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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, 2000
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 14,478,643 shares of Common Stock held by
non-affiliates of the Registrant based on the closing sale price on January 5,
2001 of $6.125 was $88,681,688.
The number of shares of Common Stock outstanding as of the close of business on
January 5, 2001 was 17,376,210.
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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............................................. 2
Item 3. Legal Proceedings...................................... 3
Item 4. Submission of Matters to
a Vote of Security Holders.......................... 3
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters.............. 3
Item 6. Selected Financial Data................................ 3
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations........................... 4
Item 8. Financial Statements and Supplementary Data............ 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 14
PART III
Item 10. Directors and Executive Officers of
the Registrant...................................... 14
Item 11. Executive Compensation................................. 14
Item 12. Security Ownership of Certain Beneficial
Owners and Management............................... 14
Item 13. Certain Relationships and Related
Transactions........................................ 14
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K............................. 15
Signature Page ................................................... 16
- ----------
* This Table of Contents is inserted for convenience of reference only and is
not a part of this Report as filed.
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PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
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.
In September 1992, the Company acquired Tidel Engineering, Inc., a
manufacturer of cash handling devices and other products, for $4,746,848.
The Company changed its name to Tidel Technologies, Inc. in July 1997, and
is primarily engaged in the development, manufacturing, sale and support of
automated teller machines ("ATMs") and electronic safes. During 2000, no
significant changes occurred in the manner of conducting the Company's
business
(b) FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS
The Company conducts business within one operating segment, principally in
the United States.
(c) DESCRIPTION OF BUSINESS
The Company develops, manufactures, sells and supports ATM products and
related software, known as the Ignition and Chameleon series products, and
electronic safe products, known as the Timed Access Cash Controller
("TACC") products, which are designed for specialty retail marketers. Sales
of products are generally made on a wholesale basis to more than 250
distributors and manufacturer's representatives. The Company's engineering,
sales and service departments work closely with distributors and their
customers to continually analyze and fulfill their needs, enhance existing
products and develop new products. Sales of the Company's ATM and TACC
products accounted for 92% of revenue in each of the fiscal years ended
September 30, 2000 and 1999, and 88% in the fiscal year ended September 30,
1998.
The principal materials and components used by the Company are
pre-fabricated steel cabinets, custom molded plastic, and various
electronic parts and components, all of which are generally available in
quantity at this time. The Company assembles its products by configuring
parts and components received from a number of major suppliers with the
Company's proprietary hardware and software.
The Company has one customer, Credit Card Center ("CCC"), that accounted
for 61% and 40% of its total net sales for the years ended September 30,
2000 and 1999, respectively. CCC also purchases a significant amount of ATM
products from a principal competitor of the Company, and there can be no
assurance that the Company's sales to this customer will reach or exceed
historical levels in any future period. Although management believes that
it has a good relationship with CCC, the loss of this customer would have a
material adverse effect on the Company's business.
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The Company's operating results and the amount and timing of revenue are
affected by numerous factors including production schedules, customer
priorities, sales volume, and sales mix. The Company normally fills and
ships customer orders within 45 days of receipt, and therefore no
significant backlog generally exists.
All phases of the Company's business are highly competitive. The Company
believes, based upon independent industry estimates, that it is a leading
manufacturer of ATMs in the U.S. off-premise ATM market. Competition in the
U.S. market is substantial, with large corporations such as Diebold
Incorporated and NCR Corporation dominating the marketplace. Direct
competition to the Company in the off-premise market consists of companies
such as Triton Systems, Inc. (a subsidiary of Dover Corporation),
Fujitsu-ICL Systems, Cross Technologies, Inc. (a distributor of Hyosung
products) and Wincor-Nixdorf. The Company believes that the quality and
value offered by its ATM product line allows it to compete effectively in
the off-premise market. The Company believes that it is also a leader in
the global market for electronic cash controller equipment. Competition in
that market comes principally from NKL Industries, McGunn Safe Company,
Armor Safe Company and AutoVend. Many smaller manufacturers of ATMs,
electronic safes and kiosks are also found in the market.
The Company can experience seasonal variances in its operations and
historically has its lowest dollar volume sales months between November and
February. The Company's operating results for any particular quarter may
not be indicative of the results for the future quarter or for the year.
The Company's charges to expense for research and development were
approximately $2,800,000, $1,700,000 and $1,400,000 for the years ended
September 30, 2000, 1999 and 1998, respectively.
Compliance by the Company with federal, state and local environmental
protection laws during 2000 had no material effect upon capital
expenditures, earnings or the competitive position of the Company.
The Company employed 133 people at September 30, 2000, compared to 144
people at the end of the preceding year. The decrease in 2000 relates to a
reduction in the number of full-time assembly line personnel.
(d) FINANCIAL INFORMATION ABOUT EXPORT SALES
Sales to customers outside the United States, as a percentage of total
revenues, were approximately, 6%, 5% and 4% in the fiscal years ended
September 30, 2000, 1999 and 1998, respectively.
ITEM 2. PROPERTIES
The Company's corporate office is located in approximately 4,100 square
feet in Houston, Texas, under a lease expiring in December 2001. The
manufacturing, engineering and warehouse operations are located in two
adjacent facilities occupying approximately 110,000 square feet in
Carrollton, Texas, under leases expiring in January 2004. Additionally, the
Company has sales and administration offices in Canada and Greece.
At September 30, 2000, the Company owned tangible property and equipment
with a cost basis of approximately $4,919,000.
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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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2000.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICES
The Company's common stock trades on the National Market System of the
Nasdaq Stock Market under the symbol "ATMS". Prior to August 16, 2000, the
Company's common stock traded 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, 2000:
2000 1999
------------------- -------------------
Fiscal Quarter Ended High Low High Low
- -------------------- ------- ------- ------- -------
December 31, ....... $ 3.000 $ 1.781 $ 1.781 $ 1.063
March 31, .......... 8.813 2.750 2.969 1.750
June 30, ........... 12.000 6.313 2.875 1.938
September 30, ...... 12.500 5.750 2.500 1.531
------- ------- ------- -------
Fiscal Year .... $12.500 $ 1.781 $ 2.969 $ 1.063
======= ======= ======= =======
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.
There were approximately 8,500 shareholders as of January 3, 2001, which
includes an estimated number of shareholders who have shares held for their
accounts by brokers, banks and trustees for benefit plans.
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.
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Year Ended September 30,
------------------------------------------------------------
SELECTED STATEMENT OF INCOME DATA:(1) 2000 1999 1998 1997 1996
- -------------------------------------- -------- -------- -------- -------- --------
Revenues ............................................. $ 72,931 $ 45,873 $ 33,608 $ 30,153 $ 20,111
Operating income ..................................... 15,440 5,117 4,325 2,590 1,598
Net income(2) ........................................ 9,169 2,936 4,240 2,117 1,215
Net income per share:
Basic ............................................. $ 0.55 $ 0.18 $ 0.27 $ 0.15 $ 0.10
Diluted ........................................... $ 0.50 $ 0.17 $ 0.25 $ 0.14 $ 0.10
Year Ended September 30,
------------------------------------------------------------
SELECTED BALANCE SHEET DATA:(1) 2000 1999 1998 1997 1996
- ------------------------------- -------- -------- -------- -------- --------
Current assets ....................................... $ 58,461 $ 25,551 $ 20,966 $ 15,894 $ 9,815
Current liabilities .................................. 11,945 7,528 5,528 6,517 7,594
Working capital ...................................... 46,516 18,023 15,438 9,377 2,221
Total assets ......................................... 63,060 28,696 24,247 18,263 12,363
Total short-term notes payable and long-term debt .... 22,397 5,375 5,363 4,603 4,769
Shareholders' equity ................................. 28,846 15,922 13,484 8,092 4,129
Three Months Ended
---------------------------------------------------------------------------------------------------
SELECTED QUARTERLY Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 Dec. 31
FINANCIAL DATA:(1) 2000 2000 2000 1999 1999 1999 1999 1998
- ------------------ -------- -------- -------- -------- -------- -------- -------- --------
Revenues ................. $ 20,222 $ 20,264 $ 18,663 $ 13,782 $ 16,146 $ 12,380 $ 10,286 $ 7,061
Operating income ......... 4,782 4,393 3,916 2,349 1,991 1,488 1,134 504
Net income(2) ............ 2,373 2,796 2,519 1,481 1,099 959 626 252
Net income per share:
Basic ................. $ 0.14 $ 0.17 $ 0.15 $ 0.09 $ 0.07 $ 0.06 $ 0.04 $ 0.02
Diluted(3) ............ $ 0.13 $ 0.15 $ 0.14 $ 0.09 $ 0.06 $ 0.06 $ 0.04 $ 0.02
- ---------
(1) All amounts are in thousands, except per share dollar amounts.
(2) Income tax expense (benefit) was $4,838,000, $1,800,000 and ($307,251) in
2000, 1999 and 1998, respectively. There was no provision for taxes in 1997
and 1996.
(3) The sum of the quarterly amounts of basic and diluted earnings per share
does not necessarily equal basic and diluted earnings per share for the
entire fiscal year due to rounding differences and/or variations in the
stock prices utilized in the calculations at the end of each period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The Company's revenues were $72,931,000 for the year ended September 30,
2000, representing an increase of $27,058,000, or 59%, from fiscal 1999 and
$39,324,000, or 117%, from fiscal 1998. Operating income for the year was
$15,440,000 as compared to $5,117,000 in fiscal 1999 and $4,325,000 in
fiscal 1998. Net income was $9,169,000 for the year ended September 30,
2000, an increase of $6,233,000, or 212%, from fiscal 1999 and $4,929,000,
or 116%, from fiscal 1998.
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The increases in sales were primarily due to shipments of ATMs in the
off-premise markets, to one major customer. The gross profit from these
increased sales, offset somewhat by increased operating expenses, provided
the overall improvement in operating and net income.
PRODUCT REVENUES
A breakdown of net sales by individual product line is provided in the
following table:
(dollars in 000's)
----------------------------------
2000 1999 1998
-------- -------- --------
ATM .................................... $ 59,210 $ 35,570 $ 22,971
TACC ................................... 7,569 6,579 6,477
Parts and other ........................ 6,152 3,724 4,160
-------- -------- --------
$ 72,931 $ 45,873 $ 33,608
======== ======== ========
ATM sales increased 66% in the past year due to strong customer demand for
the Company's cost-competitive Ignition series ATMs in non-bank locations.
For the year ended September 30, 2000, the Company shipped 12,426 units, an
increase of 76% over the 7,061 units shipped in fiscal 1999 and an increase
of 200% over the 4,140 units shipped in fiscal 1998. Based on industry
estimates for 2000, Tidel has gained significant market share, during the
year and is now positioned as one of the industry leaders in deployments of
ATMs in the off-premise market.
TACC sales increased 15% in 2000 as the Company has increased its marketing
efforts in the U.S. for this product line and has experienced some
penetration in market segments outside of the traditional convenience store
and petroleum retail markets, such as food service and hospitality markets.
Parts and other revenues vary directly with sales of finished goods, and
have increased accordingly. Additionally, the Company had sales of parts
and equipment related to its former environmental monitoring business of
$554,000 and $1,355,000 in 1999 and 1998, respectively. The Company did not
record a significant amount of revenues related to this business in 2000
and does not expect to record any significant revenues from this business
in the future.
GROSS PROFIT, OPERATING EXPENSES AND NON-OPERATING ITEMS
A comparison of certain operating information is provided in the following
table:
(dollars in 000's)
----------------------------------
2000 1999 1998
-------- -------- --------
Gross profit ........................... $ 27,916 $ 14,960 $ 12,180
Selling, general and administrative .... 11,108 9,030 7,366
Depreciation and amortization .......... 1,368 813 489
-------- -------- --------
Operating income ....................... 15,440 5,117 4,325
Interest expense ....................... 432 381 392
Write-down of investment in 3CI ........ 1,000 -- --
-------- -------- --------
Income before taxes .................... 14,007 4,736 3,933
Income tax expense (benefit) ........... 4,838 1,800 (307)
-------- -------- --------
Net income ............................. $ 9,169 $ 2,936 $ 4,240
======== ======== ========
Gross profit on product sales was $27,916,000 in 2000, an increase of
$12,956,000, or 87%, from 1999 and $15,736,000, or 129%, from 1998. The
gross margin, as a percentage of sales, was 38.3% of product sales,
compared to 32.6% in 1999 and 36.2% in 1998. The improvement in gross
margin in
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2000 compared to 1999 was principally due to lower production costs per ATM
unit as a result of volume discounts on raw materials and manufacturing
efficiencies.
Selling, general and administrative expenses were $11,108,000 in 2000, an
increase of $2,078,000 from $9,030,000 in 1999, and an increase of
$3,742,000 from $7,366,000 in 1998, as a result of higher salaries and
increased marketing expenses. These costs were 15.2% of sales in 2000, a
decrease from the 1999 and 1998 levels of 19.7% and 21.9%, respectively.
The percentage decline relates primarily to increased sales volume.
Depreciation and amortization was $1,368,000, $813,000 and $489,000, for
the years ended September 30, 2000, 1999 and 1998, respectively. The
increase in 2000 compared to 1999 and 1998 related to additions of
property, plant and equipment primarily for the production of new models in
the Ignition and Chameleon series ATM product lines.
Interest expense fluctuations in 2000, 1999 and 1998 are a result of
varying levels of outstanding indebtedness under the Company's revolving
credit agreement with a bank and changes in the prime rate. The Company
expects interest expense to increase during fiscal 2001 due to the issuance
of the convertible debentures described below.
Income tax expense (benefit) provisions of $4,838,000 in 2000 and
$1,800,000 in 1999, represented an effective tax rate of 34.5% in 2000 and
38% in 1999. The income tax benefit in 1998 was attributable to a fourth
quarter reduction in valuation allowance estimates to reflect the probable
utilization of the Company's remaining deferred tax assets. This resulted
in the recognition of a deferred income tax benefit of $947,000 which, when
offset with current tax expense of $640,000, resulted in a net income tax
benefit of $307,000.
LIQUIDITY AND CAPITAL RESOURCES
The financial position of the Company continues to improve primarily as a
result of profitable operations, the infusion of capital from the exercise
of options and warrants, and the issuance of convertible debentures in
September 2000 as reflected in the following key indicators as of September
30, 2000, 1999 and 1998:
(dollars in 000's)
----------------------------------
2000 1999 1998
-------- -------- --------
Cash .............................. $ 16,223 $ 2,424 $ 1,400
Working capital ................... 46,516 18,023 15,438
Total assets ...................... 63,060 28,696 24,247
Shareholders' equity .............. 28,846 15,922 13,484
The improvement in working capital in 2000 is principally due to the
increase in cash from the private placement in September 2000 of
$18,000,000 of convertible debentures, as described more fully below, and
an increase in accounts receivable and inventories as a result of higher
sales levels.
The Company has a credit agreement with a bank which provides for a
$7,000,000 revolving line of credit with interest equal to the prime rate,
of which $1,800,000 was unused and available at September 30, 2000, and a
$640,000 term loan at 8.4% interest per annum. At September 30, 2000,
$5,200,000 was outstanding on the revolving credit facility compared to
$4,894,634 at September 30, 1999. Subsequent to September 30, 2000, the
Company amended the credit agreement to increase the
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line of credit to $10,000,000. See Note 8 to Notes to Consolidated
Financial Statements for a description of all outstanding debt and
maturities.
In September 2000, the Company issued an aggregate of $18,000,000 of the
Company's 6% Convertible Debentures, due September 8, 2004, to two
investors convertible into the Company's common stock at a price of $9.50
per share. Some of these proceeds may be used to provide financing to
several of the Company's major customers. In addition, the Company issued
warrants to the investors to purchase 378,947 shares of the Company's
common stock exercisable at any time through September 8, 2005 at an
exercise price of $9.80 per share. The debentures provide for three methods
to convert the debentures into shares of the Company's common stock: (1)
conversion at the option of the Holder; (2) conversion at the option of the
Company; and (3) a put option. See Note 9 to Notes to Consolidated
Financial Statements for a description of the terms and conditions of the
convertible debentures.
The Company formerly owned 100% of 3CI Complete Compliance Corporation, a
company engaged in the transportation and incineration of medical waste,
until its divestiture of a majority interest in February 1994. The Company
continues to own 698,464 shares of the common stock of 3CI. During the
fourth quarter, management of the Company deemed the decline in the fair
value of the 3CI to be other than temporary and recorded a non-cash
impairment charge in the amount of $1,000,000 for the write-down of its
investment in the common stock of 3CI in accordance with Financial
Accounting Standards Board Statement No. 115. With respect to its remaining
investment, the Company had previously provided aggregate loss provisions
of $1,436,750 in prior periods, resulting in a write-down of the investment
to its present carrying amount of $130,962. The Company has no immediate
plan for the disposal of these shares, and accordingly, all the shares are
presently pledged to secure borrowings under the revolving credit agreement
with a bank. See Note 5 to Notes to Consolidated Financial Statements.
During the year ended September 30, 2000, warrants to purchase 1,055,692
shares of Common Stock were exercised, generating proceeds of $995,587. In
addition, an aggregate of options to purchase 252,550 shares of Common
Stock were exercised pursuant to the Company's stock option plans,
generating proceeds of $353,577.
The Company's research and development budget for fiscal 2001 has been
estimated at $3,200,000. 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 $2,800,000,
$1,700,000 and $1,400,000 for the years ended September 30, 2000, 1999 and
1998, respectively.
With its present capital resources, its continuing earnings from
operations, its potential capital from the exercise of warrants, and
available credit from its revolving facility, the Company believes it
should have sufficient resources to meet its operating needs for the
foreseeable future and to provide for debt maturities and capital
expenditures.
The Company has never paid dividends on shares of its common stock, 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.
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IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes new accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet
as either an asset or liability measured at its fair value. SFAS 133
requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement
and requires that a company must formally document, designate, and assess
the effectiveness of transactions that receive hedge accounting. SFAS 133,
as amended, is effective for all fiscal years beginning after June 15,
2000. The Company has not yet determined the impact; if any, SFAS 133 will
have on its financial position or results of operations, and plans to adopt
this standard during the year ending September 30, 2001.
YEAR 2000 DISCLOSURE
The Company was well prepared for the year 2000 and experienced no major
problems with its internal systems or in products purchased from suppliers
used in manufacturing. The Company is also aware of no major problems with
any of its products in the field. As required, the Company expensed as
incurred all costs associated with year 2000 issues. The costs did not have
a material effect on the Company's financial position or results of
operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates as a result of
significant financing through its issuance of variable-rate and fixed-rate
debt. If market interest rates were to increase 1% in fiscal 2000, there
would be no material impact on the Company's consolidated results of
operations or financial position.
RISK FACTORS
There are several risks inherent in the business of the Company including,
but not limited to, the following:
A substantial amount of our revenues comes from one product line.
We receive a substantial amount of our revenues from sales of our ATMs.
Approximately 81% and 78% of our net sales came from our ATM product line
for the years ended September 30, 2000 and 1999, respectively.
We expect our future success to depend in large part on the sale of our
ATMs. Because of this product concentration, our business could be
materially adversely affected by a decline in demand for these products or
an increase in competition. Our future performance will depend in part on
the successful development, introduction and customer acceptance of new ATM
products and other products. We may be unsuccessful in designing,
manufacturing, marketing and selling any new products.
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We may be unable to sustain our recent growth and our operating results may
fluctuate for a variety of reasons, many of which are beyond our control.
We may be unable to sustain our recent growth in revenues and profits in
the future. Our business strategies may fail and our quarterly and annual
operating results may vary significantly from period to period depending
on:
- the volume and timing of orders received during the period,
- the timing of new product introductions by us and our
competitors,
- the impact of price competition on our selling prices,
- the availability and pricing of components for our products,
- seasonal fluctuations in operations and sales,
- changes in product or distribution channel mix,
- changes in operating expenses,
- changes in our strategy, and
- personnel changes and general economic factors.
Many of these factors are beyond our control. We are unable to forecast the
volume and timing of orders received during a particular period. Customers
generally order our products on an as-needed basis, and accordingly we have
historically operated with a relatively small backlog. We experience
seasonal variances in our operations and historically have our lowest
dollar volume sales months between November and February. Accordingly,
operating results for any particular quarter may not be indicative of the
results for the future quarter or for the year.
Even though it is difficult to forecast future sales and we maintain a
relatively small level of backlog at any given time, we generally must plan
production, order components and undertake our development, sales and
marketing activities and other commitments months in advance. Accordingly,
any shortfall in sales in a given period may adversely impact our results
of operations if we are unable to adjust expenses or inventory during the
period to match the level of sales for the period.
We depend on one major customer and, if we lose that customer, we may be
unable to replace it.
One customer, Credit Card Center ("CCC") accounted for 61% and 40% of our
net sales for the years ended September 30, 2000 and 1999, respectively. We
expect to depend upon CCC for a significant portion of our net sales in
future periods. If CCC fails to place anticipated orders or defers or
cancels its orders, we will experience an immediate and severe drop in our
sales. We are unable to predict whether sales from CCC will reach or exceed
historical levels in any future period. In addition, we may be unable to
retain CCC or expand our distribution channels by entering into
arrangements with new customers.
We provide substantial amounts of credit to one major customer, and we
could incur a substantial accounting loss if that customer defaulted on its
obligations to us.
In order to remain competitive, we provide extended financing terms for
substantial amounts of credit to assist our major customer, CCC, with its
working capital requirements. The amounts owed to us by CCC are secured by
a collateral pledge of accounts receivable, inventories and transaction
income. In the event that CCC failed to perform according to the terms of
our credit arrangement with them, we might be required to foreclose and
liquidate the underlying collateral. We would incur a loss to the extent
that the proceeds realized from the liquidation of collateral were less
than the amount owed to us by CCC.
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Failure by third-party suppliers to provide us with components will affect
our ability to produce our ATM and TACC products.
We depend on third-parties to manufacture components for most of our ATM
and TACC products as part of our low-cost manufacturing strategy. Our
principal suppliers are Fujitsu-ICL Systems, De La Rue and Special
Products. We have alternative suppliers for the components; however, the
unit costs currently paid by us for these components may increase if we
switch to these alternative suppliers. Moreover, our inability to obtain
enough of, or the failure of suppliers to deliver, the components would
require us to change the design of the products in order to use other
components. Alternative sources of supply may be unavailable on reasonably
acceptable terms, on a timely basis, or at all.
We have a written agreement with only one of our component suppliers. We
purchase components from our other suppliers on a purchase order basis. We
don't have any guaranteed supply arrangements with most of our suppliers
and these suppliers may be unable to meet our future requirements. We keep
a limited inventory of components for which there is only one or a limited
number of suppliers, but these inventories may be insufficient for our
needs.
Our growth may over-extend our management and other resources.
Future growth in our business could significantly strain our limited
personnel, management, financial controls and other resources. Our ability
to manage any future expansion effectively will require us to attract,
train, motivate and manage new employees successfully, to integrate new
management and employees into our overall operations and to continue to
improve our operational, financial and management systems and controls and
facilities. Our failure to manage any expansion effectively, including any
failure to integrate new management controls, systems and procedures, could
materially adversely affect our business, results of operations and
financial condition.
The ATM market is very competitive and, if we fail to adapt our products
and services, we will lose customers and fail to compete effectively.
The markets for our ATM products are characterized by intense competition.
We expect the intensity of competition to increase. Large manufacturers
such as Diebold Incorporated, NCR Corporation, Triton Systems (a division
of Dover Corporation) and Hyosung compete directly with us in the quickly
growing, low-cost ATM market. Our direct competitors for our TACC products
include Allied Gary International, McGunn, Scitak and AutoVend. We believe
that AutoVend is the only other manufacturer that features cash controllers
as a major product line.
Competition is likely to result in price reductions, reduced margins and
loss of market share, any one of which may harm our business. Competitors
vary in size, scope and breadth of the products and services offered. We
may encounter competition from competitors who offer more functionality and
features. In addition, we expect competition from other established and
emerging companies, as the market continues to develop and expand,
resulting in increased price sensitivity for our products.
To compete successfully, we must adapt to a rapidly changing market by
continually improving the performance, features and reliability of our
products and services or else our products and services may become
obsolete. We may also incur substantial costs in modifying our products,
services or infrastructure in order to adapt to these changes.
10
13
Many of our competitors have greater financial, technical, marketing and
other resources and greater name recognition than we do. In addition, many
of our competitors have established relationships with our current and
potential customers and have extensive knowledge of our industry. In the
past, we have lost potential customers to competitors. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the
ability of their products to address customer needs. Accordingly, it is
possible that new competitors or alliances among competitors may develop
and rapidly acquire significant market share.
Our future growth will depend upon our ability to continue to manufacture,
market and sell ATMs with cost-effective characteristics, develop and
penetrate new market segments and enter and develop new markets.
We must design and introduce new products with enhanced features, develop
close relationships with the leading market participants and establish new
distribution channels in each new market or market segment in order to
grow. We are currently marketing a new ATM product, the Chameleon, which is
a web-enabled ATM product that provides users with e-commerce and
point-of-sale functionality in addition to traditional ATM features. We are
unable to predict whether Chameleon will gain acceptance in the ATM market.
Additionally, some of the transactions currently initiated through ATMs
could be accomplished in the future using emerging technologies, such as
wireless devices and cellular telephones, which we do not currently
support. We may be unable to develop or gain market acceptance of products
supporting these technologies. Our failure to successfully offer products
supporting these emerging technologies could harm our business.
Because the protection of our proprietary technology is limited, our
proprietary technology may be used by others without our consent, which may
reduce our ability to compete and may divert resources.
Our success depends upon proprietary technology and other intellectual
property rights. We must be able to obtain patents, maintain trade-secret
protection and operate without infringing on the intellectual property
rights of others. We have relied on a combination of copyright, trade
secret and trademark laws and nondisclosure and other contractual
restrictions to protect proprietary technology. Our means of protecting
intellectual property rights may be inadequate. It is possible that patents
issued to or licensed by us will be successfully challenged. We may
unintentionally infringe patents of third parties or we may have to alter
our products or processes or pay licensing fees or cease certain activities
to take into account patent rights of third parties, thereby causing
additional unexpected costs and delays which may adversely affect our
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 we use. The scope and validity of these
patents and proprietary rights, the extent to which we 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 our ability to market our existing or future products.
We also rely upon unpatented trade secrets. Other entities may
independently develop substantially the same proprietary information and
techniques or otherwise gain access to our trade secrets or disclose such
technology. In addition, we may be unable to meaningfully protect our
rights to our unpatented trade secrets. In addition, certain previously
filed patents relating to our ATM products and TACC products have expired.
11
14
Litigation may be necessary to enforce our intellectual property rights,
protect trade secrets, determine the validity and scope of the proprietary
rights of others, or defend against claims of infringement or invalidity.
Litigation may result in substantial costs and diversion of resources,
which may limit our ability to develop new services and compete for
customers.
If the ability to charge ATM fees is limited or prohibited, ATMs may become
less profitable and demand for our ATM products could decrease.
The growth in the market and in our sales of ATMs has been due, in part, to
the ability of ATM owners to charge consumers a surcharge fee for the use
of the ATM. The ability to charge fees resulted from the elimination in
April 1996 by the Cirrus and Plus national ATM networks of their policies
against the imposition of surcharges on ATM transactions.
ATM owners are subject to federal and state regulations governing
consumers' rights with respect to ATM transactions. Some states and
municipalities have enacted legislation in an attempt to limit or eliminate
surcharging, and similar legislation has been introduced in Congress. In
addition, it is possible that one or more of the national ATM networks will
reinstate their former policies prohibiting surcharging. The adoption of
any additional regulations or legislation or industry policies limiting or
prohibiting ATM surcharges could decrease demand for our products.
Any interruption of our manufacturing whether as a result of damaged
equipment, natural disasters or otherwise could injure our business.
All of our manufacturing occurs at our facility in Carrollton, Texas. Our
manufacturing operations utilize equipment which, if damaged or otherwise
rendered inoperable, would result in the disruption of our manufacturing
operations. Although we maintain business interruption insurance, our
business would be injured by any extended interruption of the operations at
our manufacturing facility. This insurance may not continue to be available
on reasonable terms or at all. Our facilities are also exposed to risks
associated with the occurrence of natural disasters, such as hurricanes and
tornadoes. It is possible that natural disasters may damage our facilities.
If we release products containing defects, we may need to halt further
sales and/or services until we fix the defects, and our reputation would be
harmed.
We provide a limited warranty on each of our products covering
manufacturing defects and premature failure. While we believe that our
reserves for warranty claims are adequate, we may experience increased
warranty claims. Our products may contain undetected defects which could
result in the improper dispensation of cash or other items. Although we
have experienced only a limited number of claims of this nature to date,
these types of defects may occur in the future. In addition, we may be held
liable for losses incurred by end users as a result of criminal activity
which our products were intended, but unable, to prevent, or for any
damages suffered by end users as a result of malfunctioning or damaged
components.
12
15
We remain liable for any problems or contamination related to our fuel
monitoring units.
Although we discontinued the production and distribution of our fuel
monitoring units, those units which are still in use are subject to a
variety of federal, state and local laws, rules and regulations governing
storage, manufacture, use, discharge, release and disposal of product and
contaminants into the environment or otherwise relating to the protecting
of the environment. These regulations include, among others (i) the
Comprehensive Environmental Response, (ii) Compensation and Liability Act
of 1980, (iii) The Resource Conservation and Recovery Act of 1976, (iv) the
Oil Pollution Act of 1990, (v) the Clean Air Act of 1970, the Clean Water
Act of 1972, (vi) the Toxic Substances control Act of 1976, (vii) the
Emergency Planning and Community Right-to-Know Act, and (viii) the
Occupational Safety and Health Administration Act.
Our fuel monitoring products, by their very nature, give rise to the
potential for substantial environmental risks. If our monitoring systems
fail to operate properly, releases or discharges of petroleum and related
products and associated wastes could contaminate the environment. If there
are releases or discharges we may be found liable under the environmental
laws, rules and regulations of the United States, states and local
jurisdictions relating to contamination or threat of contamination of air,
soil, groundwater and surface waters. This indirect liability could expose
us to monetary liability incident to the failure of the monitoring systems
to detect potential leaks in underground storage tanks. Although we have
tried to protect our business from environmental claims by limiting the
types of services we provide, operating pursuant to contracts designed to
protect us, instituting quality control operating procedures and, where
appropriate, insuring against environmental claims, we are unable to
predict whether these measures will eliminate the risk of potential
environmental liability entirely.
We could lose the services of one or more of our executive officers or key
employees.
Our executive officers and key employees are critical to our business
because of their experience and acumen. In particular, the loss of the
services of James T. Rash, Chairman of the Board, Chief Executive Officer
and Chief Financial Officer, or Mark K. Levenick, Chief Operating Officer
of the Company and President of our operating subsidiaries, could have a
material adverse effect on our operations. We have key-man life insurance
on the life of Mr. Rash in the amount of $1,000,000, with the company named
as sole beneficiary. In addition, one of our subsidiaries has key-man life
insurance on the life of Mr. Levenick in the amount of $1,000,000, with the
subsidiary named as the sole beneficiary.
Our future success and growth also depends on our ability to continue to
attract, motivate and retain highly qualified employees, including those
with the expertise necessary to operate our business. These officers and
key personnel may not remain with us, and their loss may harm our
development of technology, our revenues and cash flows. Concurrently, the
addition of these personnel by our competitors would allow our competitors
to compete more effectively by diverting customers from us and facilitating
more rapid development of their technology.
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
13
16
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
Information with respect to directors of the Registrant is included on
pages 3 and 4 of the Company's proxy statement for the 2001 Annual Meeting
of Shareholders ("2001 Annual Meeting") and is incorporated herein by
reference. Information with respect to "Section 16(a) Beneficial Ownership
Reporting Compliance" is included on page 5 of the Company's proxy
statement for the 2001 Annual Meeting and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is included on pages 7
through 9 of the Company's proxy statement for the 2001 Annual Meeting and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management is included on pages 5 through 7 of the Company's proxy
statement for the 2001 Annual Meeting and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to certain relationships and related
transactions is included on page 9 of the Company's proxy statement for the
2001 Annual Meeting is incorporated herein by reference.
14
17
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.
REPORTS ON FORM 8-K
The Company filed one report on Form 8-K on September 20, 2000 under Item 5
- Other Events.
15
18
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 9, 2001 /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 9, 2001
- ----------------------------
James T. Rash
/s/ JAMES L. BRITTON, III Director January 9, 2001
- ----------------------------
James L. Britton, III
/s/ JERRELL G. CLAY Director January 9, 2001
- ----------------------------
Jerrell G. Clay
/s/ MARK K. LEVENICK Director January 9, 2001
- ---------------------------
Mark K. Levenick
19
INDEX TO FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS OF TIDEL TECHNOLOGIES, INC.
AND SUBSIDIARIES
Independent Auditors' Report F-2
Consolidated Balance Sheets - September 30, 2000 and 1999 F-3
Consolidated Statements of Income for the years ended
September 30, 2000, 1999 and 1998 F-4
Consolidated Statements of Comprehensive Income for the
years ended September 30, 2000, 1999 and 1998 F-5
Consolidated Statements of Shareholders' Equity for the years
ended September 30, 2000, 1999 and 1998 F-6
Consolidated Statements of Cash Flows for the years ended
September 30, 2000, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
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
20
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 auditing standards generally
accepted in the United States of America. 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, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 2000 in conformity with accounting
principles generally accepted in the United States of America. 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 LLP
Houston, Texas
December 15, 2000
F-2
21
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
------------------------------
2000 1999
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 16,223,192 $ 2,423,844
Trade accounts receivable, net of allowance of
$448,037 and $566,917, respectively 29,168,134 15,137,056
Notes and other receivables 1,151,680 897,368
Inventories 10,415,492 6,128,741
Deferred tax assets 1,153,472 738,691
Prepaid expenses and other 349,251 225,599
------------ ------------
Total current assets 58,461,221 25,551,299
Investment in 3CI, at market value 130,962 261,924
Property, plant and equipment, at cost 4,919,186 3,912,348
Accumulated depreciation (2,954,873) (1,932,575)
------------ ------------
Net property, plant and equipment 1,964,313 1,979,773
Intangible assets, net of accumulated amortization of
$1,161,675 and $1,039,364, respectively 539,398 661,709
Deferred tax assets 519,345 195,390
Deferred financing costs and other assets 1,445,118 45,974
------------ ------------
Total assets $ 63,060,357 $ 28,696,069
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 128,000 $ 128,000
Accounts payable 8,176,905 5,285,591
Accrued liabilities 3,640,264 2,114,314
------------ ------------
Total current liabilities 11,945,169 7,527,905
Long-term debt, net of current maturities 5,424,000 5,246,634
Convertible debentures, net of discount of $1,155,157 16,844,843 --
------------ ------------
Total liabilities 34,214,012 12,774,539
------------ ------------
Commitments and contingencies (Note 15)
Shareholders' Equity:
Common stock, $.01 par value, authorized 100,000,000
shares; issued and outstanding 17,376,210 and
16,067,968 shares, respectively 173,762 160,680
Additional paid-in capital 17,207,137 14,299,373
Retained earnings 12,318,721 3,149,328
Deferred financing costs (416,525) --
Stock subscriptions receivable -- (382,063)
Accumulated other comprehensive loss (436,750) (1,305,788)
------------ ------------
Total shareholders' equity 28,846,345 15,921,530
------------ ------------
Total liabilities and shareholders' equity $ 63,060,357 $ 28,696,069
============ ============
See accompanying notes to consolidated financial statements.
F-3
22
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues $ 72,931,388 $ 45,873,341 $ 33,607,533
Cost of sales 45,015,368 30,912,917 21,427,255
------------ ------------ ------------
Gross profit 27,916,020 14,960,424 12,180,278
Selling, general and administrative 11,108,302 9,030,171 7,366,444
Depreciation and amortization 1,367,964 813,332 489,201
------------ ------------ ------------
Operating income 15,439,754 5,116,921 4,324,633
Other expense:
Interest expense, net 432,361 380,957 392,258
Write-down of investment in 3CI 1,000,000 -- --
------------ ------------ ------------
Total other expense 1,432,361 380,957 392,258
------------ ------------ ------------
Income before income taxes 14,007,393 4,735,964 3,932,375
Income tax expense (benefit) 4,838,000 1,800,000 (307,251)
------------ ------------ ------------
Net income $ 9,169,393 $ 2,935,964 $ 4,239,626
============ ============ ============
Basic earnings per share:
Net income $ 0.55 $ 0.18 $ 0.27
============ ============ ============
Weighted average common shares
outstanding 16,630,482 16,008,639 15,569,849
============ ============ ============
Diluted earnings per share:
Net income $ 0.50 $ 0.17 $ 0.25
============ ============ ============
Weighted average common and
dilutive shares outstanding 18,493,331 16,968,412 16,896,688
============ ============ ============
See accompanying notes to consolidated financial statements.
F-4
23
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED SEPTEMBER 30,
------------------------------------------------
2000 1999 1998
------------ ------------ ------------
Net income $ 9,169,393 $ 2,935,964 $ 4,239,626
Other comprehensive income (loss):
Unrealized gain (loss) on investment in 3CI (130,962) (655,159) 342,774
Less: reclassification adjustment for loss
included in net income 1,000,000 -- --
------------ ------------ ------------
Other comprehensive income (loss) 869,038 (655,159) 342,774
------------ ------------ ------------
Comprehensive income $ 10,038,431 $ 2,280,805 $ 4,582,400
============ ============ ============
See accompanying notes to consolidated financial statements.
F-5
24
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
RETAINED
SHARES ADDITIONAL EARNINGS TOTAL
ISSUED AND COMMON PAID-IN (ACCUMULATED SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL DEFICIT) OTHER EQUITY
------------ ----------- ------------ ------------ ----------- -------------
Balance, September 30, 1997 14,851,050 148,511 13,387,412 (4,026,262) (1,417,840) 8,091,821
Exercise of warrants 1,009,418 10,094 757,141 -- -- 767,235
Net income -- -- -- 4,239,626 -- 4,239,626
Payments of stock subscriptions -- -- -- -- 42,374 42,374
Unrealized gain on
investment in 3CI -- -- -- -- 342,774 342,774
------------ ----------- ------------ ------------ ----------- ------------
Balance, September 30, 1998 15,860,468 158,605 14,144,553 213,364 (1,032,692) 13,483,830
Exercise of warrants 207,500 2,075 154,820 -- -- 156,895
Net income -- -- -- 2,935,964 -- 2,935,964
Unrealized loss on
investment in 3CI -- -- -- -- (655,159) (655,159)
------------ ----------- ------------ ------------ ----------- ------------
Balance, September 30, 1999 16,067,968 160,680 14,299,373 3,149,328 (1,687,851) 15,921,530
Exercise of warrants and options 1,308,242 13,082 1,336,082 -- -- 1,349,164
Issuance of warrants
in connection with
convertible debentures -- -- 1,571,682 -- -- 1,571,682
Deferred financing costs -- -- -- -- (416,525) (416,525)
Payments of stock subscriptions -- -- -- -- 382,063 382,063
Net income -- -- -- 9,169,393 -- 9,169,393
Unrealized loss on
investment in 3CI -- -- -- -- (130,962) (130,962)
Reclassification adjustment for
realized loss on investment
in 3CI included in net income -- -- -- -- 1,000,000 1,000,000
------------ ----------- ------------ ------------ ----------- ------------
Balance, September 30, 2000 17,376,210 $ 173,762 $ 17,207,137 $ 12,318,721 $ (853,275) $ 28,846,345
============ =========== ============ ============ =========== ============
See accompanying notes to consolidated financial statements.
F-6
25
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Cash flows from operating activities:
Net income $ 9,169,393 $ 2,935,964 $ 4,239,626
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,367,964 813,332 489,201
Deferred taxes (738,736) 332,186 (947,457)
Write-down of investment in 3CI 1,000,000 -- --
Gain on sale of property, plant and equipment -- (12,195) (400)
Changes in assets and liabilities:
Trade accounts receivable, net (14,031,078) (4,890,981) (1,513,995)
Notes and other receivables (254,312) 276,687 (640,104)
Inventories (4,286,751) 577,015 (2,497,396)
Prepaids and other assets (1,522,811) 175,316 (136,378)
Accounts payable and accrued liabilities 4,417,264 1,999,698 (168,122)
------------ ------------ ------------
Net cash provided by (used in) operating activities (4,879,067) 2,207,022 (1,175,025)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,230,178) (1,282,875) (724,844)
Proceeds from sale of property, plant and equipment -- 12,195 400
Increase in intangible assets -- (81,571) (116,385)
Increase in investment in 3CI -- -- (20,804)
------------ ------------ ------------
Net cash used in investing activities (1,230,178) (1,352,251) (861,633)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of convertible debentures 18,000,000 -- --
Proceeds from borrowings under revolving credit note 305,366 140,030 1,740,000
Repayments of notes payable (128,000) (128,000) (980,697)
Proceeds from exercise of warrants and options 1,349,164 156,895 767,235
Payments of stock subscriptions 382,063 -- 360,937
------------ ------------ ------------
Net cash provided by financing activities 19,908,593 168,925 1,887,475
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 13,799,348 1,023,696 (149,183)
Cash and cash equivalents at beginning of period 2,423,844 1,400,148 1,549,331
------------ ------------ ------------
Cash and cash equivalents at end of period $ 16,223,192 $ 2,423,844 $ 1,400,148
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 529,242 $ 459,636 $ 462,297
============ ============ ============
Cash paid for taxes, net of refunds receivable $ 4,770,100 $ 1,539,549 $ 451,182
============ ============ ============
Supplemental disclosure of non-cash financing activities:
Discount on long-term debt for detachable warrants $ 1,155,157 $ -- $ --
============ ============ ============
Warrants issued for deferred financing costs $ 416,525 $ -- $ --
============ ============ ============
See accompanying notes to consolidated financial statements.
F-7
26
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Tidel Technologies, Inc. (the "Company") is a Delaware corporation which,
through its wholly owned subsidiaries, develops, manufactures, sells and
supports automated teller machines and related software and electronic cash
security systems, primarily in the United States.
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.
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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company's long-lived assets and certain identifiable intangibles and
goodwill 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 future cash
flows expected to result from the use of the asset and its eventual disposition.
If the sum of the expected
F-8
27
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 recognized at the time products are shipped to customers.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Research and
development costs charged to expense were approximately $2,800,000, $1,700,000
and $1,400,000 for the years ended September 30, 2000, 1999 and 1998,
respectively.
FEDERAL INCOME TAXES
Income taxes are accounted for under the asset and liability method, whereby
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 component of other comprehensive
income. Declines in fair value below the amortized cost basis of the investments
that are determined to be other than a temporary decline are charged to
earnings.
ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss includes all non-equity holder changes in
stockholders' equity. As of September 30, 2000 and 1999, the Company's only
component of accumulated other comprehensive loss relates to unrealized losses
on its investment in 3CI.
NET INCOME PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), the Company computes and presents both
basic and diluted earnings per share ("EPS") amounts. 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 options, warrants and convertible securities.
F-9
28
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), requires companies to recognize stock-based
expense based on the estimated fair value of employee stock options.
Alternatively, 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.
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 financial instruments included in
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 retains a security interest in the underlying equipment
that is sold to customers until it receives payment in full. In addition, one
major customer has pledged additional collateral to the Company. The Company
would incur an accounting loss equal to the carrying value of the accounts
receivable, less any amounts recovered from liquidation of collateral, if a
customer failed to perform according to the terms of the credit arrangements.
During the year ended September 30, 2000, the Company had sales to one major
customer that accounted for more than 10% of sales in the amount of $44,825,049.
During the year ended September 30, 1999, the Company had such sales to two
major customers in the amounts of $18,554,624 and $4,781,236. During the year
ended September 30, 1998, the Company had such sales to two major customers in
the amounts of $3,526,941 and $3,520,910.
Foreign sales accounted for 6%, 5% and 4% of the Company's total sales during
the years ended September 30, 2000, 1999 and 1998, respectively. Foreign sales
are transacted in U.S. dollars.
(3) NOTES AND OTHER RECEIVABLES
Notes and other receivables consisted of non-trade notes and accounts of
$1,151,680 and $897,368 at September 30, 2000 and 1999, respectively.
F-10
29
At September 30, 2000, the Company had a note due from a non-affiliated
corporation with an outstanding principal balance of $213,058. The note bears
interest at 12% per annum and is secured by the personal guaranty of the
majority shareholder of the non-affiliated corporation and a pledge of
outstanding common stock of the corporation. The note matures March 31, 2001.
Non-trade accounts also include amounts due from related parties as described in
Note 16.
(4) INVENTORIES
Inventories consisted of the following at September 30, 2000 and 1999:
2000 1999
------------ ------------
Raw materials ..................... $ 9,047,215 $ 5,200,887
Work in process ................... 12,191 36,749
Finished goods .................... 1,244,944 590,852
Other ............................. 398,560 384,963
------------ ------------
10,702,910 6,213,451
Inventory reserve ................. (287,418) (84,710)
------------ ------------
$ 10,415,492 $ 6,128,741
============ ============
(5) INVESTMENT IN 3CI
The Company owned 698,464 shares of 3CI common stock at September 30, 2000 and
1999 with a market value of $130,962 ($0.188 per share) and $261,924 ($.375 per
share), respectively. In accordance with the provisions of SFAS No. 115, the
Company recorded an impairment charge of $1,000,000 in September 2000 as the
decline in fair value has been deemed to be other than temporary. In addition,
the Company recorded unrealized losses of $130,962 and $655,159 as components of
other comprehensive income at September 30, 2000 and 1999, respectively.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at September 30, 2000
and 1999:
2000 1999 Useful Life
---------- ------------ -------------
Machinery and equipment ........................ 3,003,498 $ 2,235,371 2 - 10 years
Computer equipment and systems ................. 963,994 958,332 2 - 7 years
Furniture, fixtures and other improvements ..... 951,694 718,645 3 - 5 years
---------- ------------
$4,919,186 $ 3,912,348
========== ============
Depreciation expense was $1,245,653, $596,438 and $368,825 for the years ended
September 30, 2000, 1999 and 1998, respectively. Repairs and maintenance expense
was $111,711, $112,637 and $56,330 for the years ended September 30, 2000, 1999
and 1998, respectively.
(7) INTANGIBLE ASSETS
Intangible assets consisted of the following at September 30, 2000 and 1999:
F-11
30
2000 1999
----------- -----------
Electronic cash security systems:
Software ............................ $ 350,000 $ 350,000
Proprietary technology .............. 417,000 417,000
Other .................................. 350,849 350,849
Goodwill ............................... 583,224 583,224
Accumulated amortization ............... (1,161,675) (1,039,364)
----------- -----------
$ 539,398 $ 661,709
=========== ===========
(8) LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 2000 and 1999:
2000 1999
----------- -----------
Revolving credit note payable to bank, due
April 30, 2002, interest payable monthly
at prime (8.4% and 8.25% at September 30,
2000 and 1999, respectively) .......................... $ 5,200,000 $ 4,894,634
Term note payable to bank, payable in quarterly
installments of $32,000 plus accrued interest
at 8.4% through May 31, 2003 .......................... 352,000 480,000
----------- -----------
Total long-term debt ..................................... 5,552,000 5,374,634
Less: current maturities .............................. (128,000) (128,000)
----------- -----------
Long-term debt, less current maturities .................. $ 5,424,000 $ 5,246,634
=========== ===========
The Company has a credit agreement with a bank which provides for a $7,000,000
revolving line of credit, of which $1,800,000 was unused and available at
September 30, 2000, and a $640,000 term loan. The facility is secured by
substantially all of the assets of the Company and its subsidiaries. Borrowings
under the revolving line of credit are limited to the balance of eligible
accounts receivable and inventory, and accrue interest at the prime rate with
certain LIBOR alternatives. The term loan is payable in quarterly principal
installments of $32,000 together with accrued interest at 8.4% per annum.
Borrowings under the revolving line of credit mature in April 2002 and the term
loan matures in May 2003. The credit agreement includes covenants which among
other things, require the maintenance of specified financial ratios, restrict
payments of dividends and limit the amount of capital expenditures. The Company
was in compliance with all covenants at September 30, 2000. Subsequent to
September 30, 2000, the Company amended the credit agreement to increase the
line of credit to $10,000,000.
The scheduled maturities of long-term debt outstanding at September 30, 2000 are
summarized as follows: $128,000 in 2001, $5,328,000 in 2002 and $96,000 in 2003.
(9) CONVERTIBLE DEBENTURES
In September 2000, the Company entered into an agreement with two investors (the
"Holders") whereby the Company issued $18,000,000 of the Company's 6%
Convertible Debentures, due September 8, 2004, which are convertible into shares
of the Company's common stock at $9.50 per share. In addition, the Company
issued to the Holders warrants to purchase 378,947 shares of the Company's
common stock, which are exercisable at any time through September 2005 at a
price of $9.80 per share.
F-12
31
The debentures provide for three methods to convert the debentures into shares
of the Company's common stock: (1) conversion at the option of the Holder; (2)
conversion at the option of the Company; and (3) a put option. The conversion
price in effect on any conversion date shall be $9.50 per common share, with the
exception of the put option, as discussed below. In addition, the conversion
ratio is subject to adjustment by an anti-dilution provision with regards to
common share dividends, stock splits, and the granting of stock options and
warrants.
CONVERSION AT THE OPTION OF THE HOLDER
The debentures shall be convertible into shares of common stock at the option of
the Holder at any time following the original issue date. The Holder shall
effect conversions at its option by delivering to the Company the conversion
notice specifying therein the principal amount of debentures to be converted and
the date on which such conversion is to be effected.
CONVERSION AT THE OPTION OF THE COMPANY
The Company may require conversion of all or a portion of the then outstanding
principal amount of the debentures if the per share market value of the
Company's common stock exceeds 150% of the then applicable conversion price for
20 trading days (which need not be consecutive) in a period of 30 consecutive
trading days at any time after registration of the underlying shares, as well as
certain other administrative requirements.
PUT OPTION
The debentures provide for the Holder to put the debentures back to the Company
on either the 270th day or 540th day following the original issue date (the "Put
Dates"). However, 20 days prior to each Put Date, the Company may indicate to
the Holder the maximum amount of cash that the Company will pay upon the Put
Date (the "Maximum Cash Consideration"). If the Holder still elects to put all
or a portion of the debentures, then any amounts in excess of the Maximum Cash
Consideration will convert into shares of common stock at a conversion price
equal to the average of the per share market values for the five trading days
preceding the put date, without regard to the stated conversion price of $9.50
per share.
If the Holder exercises the put option, the Company shall pay the Holder the put
price, up to the Maximum Cash Consideration, within 60 days following the Put
Date (the "Put Payment Date"). If any portion of the Maximum Cash Consideration
of the put price shall not be paid on or prior to the Put Payment Date, then the
Holder shall have the right, no later than 20 trading days following the Put
Payment Date, to either (i) rescind the put notice or (ii) convert all or
portion of the principal amount and interest at a conversion price equal to the
lower of the conversion price and the average of the per share market values
during the ten trading days immediately preceding either the Put Payment Date or
the date the Holder rescinds the put notice, whichever is lower.
As discussed above, the Holders received an aggregate of 378,947 common stock
purchase warrants with an exercise price equal to $9.80 per share, exercisable
at any time prior to the expiration date in September 2005. In addition, the
investment advisors for the transaction received warrants to purchase 189,473
shares of common stock at exercises prices of (i) $10.925 per share as to
157,895 shares and (ii) $11.27 per share as to 31,578 shares.
F-13
32
The Company calculated the fair value attributable to the Holders' detachable
warrants to be $1,155,157, with a corresponding discount recorded against the
carrying value of the debentures. In addition, the Company attributed a fair
value to the investment advisors' warrants of $416,525, which has been recorded
as deferred financing costs within shareholders' equity. Based on the terms of
the debentures, management has determined that no beneficial conversion features
have been granted to the Holders as a result of this agreement.
(10) ACCRUED LIABILITIES
Accrued liabilities consisted of the following at September 30, 2000 and 1999:
2000 1999
----------- -----------
Wages and related benefits ........... $ 1,159,588 $ 822,928
Reserve for warranty charges ......... 899,997 714,325
Taxes:
Federal income ................. 350,167 175,000
Sales and use .................. 143,725 97,514
Ad valorem ..................... 212,854 159,460
Other ................................ 873,933 145,087
----------- -----------
$ 3,640,264 $ 2,114,314
=========== ===========
(11) WARRANTS
The Company's registration statement covering the offering and sale by selling
shareholders of the common stock underlying all of the Company's then
outstanding warrants was declared effective in 1997. The warrants related to
grants made in connection with debt and equity issues, acquisitions, directors'
remuneration and various services rendered. During the year ended September 30,
2000, warrants to purchase 1,055,692 shares of common stock were exercised
generating proceeds of $995,587.
During the year ended September 30, 2000, the Company issued warrants to
purchase 693,420 shares of common stock at exercise prices ranging from $1.875
to $11.27 (such prices being equal to or greater than the fair market value of
the common stock at the date of the grants) in connection with the issuance of
convertible debentures and for services rendered. At September 30, 2000, the
Company had outstanding warrants to purchase 1,113,420 shares of common stock
which expire at various dates through September 2005. The warrants have exercise
prices ranging from $0.625 to $11.27 per share and, if exercised, would generate
proceeds to the Company of approximately $6,900,000.
(12) EMPLOYEE STOCK OPTION PLANS
The Company adopted a Long-Term Incentive Plan in 1997 (the "1997 Plan")
pursuant to which the Company's Board of Directors may grant stock options to
officers and key employees. The 1997 Plan authorizes grants of options to
purchase up to 1,000,000 shares of common stock. Options are granted with an
exercise price equal to the fair market value of the common stock at the date of
grant. Options granted under the 1997 Plan vest over four-year periods and
expire no later than 10 years from the date of grant. At September 30, 2000,
there were 955,700 options outstanding, and no additional shares available for
grant under the 1997 Plan.
F-14
33
The Company's predecessor employee stock option plan, the 1989 Incentive Stock
Option Plan (the "1989 Plan"), was terminated in June 1999. At the date of
termination of the 1989 Plan, there were outstanding options to purchase 438,250
shares of common stock, of which 230,000 were outstanding at September 30, 2000.
The weighted-average fair value per share of stock options granted during 2000,
1999 and 1998 was $1.17, $.78 and $1.39, respectively, on the date of grant,
using the Black Scholes model with the following assumptions: risk-free interest
rate of 5.16%, expected life of 4 years, expected volatility of 80.63%, and an
expected dividend yield of 0% for the 2000 granted options; risk-free interest
rate of 6.0%, expected life of 4 years, expected volatility of 80.16%, and an
expected dividend yield of 0% for the 1999 granted options; and a risk-free
interest rate of 5.62%, expected life of 4 years, expected volatility of 75.66%,
and an expected dividend yield of 0% for the 1998 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 at 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 as follows:
2000 1999 1998
------------- ------------- -------------
Net income:
As reported ......................... $ 9,169,393 $ 2,935,964 $ 4,239,626
Pro forma ........................... 8,976,867 2,717,847 4,087,605
Basic earnings per share:
As reported ......................... 0.55 0.18 0.27
Pro forma ........................... 0.54 0.17 0.26
Diluted earnings per share:
As reported ......................... 0.50 0.17 0.25
Pro forma ........................... 0.49 0.16 0.24
At September 30, 2000, the range of exercise prices was $0.88 to $1.75 per share
under the 1989 Plan and $1.25 to $2.50 per share under the 1997 Plan. At
September 30, 2000 and 1999, the weighted-average remaining contractual life of
the outstanding options was 7.07 years and 6.8 years, respectively. Stock option
activity during the periods indicated was as follows:
Number of Weighted average
shares exercise price
--------- ----------------
Balance at October 1, 1997 ............... 759,550 $ 1.78
Granted ............................... 10,000 2.31
Canceled .............................. (15,000) (1.16)
---------
Balance at September 30, 1998 ............ 754,550 1.80
Granted ............................... 442,400 1.25
Canceled .............................. (36,200) (1.70)
---------
Balance at September 30, 1999 ............ 1,160,750 1.59
Granted ............................... 277,500 1.88
Exercised ............................. (252,550) (1.40)
---------
Balance at September 30, 2000 ............ 1,185,700 1.70
=========
F-15
34
At September 30, 2000 and 1999, the number of options exercisable was 324,250
and 438,250, respectively, at weighted average prices of $1.79 per share and
$1.34 per share, respectively.
(13) INCOME TAXES
Income tax expense (benefit) attributable to income from operations consisted of
the following for the years ended September 30, 2000, 1999, and 1998:
2000 1999 1998
----------- ----------- -----------
Federal current tax expense ................. $ 5,576,736 $ 1,376,010 $ 225,755
State current tax expense ................... -- 91,804 414,451
Federal deferred tax expense (benefit) ...... (738,736) 233,854 (849,125)
State deferred tax expense (benefit) ........ -- 98,332 (98,332)
----------- ----------- -----------
$ 4,838,000 $ 1,800,000 $ (307,251)
=========== =========== ===========
Income tax expense (benefit) differed from the amounts computed by applying the
U.S. statutory federal income tax rate of 34% to pretax income from operations
as a result of the following:
2000 1999 1998
----------- ----------- -----------
Computed "expected" tax expense ....................... $ 4,762,514 $ 1,610,228 $ 1,337,007
Change in valuation allowances ........................ -- -- (1,938,458)
State taxes, net of benefit ........................... -- 125,490 208,639
Nondeductible items and permanent differences ......... 46,687 56,632 36,355
Other ................................................. 28,799 7,650 49,206
----------- ----------- -----------
$ 4,838,000 $ 1,800,000 $ (307,251)
=========== =========== ===========
The tax effects of temporary differences that were the sources of the deferred
tax assets consisted of the following at September 30, 2000 and 1999:
2000 1999
----------- -----------
Deferred tax assets:
Fixed assets ............................. $ 152,009 $ --
Intangible assets ........................ 188,510 176,091
Accounts receivable ...................... 152,333 192,752
Inventories .............................. 359,269 204,642
Investment in 3CI ........................ 605,001 560,474
Accrued expenses ......................... 421,237 368,633
Other .................................... 59,459 --
----------- -----------
Total gross deferred tax assets ....... 1,937,818 1,502,592
Less: valuation allowance ................ (265,001) (560,474)
----------- -----------
Net deferred tax assets ............... 1,672,817 942,118
Other deferred tax liabilities ........... -- 8,037
----------- -----------
Net deferred tax assets ..................... $ 1,672,817 $ 934,081
=========== ===========
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 expected to be
utilized.
F-16
35
(14) EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted computations for the years ended September 30, 2000, 1999 and
1998:
Weighted
Net Average Shares Per Share
Income Outstanding Amount
------------ -------------- ---------
Year Ended September 30, 2000:
Basic earnings per share ....................... $ 9,169,393 16,630,482 $ 0.55
Effect of dilutive warrants and options ........ -- 1,862,849 (0.05)
------------ ------------ -------
Diluted earnings per share ..................... $ 9,169,393 18,493,331 $ 0.50
============ ============ =======
Year Ended September 30, 1999:
Basic earnings per share ....................... $ 2,935,964 16,008,639 $ 0.18
Effect of dilutive warrants and options ........ -- 959,773 (0.01)
------------ ------------ -------
Diluted earnings per share ..................... $ 2,935,964 16,968,412 $ 0.17
============ ============ =======
Year Ended September 30, 1998:
Basic earnings per share ....................... $ 4,239,626 15,569,849 $ 0.27
Effect of dilutive warrants and options ........ -- 1,326,839 (0.02)
------------ ------------ -------
Diluted earnings per share ..................... $ 4,239,626 16,896,688 $ 0.25
============ ============ =======
(15) 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.
The Company leases office and warehouse space, transportation equipment and
other equipment under terms of operating leases which expire through 2004.
Rental expense under these leases for the years ended September 30, 2000, 1999
and 1998 was approximately $500,388, $366,128 and $382,000, respectively. The
Company has approximate future lease commitments as follows:
Amount
-----------
Year Ending September 30:
2001 ...................... $ 542,642
2002 ...................... 365,835
2003 ...................... 294,901
2004 ...................... 97,968
Thereafter ................... --
-----------
$ 1,301,346
(16) RELATED PARTY TRANSACTIONS
From time to time, the Company provides certain administrative and clerical
services to three entities with which certain directors have an affiliation.
Fees earned by the Company for these services were $26,000 and $42,000 for the
years ended September 30, 1999 and 1998; however, the Company earned
F-17
36
no such fees for the year ended September 30, 2000. Amounts due to the Company
from these entities totaled $238,207 and $260,532 at September 30, 2000 and
1999, respectively.
In September 2000, the Company loaned $141,600 to Michael F. Hudson, Executive
Vice President of the Company, in a six-month promissory note bearing interest
at 10% per annum. Subsequent to September 2000, the Company loaned Mr. Hudson an
additional $100,000 on similar terms and conditions.
F-18
37
SCHEDULE I
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
SEPTEMBER 30,
----------------------------
2000 1999
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 12,967,697 $ 148,962
Notes and other receivables 877,494 761,410
Prepaid expenses and other assets 58,999 48,970
------------ ------------
Total current assets 13,904,190 959,342
Investment in 3CI, at market value 130,962 261,924
Property, plant and equipment, at cost 128,680 125,394
Accumulated depreciation (100,219) (85,411)
------------ ------------
Net property, plant and equipment 28,461 39,983
Investment in subsidiaries, at equity 24,547,001 14,001,431
Receivables from subsidiaries 6,992,517 1,418,142
Deferred tax asset 431,627 --
Other assets 1,333,452 6,015
------------ ------------
Total assets $ 47,368,210 $ 16,686,837
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 128,000 $ 128,000
Accounts payable 173,465 41,591
Accrued liabilities 1,151,557 243,716
------------ ------------
Total current liabilities 1,453,022 413,307
Long-term debt, net of current maturities 224,000 352,000
Convertible debentures, net of discount of $1,155,157 16,844,843 --
------------ ------------
Total liabilities 18,521,865 765,307
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $.01 par value, authorized 100,000,000
shares; issued and outstanding 17,376,210 and
16,067,968 shares, respectively 173,762 160,680
Additional paid-in capital 17,207,137 14,299,373
Retained earnings 12,318,721 3,149,328
Deferred financing costs (416,525) --
Stock subscriptions receivable -- (382,063)
Accumulated other comprehensive loss (436,750) (1,305,788)
------------ ------------
Total shareholders' equity 28,846,345 15,921,530
------------ ------------
Total liabilities and shareholders' equity $ 47,368,210 $ 16,686,837
============ ============
See accompanying notes to condensed financial information of registrant.
S-1
38
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues $ -- $ -- $ --
Costs and expenses:
Selling, general and administrative 1,202,709 992,790 738,433
Depreciation and amortization 14,808 16,612 13,474
------------ ------------ ------------
Operating loss (1,217,517) (1,009,402) (751,907)
Interest income (expense), net 56,112 29,929 (18,322)
------------ ------------ ------------
Loss before equity in income of subsidiaries and taxes (1,161,405) (979,473) (770,229)
Equity in income of subsidiaries 10,545,570 3,590,437 3,895,705
Write-down of investment in 3CI (1,000,000) -- --
------------ ------------ ------------
Income before taxes 8,384,165 2,610,964 3,125,476
Income tax benefit 785,228 325,000 1,114,150
------------ ------------ ------------
Net income 9,169,393 2,935,964 4,239,626
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on investment in 3CI (130,962) (655,159) 342,774
Less: reclassification adjustment for realized loss
included in net income 1,000,000 -- --
------------ ------------ ------------
Other comprehensive income (loss) 869,038 (655,159) 342,774
------------ ------------ ------------
Comprehensive income $ 10,038,431 $ 2,280,805 $ 4,582,400
============ ============ ============
See accompanying notes to consolidated financial statements.
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39
TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
2000 1999 1998
------------ ------------ ------------
Cash flows from operating activities:
Net income $ 9,169,393 $ 2,935,964 $ 4,239,626
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 14,808 16,612 13,474
Deferred taxes (431,627) (325,000) (1,114,150)
Write-down of investment in 3CI 1,000,000 -- --
Equity in income of subsidiaries (10,545,570) (3,590,437) (3,895,705)
Changes in assets and liabilities:
Notes and other receivables (116,084) (346,183) (92,540)
Prepaid expenses and other assets (1,337,466) 946,965 (609,325)
Receivables from subsidiaries (5,574,375) 395,890 835,308
Accounts payable and accrued liabilities 1,039,715 (9,284) (56,908)
------------ ------------ ------------
Net cash provided by (used in) operating activities (6,781,206) 24,527 (680,220)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment (3,286) (18,555) (11,512)
Increase in investment in 3CI -- -- (20,804)
Investment in subsidiaries -- (2,000) --
------------ ------------ ------------
Net cash used in investing activities (3,286) (20,555) (32,316)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of convertible debentures 18,000,000 -- 640,000
Repayments of notes payable (128,000) (128,000) (972,000)
Proceeds from exercise of warrants 1,349,164 156,895 767,235
Payments of stock subscriptions 382,063 -- 360,937
------------ ------------ ------------
Net cash provided by financing activities 19,603,227 28,895 796,172
------------ ------------ ------------
Net increase in cash and cash equivalents 12,818,735 32,867 83,636
Cash and cash equivalents at beginning of year 148,962 116,095 32,459
------------ ------------ ------------
Cash and cash equivalents at end of year $ 12,967,697 $ 148,962 $ 116,095
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 40,769 $ 48,751 $ 93,559
============ ============ ============
Cash paid for taxes, net of refunds receivable $ 4,770,100 $ 1,055,730 $ 451,182
============ ============ ============
Supplemental disclosure of non-cash financing activities:
Discount on long-term debt for detachable warrants $ 1,155,157 $ -- $ --
============ ============ ============
Warrants issued for deferred financing costs $ 416,525 $ -- $ --
============ ============ ============
See accompanying notes to condensed financial information of registrant.
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TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(A) LONG-TERM DEBT AND CONVERTIBLE DEBENTURES
Long-term debt and convertible debentures consisted of the following at
September 30, 2000 and 1999:
2000 1999
------------ ------------
Term note payable to bank, payable in quarterly
installments of $32,000 plus accrued interest
at 8.4% through May 31, 2003 ....................... 352,000 480,000
Convertible debentures, due September 2004,
less unamortized discount of $1,155,157,
interest payable quarterly at 6% ................... 16,844,843 --
------------ ------------
Total ................................................. 17,196,843 480,000
Less: current maturities ........................... (128,000) (128,000)
------------ ------------
Total, less current maturities ........................ $ 17,068,843 $ 352,000
============ ============
(B) GUARANTEES
The parent company and its subsidiaries have guaranteed the revolving credit
note issued by its wholly owned operating company, Tidel Engineering, L.P., to a
bank in the maximum principal amount of $7,000,000 due April 30, 2002 (the
"Revolving Credit Note"). At September 30, 2000, $5,200,000 was outstanding
pursuant to the Revolving Credit Note. Subsequent to September 30, 2000, the
Company amended the credit agreement to increase the line of credit to
$10,000,000.
(C) DIVIDENDS FROM SUBSIDIARIES
No dividends have been paid to the parent company by its subsidiaries as of
September 30, 2000. The Company's wholly owned operating company, Tidel
Engineering, L.P., is restricted from paying dividends to the parent company and
its subsidiaries pursuant to the Revolving Credit Note.
(D) INCOME TAXES
The parent company and its subsidiaries (collectively the "Companies") have
entered into a tax sharing agreement providing that each of the Companies will
be responsible for its tax liability for the years that the Companies were
included in the parent company's consolidated income tax returns. Income taxes
have been allocated to each of the Companies based on its pretax income and
calculated on a separate company basis. Further, the agreement provides for
reimbursements to the parent company for payment of the consolidated tax
liability based on the allocations, and compensates each of the Companies for
use of its losses or tax credits. As a result of the agreement, the parent
company recognized tax benefits of $785,228, $325,000 and $1,114,150 for the
years ended September 30, 2000, 1999 and 1998, respectively.
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TIDEL TECHNOLOGIES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(CONTINUED)
(E) AFFILIATED TRANSACTIONS
From time to time, the Company provides certain administrative and clerical
services to three entities with which certain directors have an affiliation.
Fees earned by the Company for these services were $26,000 and $42,000 for the
years ended September 30, 1999 and 1998; however, the Company earned no such
fees for the year ended September 30, 2000. Amounts due to the Company from
these entities totaled $238,207 and $260,532 at September 30, 2000 and 1999,
respectively.
In September 2000, the Company loaned $141,600 to Michael F. Hudson, Executive
Vice President of the Company, in a six-month promissory note bearing interest
at 10% per annum. Subsequent to September 2000, the Company loaned Mr. Hudson an
additional $100,000 on similar terms and conditions.
The subsidiaries paid annual management fees to the parent company in the
aggregate amount of $250,000, $180,000 and $180,000 during the fiscal years
ended September 30, 2000, 1999 and 1998, respectively. 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.
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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, 2000:
Allowance for doubtful accounts $ 566,917 $ 500,000 $ -- $ 618,880 $ 448,037
Inventory reserve 84,710 370,000 -- 167,292 287,418
------------ ------------ ------------ ------------ ------------
$ 651,627 $ 870,000 $ -- $ 786,172 $ 735,455
============ ============ ============ ============ ============
For the year ended September 30, 1999:
Allowance for doubtful accounts $ 693,613 $ -- $ -- $ 126,696 $ 566,917
Inventory reserve 495,000 80,000 -- 490,290 84,710
------------ ------------ ------------ ------------ ------------
$ 1,188,613 $ 80,000 $ -- $ 616,986 $ 651,627
============ ============ ============ ============ ============
For the year ended September 30, 1998:
Allowance for doubtful accounts $ 750,347 $ 50,000 $ 16,435 $ 123,169 $ 693,613
Inventory reserve 512,000 40,000 -- 57,000 495,000
------------ ------------ ------------ ------------ ------------
$ 1,262,347 $ 90,000 $ -- $ 180,169 $ 1,188,613
============ ============ ============ ============ ============
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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
------- -----------
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. 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 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).
4.02. Credit Agreement dated April 1, 1999 by and among
Tidel Engineering, L.P., Tidel Technologies, Inc. and
Chase Bank of Texas, N.A. (incorporated by reference
to Exhibit 4.02 of the Company's Report on Form 10-K
for the year ended September 30, 1999).
4.03. Promissory Note dated April 1, 1999 executed by Tidel
Engineering, L.P. payable to the order of Chase Bank
of Texas Commerce, N.A. (incorporated by reference to
Exhibit 4.03 of the Company's Report on Form 10-K for
the year ended September 30, 1999).
4.04. Term Note dated April 1, 1999, executed by Tidel
Engineering, L.P. and Tidel Technologies, Inc.
payable to the order of Chase Bank of Texas, N.A.
(incorporated by reference to Exhibit 4.04 of the
Company's Report on Form 10-K for the year ended
September 30, 1999).
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4.05. Security Agreement (Personal Property) dated as of
April 1, 1999, by and between Tidel Engineering, L.P.
and Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.05 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.06. Security Agreement (Personal Property) dated as of
April 1, 1999, by and between Tidel Cash Systems,
Inc. and Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.06 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.07. Security Agreement (Personal Property) dated as of
April 1, 1999, by and between Tidel Services, Inc.
and Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.07 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.08. Unconditional Guaranty Agreement dated April 1, 1999
executed by Tidel Technologies, Inc. for the benefit
of Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.08 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.09. Unconditional Guaranty Agreement dated April 1, 1999
executed by Tidel Services, Inc. for the benefit of
Chase Bank of Texas, N.A. (incorporated by reference
to Exhibit 4.09 of the Company's Report on Form 10-K
for the year ended September 30, 1999).
4.10. Unconditional Guaranty Agreement dated April 1, 1999
executed by Tidel Cash Systems, Inc. for the benefit
of Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.10 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.11. Pledge and Security Agreement (Stock) dated April 1,
1999 executed by Tidel Technologies, Inc. for the
benefit of Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.11 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.12. Pledge and Security Agreement (Limited Partnership
Interest) dated April 1, 1999 executed by Tidel
Services, Inc. for the benefit of Chase Bank of
Texas, N.A. (incorporated by reference to Exhibit
4.12 of the Company's Report on Form 10-K for the
year ended September 30, 1999).
4.13. Pledge and Security Agreement (Limited Partnership
Interest) dated April 1, 1999 executed by Tidel Cash
Systems, Inc. for the benefit of Chase Bank of Texas,
N.A. (incorporated by reference to Exhibit 4.13 of
the Company's Report on Form 10-K for the year ended
September 30, 1999).
4.14. Patent Assignment dated as of March 31, 1999 executed
by Tidel Engineering, Inc. to Tidel Engineering, L.P.
(incorporated by reference to
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Exhibit 4.14 of the Company's Report on Form 10-K for
the year ended September 30, 1999).
4.15. Patent Security Agreement dated April 1, 1999
executed by Tidel Engineering, L.P. for the benefit
of Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.15 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.16. Trademark Assignment dated as of March 31, 1999
executed by Tidel Engineering, Inc. to Tidel
Engineering, L.P. (incorporated by reference to
Exhibit 4.16 of the Company's Report on Form 10-K for
the year ended September 30, 1999).
4.17. Trademark Security Agreement dated April 1, 1999
executed by Tidel Engineering, L.P. for the benefit
of Chase Bank of Texas, N.A. (incorporated by
reference to Exhibit 4.17 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.18. Revolving Credit Note dated September 30, 1999
executed by Tidel Engineering, L.P. payable to the
order of Chase Bank of Texas, Inc. (incorporated by
reference to Exhibit 4.18 of the Company's Report on
Form 10-K for the year ended September 30, 1999).
4.19. First Amendment to Credit Agreement dated April 1,
1999 by and between Tidel Engineering, L.P., Tidel
Technologies, Inc. and Chase Bank of Texas, N.A.
(incorporated by reference to Exhibit 4.19 of the
Company's Report on Form 10-K for the year ended
September 30, 1999).
4.20. Form of Convertible Debenture dated September 8, 2000
(incorporated by reference to Exhibit 4.1 of the
Company's Report on Form 8-K dated September 8,
2000).
4.21. Form of Common Stock Purchase Warrant dated September
8, 2000 (incorporated by reference to Exhibit 4.2 of
the Company's Report on Form 8-K dated September 8,
2000).
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).
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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. Copy of Amendment No. 2 dated as of September 15,
1997 to Exhibit 10.02. above (incorporated by
reference to Exhibit 10.14. of the Company's report
on Form 10-K for the year ended September 30, 1997).
10.10. Convertible Debenture Purchase Agreement dated
September 8, 2000 by and between the Registrant and
Montrose Investments Ltd. (incorporated by reference
to Exhibit 10.1 of the Company's Report on Form 8-K
dated September 8, 2000).
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10.11. Registration Rights Agreement dated September 8, 2000
by and between the Registrant and Montrose
Investments Ltd. (incorporated by reference to
Exhibit 10.2 of the Company's Report on Form 8-K
dated September 8, 2000).
10.12. Subordination Agreement dated September 8, 2000 by
and among the Registrant, Tidel Engineering, L.P.,
Montrose Investments Ltd. and The Chase Manhattan
Bank (incorporated by reference to Exhibit 10.3 of
the Company's Report on Form 8-K dated September 8,
2000).
10.13. Second Amendment to Credit Agreement dated September
8, 2000 by and among the Registrant, Tidel
Engineering, L.P. and The Chase Manhattan Bank
(incorporated by reference to Exhibit 10.4 of the
Company's Report on Form 8-K dated September 8,
2000).
21.01. 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 Services, Inc. Delaware 100%
*27.01. Financial data schedule.
99.01. Employment agreement, dated January 1, 2000, between
the Company and James T. Rash (incorporated by
reference to Exhibit 99.1 of the Company's Report on
Form 10-Q for the quarterly period ended March 31,
2000).
99.02. Employment agreement, dated January 1, 2000, between
Tidel Engineering, L.P. and Mark K. Levenick
(incorporated by reference to Exhibit 99.2 of the
Company's Report on Form 10-Q for the quarterly
period ended March 31, 2000).
99.03. Employment agreement, dated January 1, 2000, between
Tidel Engineering, L.P. and Michael F. Hudson
(incorporated by reference to Exhibit 99.3 of the
Company's Report on Form 10-Q for the quarterly
period ended March 31, 2000).
----------------
* -- Filed herewith.
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