 31, 1998 6,526,187 1,634 157,898 (965) 33,328 (14,819) (801)
Warrants issued 600
Collection of receivable 51
Net loss (14,765)
-----------------------------------------------------------------------------------------------
Balance, December 31, 1999 6,526,187 1,634 157,898 (965) 33,928 (29,584) (750)
Settlement (Note 7) (714,000) (179) (35)
Collection of receivable 400
Net loss (17,158)
-----------------------------------------------------------------------------------------------
Balance, December 31, 2000 5,812,187 $1,455 157,898 $ (965) $ 33,893 $ (46,742) $ (350)
===============================================================================================
F-4
TRIDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31,
-------------------------------------------------------
2000 1999 1998
-------------------------------------------------------
Cash flows from operating activities:
Net loss $ (17,158) $ (14,765) $ (14,146)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,536 3,931 2,402
Debt discount amortization 714 300 119
Extraordinary loss 695 0 0
Charge for purchased in-process software technology 0 0 17,600
Deferred income taxes 0 8,848 (8,384)
Provision for doubtful accounts (214) 766 290
Loss (gain) on disposal of assets 294 (155)
Gain on sale of discontinued operations (5,588) 0 0
Loss (gain) from discontinued operations 26 (1,506) (797)
Non-cash portion of settlement (Note 7) (214) 0 0
Impairment charge (Note 1) 12,300 0 0
Changes in operating assets and liabilities:
Receivables 3,599 (2,353) 245
Inventory 1,552 1,411 502
Other assets (695) (220) (205)
Accounts payable, accrued liabilities, and deferred
revenue 1,604 306 1,416
-------------------------------------------------------
Net cash provided by (used in) operating activities 451 (3,437) (958)
-------------------------------------------------------
Cash flows from investing activities:
Purchases of plant and equipment (101) (132) (555)
Capitalized software development costs 0 (725) (1,731)
Net cash paid for acquisition 0 0 (42,596)
Proceeds from sale of assets 0 302 0
Proceeds from sale of discontinued operations 11,443 0 855
-------------------------------------------------------
Net cash provided by (used in) provided by investing activities 11,342 (555) (44,027)
-------------------------------------------------------
Cash flows from financing activities:
Net change in borrowings under line of credit (2,723) 984 4,756
Borrowings of long-term debt 0 0 23,000
Principal payments on long-term borrowings (8,000) 0 (900)
Net decrease in short term investments 0 0 4,403
Proceeds from issuance of shares and exercise of stock options and
warrants 0 51 2,101
Net transactions with discontinued operations 0 3,306 (196)
Collection of stock sale receivable 400 0 0
Restricted cash (Note 7) (1,440) 0 0
-------------------------------------------------------
Net cash (used in) provided by financing activities (11,763) 4,341 33,164
-------------------------------------------------------
Increase (decrease) in cash and cash equivalents 30 349 (11,821)
Cash and cash equivalents at beginning of year 367 18 11,839
-------------------------------------------------------
Cash and cash equivalents at end of year $ 397 $ 367 $ 18
=======================================================
Supplemental cash flow information
Interest paid $ 997 $ 1,974 $ 1,649
Supplemental non-cash investing and financing activities: 0 0 0
Warrants issued concurrent with debt $ 0 $ 600 $ 1,228
Stock issued (returned) for acquisition $ (214) $ 0 $ 4,998
See notes to consolidated financial statements.
F-5
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS: Tridex Corporation (the "Company"), through its wholly owned
subsidiary, Progressive Software, Inc. ("Progressive"), is a leading
designer, developer, and marketer of specialized point-of-sale, back
office and enterprise technology for the food service industry. As
described in Note 2, the Company disposed of its Ultimate Technology
Corporation subsidiary ("Ultimate") a leading developer, manufacturer and
marketer of high quality hardware systems and components for the
point-of-sale industry in February 2000.
The Company has experienced net losses from continuing operations of
approximately $22.0 million and $16.3 million in each of the years ended
December 31, 2000 and 1999, respectively. In addition, all of the
Company's debt matured on December 31, 2000 and no agreements with
respect to extension or terms under which any extensions may be offered
has been reached with the holders of the matured debt. These matters, and
their effect on the Company's liquidity, raise substantial doubt about
the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that might result
from this uncertainty.
As noted above, the Company sold Ultimate on February 18, 2000. The sale
generated approximately $11.8 million in cash proceeds after transaction
expenses. The Company used $11.0 million of the proceeds to pay down
outstanding debt from Fleet National Bank. During 2000, the Company
reduced overhead costs at its Westport headquarters facility and
instituted a substantial reduction-in-force at Progressive.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of the Company after elimination of all
material intercompany accounts and transactions. See Note 2 for treatment
of discontinued operations.
CASH AND CASH EQUIVALENTS: Cash equivalents consist primarily of
certificates of deposit with original maturities of less than ninety days
at date of acquisition and are carried at cost, which approximates market
value.
RESTRICTED CASH: Restricted cash represents the proceeds received under
the terms of the Smith settlement, as discussed in Note 7. The debtholder
requires the value of the proceeds to be applied against its outstanding
debt. The proceeds have also been attached by the plaintiff in the Foley
matter (see Note 7).
USE OF ESTIMATES: The preparation 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. Significant estimates have been
made in allowances for doubtful accounts, inventory valuation,
depreciable lives of long-lived assets, investments and accrued
liabilities. Actual results could differ from those estimates.
FOREIGN CURRENCY: The financial position and results of operations of the
Company's foreign subsidiary are measured using local currency as the
functional currency. Assets and liabilities of the subsidiary have been
translated at current exchange rates, and related revenues and expenses
have been translated at weighted average exchange rates.
INVENTORIES: Inventories are stated at the lower of cost (principally
first-in, first-out) or market and consist principally of finished goods
inventory.
PLANT AND EQUIPMENT AND DEPRECIATION: Plant and equipment and leasehold
improvements are stated at cost. Depreciation is provided for primarily
by the straight-line method over the estimated useful lives. The
estimated useful life of machinery, furniture and equipment is five to
ten years. Leasehold improvements are amortized over the shorter of the
term of the lease or the useful life of the asset. The Company
periodically reviews the carrying value of its plant and equipment assets
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable, in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". As
discussed below, the Company completed an impairment evaluation which
resulted in the write-down of $294,000 of plant and equipment assets.
F-6
INTANGIBLE ASSETS AND IMPAIRMENT CHARGE:
GOODWILL: Goodwill was zero at December 31, 2000 and $10.8
million at December 31, 1999. Goodwill originated from the
acquisition of Progressive in 1998 and was amortized on the
straight-line method over ten years prior to the impairment
charge discussed below.
The Company periodically reviews goodwill, intangibles and other
long-term assets to assess recoverability based upon
expectations of non-discounted cash flows from operations. The
operating results of Progressive during fiscal 2000 were below
management's and as a result, in August 2000, management
instituted a reduction-in-force at Progressive, revised its
operating forecasts and initiated an evaluation of the carrying
value of long-lived assets. The evaluation commenced with
estimates of the future cash flows, on an undiscounted basis,
expected to result from the assets and their eventual
disposition. Based on this evaluation, management concluded that
an impairment of the acquired assets had occurred and recorded a
write down of such assets to fair value. The fair values of the
long-lived assets were estimated using the present value of
expected future cash flows expected from such assets, discounted
at a rate of return of 18%. Considerable management judgment was
involved in estimating fair value and, therefore, operating
results could vary significantly from management's estimates. In
accordance with the provisions of the Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company recorded an impairment charge of $12,300,000,
consisting of $9,847,000 of goodwill, $2,159,000 of purchased
technology and internally developed software costs and $294,000
of plant and equipment. Following the impairment charge, the
carrying value of goodwill is zero.
PURCHASED TECHNOLOGY AND CAPITALIZED SOFTWARE COSTS: The Company
capitalizes software development costs in accordance with
Statement of Financial Accounting Standards Number 86
"Accounting for the Costs of Computer Software to Be Sold
Leased, or Otherwise Marketed" (SFAS 86). The capitalization of
software development costs begins when the technological
feasibility of a product has been established by development of
a working model and ends when the product is available for
general release to customers. The establishment of technological
feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable
judgment by management with respect to certain external factors,
including, but not limited to, anticipated future revenues,
estimated economic life and changes in software and hardware
technologies. Annual amortization charged to cost of sales are
computed on an individual product basis and are the greater of:
(a) the ratio of current gross revenues for a product to the
total current and anticipated future gross revenues for the
product, or (b) the straight-line method over the estimated
economic life of the product, which is generally estimated to be
5 years. The Company also capitalizes purchased technology as
discussed in Note 2. As noted above, the Company completed an
impairment evaluation which resulted in the write-down of
$2,159,000 of purchased technology and capitalized software.
As of December 31, 2000 and 1999, capitalized software
development costs, net of accumulated amortization, were
$1,204,000 and $2,106,000 respectively. Amortization expense
excluding the write-down related to the capitalized software
development costs was $453,000, $350,000 and $0 for the years
ended December 31, 2000, 1999 and 1998, respectively. As of
December 31, 2000 and 1999, purchased technology associated with
the acquisition of Progressive were $4,383,000 and $7,750,000,
net of accumulated amortization, respectively. Amortization
expense, excluding the write down, related to the purchased
technology was $1,673,000, $1,838,000 and $1,212,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.
RESEARCH AND DEVELOPMENT: All research and development expenditures are
charged to expense in the period incurred.
OTHER LONG-TERM ASSETS: Included in other long-term assets at December
31, 2000 and 1999 is a note receivable from a corporate officer of
$125,000, which bears interest at the prime rate. Also included at
December 31, 2000 and 1999 is $850,000 and $500,000, respectively,
representing the value assigned by the Company to 6,750,000 and 2,500,000
membership interests in RetailDNA LLC, a privately held company involved
in the development of specialty software products for the restaurant
industry. The Company received such interests in return for having
provided certain custom software development. The Company accounted for
the exchange in accordance with APB #29, "Accounting for Nonmonetary
Transactions". Accordingly, $350,000 and $500,000 were netted against
engineering, design and product development expense in 2000 and 1999,
respectively.
RECEIVABLE FROM SALE OF STOCK: In connection with the exercise of options
in 1997, the Company offered loans to all employees whose total exercise
price of options under the Tridex Corporation 1989 Long Term Incentive
Plan (the "1989 Plan") exceeded $50,000. At December 31, 2000 one such
loan was outstanding in the amount of $350,000. The loan is a full
recourse loan which expired in June 2000, bears interest at the rate of
7.577% and is secured by a
F-7
pledge of the shares acquired by the employee through the exercise of the
options. The Company has taken no action to modify the terms of the loan
or demand payment or repatriation of the shares acquired by the employee.
REVENUE RECOGNITION: Revenue is generated from sales of hardware systems
and components and from licensing software systems under noncancelable
license agreements through direct and indirect channels. The Company also
generates revenues from custom software design, customer support,
maintenance and training services.
Revenue on software sales is recognized in accordance with Statement of
Position SOP 97-2, "Software Revenue Recognition" (SOP 97-2). Under SOP
97-2, software license revenues through the Company's direct sales
channels are recognized when a noncancelable license agreement has been
executed, fees are fixed and determinable, the software has been
delivered, accepted by the customer if acceptance is required by the
contract and other than perfunctory, and collection is considered
probable. Software license revenues through the Company's indirect sales
channel are recognized as such fees are reported to the Company.
Customer support and maintenance revenues are recognized ratably over the
contractual period associated with them, generally one year. Revenues
from other services are recognized as services are performed. The Company
may enter into contracts which provide hardware, software license, and
service elements. As such service elements are not essential to
functionality of the software, in accordance with SOP 97-2, the hardware
and license fees are generally recognized upon delivery of the respective
elements and the service revenues are recognized when performed.
Deferred revenue is comprised of payments received in advance.
CONCENTRATION OF CREDIT RISK: During the year ended December 31, 2000,
sales to the Company's three largest customers accounted for
approximately 32%, 18% and 9%, respectively, of the Company's net sales.
During the year ended December 31, 1999, sales to the three largest
customers accounted for approximately 35%, 13% and 13%, respectively, of
the Company's net sales. During the year ended December 31, 1998, sales
to the Company's two largest customers accounted for approximately 25%
and 15%, respectively, of the Company's net sales.
STOCK BASED COMPENSATION: The Company applies APB Opinion 25 and related
interpretations in accounting for its stock option plan. Under APB 25,
compensation expense is recognized to the extent that the fair market
value of the underlying stock on the date of grant exceeds the exercise
price of the employee stock option. Additional disclosures required under
Financial Accounting Standards Board Statement No. 123 "Accounting for
Stock-Based Compensation" (SFAS 123), are included in Note 8.
RECENT ACCOUNTING PRONOUNCEMENTS: In March 2000, the Financial Accounting
Standards Board issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB
Opinion No. 25". The interpretation clarifies the application of APB
Opinion No. 25 in specified events, as defined. The adoption of this
interpretation has not had a material effect on the accompanying
financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition". This
bulletin, as amended by SAB 101A and SAB 101B, summarizes views of the
Staff on the measurement and timing of revenue recognition in financial
statements of public companies. We believe that our current revenue
recognition policy complies with the guidelines in the bulletin.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. Tridex is required to
adopt SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, in
fiscal 2001. SFAS No. 133 establishes methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. The Company has not
entered into any derivative financial instruments or hedging activities.
As a result, management believes adoption of SFAS No. 133 will not have a
material impact on the financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of the
Company's cash and cash equivalents, accounts receivable, accounts
payable, accrued liabilities and debt are carried at cost which
approximates their fair value.
INCOME TAXES: Income tax expense is based on estimated taxes payable or
refundable on a tax return basis for the current year and changes in the
amount of deferred tax assets and liabilities during the year. Deferred
income taxes are provided for revenue and expenses that are recognized in
different periods for income tax and financial statement purposes. The
Company accounts for income taxes in accordance with FAS 109 "Accounting
for Income Taxes," which mandates the liability method for computing
deferred income taxes. The objective of the liability method is to
F-8
recognize the amount of current and deferred taxes payable or refundable
at the financial statement date resulting from all events that have been
recognized in the financial statement based upon the provisions of
enacted tax laws. See Note 9 for a further discussion.
EARNINGS (LOSS) PER COMMON SHARE: Basic earnings (loss) per common share
is based on the weighted average number of common shares outstanding
during the period. Diluted earnings per common share assumes the exercise
of options and warrants and the conversion of dilutive securities, when
the result is dilutive. For the years ending December 31, 2000, 1999 and
1998, the effects of potential dilutive common shares outstanding have
been excluded as they would be anti-dilutive in the loss per share
calculation and accordingly, the basic and diluted per share amounts were
the same.
2. ACQUISITIONS AND DISPOSITIONS:
In the quarter ended December 31, 1999, management committed to sell
Ultimate to UTC Holding Company, Inc., an affiliate of CFG Management II,
L.P. and completed the sale on February 18, 2000 for approximately
$12,544,000 in cash. The gain on the sale was $5,588,000. As described in
Note 5, the Company used $8,000,000 of the sale proceeds to repay a
portion of the Fleet Term Loan and $3,000,000 to repay a portion of the
Working Capital Facility.
The Consolidated Financial Statements have been reclassified to present
the results of operations of Ultimate as discontinued operations. Summary
results of Ultimate for each of the last three years until its sale are
summarized below.
Year Ended December 31,
----------------------------------------------------------------------------
2000 1999 1998
----------------------------------------------------------------------------
(Dollars in thousands, except share amounts)
Net sales $ 2,683 $ 29,490 $ 25,608
Operating income (loss) (26) 2,738 1,671
Net income (loss) (26) 2,084 879
Earnings (loss) per share basic (0.01) 0.33 0.14
On April 17, 1998, the Company purchased all of the issued and
outstanding shares of privately held Progressive, a software and systems
provider for the restaurant and specialty retail industries. The purchase
price of Progressive was $47,594,000 including acquisition costs. The
acquisition of Progressive was accounted for by the purchase method.
Accordingly, the results of operations of Progressive have been included
in the accompanying consolidated financial statements from the date of
acquisition.
A valuation of all intangible assets of Progressive was performed by an
independent appraisal firm in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation. The
intangible assets included in-process software technology projects, among
other assets, which were related to research and development that had not
reached technological feasibility and for which there was no alternative
future use.
The amount of the purchase price allocated to in-process research and
development was determined by estimating that the stage of completion at
the date of acquisition was 89%, estimating cash flows resulting from the
expected revenues generated from the project, and discounting the net
cash flows back to their present value using a discount rate of 23%,
which represents an appropriate risk premium to the Company's weighted
average cost of capital. In process technology under development at the
date of acquisition that had not established technological feasibility
and for which no alternative use was identified were written off in
accordance with generally accepted accounting principles. If this project
is not successfully developed, the Company may not realize the value
assigned to the in-process research and development projects. The
goodwill and other intangibles and purchased existing and core technology
are being amortized over five to ten years. The allocation of the
purchase price was as follows:
F-9
Tangible net assets $ 6,475
Purchased in process software technology 17,600
Purchased existing and core technology 10,800
Goodwill and other intangibles 12,719
-----------------------
$ 47,594
=======================
The following unaudited pro forma data reflect the acquisition of
Progressive as if the acquisition had occurred at the beginning of 1998,
but exclude the one-time charge for in-process software technology,
discussed above. The pro forma financial information is not necessarily
indicative of the combined results that would have occurred had the
acquisition taken place at the beginning of the period, nor is it
necessarily indicative of the results that may occur in the future.
Year Ended
December 31, 1998
----------------------------------------
(Dollars in Thousands,
Except share amounts)
Net sales $ 24,362
Operating loss (6,139)
Loss from continuing operations (13,939)
Loss from continuing operations, per share - basic (0.78)
3. RECEIVABLES:
Receivables are net of the allowance for doubtful accounts. The
reconciliation of the allowance for doubtful accounts is as follows:
Year Ended December 31,
--------------------------------------------------
2000 1999
--------------------------------------------------
(Dollars in thousands)
Balance at beginning of year $ 975 $ 290
Provision for doubtful accounts (214) 766
Accounts written off, net (611) (81)
--------------------------------------------------
Balance at end of year $ 150 $ 975
==================================================
4. ACCRUED LIABILITIES:
The components of accrued liabilities are:
Year Ended December 31,
--------------------------------------------------
2000 1999
--------------------------------------------------
(Dollars in thousands)
Interest $ 2,656 $ 1,413
Legal and environmental matters 807 479
Compensation 181 97
Other 825 422
--------------------------------------------------
$ 4,469 $ 2,411
==================================================
F-10
5. BANK CREDIT AGREEMENT AND SUBORDINATED DEBT:
The components of debt are:
Year Ended December 31,
---------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------
(Dollars in thousands)
Term loan payable $ 3,100 $ 11,100
Senior subordinated notes, net of discount 11,000 9,591
---------------------------------------------------------------------
14,100 20,691
Current portion 14,100 20,691
---------------------------------------------------------------------
Long term portion $ 0 $ 0
=====================================================================
In April 1998, the Company entered into a Credit Agreement with Fleet
National Bank which provided a $12.0 million Senior Term Loan (the "Term
Loan") with a maturity of March 31, 2003 and an $8.0 million Working
Capital Facility ("WCF"). At the same time, the Company sold Senior
Subordinated Notes due April 17, 2005 (the "Notes") in the principal
amount of $11.0 million to Massachusetts Mutual Life Insurance Company
and affiliates. The proceeds of the Senior Term Loan and the Senior
Subordinated Notes were used in the acquisition of Progressive. The Term
Loan and WCF are secured by a first priority security interest in
substantially all of the Company's assets. The Credit Agreement, as
amended, permits the Company to borrow up to $6,000,000 under the WCF,
subject to the eligible borrowing base limitations, establishes interest
rate margins of 2.5% on prime rate-based loans and 4.75% on LIBOR-based
loans and requires minimum monthly maintenance fees of $3,000. If loans
under the WCF exceed borrowing base capacity, the Company will incur an
additional interest rate margin of 2.0%. In February 2000, the Company
used a portion of the proceeds from the sale of Ultimate to retire $8.0
million principal amount of the Senior Term Loan. At December 31, 2000
the interest rates were 11.5%, 11.4% and 12.0% on the Term Loan, WCF and
Notes, respectively.
The Company issued to the MassMutual Investors on May 27, 1998 warrants
to purchase 350,931 shares of the Company's common stock at $7.00 per
share. The estimated fair market value of the warrants of $1,228,000 was
recorded as a discount to the principal amount of the outstanding Notes
and was being amortized to interest expense over the term of the Notes
using the interest rate method. In consideration for a March 26, 1999
amendment to the Notes and in exchange for the warrant issued in 1998,
the Company issued new stock purchase warrants to the MassMutual
Investors to purchase 800,000 shares of common stock at $2.03 per share.
The incremental estimated fair value of the new warrants over the
estimated fair value of the old warrants, $600,000, was recorded as
additional debt discount.
On February 18, 2000, MassMutual and its affiliates agreed to certain
modifications of the Notes, including the acceleration of their maturity
to December 31, 2000. That acceleration of the maturity of the Notes
constituted a substantial debt modification, which under EITF 96-19
"Debtor's Accounting for a Modification or Exchange of Debt Instruments",
requires the Notes to be adjusted to their fair value as of the date of
the February 18, 2000 amendment. The Company calculated the present value
of the principal and interest due December 31, 2000 using the remaining
maturity period of the Notes and an estimated fair value interest rate at
the modification date. As a result of this modification, the Company
recognized a debt extinguishment loss of $695,000 which was recorded as
an extraordinary item in the quarter ending March 31, 2000.
As reported previously, the Company, at various times, has been in
violation of the covenants of both the Term Loan and the Notes, resulting
in several modifications of the terms of each, including an acceleration
of the maturities of both loans to December, 31, 2000. The Company does
not have the capability to repay or replace either the Term Loan or the
Notes. As a result, both credit facilities are due upon demand and that
fact raises substantial doubt about the Company's ability to continue as
a going concern. The Term Loan, WCF and Notes are reflected as current
liabilities in the Company's financial statements.
F-11
The Company has been advised that, in December 2000, Fleet National Bank
sold its interest in the Term Loan and WCF to ARK CLO 2000-1, Limited.
Inasmuch as the Company, at present, still lacks the capability to repay
or replace its existing credit facilities, it intends to seek
accommodation with its lenders which will allow it to continue operating
while seeking either a modification to, or replacement of, the
facilities. However, there can be no assurance that the Company will be
successful in such efforts or as to what form such modification or
replacement might be.
6. PENSION PLAN:
During the quarter ended September 30, 1999, the Company's obligations
under a non-qualified unfunded pension arrangement for Alvin Lukash, a
shareholder and former corporate officer and Director Emeritus, ceased
due to the death of Mr. Lukash. The unfunded accumulated benefit
obligation at the time of his death, approximately $500,000, was reversed
and recorded as a reduction of pension expense.
7. COMMITMENTS AND CONTINGENCIES:
(a) LEASE OBLIGATIONS:
At December 31, 2000, the Company was lessee on long term operating
leases for real property. The terms of certain leases provide for
escalating rent payments in later years of the lease as well as payment
of minimum rent and real estate taxes. Rent expense amounted to
approximately $362,000 in 2000, $441,000 in 1999 and $434,000 in 1998.
Minimum aggregate rental payments required under operating leases that
have initial or remaining non-cancelable lease terms in excess of one
year as of December 31, 2000 are as follows: approximately $420,000 in
2001, approximately $432,000 in 2002, approximately $520,000 in 2003,
approximately $536,000 in 2004 and approximately $391,000 in 2005.
(b) LEGAL PROCEEDINGS:
In April, 1998, the Company acquired all of the common stock of
Progressive Software, Inc. from Paul J. Smith ("Smith"), for a total
purchase price of $47,594,000 consisting of 714,000 shares of the
Company's common stock, valued at $4,998,000, and the balance in cash. As
a part of the transaction, the parties entered into an Escrow Agreement
with respect to possible future liabilities related to sales taxes in
various jurisdictions where Progressive had done business. Additionally,
the Company entered into a three year lease (the "Lease") with a
partnership in which Smith is a principal to occupy the primary office
facility used by Progressive. Subsequent to the acquisition, the Company
filed for arbitration against Smith seeking a reduction in the purchase
price paid by the Company. In January, 1999, Smith filed a complaint
seeking damages up to $5,000,000 for the refusal by the Company to
register the shares of common stock received by him as a part of the
purchase price.
On October 31, 2000, the Company and Smith entered into a Settlement
Agreement under which all of the claims pending between the parties were
settled. Pursuant to the Settlement Agreement, Smith returned to the
Company the 714,000 shares of the Company's common stock issued to him,
originally valued at $7.00 per share, as well as $1,226,000 in cash. The
Settlement Agreement further provided that effective October 1, 2000, no
further rent would be due under the Lease, that the Lease would terminate
on December 31, 2000 and that the Company had no further obligation
pursuant to the Escrow Agreement. Effective upon Smith's returning the
714,000 shares of common stock, the Company's outstanding shares of
common stock decreased to 5,654,289. The settlement has been reflected in
the Company's financial statements in the quarter ending December 31,
2000 as other income in the amount of $1,440,200, of which $214,200 has
been attributed to the value of the stock received. (See Note 1
"Restricted Cash")
Allu Realty ("Allu"), a Massachusetts business trust owned by the
Company, is the former owner of
F-12
land located at 100 Foley Street, Somerville, Massachusetts (the "Site").
Allu sold the property to 100 Foley Street Incorporated ("Foley"), an
unrelated entity.
In 1984, Allu and the Company disclosed to the Massachusetts Department
of the Attorney General the existence of chromium, oil and grease at the
Site. As a result, the Environmental Protection Division of the
Department of the Attorney General and the Massachusetts Department of
Environmental Protection conducted an investigation of the Site. In 1993,
the Company entered into an agreement with Foley pursuant to which the
Company and Foley agreed to pay 75% and 25%, respectively, of the costs
incurred after January 1, 1992 in connection with the investigation and
remediation of the Site (the "Site Participation Agreement"). The Site
Participation Agreement also provided that, to the extent there are
available proceeds from the sale of the Site, the Company would be
reimbursed approximately $200,000 of the $250,000 it expended in
connection with the Site prior to January 1, 1992. As of December 31,
2000, the Company had spent approximately $766,000 in connection with the
Site.
In 1997, Foley sold the Site to an affiliate of Stop & Shop, Inc. ("Stop
& Shop"). As part of the sale transaction, Foley was required to place
approximately $875,000 in escrow (the "Stop & Shop Escrow") to cover the
costs of remediation, which was completed in 1999. In 1997, Foley brought
suit in the United States District Court, District of Massachusetts,
against the Company claiming that the Company failed to contribute its
shares of the remediation costs pursuant to the Site Participation
Agreement. Foley asserted that Allu and the Company remain liable for
payment of certain costs associated with the remediation of the Site
after its sale to Stop & Shop, and claimed that it is entitled to
reimbursement from the Company of a portion of the Stop & Shop Escrow.
The Company filed a counterclaim, and sought reimbursement of funds
previously expended in accordance with the Site Participation Agreement.
Mediation between the parties was not successful and in July 2000, after
trial of the case, the jury made certain factual findings upholding the
parties' obligations under the Site Participation Agreement, including
the Company's obligation to pay 75% of the remediation costs and the
obligation of Foley to reimburse the Company out of sale proceeds.
On October 16, 2000, the United States District Court for Massachusetts
entered judgment against the Company in the amount of approximately
$791,000, of which approximately $156,000 represented legal fees awarded
to the opposing party and approximately $108,000 represented interest.
The Company has filed various post-trial motions seeking to vacate the
judgment or to have it modified. If these motions are unsuccessful, the
Company intends to appeal the decision of the Court. Subsequently, Foley
attached $791,000 in cash being held for the account of the Company by a
third party. The Company has moved to discharge the attachment, which
motion has not yet been heard. As of December 31, 2000, the Company had
accrued $791,000 with respect to its potential liability under this
judgment. The Company is unable to forecast when this litigation will
finally be resolved or the amount of its ultimate exposure with respect
thereto.
8. STOCK OPTIONS AND WARRANTS:
The Company presently maintains three stock option plans for employees
and non-employee directors as follows:
1998 NON-EXECUTIVE LONG TERM INCENTIVE PLAN
The 1998 Long Term Incentive Plan (the "1998 Non-Executive Plan") was
approved by the shareholders of the Company at the Annual Meeting held on
May 27, 1998. The 1998 Non-Executive Plan permits stock-based incentive
compensation in the form of: (a) stock options, (b) stock appreciation
rights, (c) restricted stock, (d) deferred stock, (e) stock purchase
rights and (f) other stock-based compensation. Pursuant to the 1998
Non-Executive Plan, up to 600,000 shares of common stock may be
distributed to key non-executive employees of the Company. Options
granted are at prices equal to 100% of the fair market value of the
common stock at the date of grant. Under APB 25, when the exercise price
of employee stock options equals the fair market value of the underlying
stock on the date of grant, no compensation expense is
F-13
recognized. Options granted are exercisable at the discretion of the
Stock Option Committee, but in no event shall the period be for more than
ten years. Ninety days after an employee's termination, the outstanding
options are canceled. At December 31, 2000, the Company had reserved
600,000 shares of common stock for issuance upon the exercise of options
granted under the 1998 Non-Executive Plan. At December 31, 2000, options
for 179,500 shares were outstanding under the 1998 Non-Executive Plan at
exercise prices ranging from $0.75 to $7.00 per share. These options, of
which 48,821 were exercisable, have a weighted average exercise price of
$5.41 per share and a weighted average remaining contractual life of 8.7
years.
1997 LONG TERM INCENTIVE PLAN
The 1997 Long Term Incentive Plan (the "1997 Plan") was approved by the
shareholders of the Company at the Annual Meeting held on May 14, 1997
and amended at the Annual Meeting on May 27, 1998 to increase the number
of authorized shares. The 1997 Plan permits stock-based incentive
compensation in the form of: (a) stock options, (b) stock appreciation
rights, (c) restricted stock, (d) deferred stock, (e) stock purchase
rights and (f) other stock-based compensation. Pursuant to the 1997 Plan,
as amended, up to 1,000,000 shares of common stock may be distributed to
officers and key employees of the Company. Options granted are at prices
equal to 100% of the fair market value of the common stock at the date of
grant. Under APB 25 when the exercise price of employee stock options
equals the fair market value of the underlying stock on the date of
grant, no compensation expense is recognized. Options granted are
exercisable at the discretion of the Stock Option Committee of the Board,
but in no event shall the period be for more than ten years. Ninety days
after an employee's termination, the outstanding options are canceled. At
December 31, 2000, the Company had reserved 971,335 shares of common
stock for issuance upon the exercise of options granted under the 1997
Plan. At December 31, 2000, options for 452,666 shares were outstanding
under the 1997 Plan at exercise prices ranging from $0.81 to $7.50 per
share. These options, of which 92,667 were exercisable, have a weighted
average exercise price of $3.02 per share and a weighted average
remaining contractual life of 7.8 years.
NON-EMPLOYEE DIRECTORS PLAN
The Non-Employee Directors' Stock Plan (the "Directors' Plan") was
approved by the Shareholders of the Company at the Annual Meeting held on
May 14, 1997. The Directors' Plan permits the issuance to non-employee
directors of the Company of options for up to 100,000 shares of the
Company's common stock. Options issued under the Directors' Plan do not
qualify as incentive options under Section 422 of the Internal Revenue
Code. Options to purchase 10,000 shares of the Company's common stock
were granted to each non-employee director upon the effective date of the
Directors' Plan. Persons subsequently elected as non-employee directors
will be granted options to purchase 10,000 shares on the date of their
election. Thereafter, on the date of the Company's Annual Meeting of
Shareholders, each non-employee director will be granted an option to
purchase 3,000 shares of common stock. Options become exercisable in
three equal annual installments and may be exercised within ten years of
the date of the grant. At December 31, 2000, the Company had reserved
100,000 shares of common stock for issuance upon the exercise of options
granted under the Directors' Plan. At December 31, 2000, options for
57,000 shares were outstanding under the Directors Plan at exercise
prices ranging from $0.53 to $6.75 per share. These options, of which
38,996 were exercisable, have a weighted average exercise price of $3.41
per share and a weighted average remaining contractual life of 7.3 years.
WARRANTS
As of December 31, 2000 the Company had outstanding stock purchase
warrants for 800,000 shares of common stock issued to the MassMutual
Investors in conjunction with the issuance of the Notes discussed in Note
5. These warrants are exercisable at $2.03 per share through April 17,
2008.
F-14
The following summarizes the combined activity of all stock option plans
and outstanding warrants during the three-year period ended December 31,
2000:
Weighted- Weighted-
Stock Average Options and Average
Options and Exercise Warrants Exercise
Warrants Price Exercisable Price
---------------------------------------------------------------------------
Balance, December 31, 1997 450,000 $ 2.97 0 $ 0
Granted 860,431 6.43
Exercised (28,665) 2.81
Canceled (143,836) 4.63
---------------------------------------------------------------------------
Balance, December 31, 1998 1,137,930 4.65 117,981 3.00
Granted 1,009,000 2.08
Canceled (570,936) 6.33
---------------------------------------------------------------------------
Balance, December 31, 1999 1,575,994 2.92 1,089,762 2.53
Granted 445,000 1.06
Canceled (531,828) 3.87
---------------------------------------------------------------------------
Balance December 31, 2000 1,489,166 $ 2.02 980,484 $ 2.35
===========================================================================
The following summarizes additional information about stock options and
warrants outstanding at December 31, 2000:
Options and Warrants Outstanding Options and Warrants Exercisable
-------------------------------------------------- ----------------------------------
Number Weighted- Weighted- Number Weighted-
Range of Outstanding at Average Average Exercisable at Average
Exercise December 31, Exercise Remaining December 31, Exercise
Prices 2000 Price Life 2000 Price
--------------------------------------------------------------------------------- ----------------------------------
$ 0.53 $ 0.75 19,000 $ 0.65 9.39 - $ -
$ 0.81 $ 1.00 392,500 $ 0.96 9.41 - $ -
$ 1.56 $ 2.13 829,500 $ 2.02 7.36 806,834 $ 2.03
$ 2.38 $ 3.31 179,666 $ 2.86 5.03 133,328 $ 2.97
$ 3.39 $ 4.13 15,500 $ 3.96 6.90 3,678 $ 4.13
$ 6.75 $ 7.00 53,000 $ 6.96 7.31 36,644 $ 6.96
-------------------------------------------------- ----------------------------------
1,489,166 $ 2.02 7.64 980,484 $ 2.35
================================================== ==================================
Had compensation expense been recognized based on the fair value of the
options at their grant dates, as prescribed in Financial Accounting
Standard No. 123, the Company's net loss and loss per share would have
been:
Year Ended December 31,
------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
Net loss:
As reported $ (17,158) $ (14,765) $(14,146)
Pro forma under FAS 123 $ (17,463) $ (15,373) $(14,513)
Pro forma loss per share, basic
and diluted:
As reported $ (2.75) $ (2.32) $ (2.33)
Pro forma under FAS 123 $ (2.80) $ (2.41) $ (2.41)
F-15
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions:
2000 1999 1998
------------------------------------------------------------------------------
Dividend yield 0% 0% 0%
Risk-free interest rates 5.3% - 6.7% 4.9% - 5.8% 4.1% - 5.6%
Expected volatility 53% - 65% 42% - 44% 37% - 44%
Expected option term 3 years 3 years 3 years
9. INCOME TAXES:
The components of the income tax provision (benefit) are as follows:
Year Ended December 31,
------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------
(Dollars in thousands)
Current:
Federal $ 0 $ (329) $ 69
State 159 301 (17)
------------------------------------------------------------------------------
159 (28) 52
------------------------------------------------------------------------------
Deferred:
Federal 521 7,856 (7,498)
State 49 680 (729)
------------------------------------------------------------------------------
570 8,536 (8,227)
------------------------------------------------------------------------------
Provision (benefit) for income
taxes $ 729 $ 8,508 $ (8,175)
------------------------------------------------------------------------------
Income tax provision (benefit) is included in the statement of operations
as follows:
Year Ended December 31,
------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------
(Dollars in thousands)
Continuing operations $ 159 $ 7,276 $ (9,026)
Discontinued operations 570 1,232 851
------------------------------------------------------------------------------
Provision (benefit) for income
taxes $ 729 $ 8,508 $ (8,175)
------------------------------------------------------------------------------
F-16
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the
financial statements. The Company's gross deferred tax assets and
liabilities were comprised of the following:
December 31, 2000 December 31, 1999
-------------------------------------------------------
(Dollars in thousands)
Deferred tax assets:
In-process research and development $ 5,553 $ 6,005
Intangibles 4,832 174
Future deductible liabilities and reserves 594 1,037
Net operating loss carryforwards 7,674 3,866
Federal minimum tax credit carryforwards 247 210
Federal business and other tax credit
carryforwards 437 375
Valuation allowance (19,285) (11,460)
--------------------------------------------------
Net deferred tax assets 52 207
Deferred tax liabilities:
Depreciation (52) (207)
--------------------------------------------------
Net deferred asset/liability $ 0 $ 0
==================================================
The valuation allowance increased by $7,825,000 due to the current year's
net loss. Management has concluded that realization of all deferred tax
assets is no longer more likely than not, and accordingly has recorded a
full valuation allowance. Management's conclusion is based on the
Company's cumulative losses.
At December 31, 2000, the Company had federal net operating loss
carryforwards of $19,071,000 that expire beginning in 2018 and state net
operating loss carryforwards of $24,991,000 that expire principally in
2001 through 2005. The Company also had federal minimum tax credit
carryforwards of $247,000 which may be carried forward indefinitely as a
credit against regular federal tax liability in future years and other
tax credit carryforwards of $437,000 consisting primarily of research and
development tax credits that expire beginning in 2010.
Differences between the U.S. statutory federal income tax rate and the
Company's effective income tax rate from continuing operations are
analyzed below:
Year Ended December 31,
------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------
Federal statutory tax rate (34.0%) (34.0%) (34.0%)
State income taxes, net of
federal income taxes (4.1%) (3.2%) (3.4%)
Valuation allowance 39.2% 118.2% -
Other (0.4%) (0.1%) (0.2%)
------------------------------------------------------------------
Effective tax rate 0.7% 80.9% (37.6%)
==================================================================
F-17
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's quarterly results of operations for the years ended December
31, 2000 and 1999 (unaudited) are as follows:
(In thousands except share data)
-------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
-------------------------------------------------------------------------------------
2000:
Total sales $ 3,952 $ 4,116 $ 4,405 $ 4,477
Total expenses 6,756 5,525 18,171 6,015
Other charges (income) 937 832 1,018 (438)
Loss from continuing
operations (3,741) (2,241) (14,819) (1,065)
Net income (loss) $ 1,126 $ (2,311) $ (14,819) $ (1,154)
Loss per share from
continuing operations -
basic and diluted $ (0.58) $ (0.36) $ (2.33) $ (0.26)
Net income (loss) per share
- basic and diluted 0.18 (0.36) (2.33) (0.24)
1999:
Total sales $ 6,311 $ 9,875 $ 7,920 $ 7,150
Total expenses 7,354 10,743 9,602 9,225
Other charges (income) 722 783 898 924
Loss from continuing
operations (1,049) (982) (1,742) (12,498)
Net loss $ (726) $ (324) $ (1,399) $ (12,316)
Loss per share from
continuing operations -
basic and diluted $ (0.16) $ (0.15) $ (0.27) $ (1.97)
Net loss per share - basic
and diluted (0.11) (0.05) (0.22) (1.94)
F-18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) DIRECTORS.
SETH M. LUKASH, 55, has been a senior executive officer of the Company
since 1977 and has been a Director since 1979. He has served as Chairman
of the Board of Directors of the Company since November 1988, Chief
Executive Officer since August 1987 and President and Chief Operating
Officer since June 1989. [Mr. Lukash has been a director of Tanaka
Capital Management since 1996 and has been a director or F.A.S.T.
(Food Automation Service Techniques, Inc.) since 1995.]
PAUL J. DUNPHY, 81, has been a Director of the Company since 1989. Mr.
Dunphy has been a management consultant from 1988 until the present. Mr.
Dunphy was Chairman of the Board, Chief Executive Officer and President
of Towle Manufacturing Company from 1985 through 1988 and was Executive
Vice President of Anchor Hocking, a glass and metal manufacturer, from
1970 through 1984. Mr. Dunphy is a Director of Midwest Fabricating Co.
and Four Johns Corporation. He is also a member of the Board of Trustees
of Mt. Ida College, the President's Advisory Council of Bentley College
and the Executive Advisory Board for Ohio University.
GRAHAM Y. TANAKA, 53, has been a Director of the Company since 1988. Mr.
Tanaka has been President of Tanaka Capital Management, Inc., an
investment management firm, since 1986. From 1980 to 1986, Mr. Tanaka
served as Chairman of Milbank, Tanaka & Associates. He is also President
of The Tanaka Funds, Inc. Mr. Tanaka is a director of TransAct
Technologies Incorporated ("TransAct"), a manufacturer of
transaction-based printers that was a subsidiary of the Company through
March 31, 1997. Mr. Tanaka is also a member of the Board of Directors of
the Japanese American National Museum.
THOMAS R. SCHWARZ, 64, has been a Director of the Company since 1995. Mr.
Schwarz was Chairman of Grossman's Inc., a retailer of building
materials, from 1990 to 1994, when he retired. Mr. Schwarz was President,
Chief Operating Officer and a director of Dunkin' Donuts Incorporated, a
food service company, from 1980 to 1990. He is the Chairman of the Board
of Directors of TransAct and a director of Lebhar-Friedman Publishing
Company, Yorkshire Restaurants and Foilmark, Inc., a manufacturer of hot
stamping equipment and supplies. He is a Trustee of the Tanaka Growth
Fund. Mr. Schwarz was a board member of The Timberland Company, an
overseer of WGBH Educational Foundation, Inc. (New England Public
Broadcasting), the David Littman Foundation, The Walnut Hill School and
co-chairman of the Inner City Scholarship Fund.
(b) EXECUTIVE OFFICERS.
Name Age Position
------------------------- ------- --------------------------------------------------------------------------
Seth M. Lukash 55 Chairman of the Board of Directors, President, Chief Executive Officer,
Chief Operating Officer and Director
William A. Beebe 65 Chief Financial Officer
Seth M. Lukash has been a senior executive officer of the Company
since 1977 and has been a Director since 1979. He has served as
Chairman of the Board of Directors of the Company since November
1988, Chief Executive Officer since August 1987, and President and
Chief Operating Officer since June 1989. Mr. Lukash previously
served as President of the Company from September 1983 to August
1988 and as Chief Operating Officer from September 1983 to August
1987.
10
William A. Beebe joined the Company in June 2000 as Chief
Financial Officer. Since his retirement in 1997 from the position
of chief financial officer of Project Pros, Inc., Mr. Beebe has
served in various consulting capacities. Previously, for more than
30 years, he held executive and consulting positions, principally
that of chief financial officer in a number of companies in the
food service, software, electronic manufacturing and distribution
industries.
(c) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and Executive Officers and persons who beneficially
own more than 10% of a registered class of the Company's equity
securities ("10% Owners") to file with the Securities and Exchange
Commission ("SEC") reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company.
Directors, Executive Officers and 10% Owners are required by SEC
regulation to furnish the Company with copies of all Section 16(a)
reports they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, or written representations that no
other reports were required for those persons, the Company believes that,
during the fiscal year ended December 31, 2000, the Company's Directors,
Executive Officers and persons who beneficially own more than 10% of the
Company's equity securities filed all reports required under Section
16(a) of the Securities Exchange Act of 1934, other than a Form 3 which
was required to be filed by William A. Beebe upon his election as Chief
Financial Officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four most highly compensated Executive Officers
who earned more than $100,000 in salary and bonus in 2000 for each of the last
three fiscal years.
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four most highly compensated Executive Officers
who earned more than $100,000 in salary and bonus in 1999 for each of the last
three fiscal years.
LONG TERM
COMPENSATION
ANNUAL COMPENSATION (A) ($)
-------------------------------------- -------------
SECURITIES ALL OTHER
NAME AND FISCAL SALARY BONUS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) (B)($) OPTIONS(#) (C)($)
------------------ ---------- ----------- ----------- ---------- ------------
Seth M. Lukash 2000 $ 281,169 - - $ 5,868
Chairman of the Board, 1999 $ 282,000 - - $ 5,000
President, Chief 1998 $ 276,000 - - $ 4,170
Executive Officer and
Chief Operating Officer
John Forester (d) 2000 $ 182,340 - - $ 2,900
Vice President 1999 $ 38,942 20,000 - $ 779
1998 - - - -
Thomas Mounts (e) 2000 $ 155,000 - - $ 3,100
1999 35,000 - $ 807
1998 - -
- ------------------------------------
(a) Neither the Chief Executive Officer nor any of the other named Executive
Officers received perquisites or other personal benefits in an amount that
exceeded 10% of their salary plus bonus during 2000.
(b) There were no bonuses paid to the named Executive Officers in 1998, 1999 or
2000.
(c) All amounts reported in this column consist entirely of Company
contributions under the Company's 401(k) Plan.
11
(d) Mr. Forester resigned as vice president of Progressive Software, Inc., a
wholly owned subsidiary of the Company, on March 2, 2001. Upon his
resignation, all of Mr. Forester's outstanding options terminated
immediately.
(e) Mr. Mounts resigned as President of Progressive Software, Inc., a wholly
owned subsidiary of the Company, on January 2, 2001. Upon his resignation,
all of Mr. Mounts's outstanding options terminated immediately.
OPTION GRANTS IN 2000
- -------------------------------------------------------------------------------------------------------------------------
Individual Grants Potential realizable value at
assumed annual rates of stock
price appreciation for option
term (b)
- -------------------------------------------------------------------------------------------------------------------------
Percent of
Number of total
securities options/
underlying SARs
options/ granted to
SARs employees Exercise or
Granted in fiscal base price Expiration
Name (#) year ($/Sh) date 5% 10%
- -------------------------------------------------------------------------------------------------------------------------
Seth M. Lukash(a) - - - - - -
Chief Executive Officer
- -------------------------------------------------------------------------------------------------------------------------
William A. Beebe 40,000 25.8% $0.81 May 24, 2011 $23,015 $60,041
Chief Financial Officer
- -------------------------
(a) Mr. Lukash did not receive an option grant in 2000.
(b) The potential realizable dollar value reflected herein is the product of
(i) the difference between (A) the product of the per-share market price
at the time of the grant and the sum of 1 plus the adjusted stock price
appreciation rate (the assumed rate of appreciation compounded annually
over the term of the option) and (B) the per-share exercise price of the
option; and (ii) the number of securities underlying the grant at fiscal
year-end.
AGGREGATE OPTION EXERCISES IN 2000 AND VALUES AT DECEMBER 31, 2000
No options to purchase the Company's common stock were exercised during the
fiscal year ended December 31, 2000.
Number of Securities Underlying Value of Unexercised
Unexercised Options At In-the-Money
December 31, 2000 Options ($)(a)
--------------------------------------- -------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Seth M. Lukash 80,000 -
- -------------------------------
(a) The closing price for the Company's common stock as reported by the
Nasdaq Stock Market on December 29, 2000 was $0.125. Consequently, none
of the options were in-the-money as of December 31, 2000.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
SETH M. LUKASH
Pursuant to the terms of an Employment Agreement dated December 2, 1996 between
Seth M. Lukash and the Company, Mr. Lukash serves as Chairman and Chief
Executive Officer for a term of two years, which term renews automatically on a
monthly basis. Under the terms of the agreement, if Mr. Lukash's employment is
terminated other than for cause, Mr. Lukash shall be entitled to continue to
receive his then current annual base salary, his annual target bonus for the
year of termination, group insurance, and other benefits for a period of two
years payable in monthly installments. If Mr. Lukash's employment is terminated,
other than for cause, within one year of a change in control of the Company, Mr.
Lukash shall be entitled to
12
receive, for a period of three years, his then current annual base salary and
annual target bonus, payable in monthly installments, and continuation of all
benefits. In addition, the Company shall cause immediate vesting of all options
and rights under the Company's stock plans.
CHRISTOPHER SEBES
Pursuant to the terms of an Employment Agreement dated December 26, 2000 between
Christopher Sebes and Progressive Software, Inc., Mr. Sebes serves as Executive
Vice President for a term of one year, which term renews automatically on a
monthly basis. Under the terms of the agreement, if Mr. Sebes is terminated
other than for cause, Mr. Sebes shall be entitled to continue to receive his
then current annual base salary and continuation of benefits for a period of six
months payable in monthly installments. In addition, in the event Mr. Sebes is
terminated in connection with a change in control, the Company shall cause
immediate vesting of all options and rights under the Company's stock plans.
WILLIAM A. BEEBE
Pursuant to the terms of an Employment Agreement dated June 1, 2000 between
William A. Beebe and the Company, Mr. Beebe serves as Vice President and Chief
Financial Officer for a term of one year, which term renews automatically on a
monthly basis. Under the terms of the agreement, if Mr. Beebe is terminated
other than for cause, Mr. Beebe shall be entitled to continue to receive his
then current annual base salary and continuation of benefits for a period of one
year payable in monthly installments. In addition, in the event Mr. Beebe is
terminated in connection with a change in control, the Company shall cause
immediate vesting of all options and rights under the Company's stock plans.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of the close of business on March 16, 2001 there were 5,654,289 shares of
common stock issued and outstanding.
The following table sets forth information as to the beneficial ownership of the
Company's common stock as of March 16, 2001 for each person who is known by the
Company to own beneficially more than five percent of the Company's issued and
outstanding common stock, each person who is a Director or an individual named
in the Summary Compensation Table, and all Directors and Executive Officers of
the Company as a group. The persons named in such table have furnished the
information set forth opposite their respective names:
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(A) CLASS(B)
- ---------------------------------------------------------------------------------------------------------------
MANAGEMENT BENEFICIAL OWNERS
Seth M. Lukash........................ .................... 630,271 (c) 10.99%
Graham Y. Tanaka........................................... 141,716 (d) 2.50%
Paul J. Dunphy............................................. 56,500 (e) 1.00%
Thomas R. Schwarz.......................................... 21,500 (e) *
William A. Beebe........................................... 13,333 (f) *
OTHER BENEFICIAL OWNERS
Massachusetts Mutual Life Insurance Company & Related Parties 1,085,714 (g) 16.82%
1295 State Street, Springfield, MA 01111
Dimensional Fund Advisors, Inc. ........................... 318,100 (h) 5.63%
1299 Ocean Avenue, Santa Monica, CA 90401
Jack Silver................................................ 616,282 (i) 10.90%
660 Madison Ave., 15th floor, New York, NY 10021
All Directors and Executive Officers as a group (5 persons) 863,320 (j) 14.91%
- ------------------------------------
13
(a) Except as otherwise indicated, each of the persons named in the table has
sole voting power and sole investment power with respect to the shares set
forth opposite his name. The information contained in this table was
derived from the Company's records or from a Schedule 13D or 13G filed with
the Securities and Exchange Commission.
(b) An asterisk denotes beneficial ownership of less than 1%.
(c) Includes 80,000 shares exercisable under the Company's 1997 Long Term
Incentive Plan (the "1997 Plan"). Mr. Lukash's address is care of the
Company at 61 Wilton Road, Westport, CT 06880.
(d) Includes 2,000 shares held of record by Mr. Tanaka's sons, and 14,000
shares issuable upon exercise of options granted under the Company's
Non-employee Directors' Stock Plan (the "Directors' Plan") which are
currently exercisable or become exercisable within 60 days.
(e) Includes 14,000 shares issuable upon exercise of options granted under the
Director's Plan which are currently exercisable or become exercisable
within 60 days.
(f) Includes 13,333 shares issuable upon exercise of options granted under the
Director's Plan which are currently exercisable or become exercisable
within 60 days.
(g) Represents shares beneficially owned by Massachusetts Mutual Life Insurance
Company, MassMutual Corporate Investors, MassMutual Participation Investors
and MassMutual Corporate Value Partners Limited (the "MassMutual
Investors") and includes warrants to purchase 800,000 shares of common
stock at $2.03125.
(h) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 318,100 shares of common
stock as of December 31, 1999, all of which shares are held in portfolios
of DFA Investment Dimensions Group, Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(i) Mr. Jack Silver has full voting and dispositive power over the following
four entities, which entities purchased shares of common stock of the
issuer on behalf of the reporting person: (i) Sherleigh Associates Defined
Benefit Pension Plan in the amount of 65,200 shares; (ii) Sherleigh
Associates, Inc., Profit Sharing Plan in the amount of 316,550 shares;
(iii) the Jack & Sherleigh Silver Foundation in the amount of 125,000; and
(iv) Sherleigh Associates, Inc. in the amount of 20,000. The balance of the
shares in the amount of 89,532 are registered in the name of Mr. Silver.
(j) Includes 135,333 shares exercisable under Company Stock Plans which are
currently exercisable or become exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
Prior to 1997, the Company made a personal loan to Seth M. Lukash, Chairman of
the Board, President, Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer and a Director of the Company. During 1999, the highest
outstanding balance of the loan to Seth M. Lukash was $125,000. The loan is
evidenced by a demand note and bears interest at an annual rate equal to the
rate charged by the Company's senior lender on its line of credit. The Company's
Board of Directors has agreed to defer payment of the principal balance of the
loan. Interest on the loan is paid monthly. As of March 16, 2001, the principal
amount outstanding under the loan was $125,000.
On March 14, 1997, the Company accepted a note in the amount of $801,375.00 from
Seth M. Lukash in payment of the exercise price of options and warrants. The
note is a full recourse note, bearing interest payable quarterly at 7.577% and
secured by a pledge of shares acquired through the exercise of the options and
warrants. The highest amount outstanding under the note during 1999 was
$801,375.00. As of March 16, 2001, the principal balance of this note was
$350,000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) THE FOLLOWING FINANCIAL STATEMENTS AND EXHIBITS ARE FILED AS PART OF THIS
REPORT:
(i) FINANCIAL STATEMENTS
See Item 8 on page __.
(ii) FINANCIAL STATEMENT SCHEDULES
See Item 8 on page __.
(iii) LIST OF EXHIBITS.
See Exhibit Index on page __.
(b) REPORTS ON FORM 8-K.
The Company did not file any Current Reports on Form 8-K during the last
quarter of the period covered by this report.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TRIDEX CORPORATION
By: /s/ Seth M. Lukash
---------------------------------------------
Seth M. Lukash
Chairman of the Board, President,
Chief Executive Officer,
Chief Operating Officer and Director
Date: April 13, 2001
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Seth M. Lukash Chairman of the Board, President, Chief April 13, 2001
- ------------------------------------ Executive Officer, Chief Operating Officer
Seth M. Lukash Director
(Principal Executive Officer)
/s/ William A. Beebe
- ------------------------------------ Chief Financial Officer April 13, 2001
William A. Beebe
Chief Financial Officer
(Principal Financial Officer)
- ------------------------------------ Director
Graham Y. Tanaka
/s/ Paul J. Dunphy Director April 13, 2001
- ------------------------------------
Paul J. Dunphy
/s/ Thomas R. Schwarz Director April 13, 2001
- ------------------------------------
Thomas R. Schwarz
15
Exhibit Index
3.1 Certificate of Incorporation of Tridex, as amended, filed on June 28,
1985 as Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 30, 1985, is hereby incorporated herein
by reference.
3.2 Certificate of Amendment of Incorporation of Tridex, dated October 1,
1987, filed on July 18, 1988 as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 2, 1988 is hereby
incorporated herein by reference.
3.3 Certificate of Amendment of Incorporation of Tridex, dated August 15,
1988, filed on June 29, 1989 as Exhibit 3.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 1, 1989 is hereby
incorporated herein by reference.
3.4 Certificate of Amendment of Incorporation of Tridex, dated March
31,1989 filed on June 29, 1989 as Exhibit 3.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 1, 1989 is hereby
incorporated herein by reference.
3.5 Bylaws of Tridex, as amended and restated as of January 22, 1996,
filed on March 26, 1996 as Exhibit 3.5 to the Company's Transition
Report on Form 10-K for the transition year ended December 31, 1995
is hereby incorporated herein by reference.
4.1 Description of the Company's common stock set forth in the Company's
Registration Statement on Form 8-A filed July 14, 1986, is hereby
incorporated herein by reference.
4.2 Tridex Corporation 1997 Long Term Incentive Plan (as amended and
restated), filed as Exhibit A to the Company's Proxy Statement for
the Annual Meeting of Shareholders filed April 17, 1997 is hereby
incorporated herein by reference. *
4.3 Tridex Corporation Non-Employee Directors' Stock Plan filed as
Exhibit B to the Company's Proxy Statement for the Annual Meeting of
Shareholders filed April 17, 1997 is hereby incorporated herein by
reference. *
4.4 Tridex Corporation 1998 Non-Executive Long Term Incentive Plan filed
as Exhibit A to the Company's Proxy Statement for the Annual Meeting
of Shareholders filed May 8, 1998 is hereby incorporated herein by
reference. *
4.6 Securities Purchase Agreements dated as of April 17, 1998, by and
among Massachusetts Mutual Life Insurance Company and certain of its
affiliates and Tridex filed as Exhibit 4.2 to the Company's Current
Report on Form 8-K filed April 30, 1998 is hereby incorporated herein
by reference.
4.7 Form of 19% senior subordinated notes due April 17, 2005 filed as
Exhibit 4.3 to the Company's Current Report on Form 8-K filed April
30, 1998 is hereby incorporated herein by reference.
4.8 Form of Letter of Waiver and Limited Amendment dated November 12,
1998 by and among Massachusetts Mutual Life Insurance Company and
certain of its affiliates and Tridex filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 is hereby incorporated herein by reference.
4.9 Second Amendment to Securities Purchase Agreements dated March 26,
1999 by and among Massachusetts Mutual Life Insurance Company and
certain of its affiliates and Tridex filed as Exhibit 4.9 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1998 is hereby incorporated herein by reference.
4.10 Third Amendment to Securities Purchase Agreements dated as of June
30, 1999 by and among Massachusetts Mutual Life Insurance Company and
certain of its affiliates and Tridex filed as Exhibit 4.10 to the
Company's Current Report on Form 8-K filed on July 16, 1999 is hereby
incorporated herein by reference.
4.11 Fourth Amendment to Securities Purchase Agreements dated as of
September 30, 1999 by and among Massachusetts Mutual Life Insurance
Company and certain of its affiliates and Tridex filed as Exhibit 4.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 is hereby incorporated herein by reference.
4.12 Fifth Amendment to Securities Purchase Agreements dated as of
February 18, 2000 by and among Massachusetts Mutual Life Insurance
Company and certain of its affiliates and Tridex filed as Exhibit 4.1
to the Company's Current Report on Form 8-K filed March 6, 2000 is
hereby incorporated herein by reference.
16
10.1 Credit Agreement dated as of April 17, 1998, by and between Fleet
National Bank, Tridex, Progressive Software, Inc., Ultimate
Technology Corporation, and Tridex NC, Inc., with index of Schedules
and Exhibits thereto filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K filed April 30, 1998 is hereby incorporated herein
by reference.
10.2 Term Note in the amount of $12,000,000, due March 31, 2003, payable
by Tridex and its affiliates to Fleet National Bank ("Fleet") filed
as Exhibit 10.2 to the Company's Current Report on Form 8-K filed
April 30, 1998 is hereby incorporated herein by reference.
10.3 Working Capital Note in the amount of $8,000,000 due June 30, 1999,
payable by Tridex and its affiliates to Fleet National Bank filed as
Exhibit 10.3 to the Company's Current Report on Form 8-K filed April
30, 1998 is hereby incorporated herein by reference.
10.4 Amendment No. 1 to Credit Agreement dated as of November 1, 1998, to
Credit Agreement dated as of April 17, 1998, by and between Fleet,
Tridex, Progressive Software, Inc. and Ultimate Technology
Corporation filed as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998 is hereby
incorporated herein by reference.
10.5 Amendment No. 2 to Credit Agreement dated as of March 30, 1999, to
Credit Agreement dated as of April 17, 1998, by and between Fleet,
Tridex, Progressive Software, Inc. and Ultimate Technology
Corporation filed as Exhibit 10.20 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 is hereby incorporated
herein by reference.
10.6 Amendment No. 3 to Credit Agreement dated as of June 30, 1999, to
Credit Agreement dated as of April 17, 1998, by and between Fleet,
Tridex, Progressive Software, Inc. and Ultimate Technology
Corporation filed as Exhibit 10.21 to the Company's Current Report on
Form 8-K filed on July 16, 1999 is hereby incorporated herein by
reference.
10.7 Amendment No. 4 to Credit Agreement dated as of September 30, 1999 to
Credit Agreement dated as of April 17, 1998, by and between Fleet,
Tridex, Progressive Software, Inc. and Ultimate Technology
Corporation filed as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 is hereby
incorporated herein by reference.
10.8 Amendment No. 5 to Credit Agreement dated as of February 18, 2000, to
Credit Agreement dated as of April 17, 1998, by and between Fleet,
Tridex, Progressive Software, Inc. and Ultimate Technology
Corporation filed as Exhibit 10.2 to the Company's Current Report on
Form 8-K filed March 6, 2000 is hereby incorporated herein by
reference.
10.9 Stock Purchase Agreement dated as of February 8, 2000, between Tridex
Corporation, Ultimate Technology Corporation and CFG Capital
Management II, L.P. filed as Exhibit 10.1 to the company's Current
Report on Form 8-K filed March 6, 2000 is hereby incorporated herein
by reference.
10.10 Tax Sharing Agreement dated as of July 31, 1996 between Tridex and
TransAct Technologies Incorporated filed as Exhibit 10.8 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 28, 1996 is hereby incorporated herein by reference.
10.11 Employment Agreement dated December 2, 1996 between Tridex and Seth
M. Lukash filed on March 31, 1997 as Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, is
hereby incorporated herein by reference. *
10.12 Employment Agreement dated June 1, 2000 between Tridex and William A.
Beebe.*
10.13 Employment Agreement dated August 7, 1996 between Tridex and George
T. Crandall filed on March 31, 1997 as Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, is
hereby incorporated herein by reference. *
10.14 Employment Agreement dated December 26, 2000 between Progressive and
Christopher Sebes.
11.1 Statement re: computation of per share earnings.
21.1 List of Subsidiaries of Tridex.
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
17