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 June 30, 1997
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
AMERICAN MEDICAL TECHNOLOGIES, INC.
(Former name, former address and former fiscal year,
if changed since last report.)
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 August 15, 1997 was 14,818,895.
TIDEL TECHNOLOGIES, INC.
I N D E X
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
and September 30, 1996 (unaudited)............. 1
Consolidated Statements of Operations for the three
months and nine months ended June 30, 1997
and 1996 (unaudited)........................... 2
Consolidated Statements of Cash Flows for the nine
months ended June 30, 1997 and 1996
(unaudited).................................... 3
Notes to Consolidated Financial
Statements (unaudited)......................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 5
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings................................. 8
Item 2. Changes in Securities............................. 8
Item 3. Defaults Upon Senior Securities................... 8
Item 4. Submission of Matters to a Vote
Of Security Holders............................... 8
Item 5. Other Information................................. 9
Item 6. Exhibits and Reports on Form 8-K.................. 9
SIGNATURE....................................................... 10
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, September 30,
1997 1996
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents .......................... $ 975,774 $ 582,108
Trade accounts receivable, net of allowance
of $244,270 and $184,900, respectively ......... 7,966,671 5,234,307
Notes and other receivables ........................ 1,442,752 417,673
Inventories ........................................ 3,531,127 3,341,486
Prepaid expenses and other assets .................. 265,650 239,621
------------ ------------
Total current assets ........................... 14,181,974 9,815,195
Investment in 3CI, at market value ..................... 425,511 893,914
Property, plant and equipment, at cost ................. 2,031,427 1,601,145
Accumulated depreciation ........................... (1,125,986) (928,762)
------------ ------------
Net property, plant and equipment .............. 905,441 672,383
Intangible assets, net of accumulated amortization
of $662,494 and $556,546, respectively ............. 831,343 937,291
Other assets ........................................... 257,674 44,360
------------ ------------
Total assets ................................... $ 16,601,943 $ 12,363,143
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable ........................... $ 1,051,461 $ 4,128,886
Accounts payable ................................... 2,310,039 1,857,601
Accrued liabilities ................................ 1,790,459 1,607,885
------------ ------------
Total current liabilities ...................... 5,151,959 7,594,372
Long-term debt ......................................... 3,654,604 640,000
------------ ------------
Total liabilities .............................. 8,806,563 8,234,372
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $.01 par value, authorized 100,000,000
shares; issued and outstanding 14,643,379
and 12,397,404 shares, respectively ............ 146,434 123,974
Additional paid-in capital ......................... 13,228,379 10,801,273
Accumulated deficit ................................ (4,458,036) (6,143,482)
Unrealized loss on investment in 3CI ............... (1,121,397) (652,994)
------------ ------------
Total shareholders' equity ..................... 7,795,380 4,128,771
------------ ------------
Total liabilities and shareholders' equity ..... $ 16,601,943 $ 12,363,143
============ ============
See accompanying notes to consolidated financial statements.
1
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Nine Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Revenues .......................... $ 8,002,189 $ 5,626,753 $21,060,580 $14,583,187
Cost of sales ..................... 4,992,185 3,483,337 13,545,832 9,140,731
----------- ----------- ----------- -----------
Gross profit .................. 3,010,004 2,143,416 7,514,748 5,442,456
Selling, general and administrative 2,022,382 1,511,449 5,116,402 3,923,232
Depreciation and amortization ..... 121,657 84,849 344,990 257,117
----------- ----------- ----------- -----------
Operating income .............. 865,965 547,118 2,053,356 1,262,107
Interest expense, net ............. 99,207 99,837 367,910 258,149
----------- ----------- ----------- -----------
Net income ........................ $ 766,758 $ 447,281 $ 1,685,446 $ 1,003,958
=========== =========== =========== ===========
Net income per common and
common equivalent share:
Primary:
Net income ................ $ 0.05 $ 0.03 $ 0.11 $ 0.08
=========== =========== =========== ===========
Weighted average shares
oustanding ............ 16,389,732 14,376,392 14,847,684 13,041,536
=========== =========== =========== ===========
Fully diluted:
Net income ................ $ 0.05 $ 0.03 $ 0.11 $ 0.07
=========== =========== =========== ===========
Weighted average shares
oustanding ............ 16,672,599 15,345,820 15,176,687 14,804,141
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
2
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended June 30,
--------------------------
1997 1996
----------- -----------
Cash flows from operating activities:
Net income .............................................. $ 1,685,446 $ 1,003,958
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization ....................... 344,990 257,117
Changes in assets and liabilities:
Trade accounts receivable, net .................. (2,732,364) (3,131,260)
Notes and other receivables ..................... (282,079) 2,300,000
Inventories ..................................... (189,641) (931,371)
Prepaid expenses and other assets ............... (239,709) 44,340
Accounts payable and accrued liabilities ........ 635,012 (704,975)
----------- -----------
Net cash used in operating activities ............... (778,345) (1,162,191)
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment .............. (511,459) (73,487)
Proceeds from sale of property, plant and equipment ..... 39,725 --
----------- -----------
Net cash used in investing activities ............... (471,734) (73,487)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable ................. 4,549,604 2,515,769
Repayments of notes payable ............................. (4,513,675) (1,269,035)
Proceeds from exercise of warrants ...................... 1,607,816 175,250
----------- -----------
Net cash provided by financing activities ........... 1,643,745 1,421,984
----------- -----------
Net increase in cash and cash equivalents ........... 393,666 186,306
Cash and cash equivalents at beginning of period ............ 582,108 233,765
----------- -----------
Cash and cash equivalents at end of period .................. $ 975,774 $ 420,071
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest .................................. $ 417,499 $ 272,398
=========== ===========
Supplemental disclosure of noncash financing activities:
Exercise of warrants for notes receivable in lieu of cash $ 743,000 $ --
=========== ===========
Exercise of warrants in exchange for retirement of
note payable ........................................ $ 38,750 $ --
=========== ===========
Conversion of notes payable to common stock ............. $ 60,000 $ 210,000
=========== ===========
See accompanying notes to consolidated financial statements.
3
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., a Delaware corporation formerly known as American Medical
Technologies, Inc. (the "Company"), 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. 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, 1996.
(2) INVENTORIES
Inventories consist of the following at June 30, 1997 and September 30,
1996:
June 30, September 30,
1997 1996
----------- -----------
Raw materials ... $ 3,271,863 $ 2,061,659
Work in process . 225,354 740,627
Finished goods .. 396,577 916,246
Other (demo) .... 119,333 98,954
----------- -----------
4,031,127 3,817,486
Inventory reserve (482,000) (476,000)
----------- -----------
$ 3,531,127 $ 3,341,486
=========== ===========
(3) NET INCOME PER SHARE
Net income per share is computed by dividing the net income by the weighted
average number of common and common equivalent shares outstanding during the
period. For purposes of this calculation, outstanding warrants and employee
stock options are considered common stock equivalents
(4) INVESTMENT IN 3CI
The Company owns 680,818 shares of the common stock of 3CI Complete
Compliance Corporation. The investment is carried at market value.
4
(5) LITIGATION
The Company is subject to certain litigation and claims arising in the
ordinary course of business. In the opinion of management, 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 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 "AnyCard" or "ATM" products); electronic cash security systems
(the "Timed Access Cash Controller" or "TACC" products); and underground
fuel storage monitoring and leak detection devices (the "Environmental
Monitoring System" or "EMS" products).
PRODUCT REVENUES
Total revenues increased $2,375,436, or 42%, for the third quarter of fiscal
1997 over the comparable quarter of 1996. On a year-to-date basis, revenues
increased $6,477,393, or 44%, compared to the same period of the prior
fiscal year. As discussed below, a significant increase in AnyCard sales was
the principal factor in the Company's revenue growth. Revenue by product is
detailed in the following table:
Three Months Ended Nine Months Ended
June 30, June 30,
Net Product Revenues -------------------------------------
(in 000's) 1997 1996 1997 1996
------------------------ ------ ------- ------- -------
AnyCard ................ $5,705 $ 3,616 $14,428 $ 7,992
TACC ................... 1,529 1,239 4,367 4,429
Parts, service and other 592 525 1,643 1,421
EMS .................... 176 247 623 741
------ ------- ------- -------
$8,002 $ 5,627 $21,061 $14,583
====== ======= ======= =======
AnyCard product sales for the quarter ended June 30, 1997 increased 58% over
the comparable period in 1996. On a year-to-date basis, AnyCard sales
increased 81% when compared to the same period in 1996. These increases are
attributable to strong demand for the single cassette model ATM, which has
been the Company's largest selling product since its introduction in
November 1995.
TACC product sales increased 23% for the quarter ended June 30, 1997, when
compared to the same period in 1996. As expected, however, these sales were
virtually unchanged on a year-to-date basis.
All marketing activities for EMS products have terminated as the marketing
focus of the Company is shifted to its two other product lines, and as a
result, these sales have continued to decline. Certain existing customers
have continued to purchase these products, however, to complete retrofit
projects that are currently in progress.
5
Parts, service and other revenues vary directly with sales of finished
goods, and have increased accordingly.
GROSS PROFIT, OPERATING EXPENSES AND NON-OPERATING ITEMS
Gross profit was 38% of revenues for the quarters ended June 30, 1997 and
1996. On a year-to-date basis, gross profit decreased slightly from 37% of
revenues in 1996 to 36% of revenues in 1997. The decrease was primarily due
to discounts on sales prices of older tube-type ATMs shipped thus far in
fiscal 1997, and costs related to upgraded features in the single cassette
model. However, management expects gross profit to improve for the balance
of fiscal 1997, due to volume discounts from raw material suppliers and
higher margins on new products developed.
As a percentage of revenues, selling, general and administrative expense was
25% and 27% in the respective third quarters of fiscal 1997 and 1996. On a
year-to-date basis, selling, general and administrative expense was 24% of
revenues in 1997, compared to 27% of revenues in 1996. Management believes
that selling, general and administrative expense, as a percentage of
revenues, should continue to decrease over the remainder of the year.
Depreciation and amortization increased during fiscal 1997 due to the
additions of property, plant and equipment utilized in the development of
new automated teller machine products.
Interest expense increased during fiscal 1997 as a result of increased
indebtedness in the early part of the year, offset somewhat by a decline in
average rates for borrowed funds.
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
June 30, 1997 and September 30, 1996:
June 30, September 30,
1997 1996 Increase
---------- ---------- ----------
Shareholders' equity $7,795,380 $4,128,771 $3,666,609
Tangible net worth . 6,964,037 3,191,480 3,772,557
Working capital .... 9,030,015 2,220,823 6,809,192
The improvement in working capital is principally due to increased accounts
receivable and the replacement of a short-term note payable with a long-term
credit facility. The increase in accounts receivable arose from increased
sales, and the provision of extended payment terms to principal customers
for certain large orders. The replacement of the short-term note payable
with the long-term credit facility resulted from the financing described in
the following paragraph.
During June, 1997, the Company's wholly owned subsidiary entered into a
revolving credit agreement with Texas Commerce Bank National Association.
The revolving credit agreement, which replaced the subsidiary's existing
short-term revolving facility, provides for borrowings up to $5,000,000 at
the prime rate, with certain LIBOR alternatives, until May 31, 1999. At June
30, 1997, $3,654,604 was outstanding pursuant to the revolving credit
agreement.
6
The Company continues to own 680,818 shares of 3CI common stock subsequent
to its divestiture of a majority interest in February 1994. The Company has
no immediate plans for the disposal of the shares, and accordingly, the
shares may be utilized to collateralize borrowings. At present, 480,818
shares are pledged to secure an outstanding note payable in the principal
amount of $400,000.
The Company's registration statement covering the offering and sale by
selling shareholders of the common stock underlying all of the Company's
5,517,500 outstanding warrants was declared effective on January 29, 1997.
As of June 30, 1997, warrants to purchase 2,125,975 shares have been
exercised generating net proceeds to the Company of approximately
$2,390,000, and warrants representing 761,244 shares have expired. As of
June 30, 1997, the Company had outstanding warrants to purchase 2,630,281
shares of common stock, which if exercised would generate proceeds to the
Company of approximately $2,200,000.
Of the total warrants exercised, certain directors purchased 700,000 shares
through a contribution of cash and promissory notes. The notes, which are
due March 31, 1998, have an aggregate principal balance of $743,000, bear
interest at 10% per annum, and are secured by a pledge of all of the shares.
The Company's research and development budget for fiscal 1997 has been
estimated at $1,300,000. 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 $863,000 and
$656,000 for the nine months ended June 30, 1997 and 1996, respectively.
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 on shares of its common stock, and does
not anticipate paying dividends in the foreseeable future.
SEASONALITY
The Company can experience seasonal variances in operations and historically
has its lowest dollar volume sales months between November and March. With
the favorable sales of its automated teller machines, however, the Company
did not experience any downturn during this period. The Company's operating
results for any particular quarter may not be indicative of the results for
the future quarter or for the year.
MAJOR CUSTOMERS AND CREDIT RISKS
The Company generally does not require collateral or other security from its
customers and would incur an accounting loss equal to the carrying value of
the accounts receivable if a customer failed to perform according to the
terms of the credit arrangements. Sales to major customers were as follows
for the three and nine months ended June 30, 1997 and 1996:
7
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -----------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
Customer A $657,930 $ -- $2,933,968 $ 442,484
Customer B 661,816 582,328 1,426,911 1,026,134
Customer C -- 1,086,673 -- 1,086,673
Customer D -- 699,500 -- 699,500
Foreign sales accounted for 6% and 2% of the Company's total sales during
the three months ended June 30, 1997 and 1996, respectively, and 6% and 9% of
the Company's total sales during the nine months ended June 30, 1997 and 1996,
respectively.
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 future gross profit, selling, general and
administrative expense, the Company's financial position, working capital and
seasonal variances in the Company's operations, as well as general market
conditions) though the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Form 10-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 representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
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
At the Annual Meeting of Stockholders held on Tuesday, July 15, 1997, in
Houston, Texas, the following proposals were adopted by the margins
indicated:
a) Election of Directors to hold office until the next annual meeting of
stockholders and until their successors are elected and qualified.
Number of Shares
--------------------
For Withheld
---------- --------
James T. Rash ....... 12,101,496 67,710
James L. Britton, III 12,101,496 67,710
Jerrell G. Clay ..... 12,101,496 67,710
Mark K. Levenick .... 12,101,496 67,710
8
b) Approval of a proposed amendment to the Company's Certificate of
Incorporation to change the name of the Company from "American Medical
Technologies, Inc." to "Tidel Technologies Inc."
For 11,946,106
Against 2,400
Abstentions 7,000
Broker non-votes 213,700
c) Approval of the Company's 1997 Long-Term Incentive Plan.
For 8,254,239
Against 202,628
Abstentions 286,810
Broker non-votes 3,425,529
d) Ratification of the selection of KPMG Peat Marwick, LLP as the Company's
independent auditors for fiscal year 1997.
For 12,085,356
Against 73,400
Abstentions 10,450
Broker non-votes --
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
3 - Amendment to Certificate of Incorporation dated July 16, 1997.
4.01 - Credit Agreement dated June 12, 1997 by and between Tidel
Engineering, Inc. and Texas Commerce Bank National Association.
4.02 - Promissory Note dated June 12, 1997 executed by Tidel
Engineering, Inc. payable to the order of Texas Commerce Bank
National Association.
4.03 - Security Agreement (Personal Property) dated as of June 12,
1997, by and between Tidel Engineering, Inc. and Texas Commerce
Bank National Association.
4.04 - Patent Security Agreement dated June 12, 1997 executed by
Tidel Engineering, Inc. in favor of Texas Commerce Bank National
Association.
9
4.05 - Trademark Security Agreement dated June 12, 1997 executed by
Tidel Engineering, Inc. in favor of Texas Commerce Bank National
Association.
4.06 - Unconditional Guaranty Agreement dated June 12, 1997 executed
by the Company for the benefit of Texas Commerce Bank National
Association.
4.07 - Pledge and Security Agreement dated June 12, 1997 executed by
the Company in favor of Texas Commerce Bank National
Association.
10.01 - Secured Promissory Note dated March 30, 1997 executed by James
L. Britton, III and payable to the order of the Company.
10.02 - Secured Promissory Note dated March 30, 1997 executed by
Jerrell G. Clay and payable to the order of the Company.
10.03 - Secured Promissory Note dated March 30, 1997 executed by Mark
K. Levenick and payable to the order of the Company.
10.04 - Secured Promissory Note dated March 30, 1997 executed by James
T. Rash and payable to the order of the Company.
10.05 - Form of Stock Pledge Agreement dated March 30, 1997 executed
by each of the four directors of the Company in favor of the
Company.
11 - Computation of Net Income Per Share.
27 - Financial Data Schedule
b) REPORTS ON FORM 8-K
The Company filed no Reports on Form 8-K during the quarter ended June
30, 1997.
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: August 18, 1997 By: /s/ JAMES T. RASH
James T. Rash
Principal Executive
and Financial Officer
10