sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) NOVEMBER 26, 2004
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TIDEL TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-17288 75-2193593
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2900 WILCREST, SUITE 205, HOUSTON, TX 77042
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(Address of Principal Executive Offices) Zip Code)
Registrant's telephone number, including area code (713) 783-8200
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On November 26, 2004, Tidel Technologies, Inc. (the "COMPANY") entered into
(i) a Securities Purchase Agreement (the "PURCHASE AGREEMENT") with Laurus
Master Fund, Ltd. ("LAURUS") pursuant to which the Company issued to Laurus (a)
a $600,000 note (the "$600,000 NOTE") convertible into shares of common stock,
$.01 par value per share, of the Company (the "COMMON STOCK") at a conversion
price of $.30 per share; (b) a $1,500,000 term note (the "$1,500,000 NOTE")
convertible into Common Stock at a conversion price of $3.00 per share; (c) a
warrant to purchase 500,000 shares of Common Stock (the "WARRANT"); and (d)
1,251,000 shares of Common Stock (the "2003 FEE SHARES") in full satisfaction of
certain fees incurred in connection with that certain convertible term note in
the original principal amount of $6,450,000 payable to Laurus, dated as of
November 25, 2003 (the "2003 NOTE"); and (ii) an Agreement of Amendment and
Reaffirmation (the "REAFFIRMATION AGREEMENT") with Tidel Engineering, L.P.
("ENGINEERING"), Tidel Cash Systems, Inc. ("TIDEL CASH"), Anycard International,
Inc. ("ANYCARD"), Tidel Services, Inc. ("SERVICES," and together with
Engineering, Tidel Cash and Anycard, the "TIDEL SUBSIDIARIES") and Laurus
pursuant to which the Company, the Tidel Subsidiaries and Laurus agreed to amend
and reaffirm certain agreements, documents and instruments executed pursuant to
and in connection with the 2003 Note.
In connection with the aforementioned documents, on November 26, 2004, the
Company and Laurus entered into an agreement (the "ASSET SALES AGREEMENT")
whereby the Company agreed to pay a fee in the amount of at least $2,000,000
(the "REORGANIZATION FEE") to Laurus upon the occurrence of certain events as
specified therein, which Reorganization Fee is secured by existing security and
pledge agreements, as such documents are amended by the Reaffirmation Agreement,
and is guaranteed by the Tidel Subsidiaries. The Asset Sales Agreement also
provides that (i) once the obligations of Tidel to Laurus have been paid in full
(other than the Reorganization Fee) the Company shall be able to seek additional
financing in the form of a non convertible bank loan in an aggregate principal
amount not to exceed $4,000,000, subject to Laurus' right of first refusal; (ii)
the net proceeds of an asset sale to the party named therein shall be applied to
Tidel's obligations to Laurus under the 2003 Note, the $600,000 Note, the
$1,500,000 Note and the Purchase Order Note (collectively, the "OBLIGATIONS"),
but not to the Reorganization Fee; and (iii) the proceeds of any subsequent
sales of equity interests or assets of the Company of the Tidel Subsidiaries
consummated on or before the fifth anniversary of the Asset Sales Agreement
(each, a "COMPANY SALE") shall be applied first to any remaining Obligations,
then to Laurus pursuant to a decreasing percentage set forth therein, which
amount shall be applied to the Reorganization Fee. The Reorganization Fee shall
be $2,000,000 at a minimum, but could equal a higher amount based upon a
percentage of the proceeds of any Company Sale, as specified in the Asset Sales
Agreement. In the event that Laurus has not received the full amount of the
Reorganization Fee on or before the fifth anniversary of the date of the Asset
Sales Agreement, then the Company shall pay any remaining balance due on the
Reorganization Fee to Laurus.
Engineering entered into a Purchase Order Finance and Security Agreement
(the "PURCHASE ORDER AGREEMENT") as the borrower, with the Company, Tidel Cash,
Anycard and Services as credit parties and Laurus as lender pursuant to which
Engineering issued to Laurus a $1,250,000 note (the "PURCHASE ORDER NOTE"),
convertible into Common Stock at a conversion price of $3.00 per share, to
finance the purchase of required materials to fulfill purchase orders. In
connection with the Purchase Order Agreement, the Company entered into a
Guaranty in favor of Laurus for the obligations of Engineering under the
Purchase Order Note (the "GUARANTY," and together with the Purchase Agreement,
the $600,000 Note, the $1,500,000 Note, the Warrant, the Asset Sale Agreement,
the Reaffirmation Agreement, the Purchase Order Agreement, the Purchase Order
Note and the ancillary documents related thereto, the "TRANSACTION DOCUMENTS").
In connection with the closing on November 26, 2004 of the transactions
contemplated by the Transaction Documents, the Company and the Tidel
Subsidiaries received loan proceeds of $3,350,000 from Laurus. Of this amount,
$417,833.33 was placed in an escrow account controlled by Laurus for future
principal and interest payments payable to Laurus by the Company under the
$600,000 Note, the $1,500,000 Note, the Purchase Order Note and the 2003 Note.
The foregoing summary of the terms of the Purchase Agreement, the $600,000
Note, the $1,500,000 Note, the Warrant, the Asset Sales Agreement, the
Reaffirmation Agreement, the Purchase Order Agreement, the Purchase Order Note
and the Guaranty does not purport to be complete. The foregoing summary of the
terms of the Purchase Agreement, the $600,000 Note, the $1,500,000 Note, the
Warrant, the Reaffirmation Agreement, the Purchase Order Agreement, the Purchase
Order Note and the Guaranty is qualified in its entirety by reference to the
full text of such agreements, copies of which are attached hereto as Exhibits
10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8, respectively, and
incorporated herein by reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER
AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
On November 26, 2004, the Company incurred a direct financial obligation in
the aggregate amount of $2,100,000 under the $600,000 Note and the $1,500,000
Note, an indirect obligation in the amount of $1,250,000 as a guarantor on the
Purchase Order Note, and a direct financial obligation in the minimum amount of
$2,000,000 payable to Laurus under certain terms and conditions of the Asset
Sales Agreement.
The Company is directly obligated under the $600,000 Note, which bears
interest at ten percent (10%) per annum and matures on November 26, 2005, and
the $1,500,000 Note, which bears interest at fourteen percent (14%) per annum
and matures on November 26, 2007. On the $600,000 Note, repayment of the
principal amount is due at maturity on November 26, 2005 and accrued interest is
payable monthly in arrears. On the $1,500,000 Note, repayment of the principal
amount is due at maturity on November 26, 2007 and six-fourteenths (6/14) of the
accrued interest for the month is payable monthly in arrears with the balance of
the interest due at maturity on November 26, 2007.
The Company is indirectly obligated under the Guaranty for up to $1,250,000
in borrowings by Engineering under the Purchase Order Note, which bears interest
at fourteen percent (14%) per annum and matures on November 26, 2005. Repayment
of borrowings will be made periodically as Engineering's customers remit
payments to a lockbox account, and accrued interest is payable monthly in
arrears.
The Company is directly obligated under the Asset Sale Agreement to pay a
Reorganization Fee, with a minimum obligation of $2,000,000 and a maximum
obligation based on any Company Sale pursuant to the terms and condition of the
Asset Sale Agreement, as described more fully in Item 1.01 hereof. The
Reorganization Fee is payable on February 24, 2010, unless satisfied pursuant to
a Company Sale occurring on or prior to November 26, 2009.
As collateral, the $600,000 Note, the $1,500,000 Note, the Purchase Order
Note and the Reorganization Fee are secured by all of the assets of the Company
and the Tidel Subsidiaries pursuant to the Reaffirmation Agreement.
The foregoing summary of the terms of the $600,000 Note, the $1,500,000
Note, the Asset Sale Agreement, the Reaffirmation Agreement, the Purchase Order
Note and the Guaranty does not purport to be complete. The foregoing summary of
the terms of the $600,000 Note, the $1,500,000 Note, the Reaffirmation
Agreement, the Purchase Order Note and the Guaranty and is qualified in its
entirety by reference to the summary contained in Item 1.01 hereof and the full
text of such agreements, copies of which are attached hereto as Exhibits 10.2,
10.3, 10.5, 10.7 and 10.8, respectively, and incorporated herein by reference.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
On November 26, 2004, the Company issued the $600,000 Note, the $1,500,000
Note, the Purchase Order Note, the Warrant and the 2003 Fee Shares to Laurus
pursuant to the terms and conditions of the Purchase Agreement. The $600,000
Note is convertible to 2,000,000 shares of Common Stock based on a price of
$0.30 per share for the period from November 26, 2004 to November 26, 2005 (the
maturity date of the $600,000 Note). The $1,500,000 Note is convertible to
500,000 shares of Common Stock based on a price of $3.00 per share for the
period from November 26, 2004 to November 26, 2007 (the maturity date of the
$1,500,000 Note). The Purchase Order Note is convertible up to a maximum of
416,667 shares of Common Stock based on a price of $3.00 per share for the
period from November 26, 2004 to November 26, 2005 (the maturity date of the
Purchase Order Note). The Warrant is exercisable for 500,000 shares of Common
Stock at an exercise price of $0.30 per share for the period from November 26,
2004 to November 26, 2011. The 2003 Fee Shares were issued to Laurus in full
satisfaction of certain fees totaling $375,300 incurred in connection with the
2003 Note based on a price of $0.30 per share. The issuance of the $600,000
Note, the $1,500,000 Note, the Purchase Order Note, the Warrant and the 2003 Fee
Shares were deemed to be exempt from registration under the Securities Act of
1933, as amended (the "SECURITIES ACT") in reliance on Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.
The foregoing summary of the terms of the Purchase Agreement, the $600,000
Note, the $1,500,000 Note, the Purchase Order Note and the Warrant does not
purport to be complete and is qualified in its entirety by reference to the
summary contained in Item 1.01 hereof and the full text of such agreements,
copies of which are attached hereto as Exhibits 10.1, 10.2, 10.3, 10.7 and 10.4,
respectively and incorporated herein by reference.
ITEM 8.01 OTHER EVENTS.
The Company announced it has continued to incur substantial losses since
the quarter ended June 30, 2002, which is the latest period for which it has
filed a Form 10-Q report. Accordingly, the Company expects to report substantial
losses for the quarter and the fiscal year ended September 30, 2002 and for each
of the quarters and for the fiscal year ended September 30, 2003. The Company
expects to report operating losses for each of the quarters and for the fiscal
year ended September 30, 2004, however, due to gains from certain non-operating
items, the Company expects to report a net income for the quarter ended December
31, 2003 and March 31, 2004, and for the fiscal year ended September 30, 2004.
Unaudited revenues for the fiscal years ended September 30, 2002, 2003 and 2004
were approximately $19.4 million, $17.8 million and $23.2, respectively. These
financial results are subject to the performance and completion of the audits
for the periods.
A copy of the Company's press release announcing the closing of the
transactions contemplated by the Transaction Documents and its unaudited
financial results is attached hereto as Exhibit 99.1 and is incorporated herein
by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
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10.1 Securities Purchase Agreement dated as of November
26, 2004 by and between the Company and Laurus.
10.2 Convertible Term Note dated November 26, 2004 in
the amount of $600,000 executed by the Company in
favor of Laurus.
10.3 Term Note dated November 26, 2004 in the amount of
$1,500,000 executed by the Company in favor of
Laurus.
10.4 Common Stock Purchase Warrant dated November 26,
2004 for the purchase of 500,000 shares of Common
Stock issued by the Company to Laurus.
10.5 Agreement of Amendment and Reaffirmation dated as
of November 26, 2004 by and among the Company,
Engineering, Tidel Cash, Anycard, Services and
Laurus.
10.6 Purchase Order Finance and Security Agreement
dated as of November 26, 2004 by and between
Engineering, any other Credit Party signatory
thereto, and Laurus.
10.7 Promissory Note dated November 26, 2004 in the
amount of $1,250,000 executed by Engineering in
favor of Laurus.
10.8 Guaranty dated November 26, 2004 for the
obligations of Engineering under the Purchase
Order Note executed by the Company in favor of
Laurus.
99.1 Press Release dated December 3, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TIDEL TECHNOLOGIES, INC.
(Registrant)
Date: December 3, 2004
By: /s/ James T. Rash
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Name: James T. Rash
Title: Principal Executive and Financial Officer