Mail Stop 4561
November 8, 2005
Mr. Mark K. Levenick
Interim Chief Executive Officer
Tidel Technologies Inc.
2900 Wilcrest Drive, Suite 205
Houston, TX 77042
Re: Tidel Technologies, Inc.
Preliminary Proxy Statement on Schedule 14A
Filed on October 28, 2005
Form 10-K for the years ended 2004 and 2003
Forms 10-Q for the periods ended December 31, 2004,
March 31 and June 30, 2005
Dear Mr. Levenick:
We have limited our review of your filings to the matters
identified below and have the following comments. Where
indicated,
we think you should revise your documents in response to this
comment. If you disagree, we will consider your explanation as to
why our comment is inapplicable or a revision is unnecessary.
Please
be as detailed as necessary in your explanation. After reviewing
this information, we may or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comment or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Regarding the debt with Laurus Master Fund, please state the
amount owed on the debt as of the most recent practicable date.
We
note that, according to your most recent quarterly report, as of
June
30, 2005 you had approximately $8,932,988 face value of
outstanding
debt. Where you refer to the use of proceeds to repay the
outstanding indebtedness to Laurus Master Fund throughout the
document, please clarify whether this payment will extinguish the
total debt owed to Laurus. It appears from your disclosure on
page
24 that sales from Tidel`s equity interests or non-ATM business
assets through 2009 may also be used to repay any existing
indebtedness to Laurus.
2. Please also disclose the interest rate and maturity of the
indebtedness to Laurus.
Summary Term Sheet, page 5
3. Please revise to relocate the information about the parties,
which
may follow but should not lead the summary term sheet. Note that
the
summary section should not be used to recite all of the
information
contained in the disclosure document. In this regard we note the
same
disclosure about the parties is provided on page 15. The summary
is
intended to provide shareholders with a bulleted list of the most
material terms of the transaction, which typically would include
such
things as the terms of the transaction, reasons for the
transaction,
what shareholders will receive and the use of proceeds. See
instructions to Item 1001 of Regulation M-A.
Special Factors, page 6
Reasons for the Sale of the ATM business, page 6
4. Please revise the discussion in the summary section to
highlight
the primary reasons for the sale of the ATM business. As the
bulleted items in this section should be brief and concise, it
would
appear that your discussion of the fairness opinion and matters
unrelated to the reasons for the sale should be discussed
elsewhere.
Principal Risks and Disadvantes of the Transaction, page 7
5. You state that you intend to sell the cash security business
after
the sale to the ATM business so that you would have no remaining
operations. Yet you state on page 6 that the sale of the ATM
business is critical to your future operations. Please expand the
disclosure to explain what your reference to "future operations"
entails.
Proceeds of the Sale of the ATM business, page 7
6. Please discuss here or in an appropriate section of the
document
what impact an unfavorable vote on the asset sale would have on
the
company with respect to the Laurus debt facility.
Stockholder Approval of the Sale of the ATM business, page 8
7. To the extent known, please state here what percentage of the
vote
the company expects will be voted in favor of the asset sale. In
this regard we note the statement that each of your directors
intends
to vote in favor of all matters being put before the shareholders.
8. We note your answer to the question, "Will any of the proceeds
from the sale of the ATM Business be distributed to me as a
stockholder?" Please address in this answer your plan to use $8.0
million of the proceeds to repay your indebtedness to Laurus.
Special Factors, page 16
9. Expand to discuss the terms of the Laurus debt facility and to
clarify the extent to which the debt with Laurus is tied to the
asset
sale agreement. In this regard we note, for example, that section
6.19 of the Securities Purchase Agreement with Laurus Master Fund
dated November 25, 2004 stipulates that within 10 days of the
closing
date of the financing agreement "the investment banking services
of
Stifel, Nicolaus and Company, Inc. [shall be engaged] for the
purpose
of actively pursuing the consummation of the Asset Sales." To the
extent that your selection of Stifel as investment banker for the
transaction was influenced by Laurus, this should be disclosed.
The
background to the transaction should describe in material detail
the
role played by Laurus, if applicable, in effecting the
transaction.
Financial Information
10. Please refer to Question 6 in Section H of amendment 3 to the
publicly available telephone interpretations of the Division of
Corporation Finance (July 2000) for guidance regarding the
financial
statements that must be provided with respect to asset sale
transactions. Note that in addition to the audited financial
information for the company, which you have provided, you must
provide unaudited financial statements for the business being sold
for the last two fiscal years and interim periods. In addition,
you
must provide pro forma financial information that complies with
the
requirements of Article 11 of Regulation S-X. Specifically,
ensure
that your disclosure conforms to the form and content as
prescribed
by Article 11-02(b) and note that the pro forma income statement
must
be provided for the year ended September 30, 2004 as well as for
the
nine months ended June 30, 2005. Please revise accordingly.
Miscellaneous, page 37
11. Please be advised that the Commission has moved its offices to
100 F Street NE, Washington, D.C. 20549.
Form 10-K for the years ended September 30, 2004 and 2003
Controls and Procedures
12. While you disclose that you have identified significant
deficiencies, you have not provided a conclusion of management as
to
whether the disclosure controls and procedures are effective.
Please
amend the Form 10-K to state unambiguously whether your disclosure
controls and procedures are or are not effective "as of the end of
the period covered by the report." See Item 307 of Regulation S-
K.
Note that to the extent that you determine that the significant
deficiencies constitute a material weakness, a conclusion that the
disclosure controls and procedures are nevertheless effective
would
require expanded disclosure clarifying how management reached that
conclusion.
13. We note that you have included qualifying statements that the
interim chief executive is providing his assessment "having had no
prior affiliation with the combined companies or operations" prior
to
March 2005 and that the interim chief financial office is doing so
"without having ever been in a position of active management or
knowledge over transactions during fiscal years 2004, 2003 and
2002."
These statements raise questions as to whether investors may rely
on
the conclusions of management as to the effectiveness of your
disclosure controls and procedures. Please remove these
qualifying
statements from the disclosure or tell us how they are consistent
with the requirements of Item 307.
14. Your reference to Rules 13a-14 and 15d-14 refer to the
certification requirements and not to the controls and procedures
defined in Rules 13a-15(e) and 15d-15(e), as specified in Item 307
of
Regulation S-K. Please revise the disclosure to refer to the
correct
rule.
15. We note that you have identified several significant
deficiencies. Tell us what analysis you undertook to determine
whether the deficiencies constitute a material weakness.
16. Please describe in greater detail the nature of the
significant
deficiencies you identified in your disclosure. Disclose the
steps
you have taken and procedures you have implemented to correct the
deficiencies. In this regard we note your statement that you
expect
to have corrected these deficiencies by August 30, 2005. Indicate
when each corrective action was completed and clarify whether
management believes the significant deficiencies no longer exist.
Disclose the costs, if material, associated with these changes.
17. You state in the Form 10-K that there have been "no
significant
changes" in your internal controls or in other factors "that could
significantly affect these controls subsequent to the date of the
evaluation. . . ." Please note that Item 308(c) of Regulation
S-K
requires disclosure of any change in the registrant`s internal
control over financial reporting that occurred during the
registrant`s fourth fiscal quarter that has materially affected,
or
is reasonably likely to materially affect, the registrant`s
internal
control over financial reporting. Please revise the disclosure to
clarify whether there were any such material changes during the
fourth quarter. Note that if the changes you describe in response
to
the preceding comment occurred after September 30, 2004, and there
were no changes during the quarter ended September 30, 2004, the
discussion of those changes should not affect your Item 308(c)
disclosure.
Exhibits
18. We note that the 302 Certification for Mr. Peltier, filed as
exhibit 31.2, is not properly dated and does not include a
signature.
In your next amendment, please provide a certification that
conforms
to the requirements of Rule 13a-14(a) or 15d-14(a).
Forms10-Q for the periods ended December 31, 2004, March 31 and
June
30, 2005
Controls and Procedures
19. We note your statements that "considering the aforementioned
deficiencies," which you do not describe, the chief executive and
financial officers concluded that your disclosure controls and
procedures were effective for each quarterly period. Given the
carveout language referencing the deficiencies, it is unclear
whether
management has concluded that your disclosure controls and
procedures
are effective for each period. Please revise your disclosure to
state in clear and unqualified language the conclusions reached by
your certifying officers on the effectiveness of your disclosure
controls and procedures. For example, you can state that your
disclosure controls and procedures are effective including
consideration of the deficiencies, once you have identified them,
so
long as you provide appropriate disclosure explaining how the
disclosure controls and procedures were determined to be effective
in
light of the identified matters. Or, if true, you can state that
given the identified matters, your disclosure controls and
procedures
are not effective. You should not, however, state the conclusion
in
your current disclosure, which appears to state that your
disclosure
controls and procedures are effective except to the extent that
they
are not effective.
20. The changes in internal control over financial reporting
should
document the changes that occurred during each quarter. If the
significant deficiencies you identified in the Form 10-K continued
to
exist in the quarter ended December 31, 2004 and changes were
under
taken during that period to correct those deficiencies, you should
describe those changes in the first quarter 10-Q in response to
Item
308(c). To the extent that the significant deficiencies continued
to
exist in the second and third quarters, which appears likely given
your statement that you did not expect to correct the deficiencies
until August 2005, and changes to internal control over financial
reporting were made during those quarters, your disclosure in
response to Item 308(c) should discuss the changes that occurred
during those periods as well.
Except for above-cited matters, we have not and do not intend
to
conduct any review of the information statement. In view of our
limited review, all persons who are by statute responsible for the
adequacy and accuracy of the filing are urged to be certain that
all
information required pursuant to the Securities Act of 1933 has
been
included.
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
Please direct any questions you may have to Maryse Mills-
Apenteng at (202) 551-3457 or, in her absence, to Anne Nguyen at
(202) 551-3611. If you still require further assistance, please
contact the undersigned at (202) 551-3735.
Sincerely,
Barbara C. Jacobs
Assistant Director
??
??
??
??
Mr. Mark K. Levenick
Tidel Technologies Inc.
November 8, 2005
Page 1