<PAGE> 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.
<PAGE> 2
TIDEL TECHNOLOGIES, INC.
I N D E X
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
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
</TABLE>
<PAGE> 3
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1998 1998
------------ -------------
<S> <C> <C>
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
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
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
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 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:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------ -------------
<S> <C> <C>
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
============ =============
</TABLE>
(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:
<TABLE>
<CAPTION>
Weighted
Average Shares Per Share
Income Outstanding Amount
--------- -------------- ---------
<S> <C> <C> <C>
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
========= ============== =========
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Weighted
Average Shares Per Share
Income Outstanding Amount
--------- -------------- ---------
<S> <C> <C> <C>
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
========= ============== =========
</TABLE>
(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:
<TABLE>
<CAPTION>
(dollars in 000's)
-------------------------------
Three Months Ended December 31,
-------------------------------
1998 1997
------- -------
<S> <C> <C>
ATM.................................................. $ 4,772 $ 3,551
TACC................................................. 1,262 1,588
Parts, service and other............................. 684 621
EMS.................................................. 343 268
------- -------
$ 7,061 $ 6,028
======= =======
</TABLE>
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
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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:
<TABLE>
<CAPTION>
(dollars in 000's)
-------------------------------
Three Months Ended December 31,
-------------------------------
1998 1997
------- -------
<S> <C> <C>
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
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
(in 000's)
--------------------------------
December 31, September 30,
1998 1998
------------ -------------
<S> <C> <C>
Working capital...................................... $ 16,031 $ 15,438
Total assets......................................... 23,367 24,247
Shareholders' equity................................. 13,570 13,484
</TABLE>
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.
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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:
<TABLE>
<CAPTION>
Three months ended
December 31,
-----------------------
1998 1997
----------- ---------
<S> <C> <C>
Customer A............................ $ 3,063,156 $ --
Customer B............................ 838,415 --
Customer C............................ 141,705 709,184
</TABLE>
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
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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,
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<PAGE> 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
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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
<PAGE> 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
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 877,141
<SECURITIES> 0
<RECEIVABLES> 9,232,090
<ALLOWANCES> 679,006
<INVENTORY> 7,378,473
<CURRENT-ASSETS> 20,125,078
<PP&E> 2,967,487
<DEPRECIATION> 1,456,729
<TOTAL-ASSETS> 23,367,326
<CURRENT-LIABILITIES> 4,094,276
<BONDS> 5,702,604
0
0
<COMMON> 159,105
<OTHER-SE> 13,411,341
<TOTAL-LIABILITY-AND-EQUITY> 23,367,326
<SALES> 7,060,693
<TOTAL-REVENUES> 7,060,693
<CGS> 4,718,613
<TOTAL-COSTS> 4,718,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,738
<INCOME-PRETAX> 400,333
<INCOME-TAX> 148,000
<INCOME-CONTINUING> 252,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,333
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
