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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file Number 000-17288
TIDEL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2193593
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5847 San Felipe, Suite 900
Houston, Texas 77057
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 783-8200
----------------------
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
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 requirement 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 amendment to this
Form 10-K. [ ]
The aggregate market value of the 12,630,501 shares of Common Stock held by
non-affiliates of the Registrant based on the closing sale price on December 31,
1997 of $3.94 was $49,764,174.
The number of shares of Common Stock outstanding as of the close of business on
December 31, 1997 was 15,535,968.
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TIDEL TECHNOLOGIES, INC.
TABLE OF CONTENTS *
ANNUAL REPORT ON FORM 10-K
---------------------------------------------------
PAGE
PART I
Item 1. Business................................................ 1
Item 2. Properties.............................................. 5
Item 3. Legal Proceedings....................................... 5
Item 4. Submission of Matters to
a Vote of Security Holders............................. 6
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters................. 7
Item 6. Selected Financial Data................................. 8
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations.............................. 9
Item 8. Financial Statements and Supplementary Data............. 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 13
PART III
Item 10. Directors and Executive Officers of
the Registrant......................................... 13
Item 11. Executive Compensation.................................. 15
Item 12. Security Ownership of Certain Beneficial
Owners and Management................................... 18
Item 13. Certain Relationships and Related
Transactions............................................ 19
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K............................... 19
Signature Page.................................................. 20
- ------------------
* This Table of Contents is inserted for convenience of reference only and is
not a part of this Report as filed.
PART I
ITEM 1. BUSINESS
BACKGROUND
Tidel Technologies, Inc. (the "Company") was incorporated under the laws of
the State of Delaware in November 1987 under the name of American Medical
Technologies, Inc., succeeding a corporation established in British
Columbia, Canada in May 1984. The Company changed its name to Tidel
Technologies, Inc. in July 1997.
Prior to September 30, 1992, the Company was engaged in the business of
medical waste management services through its majority owned subsidiary, 3CI
Complete Compliance Corporation ("3CI"). In February 1994, the Company sold
1,255,182 shares of its holdings of common stock of 3CI resulting in a gain
of $2,229,725 The Company's investment in 3CI now consists of 680,818 shares
of common stock of 3CI, representing approximately 6.7% of the total
outstanding shares of 3CI. At September 30, 1997, the investment was carried
at market value of $553,505, net of an unrealized loss of $993,403, in
accordance with Statement of Financial Accounting Standards No. 115.
On September 30, 1992, the Company acquired all of the issued and
outstanding capital stock of Tidel Engineering, Inc., a manufacturer of
automated teller machines, electronic cash security systems and underground
fuel storage monitoring and leak detection devices for a purchase price of
$4,746,848. These operations currently represent the sole business of the
Company.
DESCRIPTION OF BUSINESS ACTIVITIES
The Company develops, manufactures, sells and supports products designed for
specialty retail marketers, including automated teller machines and related
software (the "AnyCard" or "ATM" products); electronic cash security systems
(the "Timed Access Cash Controller" or "TACC" products); and underground
fuel storage monitoring and leak detection devices (the "Environmental
Monitoring System" or "EMS" products). The following is a description of
each product line manufactured by the Company:
ANYCARD AUTOMATED TELLER MACHINES ("ANYCARD")
The Company entered the automated teller machine ("ATM") market in October
1992, with the introduction of its original AnyCard model. The original
AnyCard ATM product was an integration of Tidel's cash management equipment
with electronic funds interface processing, utilizing a Personal
Identification Number, or PIN, system familiar to ATM users.
In November 1995, the Company developed a new ATM product, the AnyCard sc
(single cassette), which offers substantially more features than the old
product and is competitively priced to assist the Company in gaining market
share in the low-cost ATM market. The AnyCard sc can process larger
transaction volumes and supports either armored car or self-serve cash
replenishment. Sales of this product commenced in November 1995 and
comprised the majority of the Company's revenues until June 30, 1997, at
which time the AnyCard td (tower design) model was introduced. The AnyCard
td utilizes the
1
same electronics and software platform as the AnyCard sc, but is housed in a
newly designed cabinet which permits multiple cassette configurations and
can be produced at a lower cost.
TIMED ACCESS CASH CONTROLLERS ("TACC")
The Company's original product is its electronic cash management security
system known as TACC, which acts both as a drop safe and as a cash
dispenser. This unit serves as a depository for cash which is stored in
plastic tubes that can be retrieved upon programmed commands at timed
intervals. The TACC has been instrumental in the reduction of incidents of
crime in many segments of the retail industry, including convenience stores,
retail gasoline, specialty retailers, hospitality and entertainment.
Management believes its TACC products are highly regarded in the retail
market and have become standard equipment in virtually all new construction
by major convenience store operators and gasoline retailers. The TACC
systems are in use in all 7-ELEVEN stores in the United States, as well as
in more than 90,000 other locations in the U.S. and 20 other countries.
Current models allow for a computer interface which can be used in
conjunction with lottery and point-of-sale systems.
ENVIRONMENTAL MONITORING SYSTEMS ("EMS")
The Company's EMS product lines are designed to provide leak detection and
fuel management of underground petroleum storage tanks and their associated
piping systems to petroleum retailers and other owners and operators of
underground storage tanks. The EMS has the capability to print reports of
requested data, verify fuel inventories and provide instant notification of
alarm conditions such as leaks. It can monitor up to eight storage tanks
simultaneously, providing a cost efficient method of monitoring fuel
inventories. In addition, the EMS console has communication ports for
interface with point-of-sale terminals, modems and computers.
Sales of the EMS product lines were less than 5% of total sales in fiscal
1997, and management has terminated marketing of the EMS product lines to
shift focus to the AnyCard and TACC product lines. However, the Company will
continue to supply products and service to existing EMS customers.
RESEARCH AND DEVELOPMENT
In the effort to protect against product obsolescence by reason of emerging
technologies, as well as to ensure development of the most advanced products
possible, the Company has a continuing program of research and development.
Management believes that the Company has established an excellent record of
product conception, design, development, field testing and commercial
production through its thirteen-person engineering department. The
engineering staff works with internal sales, marketing and service groups to
incorporate customer driven enhancements into Company products. The research
and development budget for fiscal 1998 provides for approximately $1,250,000
to be spent in the enhancement of the AnyCard and TACC product lines. In the
years ended September 30, 1997, 1996 and 1995, total research and
development expenditures were $1,202,356, $1,026,251 and $862,173,
respectively.
2
MANUFACTURING
The Company manufactures or assembles its products, produces spare parts,
and renovates or repairs its products at its facility in Carrollton, Texas.
The product assembly operations consist of configuring components received
from various vendors with the Company's proprietary hardware and software.
Upon completion of product assembly, the equipment undergoes functional
testing to the extremes of the product's specifications and final quality
assurance inspection. The Company normally fills and ships customer orders
within 45 days of receipt, and therefore no significant backlog generally
exists.
MARKETING, DISTRIBUTION AND SERVICE
DOMESTIC
The Company markets its cash system products in the United States through
Company controlled national accounts and a network of approximately 125
independent distributors and dealers operating in five marketing regions:
Northeastern, Southeastern, Central, Southwestern and Western. There are
approximately 85 distributors handling only AnyCard, 20 handling only TACC,
and 20 marketing both product lines.
The distributor network facilitates coverage of both large national accounts
and diversified end-user groups. The Company also coordinates a national
service network of service dealers, including 350 for AnyCard and TACC and
50 for EMS, to provide electronic and mechanical support for all of its
products in use.
INTERNATIONAL
The Company markets its TACC products overseas through approximately 24
distributors. The international market lags the U.S. by several years with
respect to cash management systems. The international market for petroleum
and convenience stores is heavily influenced by the Company's traditional
domestic customer base, allowing the Company and its international
distributors to leverage and develop markets in many diverse geographical
areas.
At this time, the Company does not have a presence in the international
market for automated teller machines, but the Company plans to expand its
marketing efforts to include certain foreign countries in the future.
INTELLECTUAL PROPERTIES
The Company's success depends, in part, on its ability to obtain patents,
maintain trade secret protection and operate without infringing the
proprietary rights of others. The Company owns United States patents for
certain of its products (see "PATENTS AND TRADEMARKS" below) and has filed
United States and foreign patent applications for other proprietary products
and expects to continue to file product, process and use patent applications
with respect to products or improvements developed in the future. There can
be no assurance, however, that such patent applications will be filed or, if
filed, that patents will be issued to the Company or, if issued, will be
adequate to protect its products. In addition, it is not possible to predict
the degree of protection that patents will afford. It is possible that
patents issued to or licensed by the Company will be successfully
challenged, that the Company may unintentionally infringe patents of third
parties or that the Company may have to alter its products or processes or
pay licensing fees or cease certain activities to take into account patent
3
rights of third parties, thereby causing additional unexpected costs and
delays which may have a material adverse effect on the Company's business.
In addition, competitors may obtain additional patents and proprietary
rights relating to products or processes used in, necessary to, competitive
with or otherwise related to those availed of by the Company. The scope and
validity of these patents and proprietary rights, the extent to which the
Company may be required to obtain licenses under these patents or under
other proprietary rights and the cost and availability of licenses are
unknown, but these factors may limit the Company's ability to market its
existing or future products. See "LICENSES" below.
The Company also relies upon unpatented trade secrets and no assurance can
be given that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the
Company's trade secrets or disclose such technology or that the Company can
meaningfully protect its rights to its unpatented trade secrets.
PATENTS AND TRADEMARKS
The AnyCard developed by the Company is protected by two patents and a
trademark granted by the U.S. Patent and Trademark office.
The Company owns two patents relating to its TACC machines and two patents
relating to its EMS systems. The Company also owns registered trademarks
"TACC", "Tidel Systems" and "TS and Design".
LICENSES
The Company grants various distributors a non-exclusive right and license,
with the right to grant sublicenses, to use the names "Tidel" and "Tidel
AnyCard", together with any associated trademarks, logos or insignias, for
the limited purpose of marketing, selling and distributing the AnyCard
products.
GOVERNMENTAL REGULATIONS
The Company's EMS unit is produced and sold to provide total compliance and
documentation to the EPA and other regulatory agencies to ensure customers'
compliance with all applicable regulations relating to the detection and
prevention of petroleum leaks in tanks and piping systems. The potential
liability from a leaking underground storage tank is the primary motivating
factor influencing the decision to install a leak detection device. The EPA
and other federal agencies are responsible for the regulation and
enforcement of petroleum storage and piping systems and the potential leaks
therefrom.
The Company's EMS systems are subject to numerous other state and local
regulations relating to the storage and dispensing of petroleum products.
COMPETITION
Competition in the automated teller machine manufacturing business is
substantial. Large manufacturers such as Diebold Incorporated (including
Interbold, a joint venture between Diebold and IBM), NCR Corporation and
Fujitsu Corporation dominate the marketplace. Direct competition to the
Company in the fast growing, low-cost automated teller machine and scrip
machine market currently consists of other companies such as Triton Systems,
Inc. and Dessault. Management believes that
4
AnyCard's lower initial cost and ongoing operating expenses allow it to
compete effectively in the low-cost market.
Direct competition to the Company in the domestic TACC market comes
principally from Allied Gary International, McGunn, Scitak and AutoVend.
AutoVend is the only manufacturer other than the Company which features cash
controllers as a major product line.
Competition to the Company in its EMS product line is significant. There are
at least six active competitors on a level with the Company, consisting of
EBW, Emco Wheaton, Gilbarco, Petrovend, Red Jacket, and Veeder-Root. These
companies manufacture systems which also provide general leak detection and
fuel management capabilities. Further, all of these companies have
significant name recognition in the industry and have capital resources
which are significantly greater than those presently available to the
Company.
EMPLOYEES
At September 30, 1997, the Company had 96 employees comprised of 50
manufacturing personnel, 13 engineering employees, 8 sales personnel, 18
general office employees, and 7 executive personnel. None of the Company's
employees are subject to collective bargaining agreements. The Company has
not experienced any strikes or work stoppages and considers its
relationships with all its employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive offices are located in approximately 4,100
square feet at 5847 San Felipe, Suite 900, Houston, Texas 77057.
The Company's subsidiaries occupy approximately 65,000 square feet of space
in a one story brick building in Carrollton, Texas, under a lease expiring
in January 2005. The facility houses the principal administrative offices
and all manufacturing, testing, product design and research and development
operations. The subsidiaries moved into this building in January 1995 and
added special foundations for heavy equipment and extended the office area
to meet its needs.
At September 30, 1997, the Company owned tangible property and equipment
costing $2.1 million. Such amount is comprised primarily of sheet metal
shearing, punching and forming equipment, manual and robotic welding
equipment, two vehicles used in servicing and delivery functions, and
computer equipment and systems.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are each subject to certain litigation and
claims arising in the ordinary course of business. In the opinion of the
management of the Company, the amounts ultimately payable, if any, as a
result of such litigation and claims will not have a materially adverse
effect on the Company's financial position.
5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on Tuesday, July 15, 1997, in
Houston, Texas, the following proposals were adopted by the margins
indicated:
a)Election of Directors to hold office until the next annual meeting of
stockholders and until their successors are elected and qualified.
NUMBER OF SHARES
-----------------------
FOR WITHHELD
---------- --------
James T. Rash 12,101,496 67,710
James L. Britton, III 12,101,496 67,710
Jerrell G. Clay 12,101,496 67,710
Mark K. Levenick 12,101,496 67,710
b)Approval of a proposed amendment to the Company's Certificate of
Incorporation to change the name of the Company from "American Medical
Technologies, Inc." to "Tidel Technologies Inc."
For 11,946,106
Against 2,400
Abstentions 7,000
Broker non-votes 213,700
c)Approval of the Company's 1997 Long-Term Incentive Plan.
For 8,254,239
Against 202,628
Abstentions 286,810
Broker non-votes 3,425,529
d)Ratification of the selection of KPMG Peat Marwick, LLP as the Company's
independent auditors for fiscal year 1997.
For 12,085,356
Against 73,400
Abstentions 10,450
Broker non-votes --
6
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICES
The Company's common stock trades on the NASDAQ Small-Cap Market under the
symbol ATMS. The following table sets forth the quarterly high and low
closing sales price for the Company's common stock for the two-year period
ended September 30, 1997:
QUARTER ENDED HIGH LOW
------------------ ------- -------
September 30, 1997 3 5/8 2 3/8
June 30, 1997 2 11/16 1 7/16
March 31, 1997 2 1/2 1 11/16
December 31, 1996 2 1/2 1 5/8
September 30, 1996 3 1/16 2 1/16
June 30, 1996 3 1/16 1 1/32
March 31, 1996 1 17/32 2 9/32
December 31, 1995 1 11/32 1 3/16
DIVIDENDS
The Company has not paid any dividends in the past, and does not anticipate
paying dividends in the foreseeable future. In addition, the Company's
wholly owned subsidiary is restricted from paying dividends to the Company
pursuant to the subsidiary's revolving credit agreement with a bank.
HOLDERS
At September 30, 1997, 61% of the total 14,851,050 shares outstanding of the
Company's common stock were held of record by central depository
corporations and broker-dealers for the accounts of others; however, as far
as the Company can determine, its common stock is owned by approximately
2,300 persons.
7
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below is derived from the Consolidated
Financial Statements of the Company. This data should be read in conjunction
with the Consolidated Financial Statements and the notes thereto and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" appearing elsewhere in this Report.
YEARS ENDED SEPTEMBER 30,
SELECTED STATEMENT ----------------------------------------------------
OF OPERATIONS DATA: (1) 1997 1996 1995 1994 1993(2)
------- ------- -------- -------- --------
Revenues $30,153 $20,111 $ 10,860 $ 13,256 $ 12,567
Income (loss) from
continuing operations 2,117 1,215 (3,418) (824) (759)
Discontinued operations:
Loss from operations -- -- -- (119) (506)
Gain on disposal -- -- -- 2,230 --
Income (loss) from
continuing operations
per share (3) 0.14 0.10 (0.29) (0.08) (0.08)
- ------------------
SELECTED BALANCE
SHEET DATA: (1)
Current assets $15,576 $ 9,815 $ 6,165 $ 5,534 $ 4,562
Current liabilities 6,517 7,594 5,526 3,666 3,682
Working capital 9,059 2,221 639 1,868 880
Total assets 18,263 12,363 8,193 10,420 13,071
Total short-term notes
payable and long-term
debt 4,603 4,769 2,654 2,149 6,502
Shareholders' equity 8,092 4,129 2,027 5,354 4,699
- ------------------
(1) All amounts are in thousands, except per share data.
(2) Data presented for 1993 has been restated to reflect 3CI as a discontinued
operation.
(3) Shares used to calculate income (loss) from continuing operations per share
were 15,332,231; 14,090,464; 11,605,689; 10,536,589 and 9,969,509 for the
years ended September 30, 1997, 1996, 1995, 1994 and 1993, respectively.
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The Company revenues and earnings for the years ended September 30, 1997 and
1996 increased compared to previous years. Revenues were $30,153,000 in
fiscal 1997, representing an increase of $10,042,000, or 50%, from fiscal
1996 and $19,293,000, or 178%, from fiscal 1995. Net income for the year was
$2,117,000 as compared to $1,215,000 in fiscal 1996 and a loss of $3,418,000
in fiscal 1995.
The significant sales growth resulted from the introduction of the AnyCard
sc product line in November 1995. The gross profit from these sales,
together with efficiencies in cost management, were primary factors in the
overall improvement in net income.
PRODUCT REVENUES
A breakdown of net sales by individual product line is provided in the
following table:
(DOLLARS IN 000'S)
-----------------------------------
1997 1996 1995
------- ------- -------
AnyCard $21,000 $11,508 $ 2,062
TACC 5,783 5,639 5,733
EMS 967 954 1,269
Parts, service and other 2,403 2,010 1,796
------- ------- -------
$30,153 $20,111 $10,860
======= ======= =======
AnyCard sales have steadily increased since the introduction of the
single-cassette model in November 1995 as an alternative to the tube-type
model of automated teller machine.
TACC sales remained virtually unchanged during the three-year period as
sales efforts in international markets were significantly reduced.
All marketing activities for EMS products have terminated as the marketing
focus of the Company has shifted to other product lines. Management believes
that certain customers will continue to purchase these products, however, to
complete retrofit projects that are currently in progress.
Parts, service and other revenues vary directly with sales of finished
goods, and have increased accordingly.
9
GROSS PROFIT, OPERATING EXPENSES AND NON-OPERATING ITEMS
A comparison of certain operating information is provided in the following
table:
(DOLLARS IN 000'S)
--------------------------------
1997 1996 1995
-------- ------ -------
Gross profit $ 10,695 $7,295 $ 3,485
Selling, general and administrative 7,628 5,366 5,554
Depreciation and amortization 474 342 545
Impairment of long-lived assets -- -- 1,239
Operating income (loss) 2,593 1,587 (3,853)
Interest expense 473 383 318
Other (expense) income (3) 11 37
Income from settlement -- -- 715
Net income (loss) 2,117 1,215 (3,418)
GROSS PROFIT on product sales increased $3,400,000 and $7,210,000 from 1996
and 1995, respectively, to a level of $10,695,000 in 1997. Product gross
margins in 1997 were 35.5% of product sales, compared to 36.3% in 1996 and
32.0% in 1995. The slight decrease in 1997 compared to 1996 resulted from a
decline in average sales price per unit of $600. Such decline relates
primarily to volume discounts for large orders. Cost of sales in 1995
included a provision of $600,000, or 5.5% of sales, applicable to a write
down of certain EMS components and raw materials for tube-type automated
teller machines.
SELLING, GENERAL AND ADMINISTRATIVE expenses of $7,628,000 or 25.3% of sales
in 1997 represented a decrease from the 1996 and 1995 levels of 26.7% and
51.1%, respectively. The overall decline relates to increased sales volumes
and cost reduction efforts.
DEPRECIATION AND AMORTIZATION was $474,000, $342,000 and $545,000 for the
years ended September 30, 1997, 1996 and 1995. The increase in 1997 compared
to 1996 related to additions of property, plant and equipment including
approximately $500,000 for a new computer system.
IMPAIRMENT OF LONG-LIVED ASSETS, applicable to the write-off of intangible
costs associated with the EMS-3000 series due to matters discussed elsewhere
herein, resulted in a charge of $1,238,595 to results of operations for the
year ended September 30, 1995. See Note 7 of Notes to Consolidated Financial
Statements.
INTEREST EXPENSE increased from $318,000 in 1995 to $383,000 in 1996 to
$473,000 in 1997, as a result of increased borrowings to finance increases
in accounts receivable and inventories associated with the significant
growth in revenues.
OTHER (EXPENSE) INCOME for the years ended September 30, 1997 and 1996 was
insignificant. The income for 1995 arose from gains on sales of scrap and
surplus equipment.
INCOME FROM SETTLEMENT, NET OF RELATED COSTS of $715,145 was attributable to
the one-time settlement of the litigation regarding the EMS-3000 series
products in 1995. See Note 12 of Notes to Consolidated Financial Statements.
10
LIQUIDITY AND CAPITAL RESOURCES
The financial position of the Company continues to improve primarily as a
result of profitable operations and the infusion of capital from the
exercise of warrants, as reflected in the following key indicators as of
September 30, 1997, 1996 and 1995.
(DOLLARS IN 000's)
--------------------------------------------
1997 1996 1995
----------- ----------- ----------
Working capital $ 9,059 $ 2,221 $ 639
Total assets 18,263 12,363 8,193
Shareholders' Equity 8,092 4,129 2,027
The improvement in working capital is principally due to increased cash and
accounts receivable and the replacement of a short-term note payable with a
long-term credit facility. The increase in accounts receivable arose from
increased sales, and the provision of extended terms to principal customers
for payment of certain large orders. In 1997, the Company's wholly owned
subsidiary, Tidel Engineering, Inc., entered into a revolving credit
agreement with Texas Commerce Bank National Association which provides for
borrowings up to $5,000,000 at the prime rate, with certain LIBOR
alternatives, until May 31, 1999. The terms of the note contain requirements
for maintaining tangible net worth and certain financial ratios, as well as
restrictions on additional borrowings and payments of dividends. At
September 30, 1997, $3,654,604 was outstanding pursuant to the revolving
credit agreement.
The Company continues to own 680,818 shares of 3CI common stock subsequent
to its divestiture of a majority interest in February 1994. The Company has
no immediate plans for the disposal of the shares, and accordingly, the
shares may be utilized to collateralize borrowings. At present, 480,818
shares are pledged to secure an outstanding note payable in the principal
amount of $400,000.
The Company's registration statement covering the offering and sale by
selling shareholders of the common stock underlying all of the Company's
5,517,500 outstanding warrants was declared effective on January 29, 1997.
As of September 30, 1997, warrants to purchase 2,333,646 shares have been
exercised generating net proceeds to the Company of approximately
$2,547,424, net of registration costs of $109,982. During the year ended
September 30, 1997, warrants to purchase 761,244 shares expired unexercised.
As of September 30, 1997, the Company had outstanding warrants to purchase
2,422,610 shares of common stock, which expire various dates from November
1997 to January 2000, and if exercised would generate proceeds to the
Company of approximately $2,007,000.
The Company's research and development budget for fiscal 1998 has been
estimated at $1,250,000. The majority of these expenditures are applicable
to enhancements of the existing product lines, development of new automated
teller machine products and the development of new technology to facilitate
the dispensing of products such as postage stamps, money orders, and prepaid
telephone cards, as well as multiple denominations of currency. Total
research and development expenditures were approximately $1,202,000,
$1,026,000 and $862,000 for the years ended September 30, 1997, 1996 and
1995, respectively.
With its present capital resources, its potential capital from the exercise
of warrants, and its borrowing facility, the Company should have sufficient
resources to meet its operating needs for the foreseeable future and to
provide for debt maturities and capital expenditures.
11
The Company has never paid dividends on shares of its common stock, and does
not anticipate paying dividends in the foreseeable future.
SEASONALITY
The Company can experience seasonal variances in its operations and
historically has its lowest dollar volume sales months between November and
March. With the favorable sales of its automated teller machines, however,
the Company did not experience any downturn during this period. The
Company's operating results for any particular quarter may not be indicative
of the results for the future quarter or for the year.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, EARNINGS PER
SHARE ("SFAS 128"). SFAS 128 establishes new standards for computing and
presenting earnings per share ("EPS") amounts for companies with publicly
held common stock or potential common stock. The new standards require the
presentation of both basic and diluted EPS amounts for companies with
complex capital structures. Basic EPS is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the period, and excludes the effect of potentially
dilutive securities (such as options, warrants and convertible securities)
which are convertible into common stock. Dilutive EPS reflects the potential
dilution from convertible securities. SFAS 128 is effective for periods
ending after December 15, 1997.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE ("SFAS
129"). SFAS 129 establishes standards for disclosing information about a
company's outstanding debt and equity securities and eliminates exemptions
from such reporting requirements for nonpublic companies. SFAS 129 is
effective for periods ending after December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income in a
company's financial statements. Comprehensive income includes all changes in
a company's equity accounts (including net income or loss) except
investments by, or distributions to, the company's owners. Items which are
components of comprehensive income (other than net income or loss) include
foreign currency translation adjustments, minimum pension liability
adjustments and unrealized gains and losses on certain investments in debt
and equity securities. The components of comprehensive income must be
reported in a financial statement that is displayed with the same prominence
as other financial statements. SFAS 130 is effective for fiscal years
beginning after December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
("SFAS 131"). SFAS 131 establishes standards for the way that public
companies report, in their annual financial statements, certain information
about their operating segments, their products and services, the geographic
areas in which they operate and their major customers. SFAS 131 also
requires that certain information about operating segments be reported in
interim financial statements. SFAS 131 is effective for periods beginning
after December 15, 1997.
12
FORWARD-LOOKING STATEMENTS
This Form 10-K contains certain 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, which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward-looking statements involve risks and uncertainty,
(including without limitation, the Company's future gross profit, selling,
general and administrative expense, the Company's financial position,
working capital and seasonal variances in the Company's operations, as well
as general market conditions) though the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there
can be no assurance that the forward-looking statements included in this
Form 10-K will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein,
the inclusion of such information should not be regarded as a representation
by the Company or any other person that the objectives and plans of the
Company will be achieved.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 below for an index of the financial statements and schedules
included as a part of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table below gives certain information regarding each director and each
executive officer of the Company serving at September 30, 1997. There are,
to the knowledge of the Company, no agreements or understandings by which
these individuals were so selected. No family relationships exist between
any directors or executive officers.
NAME AGE POSITION
James T. Rash 57 Chairman, Chief Executive and Financial
Officer, and Director
Mark K. Levenick 38 Chief Operating Officer and President of the
operating subsidiaries and Director
13
Michael F. Hudson 45 Senior Vice President - Marketing
James L. Britton, III 62 Director
Jerrell G. Clay 56 Director
BUSINESS BACKGROUNDS
The following is a summary of the business background and experience of each
of the persons named above:
JAMES T. RASH joined the Company in July 1987 and served as Chief Financial
Officer and as a Director until February 1989. Since that time he has served
continuously as Chairman of the Board of Directors and Chief Executive
Officer, and he has served as Chief Financial Officer since January 1995. He
was also Chairman and Chief Executive Officer of 3CI from the date of its
acquisition by the Company until February 1994. Mr. Rash earned a Bachelor
of Business Administration degree from the University of Texas at Austin.
MARK K. LEVENICK, a director since March 1995, has been an executive with
the Company's wholly owned subsidiary and its predecessors for more than the
preceding 5 years, and has served as Chief Operating Officer of the Company
since July 1997. Mr. Levenick is a recognized authority in underground
storage tank management and related environmental matters. He earned a
Bachelor of Science degree from the University of Wisconsin at Whitewater.
MICHAEL F. HUDSON has served as Senior Vice President - Marketing of the
Company's wholly owned subsidiary since September 1993 and of the Company
since July 1997. Prior to joining the Company, Mr. Hudson held various
positions with the Southland Corporation and its affiliates for more than 18
years, concluding as President and Chief Executive Officer of MoneyQuick, a
large non-bank ATM network. Mr. Hudson is a recognized authority in the ATM
industry.
JAMES L. BRITTON, III, a director since December 1990, has for more than the
past 5 years managed his own investments. Mr. Britton earned a Bachelor of
Business Administration degree from the University of Texas at Austin.
JERRELL G. CLAY, a director since December 1990, has for more than the
preceding 5 years has been the President of III Mark Financial, Inc., an
independent marketing company designed to supply products and services to
life insurance and equity sales organizations and one of its predecessors.
Mr. Clay is also a member of the Management Advisory Committee of Protective
Life Insurance Company of Birmingham, Alabama and serves as President of
International Planners, Inc., a firm involved in estate planning for
professionals and high net worth individuals.
DIRECTOR COMPENSATION
Directors of the Company receive $1,000 per meeting as compensation for
their services as members of the Board of Directors. Directors who serve on
board committees receive $500 per committee meeting.
14
BOARD OF DIRECTORS COMMITTEES
The Board of Directors has established an Audit Committee and a Compensation
Committee, each composed of Messrs. Britton and Clay, both of whom are
non-officer directors. The Audit Committee is charged with reviewing the
Company's financial statements, the scope and performance of the audit and
non-audit services provided by the Company's independent auditors and
overseeing the Company's internal accounting procedures. The Compensation
Committee administers the Company's 1997 Long-Term Incentive Plan and 1989
Stock Option Plan, and reviews and evaluates matters with respect to the
payment of direct salaries and incentive compensation to the Company's
executive officer and the senior management personnel of the subsidiaries.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of a registered
class of its equity securities, to file reports of ownership and changes in
ownership of such equity securities with the Securities and Exchange
Commission ("SEC") and NASDAQ. Such entities are also required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms
filed.
Based solely on a review of the copies of Forms 5 filed on November 14, 1997
and Form 3 filed January 12, 1998 and furnished to the Company, Messrs.
Rash, Britton, Clay, Levenick and Hudson had the following items not filed
on a timely basis: (i) Messrs. Rash and Britton each had 8 transactions on
Form 4 due on or about April 10, 1997 and 2 transactions on Form 5 due on or
about November 15, 1996, (ii) Mr. Clay had 9 transactions on Form 4 due on
or about April 10, 1997, 2 transactions on Form 5 due on or about November
15, 1996, and 1 transaction on Form 5 due on or about November 15, 1994,
(iii) Mr. Levenick had 6 transactions on Form 4 due on or about April 10,
1997, 2 transactions on Form 5 due on or about November 15, 1996, 1
transaction on Form 5 due on or about November 15, 1995, and 3 transactions
on Form 3 due on or about April 8, 1995, and (iv) Mr. Hudson had 2
transactions on Form 3 due on or about July 25, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the amount of all cash and other compensation
paid by the Company for services rendered during the fiscal years ended
September 30, 1997, 1996 and 1995 to Messrs. Rash, Levenick and Hudson [such
individuals being all of the Company's executive officers, as such term is
defined in Item 402 of Regulation S-K, whose compensation exceeded
$100,000]:
15
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND PRINCIPAL --------------------------------- -----------
POSITION YEAR SALARY BONUS OPTIONS (1)
--------------------- ---- --------- --------- -----------
James T. Rash 1997 $182,292 $ -- --
Chief Executive and 1996 $182,292 $ -- --
Financial Officer 1995 $182,292 $ 40,000 --
Mark K. Levenick 1997 $193,962 $ 97,500 100,000
Chief Operating Officer 1996 $150,000 $ 90,000 --
1995 $120,000 $ 62,500 50,000
Michael F. Hudson 1997 $124,538 $ 62,500 67,000
Senior Vice President - 1996 $105,808 $ 63,000 --
Marketing 1995 $ 99,808 $ 5,000 50,000
The options granted to executive officers in 1997 and 1995 become
exercisable and vest over four-year and three-year periods, respectively. No
options were exercised pursuant to the Company's 1997 Long-Term Incentive
Plan and 1989 Stock Option Plan during the year ended September 30, 1997.
The following table provides information regarding the options exercisable
by the respective optionees and the respective valuations at September 30,
1997:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------------------ -----------------------
% OF TOTAL
NUMBER OPTIONS
OF SHARES GRANTED TO
UNDER EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE PER EXPIRATION
NAME GRANTED YEAR SHARE DATE 5% ($) 10% ($)
----------------- ------- -------- -------- ------- --------- ----------
James T. Rash -- 0.0% $ -- -- $ -- $ --
Mark K. Levenick 100,000 34.3% 2.50 8/27/97 157,000 398,000
Michael F. Hudson 67,000 23.0% 2.50 8/27/97 105,190 266,660
The following table provides the number of options exercisable by the
respective optionees and the respective valuations at September 30, 1997:
16
OPTIONS EXERCISABLE AND RELATED VALUES
SEPTEMBER 30, 1997
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
(SHARES) ( $ )
---------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
James T. Rash 80,000 -- $155,000 $ --
Mark K. Levenick 83,334 116,666 186,043 153,644
Michael F. Hudson 33,334 83,666 82,293 116,519
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG TIDEL TECHNOLOGIES, INC., PEER GROUP INDEX AND
NASDAQ MARKET INDEX
SEPTEMBER 30,
-----------------------------------------------
1993(1) 1994 1995 1996 1997
------- ------- ------- ------- -------
Tidel Technologies, Inc. $ 58.82 $ 33.33 $ 33.33 $ 68.63 $113.73
Peer group (2) 168.18 211.36 265.01 220.96 254.17
NASDAQ Market Index 130.05 265.01 167.10 195.08 265.16
- -------------------------
(1) Assumes $100 invested on September 30, 1992 and no dividends paid in any
year thereafter.
(2) Peer group consists of companies utilizing the category for Fabricated Metal
Products Not Elsewhere Classified, SIC 3499. The Company has utilized this
category since October 1, 1992.
EMPLOYMENT AGREEMENTS
Messrs. Levenick and Hudson, both executive officers of the Company, have
employment agreements with the Company's wholly owned subsidiary, Tidel
Engineering, Inc., which provide for minimum annual salaries of $195,000 and
$125,000, respectively, over a three-year term ending July 2000, with
certain change of control provisions. Similarly, three non-executive
employees have employment agreements with the Company's wholly owned
subsidiary which provide for minimum annual salaries of $100,000, $100,000
and $75,000, respectively, for the same term, which also contain change of
control provisions.
17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1997, the number of
shares of common stock beneficially owned by (i) the only persons known to
the Company to be the beneficial owners of more than 5% of its voting
securities and (ii) each director individually and by the directors and
officers of the Company as a group. Except as otherwise indicated, and
subject to applicable community property laws, each person has sole
investment and voting power with respect to the shares shown. Ownership
information is based upon information furnished by the respective holders
and contained in the Company's records.
NAME AND AMOUNT AND
ADDRESS OF NATURE OF PERCENT
TITLE OF BENEFICIAL BENEFICIAL OF
CLASS OWNER OWNERSHIP CLASS (1)
-------- --------------------- --------------- ---------
Common Stock Alliance Developments 1,437,362 9.3%
One Yorkdale Road
Suite 510
North York, Ontario
M6A 3A1
Common Stock James L. Britton, III 813,500 (2) 5.2%
3272 Westheimer, #3
Houston, Texas 77098
Common Stock James T. Rash 630,000 (3)(4) 4.0%
5847 San Felipe, Suite 900
Houston, Texas 77057
Common Stock Jerrell G. Clay 304,605 (2) 1.9%
2900 Wilcrest
Houston, Texas 77042
Common Stock Mark K. Levenick 291,667 (5) 1.9%
2310 McDaniel Dr.
Carrollton, Texas 75006
Common Stock Michael F. Hudson 41,667 (6) 0.3%
2310 McDaniel Dr.
Carrollton, Texas 75006
Common Stock Directors and Officers 2,081,439 (7) 12.7%
as a group (5 persons)
- ---------------
(1) Based upon 15,535,968 shares outstanding as of December 31, 1997.
(2) Includes 100,000 shares which could be acquired within 60 days upon exercise
of outstanding warrants at exercise prices of (i) $0.625 per share as to
50,000 shares and (ii) $1.00 per share as to 50,000 shares.
18
(3) Includes 180,000 shares which could be acquired within 60 days upon exercise
of outstanding options and warrants at exercise prices of (i) $0.625 per
share as to 50,000 shares, (ii) $1.00 per share as to 50,000 shares and
(iii) $1.6875 per share as to 80,000 shares.
(4) 200,000 shares are being held in escrow, the release therefrom being subject
to the direction and determination of the Vancouver Stock Exchange or the
British Columbia Superintendent of Brokers, based upon the financial
condition of the Company and other matters.
(5) Includes 191,667 shares which could be acquired within 60 days upon exercise
of outstanding warrants and options at exercise prices of (i) $0.625 per
share as to 50,000 shares, (ii) $0.875 per share as to 25,000 shares, (iii)
$1.00 as to 50,000 shares, (iv) $1.25 per share as to 20,000 shares, (v)
$1.4375 per share as to 16,667 shares, and (vi) $1.75 per share as to 30,000
shares.
(6) Consists of 41,667 shares which could be acquired within 60 days upon
exercise prices of (i) $0.875 per share as to 25,000 shares and (ii) $1.4375
per share as to 16,667 shares.
(7) Includes the 100,000 shares for each of the two individuals referred to in
Note (2) above, the 180,000 shares referred to in Note (3) above, the
191,667 shares referred to in Note (5) above, and the 41,667 shares referred
to in Note (6) above obtainable upon exercise of outstanding warrants and
options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, the Company provides certain administrative and clerical
services to two entities with whom James T. Rash, Chief Executive Officer of
the Company, has an affiliation. Fees earned by the Company for these
services totaled $72,000 for the year ended September 30, 1997. Amounts due
to the Company from these entities totaled $192,180 at September 30, 1997.
On March 30, 1997, the Company received notes with an aggregate principal
balance of $743,000 in connection with the exercise of warrants to purchase
common stock by James T. Rash, James L. Britton, III, Jerrell G. Clay and
Mark K. Levenick, all directors of the Company. These notes are due March
31, 1998, bear interest at 10% and are secured by the shares issued thereby.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The audited consolidated financial statements and related financial
statement schedules of the Company and report of its independent certified
public accountants responsive to the requirements of Item 8 of Form 10-K are
included herein as part of this Report. Such audited financial statements,
related financial statement schedules, and reports as set forth in the
accompanying index include, in the opinion of management of the Company, all
required disclosures in the notes thereto.
EXHIBITS
The Exhibits filed as a part of this Report are listed in the attached Index
to Exhibits.
19
REPORTS ON FORM 8-K
The Company filed no report on Form 8-K during the last quarter of the
fiscal year ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TIDEL TECHNOLOGIES, INC.
(Company)
January 13, 1998 /s/ JAMES T. RASH
James T. Rash
President and Principal Executive Officer
/s/ JAMES T. RASH
James T. Rash
Principal Financial and Accounting Officer
Pursuant to requirements of the Securities Exchange 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/ JAMES T. RASH Director January 13, 1998
James T. Rash
/s/ JAMES L. BRITTON, III Director January 13, 1998
James L. Britton, III
/s/ JERRELL G. CLAY Director January 13, 1998
Jerrell G. Clay
/s/ MARK K. LEVENICK Director January 13, 1998
Mark K. Levenick
20
INDEX TO FINANCIAL STATEMENTS
PAGE
CONSOLIDATED FINANCIAL STATEMENTS OF TIDEL TECHNOLOGIES, INC.
AND SUBSIDIARIES
Independent Auditors' Report F-2
Consolidated Balance Sheets - September 30, 1997 and 1996 F-3
Consolidated Statements of Operations for the years ended
September 30, 1997, 1996 and 1995 F-4
Consolidated Statements of Shareholders' Equity for the years
ended September 30, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES OF TIDEL TECHNOLOGIES, INC.
AND SUBSIDIARIES
The following schedules are filed as part of this Annual Report
on Form 10-K:
Schedule I Condensed Financial Information of Registrant S-1
Schedule II Valuation and Qualifying Accounts S-6
All other schedules are omitted because they are not required, are not
applicable or the required information is presented elsewhere herein.
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Tidel Technologies, Inc.:
We have audited the consolidated financial statements of Tidel
Technologies, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tidel
Technologies, Inc. and subsidiaries as of September 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Houston, Texas
December 5, 1997
F-2
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30,
----------------------------
ASSETS 1997 1996
------------ ------------
Current Assets:
Cash and cash equivalents $ 1,549,331 $ 582,108
Trade accounts receivable, net of allowance of
$750,347 and $184,900, respectively 8,732,080 5,234,307
Notes and other receivables 852,514 417,673
Inventories 4,208,360 3,341,486
Prepaid expenses and other assets 233,273 239,621
------------ ------------
Total current assets 15,575,558 9,815,195
Investment in 3CI, at market value 553,505 893,914
Property, plant and equipment, at cost 2,126,726 1,601,145
Accumulated depreciation (1,189,409) (928,762)
------------ ------------
Net property, plant and equipment 937,317 672,383
Intangible assets, net of accumulated amortization of
$692,814 and $556,546, respectively 801,023 937,291
Deferred tax asset 318,810 --
Other assets 77,238 44,360
------------ ------------
Total assets $ 18,263,451 $ 12,363,143
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable $ 948,697 $ 4,128,886
Accounts payable 3,239,412 1,857,601
Accrued liabilities 2,328,917 1,607,885
------------ ------------
Total current liabilities 6,517,026 7,594,372
Long-term debt 3,654,604 640,000
------------ ------------
Total liabilities 10,171,630 8,234,372
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $.01 par value, authorized 100,000,000
shares; issued and outstanding 14,851,050 and
12,397,404 shares, respectively 148,511 123,974
Additional paid-in capital 13,387,412 10,801,273
Accumulated deficit (4,026,262) (6,143,482)
Stock subscriptions receivable (424,437) --
Unrealized loss on investment in 3CI (993,403) (652,994)
------------ ------------
Total shareholders' equity 8,091,821 4,128,771
------------ ------------
Total liabilities and shareholders' equity $ 18,263,451 $ 12,363,143
============ ============
See accompanying notes to consolidated financial statements.
F-3
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
Revenues $ 30,152,873 $ 20,111,249 $ 10,859,815
Cost of sales 19,458,044 12,816,453 7,375,074
------------ ------------ ------------
Gross profit 10,694,829 7,294,796 3,484,741
Selling, general and administrative 7,628,005 5,366,006 5,553,586
Depreciation and amortization 474,274 341,561 545,181
Impairment of long-lived assets -- -- 1,238,595
------------ ------------ ------------
Operating income (loss) 2,592,550 1,587,229 (3,852,621)
Other (expense) income:
Interest expense, net (472,553) (382,691) (317,871)
Other (expense) income (2,777) 10,580 37,478
Income from settlement, net of related costs -- -- 715,145
------------ ------------ ------------
Total other (expense) income (475,330) (372,111) 434,752
------------ ------------ ------------
Net income (loss) $ 2,117,220 $ 1,215,118 $ (3,417,869)
============ ============ ============
Net income (loss) per common and
common equivalent share:
Primary:
Net income (loss) $ 0.14 $ 0.10 $ (0.29)
============ ============ ============
Weighted average shares outstanding 15,332,231 14,090,464 11,605,689
============ ============ ============
Fully diluted:
Net income (loss) $ 0.13 $ 0.09 $ (0.29)
============ ============ ============
Weighted average shares outstanding 15,854,067 14,188,497 11,605,689
============ ============ ============
See accompanying notes to consolidated financial statements.
F-4
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Shares Additional Total
Issued and Common Paid-in Accumulated Shareholders'
Outstanding Stock Capital Deficit Other Equity
---------- -------- ----------- ----------- ----------- -----------
Balance, October 1, 1994 11,448,935 $114,489 $10,180,256 $(3,940,731) -- $ 6,354,014
Issuance of common stock 49,469 495 33,157 -- -- 33,652
Exercise of warrants 384,000 3,840 259,760 -- -- 263,600
Net loss -- -- -- (3,417,869) -- (3,417,869)
Unrealized loss on
investment in 3CI -- -- -- -- (1,206,499) (1,206,499)
---------- -------- ----------- ----------- ----------- -----------
Balance, September 30, 1995 11,882,404 118,824 10,473,173 (7,358,600) (1,206,499) 2,026,898
Conversion of note payable
to common stock 300,000 3,000 147,000 -- -- 150,000
Exercise of warrants 215,000 2,150 159,100 -- -- 161,250
Issuance of warrants -- -- 22,000 -- -- 22,000
Net income -- -- -- 1,215,118 -- 1,215,118
Unrealized gain on
investment in 3CI -- -- -- -- 553,505 553,505
---------- -------- ----------- ----------- ----------- -----------
Balance, September 30, 1996 12,397,404 123,974 10,801,273 (6,143,482) (652,994) 4,128,771
Conversion of note payable
to common stock 120,000 1,200 58,800 -- -- 60,000
Exercise of warrants, net of
registration costs 2,333,646 23,337 2,524,087 -- -- 2,547,424
Issuance of warrants -- -- 3,252 -- -- 3,252
Net income -- -- -- 2,117,220 -- 2,117,220
Stock subscriptions receivable -- -- -- -- (424,437) (424,437)
Unrealized loss on
investment in 3CI -- -- -- -- (340,409) (340,409)
---------- -------- ----------- ----------- ----------- -----------
Balance, September 30, 1997 14,851,050 $148,511 $13,387,412 $(4,026,262) $(1,417,840) $ 8,091,821
========== ======== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
F-5
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
-------------------------------------------------
1997 1996 1995
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) $ 2,117,220 $ 1,215,118 $(3,417,869)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 474,274 341,561 545,181
Loss (gain) on sale of property, plant and equipment 28,283 (1,214) (29,367)
Impairment of long-lived assets -- -- 1,238,595
Deferred tax benefit 318,810 -- --
Changes in assets and liabilities:
Trade accounts receivable, net (3,497,773) (4,372,709) 1,664,740
Notes and other receivables (116,278) 2,300,000 (2,300,000)
Inventories (866,874) (1,145,421) (170,807)
Prepaid expenses and other assets (36,875) (39,661) 132,388
Accounts payable and accrued liabilities 2,102,843 (38,298) 1,600,105
----------- ----------- -----------
Net cash used in operating activities (113,990) (1,740,624) (737,034)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (660,928) (352,651) (277,812)
Proceeds from sale of property, plant and equipment 40,050 1,800 87,906
----------- ----------- -----------
Net cash used in investing activities (620,878) (350,851) (189,906)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 4,549,604 3,528,211 1,128,821
Repayments of notes payable (4,616,439) (1,263,643) (603,251)
Proceeds from exercise of warrants 1,765,674 161,250 263,600
Proceeds from issuance of warrants 3,252 14,000 --
Proceeds from issuance of common stock -- -- 7,800
----------- ----------- -----------
Net cash provided by financing activities 1,702,091 2,439,818 796,970
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 967,223 348,343 (129,970)
Cash and cash equivalents at beginning of year 582,108 233,765 363,735
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,549,331 $ 582,108 $ 233,765
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 547,069 $ 356,571 $ 289,861
=========== =========== ===========
Cash paid for taxes $ 92,470 $ -- $ --
=========== =========== ===========
Supplemental disclosure of noncash financing activities:
Conversion of note payable to common stock $ 60,000 $ 150,000 $ 25,852
=========== =========== ===========
Notes received for warrant conversions $ 743,000 $ -- $ --
=========== =========== ===========
Noncash exercise of warrants $ 38,750 $ -- $ --
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-6
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Tidel Technologies, Inc. (the "Company"), formerly American Medical
Technologies, Inc., is a Delaware corporation which, through its wholly owned
subsidiaries, develops, manufactures, sells and supports automated teller
machines and related software, electronic cash security systems, and underground
fuel storage monitoring and leak detection devices.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany items have been
eliminated in consolidation.
RECLASSIFICATIONS
Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform with the current year presentation format.
CASH AND CASH EQUIVALENTS
For purposes of consolidated financial statement presentation and reporting cash
flows, all liquid investments with original maturities at date of purchase of
three months or less are considered cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the standard cost method and includes materials, labor and production overhead
which approximates an average cost method. Reserves are provided to adjust any
slow moving materials or goods to net realizable values as deemed appropriate by
management of the Company.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets.
Expenditures for major renewals and betterments are capitalized; expenditures
for repairs and maintenance are charged to expense as incurred.
INTANGIBLE ASSETS
All intangible assets are amortized using the straight-line method over a period
ranging from 5 to 10 years, with the exception of goodwill, which is amortized
over 40 years.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of", was
adopted by the Company during the year ended September 30, 1995. Accordingly,
the Company's long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of any assets may not be recoverable. In performing the
review for recoverability, the Company estimates the
F-7
future cash flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized.
WARRANTIES
Certain products are sold under warranty against defects in materials and
workmanship for a period of one to two years. A provision for estimated warranty
costs is included in accrued liabilities and is charged to operations at the
time of sale.
REVENUE RECOGNITION
Revenues are generally recognized when products are shipped to customers. When
customers, under the terms of specific orders, request that the Company
manufacture and invoice goods on a bill and hold basis, the Company recognizes
revenues based on the completion date required in the order and actual
completion of the manufacturing process.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Research and
development costs charged to expense approximated $1,200,000, $1,030,00 and
$860,000 for the years ended September 30, 1997, 1996 and 1995.
FEDERAL INCOME TAXES
Income taxes are accounted for under the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in determining income or loss in the period that includes the
enactment date.
INVESTMENT SECURITIES
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.
115"), the Company classifies its investment in 3CI Complete Compliance
Corporation ("3CI") as available for sale, with unrealized gains and losses
excluded from earnings and recorded as a separate component of shareholders'
equity.
NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS
No. 128") . SFAS No. 128 establishes new standards for computing and presenting
earnings per share ("EPS") amounts for companies with publicly held common stock
or potential common stock. The new standards require the presentation of both
basic and diluted EPS amounts for companies with complex capital structures.
Basic EPS is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period, and
excludes the effect of potentially dilutive securities (such as options,
warrants and convertible securities) which are convertible into common stock.
Dilutive EPS reflects the potential dilution from convertible securities. SFAS
No. 128 is effective for periods ending after December 15, 1997.
Net income (loss) per common share is computed by dividing the net income (loss)
by the weighted average number of common and common equivalent shares
outstanding during the period. For purposes of this calculation, outstanding
warrants and employee stock options are considered common stock equivalents.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), was issued October 23, 1995 providing a new
accounting method for recognizing stock-based expense based on the estimated
fair value of employee stock options. SFAS No. 123 allows companies to retain
the current approach set forth in APB Opinion 25, "Accounting for Stock Issued
to Employees", provided that expanded footnote disclosure is presented. The
Company has not adopted the fair value method of accounting for stock-based
compensation under SFAS No. 123, but has provided the pro forma disclosure
required therein.
F-8
USE OF ESTIMATES
The preparation of the accompanying consolidated financial statements requires
the use of estimates by management in determining the Company's assets and
liabilities at the date of the consolidated financial statements and the
reported amount of revenues and expenses during the period. Actual results could
differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", requires the disclosure of estimated fair
values for financial instruments.
Fair value estimates are made at discrete points in time based on relevant
market information. These estimates may be subjective in nature and involve
uncertainties and matters of significant judgment and therefore, cannot be
determined with precision.
The Company believes that the carrying amounts of its current assets and current
liabilities approximate the fair value of such items due to their short-term
nature. The carrying amount of long-term debt approximates its fair value
because the interest rates approximate market.
(2) MAJOR CUSTOMERS AND CREDIT RISKS
The Company generally does not require collateral or other security from its
customers and would incur an accounting loss equal to the carrying value of the
accounts receivable if a customer failed to perform according to the terms of
the credit arrangements. The Company has a concentration of credit risk, as a
significant portion of its revenues is from customers in the retail and
petroleum marketing industries. In addition, the Company's product sales are
impacted by various federal, state and local regulatory agencies involved with
regulations related to environmental monitoring.
During the year ended September 30, 1997, the Company had sales to one major
customer that accounted for more than 10% of sales in the amount of $3,970,227.
None of the Company's sales to customers accounted for more than 10% of sales
during the years ended September 30, 1996 and 1995.
Foreign sales accounted for 5%, 7% and 17% of the Company's total sales during
the years ended September 30, 1997, 1996 and 1995, respectively.
Foreign sales are transacted in U.S. dollars.
(3) NOTES AND OTHER RECEIVABLES
In connection with the exercise of warrants to purchase common stock by certain
directors on March 30, 1997, the Company received notes with an aggregate
principal balance of $743,000. These notes are due on March 31, 1998, bear
interest at an annual rate of 10% and are secured by the shares issued. During
October 1997, the Company received payments on these notes totaling $318,563,
and this balance has been included in notes and other receivables at September
30, 1997. The remaining balance due on the notes of $424,437 has been recorded
as stock subscriptions receivable and included as a separate component of
shareholders' equity at September 30, 1997.
F-9
(4) INVENTORIES
Inventories consist of the following at September 30, 1997 and 1996:
1997 1996
----------- -----------
Raw materials $ 3,635,349 $ 2,061,659
Work in process 379,708 740,627
Finished goods 492,636 916,246
Other (demo) 212,667 98,954
----------- -----------
4,720,360 3,817,486
Inventory reserve (512,000) (476,000)
----------- -----------
$ 4,208,360 $ 3,341,486
=========== ===========
(5) INVESTMENT IN 3CI
The Company owns 680,818 shares of the common stock of 3CI with a market value
of $553,505 and $893,914 as of September 30, 1997 and 1996, respectively. In
accordance with the provisions of SFAS No. 115, the Company recorded an
unrealized loss of $340,409 and an unrealized gain of $553,505 as separate
components of shareholders' equity at September 30, 1997 and 1996, respectively.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at September 30, 1997
and 1996:
1997 1996 USEFUL LIFE
----------- ----------- ------------
Machinery and equipment $ 991,370 1,173,194 2 - 10 years
Computer equipment and
systems 734,513 236,555 3 - 7 years
Furniture, fixtures and other
improvements 400,843 191,396 3 - 5 years
----------- -----------
$ 2,126,726 $ 1,601,145
=========== ===========
Depreciation expense was $327,661, $198,819 and $241,013 for the years ended
September 30, 1997, 1996 and 1995, respectively. Repairs and maintenance
expenses were $95,338, $41,999 and $57,966 for the years ended September 30,
1997, 1996 and 1995, respectively.
(7) INTANGIBLE ASSETS
Intangible assets consist of the following at September 30, 1997 and 1996:
1997 1996
------------ ------------
Electronic cash security systems:
Software $ 350,000 $ 350,000
Proprietary technology 417,000 417,000
Other technology 143,613 143,613
Goodwill 583,224 583,224
Accumulated amortization (692,814) (556,546)
------------ ------------
$ 801,023 $ 937,291
============ ============
F-10
In connection with the litigation discussed in Note 12, management of the
Company determined that the carrying amount of intangibles relating to earlier
product designs of environmental monitoring systems was not recoverable from
future cash flows expected to be realized. All costs related to these intangible
assets were written off during the year ended September 30, 1995. The charge of
$1,238,595 consisted of $948,104 (net of accumulated amortization of $454,896)
related to environmental monitoring systems software and proprietary technology,
and $290,491 (net of accumulated amortization of $23,553) related to
corresponding goodwill associated with the environmental monitoring systems.
(8) SHORT-TERM NOTES PAYABLE AND LONG-TERM DEBT
Short-term notes payable consist of the following at September 30, 1997 and
1996:
1997 1996
---------- -----------
Promissory note due March 31, 1998, interest
payable quarterly at 12%, secured by
480,818 shares of 3CI common stock. $ 400,000 $ --
Revolving credit note, secured by substantially
all of the assets of the Subsidiaries, due on
demand or by May 31, 1997, guaranteed by
the Company, interest payable monthly at
2% above prime. Paid June 12, 1997. -- 2,640,387
Promissory note due January 3, 1997, interest
payable at maturity at 12%, secured by a
first lien on 200,000 shares and a second
lien on 480,818 shares of 3CI common stock.
Paid January 3, 1997. -- 700,000
Unsecured promissory note due December 7, 1996,
convertible into 120,000 shares of common
stock of the Company at the option of the payee,
interest payable at maturity at 12%. Converted
December 7, 1996. -- 60,000
Unsecured promissory notes due various dates, interest
payable quarterly at 12%. Paid $300,000 October
28, 1997. 540,000 700,000
Other 8,697 28,499
---------- -----------
$ 948,697 $ 4,128,886
========== ===========
During June 1997, the Company's wholly owned subsidiary entered into a revolving
credit agreement with a bank. The revolving credit agreement, which replaced the
subsidiary's existing short-term revolving facility, provides for borrowings up
to $5,000,000 at the prime rate, with certain LIBOR alternatives, until May 31,
1999. The terms of the note contain requirements for maintaining tangible net
worth and certain financial ratios, as well as restrictions on additional
borrowings and payments of dividends. In addition, the terms of the note
substantially restrict cash payments from the Company's wholly owned subsidiary
to the Company.
F-11
Long-term debt consists of the following at September 30, 1997 and 1996:
1997 1996
----------- -----------
Revolving credit note, secured by substantially
all of the assets of the Subsidiaries, due
May 31, 1999, guaranteed by the Company,
interest payable monthly at prime (8.5% at
September 30, 1997). $ 3,654,604 $ --
Promissory note due March 31, 1998, interest
payable quarterly at 12%, secured by 480,818
shares of 3CI common stock. -- $ 400,000
Unsecured promissory notes due March 31, 1998,
interest payable quarterly at 12%. -- 240,000
----------- -----------
$ 3,654,604 $ 640,000
=========== ===========
(9) WARRANTS
The Company's registration statement covering the offering and sale by selling
shareholders of the common stock underlying all of the Company's 5,517,500
outstanding warrants was declared effective on January 29, 1997. The warrants
relate to grants made in connection with debt and equity issues, acquisitions,
directors' remuneration and various services rendered. As of September 30, 1997,
warrants to purchase 2,333,646 shares have been exercised generating proceeds to
the Company of $2,547,424, net of registration costs of $109,982. During the
year ended September 30, 1997, warrants to purchase 761,244 shares expired
unexercised.
At September 30, 1997, the Company had outstanding warrants to purchase
2,422,610 shares of common stock which expire various dates from November 1997
to January 2000. The warrants have exercise prices ranging from $0.50 to $1.25
per share and, if exercised would generate proceeds to the Company of
approximately $2,007,000.
(10) EMPLOYEE STOCK OPTION PLANS
The Company adopted a Long-Term Incentive Plan in 1997 (the "1997 Plan") and an
Incentive Stock Option Plan in 1989 (the "1989 Plan") pursuant to which the
Company's Board of Directors may grant stock options to officers and key
employees. The 1997 Plan and the 1989 Plan authorize grants of options to
purchase up to 1,000,000 and 500,000 shares of common stock, respectively.
Options are granted with an exercise price equal to the fair market value of the
stock at the date of grant. Options granted under the 1997 Plan and the 1989
Plan vest over four-year and three-year periods, respectively, and expire no
later than 10 years from the date of grant.
At September 30, 1997, there were 708,700 and 17,139 additional shares available
for grant under the 1997 Plan and the 1989 Plan, respectively. The
weighted-average fair value per share of stock options granted during 1997 and
1996 were $1.98 and $0.68, respectively, on the date of grant, using the Black
Scholes model with the following assumptions: risk-free interest rate of 6.49%,
expected life of 4 years, expected volatility of 118.05%, and an expected
dividend yield of 0% for the 1997 granted options, and a risk-free
F-12
interest rate of 6.18%, expected life of 3 years, expected volatility of 76.77%,
and an expected dividend yield of 0% for the 1996 granted options.
The Company applied APB Opinion No. 25 in accounting for its Plans and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value of the grant date for its stock options under SFAS
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:
1997 1996
Net income ----------- -----------
As reported $ 2,117,220 $ 1,215,118
Pro forma 1,963,959 1,206,051
Primary earnings per share
As reported 0.14 0.10
Pro forma 0.13 0.10
At September 30, 1997, the range of exercise prices was $0.69 to $2.50, and the
weighted-average remaining contractual life of the outstanding options was 7.7
years. Stock option activity during the periods indicated is as follows:
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
Balance at September 30, 1995 443,250 $ 1.38
Granted 40,000 .69
Canceled (15,000) (1.16)
--------
Balance at September 30, 1996 468,250 1.33
Granted 291,300 2.50
--------
Balance at September 30, 1997 759,550 1.78
========
At September 30, 1997, the number of options exercisable was 393,252 at a
weighted-average price of $1.38 per share.
(11) INCOME TAXES
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at September 30, 1997
and 1996 are presented as follows:
1997 1996
----------- -----------
Deferred tax assets:
Intangible assets $ 300,105 $ 369,279
Accounts receivable 255,118 --
Inventories 195,383 182,020
Investment in 3CI 360,475 360,475
Accrued expenses 242,294 207,434
Other 74,416 62,525
AMT credit carryforward 318,810 --
Net operating loss carryforward 840,509 1,840,338
----------- -----------
Total gross deferred tax assets 2,587,110 3,022,071
F-13
Less: valuation allowance (2,268,300) (2,959,399)
----------- -----------
Net deferred tax asset 318,810 62,672
Deferred tax liabilities:
Property, plant and equipment -- 5,013
Accounts receivable -- 57,659
----------- -----------
Total gross deferred tax liabilities -- 62,672
----------- -----------
Net deferred tax asset $ 318,810 $ --
=========== ===========
The Company has a federal income tax net operating loss carryforward as of
September 30, 1997 of approximately $2,500,000. The net operating loss
carryforward will expire in various amounts between the years 2001 and 2010 if
not utilized. The net operating losses are subject to limitations should the
ownership of the Company significantly change. In addition, the Company has an
Alternative Minimum Tax carryforward of $318,810 which is available to reduce
regular federal income taxes, if any, over an indefinite period. The Company
recorded current tax expense of $318,810 and a corresponding deferred tax
benefit for the year ended September 30, 1997. The net change in the total
valuation allowance during the year ended September 30, 1997 was a decrease of
approximately $690,000. Accordingly, there was no book tax expense recorded for
the year then ended.
The Company's effective tax rate applicable to income from continuing operations
of 13% differed from the U.S. federal income tax rate of 34% due to the realized
benefits of a net operating loss carryforward for which a valuation allowance
had been previously established of approximately $690,000, Alternative Minimum
Tax of $318,810 and other non-deductible expenses of approximately $29,000.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The Company has established a valuation allowance for
such deferred tax assets to the extent such amounts are not utilized to offset
existing deferred tax liabilities reversing in the same periods.
(12) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are each subject to certain litigation and
claims arising in the ordinary course of business. In the opinion of the
management of the Company, the amounts ultimately payable, if any, as a result
of such litigation and claims will not have a materially adverse effect on the
Company's financial position.
In September 1995, the Company, together with its wholly owned subsidiary, Tidel
Engineering, Inc., reached an agreement to settle litigation with third parties
concerning the malfunction of line probes formerly included in the environmental
monitoring system product line. In connection with the settlement, the Company
and its subsidiary were released by the other parties from all liability. The
aggregate settlement proceeds of $2,097,202, less related legal and professional
expenses of $1,382,057, resulted in income from settlement of $715,145 which was
included in other (expense) income for the year ended September 30, 1995.
The Company leases office and warehouse space, transportation equipment and
other equipment under terms of operating leases which expire through 2005.
Rental expense under these leases for the years ended September 30, 1997, 1996
and 1995 was approximately $355,000, $347,000 and $323,000, respectively. The
Company has approximate future lease commitments as follows:
F-14
YEAR ENDING
SEPTEMBER 30, AMOUNT
------------- ----------
1998 $ 359,423
1999 349,501
2000 360,042
2001 293,903
2002 293,903
Subsequent 685,774
----------
$2,342,546
==========
(13) RELATED PARTY TRANSACTIONS
From time to time, the Company provides certain administrative and clerical
services to two entities with which a director has an affiliation. Fees earned
by the Company for these services totaled $72,000, $144,000 and $68,000 for the
years ended September 30, 1997, 1996 and 1995, respectively. Amounts due to the
Company from these entities totaled $192,180 at September 30, 1997.
F-15
Schedule I
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
CONDENSED BALANCE SHEETS
September 30,
----------------------------
ASSETS 1997 1996
------------ ------------
Current Assets:
Cash and cash equivalents $ 32,459 $ 394,482
Notes and other receivables 641,250 198,804
Prepaid expenses and other assets 36,610 20,668
------------ ------------
Total current assets 710,319 613,954
Investment in 3CI, at market value 553,505 893,914
Property, plant and equipment, at cost 95,327 95,650
Accumulated depreciation (55,325) (45,872)
------------ ------------
Net property, plant and equipment 40,002 49,778
Investment in subsidiaires, at equity 7,829,809 4,815,514
Receivables from subsidiaries 218,670 104,893
Deferred tax asset 318,810 --
Other assets 31,015 19,360
------------ ------------
Total assets $ 9,702,130 $ 6,497,413
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable $ 940,000 $ 1,460,000
Accounts payable 225,144 115,686
Accrued liabilities 445,165 152,956
------------ ------------
Total current liabilities 1,610,309 1,728,642
Long-term debt -- 640,000
------------ ------------
Total liabilities 1,610,309 2,368,642
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $.01 par value, authorized 100,000,000
shares; issued and outstanding 14,851,050 and
12,397,404 shares, respectively 148,511 123,974
Additional paid-in capital 13,387,412 10,801,273
Accumulated deficit (4,026,262) (6,143,482)
Stock subscriptions receivable (424,437) --
Unrealized loss on investment in 3CI (993,403) (652,994)
------------ ------------
Total shareholders' equity 8,091,821 4,128,771
------------ ------------
Total liabilities and shareholders' equity $ 9,702,130 $ 6,497,413
============ ============
See accompanying notes to condensed financial information of registrant.
S-1
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
Year Ended September 30,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
Revenues $ -- $ -- $ --
Costs and expenses:
Selling, general and administrative 713,188 557,245 739,279
Depreciation and amortization 27,694 17,283 16,437
----------- ----------- -----------
Operating loss (740,882) (574,528) (755,716)
Interest expense, net (159,100) (172,500) (128,727)
Other income 2,907 -- --
----------- ----------- -----------
Loss before equity in income (loss) of subsidiaries (897,075) (747,028) (884,443)
Equity in income (loss) of subsidiaries 3,014,295 1,962,146 (2,533,426)
----------- ----------- -----------
Net income (loss) $ 2,117,220 $ 1,215,118 $(3,417,869)
=========== =========== ===========
See accompanying notes to condensed financial information of registrant.
S-2
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
Year Ended September 30,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) $ 2,117,220 $ 1,215,118 $(3,417,869)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 27,694 17,283 16,436
Loss (gain) on sale of property, plant and equipment 275 245 (1,027)
Deferred tax benefit 318,810 -- --
Equity in (income) loss of subsidiaries (3,014,295) (1,962,146) 2,533,426
Changes in assets and liabilities:
Notes and other receivables (237,660) 559,539 (381,764)
Prepaid expenses and other assets (37,942) (1,709) 31,157
Accounts payable and accrued liabilities 401,667 (207,055) 188,078
----------- ----------- -----------
Net cash used in operating activities (1,061,851) (378,725) (1,031,563)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (8,148) (16,360) (34,285)
Proceeds from sale of property, plant and equipment 300 -- 4,306
----------- ----------- -----------
Net cash used in investing activities (7,848) (16,360) (29,979)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 895,000 1,864,000 1,090,000
Repayments of notes payable (1,956,250) (1,254,000) (470,000)
Proceeds from exercise of warrants 1,765,674 161,250 263,600
Proceeds from issuance of warrants 3,252 14,000 --
Proceeds from issuance of common stock -- -- 7,800
----------- ----------- -----------
Net cash provided by financing activities 707,676 785,250 891,400
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (362,023) 390,165 (170,142)
Cash and cash equivalents at beginning of year 394,482 4,317 174,459
----------- ----------- -----------
Cash and cash equivalents at end of year $ 32,459 $ 394,482 $ 4,317
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 243,402 $ 151,700 $ 119,878
=========== =========== ===========
Cash paid for taxes $ 92,470 $ -- $ --
=========== =========== ===========
Supplemental disclosure of noncash financing activities:
Conversion of note payable to common stock $ 60,000 $ 150,000 $ 25,852
=========== =========== ===========
Notes received for warrant conversions $ 743,000 $ -- $ --
=========== =========== ===========
Noncash exercise of warrants $ 38,750 $ -- $ --
=========== =========== ===========
See accompanying notes to condensed financial information of registrant.
S-3
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(A) SHORT-TERM NOTES PAYABLE
Short-term notes payable consist of the following at September 30, 1997 and
1996:
1997 1996
---------- ----------
Promissory note due March 31, 1998,
interest payable at maturity at
12%, secured by 480,818 shares of 3CI
common stock $ 400,000 $ --
Promissory note due January 3, 1997,
interest payable at maturity at
12%, secured by a first lien on 200,000
shares and a second lien on 480,818
shares of 3CI common stock. Paid
January 3, 1997 -- 700,000
Unsecured promissory note due December 7,
1996, convertible into 120,000 shares
of common stock of the Company at the
option of the payee, interest payable at
maturity at 12%. Converted December 7,
1996 -- 60,000
Unsecured promissory notes due various dates,
interest payable quarterly at 10% to 12%.
Paid $300,000 October 28, 1997 540,000 700,000
---------- ----------
$ 940,000 $1,460,000
========== ==========
(B) LONG-TERM DEBT
Long-term debt consists of the following at
September 30, 1997 and 1996:
1997 1996
----- --------
Promissory note due March 31, 1998, interest
payable quarterly at 12%, secured by
480,818 shares of 3CI common stock $-- $400,000
S-4
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(CONTINUED)
(B) LONG-TERM DEBT (CONTINUED)
1997 1996
------ --------
Unsecured promissory notes due March 31,
1998, interest payable quarterly at 12% -- 240,000
------ --------
$ -- $640,000
====== ========
(C) GUARANTEES
The parent company has guaranteed the revolving credit note issued by its
subsidiary, Tidel Engineering, Inc., in the maximum principal amount of
$5,000,000 due May 31, 1999 (the "Revolving Credit Note"). At September 30,
1997, $3,654,604 was outstanding pursuant to the Revolving Credit Note.
(D) DIVIDENDS FROM SUBSIDIARIES
No dividends have been paid to the parent company by its subsidiaries as of
September 30, 1997. The subsidiaries are restricted from paying dividends to the
parent company pursuant to the Revolving Credit Note.
(E) AFFILIATED TRANSACTIONS
From time to time, the parent company provides certain administrative and
clerical services to two entities with whom a director has an affiliation. Fees
earned by the parent company for these services totaled $72,000, $144,000 and
$68,000 for the years ended September 30, 1997, 1996 and 1995, respectively.
Amounts due to the Company from these entities totaled $192,180 at September 30,
1997.
On March 30, 1997, the Company received notes with an aggregate principal
balance of $743,000 in connection with the exercise of warrants to purchase
common stock by certain directors.
The subsidiaries paid management fees to the parent company in the aggregate
amount of $180,000 per annum in each of the years ended September 30, 1997, 1996
and 1995. In addition, the parent company bills the subsidiaries for direct
expenses paid on their behalf and from time to time makes interest bearing
advances for working capital purposes.
S-5
Schedule II
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at Charged to Charged to Balance at
beginning costs and other end of
Classification of period expenses accounts Deductions period
- ------------------------------------- -------- -------- -------- ---------- ----------
For the year ended September 30, 1997:
Allowance for doubtful accounts $184,900 $600,000 $ -- $ 34,553 $ 750,347
Inventory reserve 476,000 36,000 -- -- 512,000
-------- -------- -------- ---------- ----------
$660,900 $636,000 $ -- $ 34,553 $1,262,347
======== ======== ======== ========== ==========
For the year ended September 30, 1996:
Allowance for doubtful accounts $161,143 $ 24,000 $ -- $ 243 $ 184,900
Inventory reserve 729,000 63,000 -- 316,000 476,000
-------- -------- -------- ---------- ----------
$890,143 $ 87,000 $ -- $ 316,243 $ 660,900
======== ======== ======== ========== ==========
For the year ended September 30, 1995:
Allowance for doubtful accounts $152,082 $ 10,000 $ -- $ 939 $ 161,143
Inventory reserve 192,000 696,000 -- 159,000 729,000
-------- -------- -------- ---------- ----------
$344,082 $706,000 $ -- $ 159,939 $ 890,143
======== ======== ======== ========== ==========
S-6
INDEX TO EXHIBITS
EXHIBITS
Except as otherwise indicated, the following documents are incorporated by
reference as Exhibits to this Report [the inclusion of certain Exhibits herein
through incorporation by reference to "Form 10 of the Company" refer in each
case to the indicated Exhibits as listed in Item 15.2 of the Company's Form 10
dated November 7, 1988 as amended by Form 8 dated February 2, 1989]:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.01. Copy of Stock Purchase Agreement dated February 4, 1994
between Waste Systems, Inc. and the Company (incorporated by
reference to Exhibit 1.2. of the Company's Report on Form 8-K
filed under date of February 18, 1994).
2.02. Copy of Option to Purchase 3CI Complete Compliance Corporation
shares dated February 4, 1994 issued by the Company to Waste
Systems, Inc. (incorporated by reference to Exhibit 1.3. of
the Company's Report on Form 8-K filed under date of February
18, 1994).
2.03. Copy of Registration Rights Agreement dated February 4, 1994
between 3CI Complete Compliance Corporation and the Company
(incorporated by reference to Exhibit 1.4. of the Company's
Report on Form 8-K filed under date of February 18, 1994).
3.01. Copy of Certificate of Incorporation of American Medical
Technologies, Inc. (filed as Articles of Domestication with
the Secretary of State, State of Delaware on November 6, 1987
and incorporated by reference to Exhibit 2 to Form 10 of the
Company).
3.02. Copy of By-Laws of the Company (incorporated by reference to
Exhibit 3 to Form 10 of the Company).
3.03. Amendment to Certificate of Incorporation dated July 16, 1997
(incorporated by reference to Exhibit 3 of the Company's
Report on Form 10-Q for the quarterly period ended June 30,
1997).
4.01. Form of Series C Warrant of the Company issued to the
investors referred to in Exhibit 4.1. above and providing for
the purchase on or before the expiration of 60 days following
the effective date of a registration statement of the Company
covering the offering to the public of the shares underlying
the warrants of an aggregate of 1,081,250 shares of the common
stock of the Company at an exercise price of $1.25 per share
(incorporated by reference to Exhibit 4.17. to the Company
Annual Report on Form 10-K for the year ended December 31,
1991).
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4.02. Form of Registration Agreement between the Company and each of
the two purchasers of its common stock in a 1991 private
placement (incorporated by reference to Exhibit 4.22. to the
Company Annual Report on Form 10-K for the year ended December
31, 1991).
4.03. Form of Warrant (Series 01) of the Company issued to the
purchasers referred to in Exhibit 4.3 above (the 14 Warrants
01 issued by the Company to such investors are identical but
for the name of the holder, the date of issue and the number
of shares of the Company's common stock which may be purchased
upon exercise) (incorporated by reference to Exhibit 4.23. to
the Company Annual Report on Form 10-K for the year ended
December 31, 1991).
4.04. Form of Warrant (Series 03) of the Company issued to the
purchasers of its common stock as referred to in Exhibits 4.3.
above (the 14 Warrants 03 issued by the Company to such
investors are identical but for the name of the holder, the
date of issue and the number of shares of the Company's common
stock which may be purchased upon exercise) (incorporated by
reference to Exhibit 4.25. to the Company Annual Report on
Form 10-K for the year ended December 31, 1991).
4.05. Form of Warrant (Series 04) of the Company issued to the
purchasers of its common stock as referred to in Exhibits 4.3.
above (the 14 Warrants 04 issued by the Company to such
investors are identical but for the name of the holder, the
date of issue and the number of shares of the Company's common
stock which may be purchased upon exercise) (incorporated by
reference to Exhibit 4.26. to the Company Annual Report on
Form 10-K for the year ended December 31, 1991).
4.06. Copy of form of series TEC common stock purchase warrant
(Warrant No. TEC--01) of the Company issued to Harry Argovitz
and Rose Argovitz as joint tenants with right of survivorship
covering 200,000 shares of the Company's common stock and
providing for an exercise price of $2.00 per share during an
exercise period expiring March 31, 1996 (identical warrants
but for (i) the name of the holder (ii) the number of shares
covered and (iii) the exercise price of $2.50 per share rather
than $2.00 were issued to the two individuals referred to in
Exhibit 4.3. above) (incorporated by reference to Exhibit 4.1.
of the Company's Report on Form 8-K filed under date of
October 14, 1992).
4.07. Copy of form of series BOD common stock purchase warrants of
the Company issued to each of the five directors of the
Company as of May 31, 1991, each such warrant providing for
the purchase on or before the expiration date referred to in
Exhibit 4.2. above of 50,000 shares at an exercise price of
$0.625 per share (incorporated by reference to Exhibit 4.21.
of the Company's Report on Form 10-K for the year ended
September 30, 1992).
E-2
4.08. Copy of form of series BOD common stock purchase warrants of
the Company issued to each of the six directors of the Company
as of February 1, 1992, each such warrant providing for the
purchase on or before the expiration date referred to in
Exhibit 4.2. above of 50,000 shares of common stock at an
exercise price of $1.25 per share (incorporated by reference
to Exhibit 4.22. of the Company's Report on Form 10-K for the
year ended September 30, 1992).
4.09. Copy of form of series BOD common stock purchase warrants of
the Company issued to each of the seven directors of the
Company as of January 5, 1995, each such warrant providing for
the purchase on or before January 19, 1997 of 75,000 shares of
common stock at an exercise price of $1.25 per share
(incorporated by reference to Exhibit 4.16. of the Company's
Report on Form 10-K for the year ended September 30, 1994).
4.10. Copy of form of series BOD common stock purchase warrants of
the Company issued to each of the seven directors of the
Company as of October 23, 1995, each such warrant providing
for the purchase on or before October 23, 1998 of 50,000
shares of common stock at an exercise price of $0.625 per
share (incorporated by reference to Exhibit 4.15. of the
Company's Report on Form 10-K for the year ended September 30,
1995).
4.11. Copy of Warrant No. JOW-02 of the Company issued to J. Otis
Winters under date of October 23, 1995 covering 150,000 shares
of the Company's common stock and providing for an exercise
price of $0.625 per share during an exercise period expiring
October 23, 1998 (incorporated by reference to Exhibit 4.16.
of the Company's Report on Form 10-K for the year ended
September 30, 1995).
4.12. Copy of Warrant No. JCF-02 of the Company issued to James C.
Ford under date of November 15, 1994, covering 120,000 shares
of the Company's common stock and providing for an exercise
price of $0.75 per share during an exercise period expiring
November 15, 1997 (incorporated by reference to Exhibit 4.20.
of the Company's Report on Form 10-K for the year ended
September 30, 1994).
4.13. First Amended and Restated Loan Agreement executed by and
between Tidel and the The Frost National Bank d/b/a Creekwood
Capital Group (incorporated by reference to Exhibit 4.01. of
the Company's Report on Form 10-Q for the quarterly period
ended December 31, 1994).
4.14. Revolving Credit Note executed by the Tidel, jointly and
severally, payable to the order of the The Frost National Bank
d/b/a Creekwood Capital Group (incorporated by reference to
Exhibit 4.02. of the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1994).
E-3
4.15. Guaranty Agreement executed by the Company (incorporated by
reference to Exhibit 4.03. of the Company's Report on Form
10-Q for the quarterly period ended December 31, 1994).
4.16. Security Agreement (Accounts, General Intangibles, Instruments
and/or Inventory) executed by AnyCard International, Inc.
(incorporated by reference to Exhibit 4.04. of the Company's
Report on Form 10-Q for the quarterly period ended December
31, 1994).
4.17. Security Agreement (Goods) executed by AnyCard International,
Inc. (incorporated by reference to Exhibit 4.05. of the
Company's Report on Form 10-Q for the quarterly period ended
December 31, 1994).
4.18. Security Agreement (Accounts, General Intangibles, Instruments
and/or Inventory) executed by Tidel Cash Systems, Inc.
(incorporated by reference to Exhibit 4.06. of the Company's
Report on Form 10-Q for the quarterly period ended December
31, 1994).
4.19. Security Agreement (Goods) executed by Tidel Cash Systems,
Inc. (incorporated by reference to Exhibit 4.07. of the
Company's Report on Form 10-Q for the quarterly period ended
December 31, 1994).
4.20. Security Agreement-Pledge executed by the Company covering all
shares of AnyCard International, Inc. (incorporated by
reference to Exhibit 4.08. of the Company's Report on Form
10-Q for the quarterly period ended December 31, 1994).
4.21. Modification of Security Agreement-Pledge (modifying Security
Agreement-Pledge previously executed by the Company in favor
of Creekwood Capital Corporation covering all shares of Tidel
Cash Systems, Inc.) (incorporated by reference to Exhibit
4.09. of the Company's Report on Form 10-Q for the quarterly
period ended December 31, 1994).
4.22. Modification of Security Agreement-Pledge by Tidel Cash
Systems, Inc. (modifying Security Agreement-Pledge previously
executed by Tidel Cash Systems, Inc. in favor of Creekwood
Capital Corporation covering all shares of Tidel Cash Systems,
Inc.) (incorporated by reference to Exhibit 4.10. of the
Company's Report on Form 10-Q for the quarterly period ended
December 31, 1994).
4.23. Modification of Security Agreements by Tidel Engineering, Inc.
((Accounts, General Intangibles, Instruments and/or Inventory)
and (Goods) modifying the respective Security Agreements
previously executed by Tidel Engineering, Inc. in favor of
Creekwood Capital Corporation)) (incorporated by reference to
Exhibit 4.11. of the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1994).
E-4
4.24. Intellectual Property Collateral Assignment executed by Tidel
Engineering, Inc. in favor of The Frost National Bank d/b/a
Creekwood Capital Group (incorporated by reference to Exhibit
4.12. of the Company's Report on Form 10-Q for the quarterly
period ended December 31, 1994).
4.25. Intellectual Property Collateral Assignment executed by
AnyCard International, Inc. in favor of The Frost National
Bank d/b/a Creekwood Capital Group (incorporated by reference
to Exhibit 4.13. of the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1994).
4.26. Intellectual Property Collateral Assignment executed by Tidel
Cash Systems, Inc. in favor of The Frost National Bank d/b/a
Creekwood Capital Group (incorporated by reference to Exhibit
4.14. of the Company's Report on Form 10-Q for the quarterly
period ended December 31, 1994).
4.27. Financing Statement executed by the Company (incorporated by
reference to Exhibit 4.15. of the Company's Report on Form
10-Q for the quarterly period ended December 31, 1994).
4.28. Financing Statement executed by AnyCard International, Inc.
(incorporated by reference to Exhibit 4.16. of the Company's
Report on Form 10-Q for the quarterly period ended December
31, 1994).
4.29. Financing Statement executed by Tidel Cash Systems, Inc.
(incorporated by reference to Exhibit 4.17. of the Company's
Report on Form 10-Q for the quarterly period ended December
31, 1994).
4.30. Special Deposit Agreement and Grant of Security Interest in
Bank Account among AnyCard International, Inc., Creekwood
Capital Corporation and Texas Commerce Bank National
Association (incorporated by reference to Exhibit 4.18. of the
Company's Report on Form 10-Q for the quarterly period ended
December 31, 1994).
4.31. Special Deposit Agreement and Grant of Security Interest in
Bank Account among Tidel Engineering, Inc., Creekwood Capital
Corporation and Texas Commerce Bank National Association
(incorporated by reference to Exhibit 4.19. of the Company's
Report on Form 10-Q for the quarterly period ended December
31, 1994).
4.32. Modification of Warrant Agreement granting to Creekwood
Capital Corporation the right to purchase through May 13, 1996
up to 30,000 shares of the Company's common stock at a price
of $2.00 per share executed by the Company (incorporated by
reference to Exhibit 4.20. of the Company's Report on Form
10-Q for the quarterly period ended December 31, 1994).
E-5
4.33. Guaranty of Validity of Collateral executed by James T. Rash
and J. Otis Winters, individually, in favor of The Frost
National Bank d/b/a Creekwood Capital Group (incorporated by
reference to Exhibit 4.21. of the Company's Report on Form
10-Q for the quarterly
period ended December 31, 1994).
4.34. Credit Agreement dated June 12, 1997 by and between Tidel
Engineering, Inc. and Texas Commerce Bank National Association
(incorporated by reference to Exhibit 4.01 of the Company's
Report on Form 10-Q for the quarterly period ended June 30,
1997).
4.35. Promissory Note dated June 12, 1997 executed by Tidel
Engineering, Inc. payable to the order of Texas Commerce Bank
National Association (incorporated by reference to Exhibit
4.02 of the Company's Report on Form 10-Q for the quarterly
period ended June 30, 1997).
4.36. Security Agreement (Personal Property) dated as of June 12,
1997, by and between Tidel Engineering, Inc. and Texas
Commerce Bank National Association (incorporated by reference
to Exhibit 4.03 of the Company's Report on Form 10-Q for the
quarterly period ended June 30, 1997).
4.37. Patent Security Agreement dated June 12, 1997 executed by
Tidel Engineering, Inc. in favor of Texas Commerce Bank
National Association (incorporated by reference to Exhibit
4.04 of the Company's Report on Form 10-Q for the quarterly
period ended June 30, 1997).
4.38. Trademark Security Agreement dated June 12, 1997 executed by
Tidel Engineering, Inc. in favor of Texas Commerce Bank
National Association (incorporated by reference to Exhibit
4.05 of the Company's Report on Form 10-Q for the quarterly
period ended June 30, 1997).
4.39. Unconditional Guaranty Agreement dated June 12, 1997 executed
by the Company for the benefit of Texas Commerce Bank National
Association (incorporated by reference to Exhibit 4.06 of the
Company's Report on Form 10-Q for the quarterly period ended
June 30, 1997).
4.40. Pledge and Security Agreement dated June 12, 1997 executed by
the Company in favor of Texas Commerce Bank National
Association (incorporated by reference to Exhibit 4.07 of the
Company's Report on Form 10-Q for the quarterly period ended
June 30, 1997).
10.01. Copy of 1989 Incentive Stock Option Plan of the Company
(incorporated by reference to Appendix A of the Company's
Proxy Statement filed under Regulation 14A with respect to the
Annual Meeting of Shareholders held June 13, 1989).
E-6
10.02. Copy of Lease Agreement dated February 21, 1992 between the
Company, as Lessee, and San Felipe Plaza, Ltd., as Lessor,
related to the occupancy of the Company's executive offices
(incorporated by reference to Exhibit 10.10. of the Company's
Report on Form 10-K for the year ended September 30, 1992).
10.03. Copy of Lease dated as of December 9, 1994 (together with the
Addendum and Exhibits thereto) between Booth, Inc., a Texas
corporation, as Landlord and Tidel Engineering, Inc., as
Tenant, covering approximately 65,000 square feet of
manufacturing and office premises at 2310 McDaniel Drive,
Carrollton, Texas (incorporated by reference to Exhibit 10.7.
of the Company's Report on Form 10-K for the year ended
September 30, 1994).
10.04. Copy of Agreement dated October 30, 1991 between ACS and Tidel
Engineering, Inc. (incorporated by reference to Exhibit 10.14.
of the Company's Report on Form 10-K for the year ended
September 30, 1992).
10.05. Copy of EFT Processing Services Agreement dated February 3,
1995 by, between and among Affiliated Computer Services, Inc.
("ACS"), AnyCard International, Inc. and the Company related
to the electronic fund transfer services to be provided by ACS
to AnyCard (incorporated by reference to Exhibit 10.9. of the
Company's Report on Form 10-K for the year ended September 30,
1995).
10.06. Copy of Amendment No. 1 dated as of September 14, 1995 to
Exhibit 10.05. above (incorporated by reference to Exhibit
10.10. of the Company's Report on Form 10-K for the year ended
September 30, 1995).
10.07. Copy of Purchase Agreement dated February 3, 1995 between ACS
and AnyCard International, Inc. related to the purchase by ACS
of AnyCard Systems (incorporated by reference to Exhibit
10.11. of the Company's Report on Form 10-K for the year ended
September 30, 1995).
10.08. Copy of Amendment No. 1 dated as of September 14, 1995 to
Exhibit 10.07. above (incorporated by reference to Exhibit
10.12. of the Company's Report on Form 10-K for the year ended
September 30, 1995).
10.09. Secured Promissory Note dated March 30, 1997 executed by James
L. Britton, III and payable to the order of the Company
(incorporated by reference to Exhibit 10.01 of the Company's
Report on Form 10-Q for the quarterly period ended June 30,
1997).
10.10. Secured Promissory Note dated March 30, 1997 executed by
Jerrell G. Clay and payable to the order of the Company
(incorporated by reference to Exhibit 10.02 of the Company's
Report on Form 10-Q for the quarterly period ended June 30,
1997).
E-7
10.11. Secured Promissory Note dated March 30, 1997 executed by Mark
K. Levenick and payable to the order of the Company
(incorporated by reference to Exhibit 10.03 of the Company's
Report on Form 10-Q for the quarterly period ended June 30,
1997).
10.12. Secured Promissory Note dated March 30, 1997 executed by James
T. Rash and payable to the order of the Company (incorporated
by reference to Exhibit 10.04 of the Company's Report on Form
10-Q for the quarterly period ended June 30, 1997).
10.13. Form of Stock Pledge Agreement dated March 30, 1997 executed
by each of the four directors of the Company in favor of the
Company (incorporated by reference to Exhibit 10.05 of the
Company's Report on Form 10-Q for the quarterly period ended
June 30, 1997).
*10.14. Copy of Amendment No.2 dated as of September 15, 1997 to
Exhibit 10.02. above.
*10.15. Form of employment agreement dated July 16, 1997 by and
between Tidel Engineering, Inc. and Michael F. Hudson,
Eugene W. Moore, M. Flynt Moreland and Roberto M. Gutierrez.
*11. Statement of Computation of Net Income (Loss) Per Share for
the three-year period ended September 30, 1997.
22. The Registrant has three subsidiaries doing business in the
names set forth below:
STATE OF PERCENT
NAME INCORPORATION OWNED
---- ------------- -----
Tidel Cash Systems, Inc. Delaware 100%
AnyCard International, Inc. Delaware 100%
Tidel Engineering, Inc. Delaware 100%
*27. Financial Data Schedule.
- ----------------
* - Filed herewith
E-8