-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Am1fhNgxw/6gqaJyQkEUZ66IrmXrMpFqRTLjDM6iM+xg3Xmjj2SU4FoBNDiLUr6G ef8YXwc5NGcYiMhKv5pC1w== 0000950129-99-000642.txt : 19990222 0000950129-99-000642.hdr.sgml : 19990222 ACCESSION NUMBER: 0000950129-99-000642 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIDEL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000842695 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 752193593 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17288 FILM NUMBER: 99546163 BUSINESS ADDRESS: STREET 1: 5847 SAN FELIPE STE 900 STREET 2: SAN FELIPE PLZ CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7137838200 MAIL ADDRESS: STREET 1: 5847 SAN FELIPE STREET 2: SUITE 900 CITY: HOUSTON STATE: TX ZIP: 77057 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MEDICAL TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 10-Q 1 TIDEL TECHNOLOGIES, INC. - DATED 12/31/1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ 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 ---------------------- 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 [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares of Common Stock outstanding as of the close of business on February 15, 1999 was 16,050,468. 2 TIDEL TECHNOLOGIES, INC. I N D E X
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of December 31, 1998 and September 30, 1998 (unaudited)...................................... 1 Consolidated Statements of Operations for the three months ended December 31, 1998 and 1997 (unaudited)..................... 2 Consolidated Statements of Comprehensive Income for the three months ended December 31, 1998 and 1997................... 3 Consolidated Statements of Cash Flows for the three months ended December 31, 1998 and 1997 (unaudited) ............................................................ 4 Notes to Consolidated Financial Statements (unaudited)..................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 6 Item 3. Quantitative and Qualitative Disclosures About Market Risks ......................................................... 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................................ 12 Item 2. Changes in Securities...................................................... 12 Item 3. Defaults Upon Senior Securities............................................ 12 Item 4. Submission of Matters to a Vote Of Security Holders..................................................... 12 Item 5. Other Information ........................................................ 12 Item 6. Exhibits and Reports on Form 8-K........................................... 12 SIGNATURE................................................................................... 13
3 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, SEPTEMBER 30, ASSETS 1998 1998 ------------ ------------- Current Assets: Cash and cash equivalents $ 877,141 $ 1,400,148 Trade accounts receivable, net of allowance of $679,006 and $693,613, respectively 9,232,090 10,246,075 Notes and other receivables 1,223,155 1,174,055 Inventories 7,378,473 6,705,756 Deferred tax assets 1,058,692 1,058,692 Prepaid expenses and other 355,527 381,528 ------------ ------------ Total current assets 20,125,078 20,966,254 Investment in 3CI, at market value 720,116 917,083 Property, plant and equipment, at cost 2,967,487 2,843,723 Accumulated depreciation (1,456,729) (1,550,387) ------------ ------------ Net property, plant and equipment 1,510,758 1,293,336 Intangible assets, net of accumulated amortization of $878,841 and $813,190, respectively 740,660 797,032 Deferred tax asset 207,575 207,575 Other assets 63,139 65,361 ------------ ------------ Total assets $ 23,367,326 $ 24,246,641 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 128,000 $ 128,000 Accounts payable 2,371,243 3,014,278 Accrued liabilities 1,595,033 2,385,929 ------------ ------------ Total current liabilities 4,094,276 5,528,207 Long-term debt 5,702,604 5,234,604 ------------ ------------ Total liabilities 9,796,880 10,762,811 ------------ ------------ Commitments and contingencies Shareholders' Equity: Common stock, $.01 par value, authorized 100,000,000 shares; issued and outstanding 15,910,468 and 15,860,468 shares, respectively 159,105 158,605 Additional paid-in capital 14,175,303 14,144,553 Retained earnings 465,697 213,364 Accumulated other comprehensive loss - net unrealized loss on investment in 3CI (847,596) (650,629) Stock subscriptions receivable (382,063) (382,063) ------------ ------------ Total shareholders' equity 13,570,446 13,483,830 ------------ ------------ Total liabilities and shareholders' equity $ 23,367,326 $ 24,246,641 ============ ============
See accompanying notes to consolidated financial statements. 1 4 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, ------------------------------- 1998 1997 ----------- ----------- Revenues $ 7,060,693 $ 6,027,986 Cost of sales 4,718,613 3,829,481 ----------- ----------- Gross profit 2,342,080 2,198,505 Selling, general and administrative 1,675,295 1,709,443 Depreciation and amortization 162,714 107,312 ----------- ----------- Operating income 504,071 381,750 Interest expense, net 103,738 93,609 ----------- ----------- Income before taxes 400,333 288,141 Income tax expense 148,000 -- ----------- ----------- Net income $ 252,333 $ 288,141 =========== =========== Basic earnings per share: Net income $ 0.02 $ 0.02 =========== =========== Weighted average common shares outstanding 15,898,511 15,274,030 =========== =========== Diluted earnings per share: Net income $ 0.02 $ 0.02 =========== =========== Weighted average common and dilutive shares outstanding 16,676,955 17,173,270 =========== ===========
See accompanying notes to consolidated financial statements. 2 5 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, ------------------------------- 1998 1997 ----------- ----------- Net income $ 252,333 $ 288,141 Other comprehensive income (loss), net of tax: Unrealized (loss) gain on investment in 3CI (196,197) 318,623 ----------- ----------- Comprehensive income $ 56,136 $ 606,764 =========== ===========
See accompanying notes to consolidated financial statements. 3 6 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, ------------------------------- 1998 1997 ----------- ----------- Cash flows from operating activities: Net income $ 252,333 $ 288,141 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 162,714 107,312 Changes in assets and liabilities: Trade accounts receivable, net 1,013,985 1,294,255 Notes and other receivables (49,100) 225,922 Inventories (672,717) (2,483,143) Prepaids and other assets 28,223 (49,509) Accounts payable and accrued liabilities (1,433,931) 66,812 ----------- ----------- Net cash used in operating activities (698,493) (550,210) ----------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (323,764) (34,078) ----------- ----------- Net cash used in investing activities (323,764) (34,078) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of notes payable 500,000 600,000 Repayments of notes payable (32,000) (302,831) Proceeds from exercise of warrants 31,250 509,434 ----------- ----------- Net cash provided by financing activities 499,250 806,603 ----------- ----------- Net (decrease) increase in cash and cash equivalents (523,007) 222,315 Cash and cash equivalents at beginning of period 1,400,148 1,549,331 ----------- ----------- Cash and cash equivalents at end of period $ 877,141 $ 1,771,646 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest $ 115,121 $ 117,867 =========== =========== Cash paid for taxes $ -- $ 200,000 =========== ===========
See accompanying notes to consolidated financial statements. 4 7 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) (1) CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated balance sheets and related interim consolidated statements of operations and cash flows of Tidel Technologies, Inc. (the "Company"), a Delaware corporation, are unaudited. In the opinion of management, these financial statements include all adjustments (consisting only of normal recurring items) necessary for their fair presentation in accordance with generally accepted accounting principles. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. Certain amounts in the prior year's financial statements have been reclassified to conform with the current year presentation format. The information included in this Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended September 30, 1998. (2) INVENTORIES Inventories consisted of the following at December 31, 1998 and September 30, 1998:
December 31, September 30, 1998 1998 ------------ ------------- Raw materials........................ $ 4,675,710 $ 3,993,447 Work in process...................... 354,991 484,884 Finished goods....................... 2,662,193 2,542,177 Other................................ 185,579 180,248 ------------ ------------- 7,878,473 7,200,756 Inventory reserve.................... (500,000) (495,000) ------------ ------------- $ 7,378,473 $ 6,705,756 ============ =============
(3) EARNINGS PER SHARE Basic earnings per share is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the income available to common shareholders by the weighted average number of common shares and dilutive potential common shares. The following is a reconciliation of the numerators and denominators of the basic and diluted per-share computations for net income for the three months ended December 31, 1998 and 1997:
Weighted Average Shares Per Share Income Outstanding Amount --------- -------------- --------- Three Months Ended December 31, 1998: Basic earnings per share............................. $ 252,333 15,898,511 $ .02 Effect of dilutive warrants and options.............. -- 778,444 -- --------- -------------- --------- Diluted earnings per share........................... $ 252,333 16,676,955 $ .02 ========= ============== =========
5 8
Weighted Average Shares Per Share Income Outstanding Amount --------- -------------- --------- Three Months Ended December 31, 1997: Basic earnings per share............................. $ 288,141 15,274,030 $ .02 Effect of dilutive warrants and options.............. -- 1,899,240 -- --------- -------------- --------- Diluted earnings per share........................... $ 288,141 17,173,270 $ .02 ========= ============== =========
(4) INVESTMENT IN 3CI The Company currently owns 698,464 shares of common stock of 3CI Complete Compliance Corporation ("3CI"), which is carried at market value. In addition, the Company owns warrants to purchase 226,939 shares of common stock of 3CI, exercisable at $1.50 per share through April 2000. (5) LITIGATION 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 material adverse effect on the Company's consolidated financial position, results of operations or cash flows. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company develops, manufactures, sells and supports products designed for specialty retail marketers, including automated teller machines and related software (the "ATM" products); electronic cash security systems (the "Timed Access Cash Controller" or "TACC" products); and underground fuel storage monitoring and leak detection devices (the "Environmental Monitoring System" or "EMS" products). PRODUCT REVENUES Total revenues increased $1,032,707, or 17%, for the first quarter of fiscal 1999 over the comparable quarter of 1998. As discussed below, a significant increase in ATM shipments was the principal factor in the Company's revenue growth. Revenue by product is detailed in the following table:
(dollars in 000's) ------------------------------- Three Months Ended December 31, ------------------------------- 1998 1997 ------- ------- ATM.................................................. $ 4,772 $ 3,551 TACC................................................. 1,262 1,588 Parts, service and other............................. 684 621 EMS.................................................. 343 268 ------- ------- $ 7,061 $ 6,028 ======= =======
The number of ATM units shipped increased 45% for the quarter ended December 31, 1998 compared to the same period in 1997, causing an increase in ATM product sales of $1,221,000, or 34%. Such 6 9 improvement was attributable to the successful introduction of the new ignition series ATMs in October 1998 and the signing of several new major distributors during the period. TACC product sales decreased $326,000 for the quarter ended December 31, 1998 compared to the same period in 1997. Management believes, however, TACC product sales for the year ending September 30, 1999 taken as a whole should increase due to the recent introduction of the TACC-IV model. Parts, service and other revenues vary directly with sales of finished goods, and have increased accordingly. All marketing activities for EMS products have terminated as the marketing focus of the Company has shifted to its two other product lines. Certain existing customers have continued to purchase these products, however, to complete retrofit projects that are currently in progress. GROSS PROFIT, OPERATING EXPENSES AND NON-OPERATING ITEMS A comparison of certain operating information is provided in the following table:
(dollars in 000's) ------------------------------- Three Months Ended December 31, ------------------------------- 1998 1997 ------- ------- Gross profit......................................... $ 2,342 $ 2,199 Selling, general and administrative.................. 1,675 1,709 Depreciation and amortization........................ 163 107 Operating income..................................... 504 382 Interest expense..................................... 104 94 Income before taxes.................................. 400 288 Income taxes......................................... 148 -- Net income........................................... 252 288
Gross profit on product sales increased $143,000 from the quarter ending December 31, 1997 to $2,342,000 for the same period in 1998. The gross margin in 1998 was 33.2% of product sales, compared to 36.5% in 1997. The decrease of 3.3% in 1998 compared to 1997 resulted from a decline in average sales prices for ATM products of $450. Selling, general and administrative expenses of $1,675,000 or 23.7% of sales in 1998 represented a decrease from the 1997 levels of $1,709,000 or 28.4% of sales. The overall decline relates to increased sales volumes and cost reduction efforts. Depreciation and amortization increased from $107,000 in 1997 to $163,000 in 1998 due to additions of property, plant and equipment. Interest expense increased from $94,000 in 1997 to $104,000 in 1998, as a result of increased borrowings to finance increases in accounts receivable and inventories associated with the significant growth in revenues. Income taxes of $148,000 were recorded in 1998, as the earnings of the Company were subject to tax at the statutory state and federal rates, while there was no tax provision in the same period in 1997. 7 10 LIQUIDITY AND CAPITAL RESOURCES The financial position of the Company continues to improve primarily as a result of profitable operations and the infusion of capital from the exercise of warrants, as reflected in the following key indicators as of December 31, 1998 and September 30, 1998:
(in 000's) -------------------------------- December 31, September 30, 1998 1998 ------------ ------------- Working capital...................................... $ 16,031 $ 15,438 Total assets......................................... 23,367 24,247 Shareholders' equity................................. 13,570 13,484
The improvement in working capital is principally due to the repayment of current liabilities. The repayment of current liabilities was facilitated by increased collections of accounts and notes receivable and additional borrowings of long-term debt. The Company's wholly owned subsidiary has a revolving credit agreement with a bank which provides for borrowings up to $7,000,000 at the prime rate, with certain LIBOR alternatives. At December 31, 1998, $5,254,604 was outstanding pursuant to the revolving credit agreement. The Company continues to own 698,464 shares of common stock of 3CI and warrants to purchase 226,939 shares of common stock of 3CI at $1.50 per share subsequent to its divestiture of a majority interest in February 1994. The Company has no immediate plans for the disposal of the shares or warrants, and accordingly, the shares and warrants may be utilized to collateralize borrowings. At present, all the shares are pledged to secure an outstanding note payable in the amount of $576,000. The Company's registration statement covering the offering and sale by selling shareholders of the common stock underlying all of the Company's 5,517,500 outstanding warrants was declared effective in January 1997. During the three-month period ended December 31, 1998, warrants to purchase 50,000 shares were exercised generating net proceeds to the Company of approximately $31,250. As of December 31, 1998, the Company had outstanding warrants to purchase 1,333,192 shares of common stock, which if exercised would generate proceeds to the Company of approximately $1,170,000. The Company's research and development budget for fiscal 1999 has been estimated at $1,800,000. 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 retail-based e-commerce applications. During the three months ended December 31, 1998, $344,000 was expended for research and development. With its present capital resources, its potential capital from the exercise of warrants, and with its borrowing facility, the Company should have sufficient resources to meet its operating needs for the foreseeable future and to provide for debt maturities and capital expenditures. The Company has never paid dividends and does not anticipate paying dividends on shares of its common stock 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. 8 11 SEASONALITY The Company can experience seasonal variances in 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. MAJOR CUSTOMERS AND CREDIT RISKS The Company generally does not require collateral or other security from its customers and would incur an accounting loss equal to the carrying value of the account receivable if a customer failed to perform according to the terms of the credit arrangements. Sales to major customers were as follows for the three months ended December 31, 1998 and 1997:
Three months ended December 31, ----------------------- 1998 1997 ----------- --------- Customer A............................ $ 3,063,156 $ -- Customer B............................ 838,415 -- Customer C............................ 141,705 709,184
Foreign sales accounted for 3% and 4% of the Company's total sales during the three months ended December 31, 1998 and 1997. YEAR 2000 The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. As a result, computer programs that have date sensitive software may recognize a date using "00" as the year 1900, rather than the year 2000. This could result in system failures or miscalculations causing disruptions in the operations of the Company, including, but not limited to, a temporary inability to process or transmit data or engage in normal business activities. The Company relies on information technology systems ("IT Systems"), primarily composed of computer hardware and software, and on non-information technology ("Non-IT Systems"), primarily composed of embedded microprocessors, to operate its business. The Company uses IT Systems in the design, development and production of its products, as well as in its internal operations such as manufacturing, accounting, billing, sales and service. In addition, IT Systems are used to operate the Company's web site and e-mail systems. The Company uses Non-IT Systems, primarily microprocessors, in the design, development and production of its products, as well as in equipment used in manufacturing and internal operations, such as telephone equipment. The Company also relies on utilities, such as telecommunications and power. The Company has defined Year 2000 Compliant to mean that a process will continue to run in the same manner when dealing with dates on or after January 1, 2000, as it did before January 1, 2000. To determine the Company's state of readiness, management has conducted an initial evaluation of the Company's current computer systems, software and embedded technologies to identify those that could be affected by the Year 2000 Issue. The evaluation, which was focused on the Company's products and most critical internal operating functions, revealed that the Company's accounting and manufacturing software are the major resources that do have Year 2000 compliance issues. These resources will need to be either replaced or upgraded and are "off-the-shelf" products with Year 2000 compliant versions now available. The Company is in the process of upgrading 9 12 these programs as well as evaluating its least critical internal operating functions, and expects to complete these projects during the quarter ending March 31, 1999. The Company has determined that there should be no Year 2000 Issues for TACC products already sold. The Company has determined that there should be no Year 2000 Issues for EMS products sold since June 5, 1991. EMS products sold prior to June 5, 1991, were manufactured by a predecessor and have not been tested by the Company. In addition, certain EMS 3000 products contain hardware manufactured by a third party. This third party component equipment has not been tested by the Company. While none of the predecessor EMS products or EMS products containing third party component equipment are still under warranty by the Company, customer problems, if any, will be addressed as incurred. The Company has tested the hardware and software platforms for its ATM products already sold, excluding the Company's initial AnyCard tube-type model ATM. The discontinued tube-type model ATM contains a point-of-sale interface manufactured by a third party. In addition, this model is dependent on a certain third party host processor for its date and time information during a transaction. Neither the point-of-sale interface nor the systems of the third party host processor have been tested by the Company. The Company believes, however, that there are less than 1,500 tube-type models still in service. The Company will attempt to notify customers about the point-of-sale interface and dependence on the third party processor, and customer problems, if any, will be addressed as incurred. While the Company has tested the hardware and software platforms for its ATM products, these products are dependent on data that is transmitted to the product during use. This information is transmitted from financial institutions via a system of private and shared computer networks. While the federal government has instituted strict Year 2000 compliance guidelines and remediation timetables for financial institutions, there can be no assurance that the systems of financial institutions, as well as the systems of the various private and shared computer networks will be timely converted and that the Company's ATM products will be able to conduct transactions in a normal manner, if at all. As part of the Company's Year 2000 readiness efforts, the Company has begun contacting its significant suppliers and large customers to determine the extent to which the Company is vulnerable to those third parties' failure to remediate their Year 2000 compliance issues. The Company expects to complete its survey of those third parties' Year 2000 compliance by June 30, 1999. There can be no assurance, however, that the systems of other companies on which the Company's business relies will be timely converted or that failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company and its operations. Expenditures in fiscal 1998 for the Year 2000 Issue amounted to less than $35,000. Management expects that completion of its Year 2000 readiness efforts may result in additional expenditures of approximately $25,000 but that such amount may increase if the Company must address a significant amount of problems relating to its tube-type model ATM or for the reasons described below. The Company's failure to resolve Year 2000 Issues on or before December 31, 1999 could result in system failures or miscalculations causing disruption in operations including, among other things, a temporary inability to process accounting transactions, or engage in similar normal business activities. Additionally, failure of third parties upon whom the Company's business relies to timely remediate their Year 2000 Issues could result in disruptions in the Company's supply of parts and materials, late, 10 13 missed or unapplied payments, temporary disruptions in order processing and other general problems related to the Company's daily operations. While the Company believes its Year 2000 readiness efforts will adequately address the Company's internal Year 2000 Issues, until the Company receives responses from a more significant number of the Company's suppliers and customers, the overall risks associated with the Year 2000 Issues remain difficult to accurately describe and quantify, and there can be no guarantee that the Year 2000 Issue will not have a material adverse effect on the Company and its operations. Readiness efforts are currently on schedule and the Company plans to have the major Year 2000 Issues resolved by June 30, 1999. At such time, an outside consultant will be retained to verify and validate all Year 2000 compliance. In the event readiness efforts should fall behind schedule, the Company will develop and implement a contingency plan by March 31, 1999. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes standards for the way that public companies report, in their annual financial statements, certain information about their operating segments, their products and services, the geographic areas in which they operate and their major customers. SFAS 131 also requires that certain information about operating segments be reported in interim financial statements. SFAS 131 is effective for periods beginning after December 15, 1997. 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 is effective for all fiscal years beginning after June 15, 1999. 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, 2000. FORWARD-LOOKING STATEMENTS This Form 10-Q 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 compliance with Year 2000 Issues, the Company's future product sales, gross profit, selling, general and administrative expense, the Company's financial position, working capital and seasonal variances in the Company's operations, as well as general market conditions) though the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q 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 11 14 representation by the Company or any other person that the objectives and plans of the Company will be achieved. ITEM 3. 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 1999, however, there would be no material impact on the Company's consolidated results of operations or financial position. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Pursuant to recent amendments to the proxy rules under the Securities Exchange Act of 1934, as amended, the Company's stockholders are notified that the deadline for providing the Company timely notice of any stockholder proposal to be submitted outside of the Rule 14a-8 process for consideration at the Company's 1999 Annual Meeting of Stockholders (the "Annual Meeting") will be May 11, 1999. As to all such matters which the Company does not have notice on or prior to May 11, 1999, discretionary authority shall be granted to the designated persons in the Company's proxy statement for the Annual Meeting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBITS 27 - Financial Data Schedule b) REPORTS ON FORM 8-K The Company filed no Reports on Form 8-K during the quarter ended December 31, 1998. 12 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TIDEL TECHNOLOGIES, INC. (Registrant) DATE: February 19, 1999 By: /s/ JAMES T. RASH ------------------------------- James T. Rash Principal Executive and Financial Officer 13 16 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 - Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1999 OCT-01-1998 DEC-31-1998 877,141 0 9,232,090 679,006 7,378,473 20,125,078 2,967,487 1,456,729 23,367,326 4,094,276 5,702,604 0 0 159,105 13,411,341 23,367,326 7,060,693 7,060,693 4,718,613 4,718,613 0 0 103,738 400,333 148,000 252,333 0 0 0 252,333 .02 .02
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