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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 2004
--------------
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 No. 0-25148
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Global Payment Technologies, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2974651
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
425B Oser Avenue, Hauppauge, New York 11788
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(631) 231-1177
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(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 Exchange Act 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
requirements for the past 90 days.
YES _X_ NO ___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES NO _X_
Shares of Common Stock outstanding on May 10, 2004 5,601,766
---------
Global Payment Technologies, Inc.
---------------------------------
Index
-----
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Page Number
Item 1. Financial Statements -----------
Condensed Consolidated Balance Sheets - March 31, 2004
(unaudited) and September 30, 2003 3
Condensed Consolidated Statements of Operations - Six Months
ended March 31, 2004 and 2003 (unaudited) 4
Condensed Consolidated Statements of Operations - Three
Months ended March 31, 2004 and 2003 (unaudited) 5
Condensed Consolidated Statements of Cash Flows - Six Months
ended March 31, 2004 and 2003 (unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7 - 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13 - 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
PART II. OTHER INFORMATION
- -------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
- ----------
2
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
PART I. FINANCIAL INFORMATION
------- ---------------------
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollar amounts in thousands, except share data)
March 31, September 30,
2004 2003
------------ -------------
(Unaudited)
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,740 $ 1,220
Accounts receivable, less allowance for doubtful accounts
of $255 and $234, respectively 2,635 2,175
Accounts receivable from affiliates 1,353 4,108
Inventory 3,621 3,499
Prepaid expenses and other current assets 378 64
Income taxes receivable 223 211
------------ -------------
Total current assets 9,950 11,277
Property and equipment, net 2,415 2,617
Investments in unconsolidated affiliates 1,948 1,722
Capitalized software costs, net 1,898 2,159
------------ -------------
Total assets $ 16,211 $ 17,775
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------
Current liabilities:
Current portion of long-term debt, net of discount $ 107 -
Bank debt - $ 1,793
Accounts payable 2,057 2,424
Accrued expenses and other current liabilities 1,405 1,881
------------ -------------
Total current liabilities 3,569 6,098
Long-term debt, net of discount 1,352 -
------------ -------------
Total Liabilities 4,921 6,098
Shareholders' equity:
Common Stock, par value $0.01; authorized 20,000,000 shares;
issued and outstanding 5,870,750 and 5,829,500, respectively 58 58
Additional paid-in capital 10,777 9,843
Retained earnings 1,274 2,973
Accumulated other comprehensive income 680 302
------------ -------------
12,789 13,176
Less: Treasury stock, at cost, 278,984 shares (1,499) (1,499)
------------ -------------
Total shareholders' equity 11,290 11,677
------------ -------------
Total liabilities and shareholders' equity $ 16,211 $ 17,775
============ =============
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
-----------
Six Months ended March 31,
---------------------------
2004 2003
----------- -----------
(Dollar amounts in thousands,
except share and per share data)
Net sales
Affiliates $ 2,459 $ 7,044
Non-affiliates 7,586 5,988
----------- -----------
10,045 13,032
Cost of sales 8,205 10,519
----------- -----------
Gross profit 1,840 2,513
Operating expenses 3,657 4,677
----------- -----------
Loss from operations (1,817) (2,164)
Other income (expense):
Equity in income of unconsolidated affiliates 128 342
Gain on sale of investment in unconsolidated affiliate 78 -
Interest expense, net ( 77) ( 155)
----------- -----------
Total other income, net 129 187
----------- -----------
Loss before provision for (benefit from) income taxes (1,688) (1,977)
Provision for (benefit from) income taxes 11 (779)
----------- -----------
Net loss ($ 1,699) ($ 1,198)
=========== ===========
Net loss per share:
Basic ($ .31) ($ .22)
=========== ===========
Diluted ($ .31) ($ .22)
=========== ===========
Common shares used in computing net loss
per share amounts:
Basic 5,555,518 5,539,997
=========== ===========
Diluted 5,555,518 5,539,997
=========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
-----------
Three Months ended March 31,
----------------------------
2004 2003
(Dollar amounts in thousands,
except share and per share data)
Net sales
Affiliates $ 1,152 $ 3,391
Non-affiliates 4,560 3,681
----------- -----------
5,712 7,072
Cost of sales 4,687 5,949
----------- -----------
Gross profit 1,025 1,123
Operating expenses 1,805 2,565
----------- -----------
Loss from operations (780) (1,442)
Other income (expense):
Equity in income of unconsolidated affiliates 41 135
Gain on sale of investment in unconsolidated affiliate 78 -
Interest expense, net (45) (89)
----------- -----------
Total other income, net 74 46
----------- -----------
Loss before provision for (benefit from) income taxes (706) (1,396)
Provision for (benefit from) income taxes 5 (538)
----------- -----------
Net loss ($ 711) ($ 858)
=========== ===========
Net loss per share:
Basic ($ .13) ($ .15)
=========== ===========
Diluted ($ .13) ($ .15)
=========== ===========
Common shares used in computing net loss
per share amounts:
Basic 5,560,577 5,542,416
=========== ===========
Diluted 5,560,577 5,542,416
=========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
-----------
Six months ended March 31,
------------------------------
2004 2003
--------- ---------
(Dollar amounts in thousands)
OPERATING ACTIVITIES:
Net loss ($ 1,699) ($ 1,198)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Equity in income of unconsolidated affiliates (128) (342)
Gain on sale of investment in unconsolidated affiliate (78) -
Depreciation and amortization 672 703
Provision for losses on accounts receivable 40 39
Provision for inventory obsolescence 90 105
Deferred income taxes - (535)
Changes in operating assets and liabilities:
Increase in accounts receivable (499) (1,508)
Decrease in accounts receivable from affiliates 2,860 321
(Increase) decrease in inventory (212) 98
(Increase) decrease in prepaid expenses and other assets (320) 33
Increase in income taxes receivable (12) (193)
(Decrease) increase in accounts payable (218) 2,073
(Decrease) increase in accrued expenses and other current liabilities (476) 409
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 20 5
--------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment (184) (336)
Proceeds from sale of investment in unconsolidated affiliate 154 -
Distributions from unconsolidated affiliates - 21
Investments in unconsolidated affiliates (51) (323)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (81) (638)
--------- ---------
FINANCING ACTIVITIES:
Net (repayments) borrowings of note payable from bank (1,793) 863
Proceeds from issuance of convertible debt 2,250 0
Proceeds from the exercise of stock options 124 29
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 581 892
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 520 259
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,220 1,604
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,740 $ 1,863
========= =========
CASH PAID DURING THE PERIOD FOR:
Interest $ 58 $ 158
========= =========
Income taxes $ 0 $ -
========= =========
NON-CASH FINANCING ACTIVITIES
Tax benefit from exercise of stock options $ - $ 11
========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Global Payment Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2004
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited interim condensed consolidated financial statements
of Global Payment Technologies, Inc. (the "Company"), including the September
30, 2003 consolidated balance sheet which has been derived from audited
financial statements, have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The operating results for
the six-month period ended March 31, 2004 are not necessarily indicative of the
results that may be expected for the fiscal year ending September 30, 2004. We
recommend that you refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
September 30, 2003.
NOTE B - EMPLOYEE STOCK-BASED COMPENSATION
- ------------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," allows the fair value of stock-based compensation to
be included in expense over the period earned; alternatively, if the fair value
of stock-based compensation awards is not included in expense, SFAS 123 requires
disclosure of net income (loss), on a pro forma basis, as if expense treatment
had been applied. As permitted by SFAS 123, the Company continues to account for
such compensation under Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations, pursuant to which
no compensation cost has been recognized in connection with the issuance of
stock options, as all options granted under the Company's stock option plans had
an exercise price equal to or greater than the market value of the underlying
common stock on the date of the grant. Had the Company elected to recognize
compensation expense for the stock option plan, consistent with the method
prescribed by SFAS 123, the Company's net loss for the periods presented would
have increased to the pro forma amounts as follows:
Three Months Ended Six Months Ended
March 31 March 31
--------------------- ----------------------
2004 2003 2004 2003
---------- -------- --------- --------
(Unaudited)
(In thousands, except per share data)
Net (loss), as reported ($711) ($858) ($1,699) ($1,198)
Deduct: Total stock-based employee compensation expense
determined under fair value method for all awards,
net of related tax effects (159) (144) (257) (290)
---------- -------- --------- --------
Pro forma net (loss) ($870) (1,002) ($1,956) ($1,488)
(Loss) per common share:
Basic and Diluted- as reported ($.13) ($.15) ($.31) ($.22)
Basic and Diluted - pro forma ($.16) ($.18) ($.35) ($.27)
7
Global Payment Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2004
NOTE C - FINANCING AND LIQUIDITY
- --------------------------------
On March 16, 2004, the Company received aggregate proceeds of $1,500,000 from
the sale to Laurus Master Fund Ltd. ("Laurus") of a $1,500,000 principal amount
secured convertible term note due in March 2007 (the "CTN"), pursuant to a
Securities Purchase Agreement. The CTN is convertible into common stock of the
Company at any time at the rate of $4.26 of principal for one share of common
stock and is collateralized by substantially all assets of the Company. The note
provides for monthly principal payments of $25,000 from July 2004 to March 2005,
$45,000 from April 2005 to September 2005 and $55,833 from October 2005 to March
2007. Interest is payable monthly at the prime rate plus 1.5%, with a minimum
rate of 6%. In addition, Laurus received 7 year warrants to purchase an
aggregate of 200,000 shares of the Company's common stock at prices of $4.87,
$5.28 and $5.68 for 100,000, 60,000 and 40,000 warrants, respectively. The
Company utilized approximately $1,200,000 of the proceeds to repay amounts
outstanding under a previous credit agreement.
The value allocated to the warrants resulted in a debt discount of $506,000 that
is being recognized as interest expense over the term of the note. Additionally,
by allocating value to the warrants, Laurus received a beneficial conversion
feature in the amount of $304,000 that resulted in additional debt discount that
is being recognized as interest expense over the term of the note. Interest
expense is computed utilizing the interest method, which results in an effective
yield over the term of the note. The amortization amounted to $19,000 for the
three months ended March 31, 2004 and the six months ended March 31, 2004. As of
March 31, 2004, the unamortized debt discount amounted to approximately
$791,000. Amortization of debt discount for the next four fiscal quarters will
approximate $115,000, $110,000, $105,000 and 100,000, which will be charged to
operations. In the event that the CTN, or any portion of the CTN, is converted
prior to maturity, the unamortized discount related to the amount converted will
be immediately recognized as interest expense and charged to operations.
On March 16, 2004, the Company also entered into a Security Agreement with
Laurus which provides for a credit facility of $2,500,000 consisting of a
secured revolving note of $1,750,000 (the "RN") and a secured convertible
minimum borrowing note of $750,000 (the "MBN"), both due in March 2007 (both
notes collectively referred to as the "LOC"). At closing, the Company borrowed
$750,000 under the MBN. Funds available under the LOC are determined by a
borrowing base equal to 85% and 70% of eligible domestic and foreign accounts
receivable, respectively, and 50% of eligible inventory. Outstanding amounts
under the RN and MBN are convertible into common stock of the Company at any
time at the rate of $4.26 of principal for one share of common stock and are
collateralized by substantially all assets of the Company. Interest is payable
monthly at the prime rate plus 1.5%, with a minimum rate of 6%. At March 31,
2004, the Company has $1,750,000 available under the RN.
Summary of outstanding debt to Laurus as of March 31, 2004 is as follows:
(In thousands)
Total debt: $2,250
Less debt discount (791)
--------
Net 1,459
Less current portion (107)
--------
Long term debt $1,352
--------
The Company's capital requirements consist primarily of those necessary to
continue to expand and improve product development and manufacturing
capabilities, sales and marketing operations and interest and principal payments
on the Company's indebtedness. A significant portion of the Company's cash
balance consists of currency used to test the Company's products and, although
it could be available, it is not anticipated to be utilized for working capital
purposes in the normal course of business. The Company has initiated outsourcing
some of its manufactured product in an effort to improve gross margin
percentages as well as its cash flow. In addition the Company expects to realize
cost savings from its cost reduction initiatives completed in December 2003. As
a result of these savings and the available funds under the credit facility with
Laurus, the Company believes that its available resources should be sufficient
to meet its obligations as they become due and permit continuation of its
planned product development and operations for the next 12 months.
8
Global Payment Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2004
NOTE D - INVENTORY
- ------------------
The following is a summary of the composition of inventory:
March September
31, 2004 30, 2003
---------- -----------
Raw Materials $1,695 $1,725
Work-in-process 725 787
Finished goods 1,201 987
---------- -----------
$3,621 $3,499
---------- -----------
NOTE E - SUPPLEMENTAL CASH FLOW INFORMATION
- -------------------------------------------
A significant portion of the Company's cash balance consists of currency used to
test the Company's products, and although it could be available, it is not
anticipated to be utilized for working capital purposes in the normal course of
business. Translation gains or losses on foreign currency amounts used for test
purposes are included in operating loss.
NOTE F - MANAGEMENT ESTIMATES
- -----------------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Among the more significant estimates included in
the consolidated financial statements are the allowance for doubtful accounts,
recoverability of inventory, deferred income taxes, capitalized software and
provisions for warranties. Actual results could differ from those estimates.
NOTE G - COMPREHENSIVE INCOME
- -----------------------------
Comprehensive income is the total of net income and all other non-owner changes
in equity (or other comprehensive income) such as unrealized gains/losses on
securities classified as available-for-sale, currency translation adjustments
and minimum pension liability adjustments. For the three and six months ended
March 31, 2004 and 2003, the Company's comprehensive losses were as follows:
Three months ended 3/31/04 Six months ended 3/31/04
-------------------------- ------------------------
2004 2003 2004 2003
------ ------ -------- --------
(in thousands)
Net (loss) $(711) $(858) ($1,699) ($1,198)
Other comprehensive
income (a) 238 2 378 14
------ ------ -------- --------
Comprehensive (loss) $(473) $(856) $(1,321) $(1,184)
====== ====== ======== ========
(a) Consisting of cumulative translation adjustments related to the Company's
investments in affiliates.
9
Global Payment Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2004
NOTE H - NET LOSS PER COMMON SHARE
- ----------------------------------
Earnings (loss) per share is computed by dividing net income by the weighted
average number of common shares outstanding for the period. Net income (loss)
per common share amounts assuming dilution ("diluted EPS") is computed by
reflecting the potential dilution from the exercise of stock options, stock
warrants and convertible debt.
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net (loss) appears below:
Six Months Ended Six Months Ended
March 31, 2004 March 31, 2003
(In thousands, except per share data) (In thousands, except per share data)
------------------------------------------ ----------------------------------------
Net (loss) Shares Per Share Net (loss) Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
------------ ------------- ----------- ----------- ------------- -----------
Net (loss) ($1,699) ($1,198)
------------ -----------
Basic EPS
- ---------
Net (loss) attributable to (1,699) 5,555.5 ($.31) (1,198) 5,540.0 ($.22)
Common stock
Effect of dilutive securities
- -----------------------------
Stock options, warrants and
convertible debt - - - - - -
------------ ------------- ----------- ----------- ------------- -----------
Diluted EPS
- -----------
Net (loss) attributable to Common
Stock and assumed option and warrant
exercises ($1,699) 5,555.5 ($.31) ($1,198) 5,540.0 ($.22)
============ ============= =========== =========== ============= ===========
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
(In thousands, except per share data) (In thousands, except per share data)
------------------------------------------ ----------------------------------------
Net (loss) Shares Per Share Net (loss) Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
------------ ------------- ----------- ----------- ------------- -----------
Net (loss) ($711) ($858)
------------ -----------
Basic EPS
- ---------
Net (loss) attributable to (711) 5,560.6 ($.13) (858) 5,542.4 ($.15)
Common stock
Effect of dilutive securities
- -----------------------------
Stock options, warrants and
convertible debt - - - - - -
------------ ------------- ----------- ----------- ------------- -----------
Diluted EPS
- -----------
Net (loss) attributable to Common
Stock and assumed option and warrant
exercises ($711) 5,560.6 ($.13) ($858) 5,542.4 ($.15)
============ ============= =========== =========== ============= ===========
Securities that could potentially dilute basic earnings per share in the future
that were not included in the computation of diluted loss per share because to
do so would have been antidilutive consist of 1,406,619 shares of common stock
issuable pursuant to outstanding options, warrants and convertible debt for the
three and six-month periods ended March 31, 2004 and 273,800 shares of common
stock issuable pursuant to outstanding options for the three and six-month
periods ended March 31, 2003.
10
Global Payment Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2004
NOTE I - ACCOUNTS RECEIVABLE AND SALES DATA FOR UNCONSOLIDATED AFFILIATES
- -------------------------------------------------------------------------
Net sales to unconsolidated affiliates and accounts receivable from
unconsolidated affiliates for the respective periods are as follows:
Net sales to affiliates
-----------------------
Three months ended
-----------------------
3/31/04 3/31/03
---------------------
Australia $ 1,104 $ 3,293
Abacus-UK - -
South Africa 48 98
-------- --------
Total $ 1,152 $ 3,391
======== ========
Net sales to affiliates
-----------------------
Six months ended
-----------------------
3/31/04 3/31/03
---------------------
Australia $ 2,141 $ 6,637
Abacus-UK - -
South Africa 318 407
-------- --------
Total $ 2,459 $ 7,044
======== ========
Accounts receivable from affiliates as of
- --------------------------------------------------------------------------
March 31, 2004 Sept. 30, 2003
- ------------------------------------------------- ----------------------
Australia $1,353 $3,872
Abacus-UK - 148
South Africa - 88
-------------------------------------------- ----------------------
Total $1,353 $4,108
============================================ ======================
Effective January 15, 2004, the Company's remaining interest in its South Africa
affiliate was sold and as such is no longer an affiliate. Sales through January
14, 2004 are included in the affiliate sales data. Accounts receivable at March
31, 2004 exclude amounts from such affiliate.
NOTE J - SUMMARY FINANCIAL INFORMATION FOR UNCONSOLIDATED INVESTEES
- -------------------------------------------------------------------
Summarized financial information for GPT Australia and eCash, in which the
Company owns a 50% and 35% non controlling interest, respectively, is as
follows:
All figures are in U.S. dollars (in thousands).
Six Months Ended
December 31, 2003
-----------------
Net sales $7,477
Operating income 246
Net income 204
11
Global Payment Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2004
As of December 31, 2003
-----------------------
Current assets $7,554
Non-current assets 175
Current liabilities 3,537
Non-current liabilities -
Net assets 4,192
NOTE K - RECENTLY ISSUED ACCOUNTING STANDARDS
- ---------------------------------------------
In August 2003, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 03-05 Applicability of AICPA Statement of Position (SOP) 97-2 to
Non-Software Deliverables in an Arrangement Containing More-Than-Incidental
Software, that in an arrangement that includes software that is more than
incidental to the products or services as a whole, software and software-related
elements are included within the scope of SOP 97-2. Software-related elements
include software products and services as well as any non-software
deliverable(s) (including hardware) for which software deliverable is essential
to its functionality. The Company adopted the provisions of this statement
effective October 1, 2003, and the adoption did not have any effect on the
Company's consolidated financial statements.
Financial Accounting Standards Board (FASB) Interpretation No. 46 (revised
December 2003), Consolidation of Variable Interest Entities addresses how a
business should evaluate whether it has a controlling financial interest in an
entity. The Company does not believe that it has any involvement with variable
interest entities that require it to consolidate under FASB Interpretation No.
46.
In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. The provisions of SFAS 150 are effective
for (1) instruments entered into or modified after May 31, 2003, and (2)
pre-existing instruments as of July 1, 2003. In November 2003, through the
issuance of FSP 150-3, the FASB indefinitely deferred the effective date of
certain provision of SFAS 150, including mandatorily redeemable instruments as
they relate to minority interests in consolidated finite-lived entities. The
adoption of SFAS 150, as modified by FSP 150-3, did not have a material effect
on the consolidated financial statements.
NOTE L - WARRANTY OBLIGATIONS
- -----------------------------
The Company recognizes the estimated cost associated with its standard warranty
on products at the time of sale. The estimate is based on historical failure
rates and current claim cost experience. The following is a summary of the
changes in the Company's accrued warranty obligation (which is included in
accrued expenses) for the period October 1, 2003 through March 31, 2004:
Beginning Balance as of October 1, 2003 $ 347,000
Deduct: Payments (120,000)
Add: Provision 79,000
----------
Ending Balance as of March 31, 2004 $ 306,000
==========
12
Global Payment Technologies, Inc.
March 31, 2004
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
Six months ended March 31, 2004 compared with six months ended March 31, 2003
- -----------------------------------------------------------------------------
Sales
Net sales decreased by 22.9%, or $2,987,000, to $10,045,000 in the six months
ended March 31, 2004 as compared with $13,032,000 in the comparative prior-year
period. This decrease was primarily due to $4.5 million in lower sales of the
Company's gaming products to its Australian affiliate, offset in part by a
$700,000 increase in sales of the Company's Aurora product to both the vending
and gaming markets, and a $400,000 increase in sales to the South African gaming
market. Gaming sales for the first half of fiscal 2004 were $7,765,000, or 77.3%
of sales, as compared with $10,996,000, or 84.4% of sales, in the prior year
period. Beverage and vending sales for the first half of fiscal 2004 were
$2,280,000, or 22.7% of sales, as compared with $2,036,000, or 15.6 % of sales,
in the prior year period.
Gross Profit
Gross profit decreased to $1,840,000, or 18.3% of net sales, in the six months
ended March 31, 2004 as compared with $2,513,000, or 19.3% of net sales, in the
comparative prior-year period. For the six months ended March 31, 2004, indirect
costs were reduced by approximately $126,000 due to cost reduction initiatives
completed in December 2003. However, as a result of the sales decrease of 22.9%
noted above, the related reduction in production and a change in mix to our
lower margin Aurora product, gross profit as a percentage of sales was
negatively impacted. The Company is continuing its efforts to further reduce
costs and to improve the margin on its Aurora product. However, until such time
as these benefits are substantially realized, the margins in the future will
continue to be affected by the mix of products as well as sales volumes.
Operating Expenses
Operating expenses decreased to $3,657,000, or 36.4% of sales, in the six months
ended March 31, 2004 as compared with $4,677,000, or 35.9% of sales, in the
comparative prior-year period. This decrease of $1,020,000 is primarily the
result of the Company's completion of its cost reduction initiatives completed
in December 2003. The Company expects to realize cost savings of approximately
$3 million on an annualized basis. While operating expenses decreased in
absolute dollars, the increase as a percentage of sales was primarily due to the
22.9% reduction in sales this period as compared to the prior year period.
Income Taxes
With respect to the provision (benefit) for income taxes, the effective rate was
a provision of .6% as compared to a benefit of 39.4% in the prior-year period.
The change in the effective rate is primarily due to operating losses in the six
months ended March 31, 2004 for which no benefit has been recognized. The
Company has provided a full valuation allowance against its deferred income tax
assets in the fourth quarter of fiscal 2003, and continues to provide a full
valuation allowance at March 31, 2004, due to the Company's continued losses and
the uncertainty as to the Company's ability to generate sufficient taxable
income to realize the full value of those net assets. The valuation allowance is
subject to adjustment based upon the Company's ongoing assessment of its future
taxable income and may be wholly or partially reversed in the future.
Net Loss
Net loss for the six months ended March 31, 2004 was ($1,699,000), or ($0.31)
per share, as compared with ($1,198,000), or ($0.22) per share, in the
comparative prior-year period. In addition to its operations, the Company owns
interests in unconsolidated affiliates in Australia, South Africa and the United
Kingdom, all of which are accounted for using the equity method, except for
South Africa which effective April 2003 was accounted for on a cost basis.
Included in the results of operations for the six months ended March 31, 2004
and 2003 are the Company's share of net profits of these affiliates of $128,000
and $342,000, respectively, which includes $105,000 and $165,000, respectively,
of the Company's proportionate share of the related gross profit on product
sales to its affiliates which have been sold by the affiliates to third party
end users. Excluding this intercompany gross profit adjustment, the Company's
share of net income of these unconsolidated affiliates was $23,000 and $177,000
for the six months ended March 31, 2004 and 2003, respectively, primarily the
results of lower profits at its Australian affiliates. In addition, on January
15, 2004, the Company sold its remaining 5% ownership interest in its investment
in its South African affiliate and recognized a gain on the sale of $78,000.
13
Global Payment Technologies, Inc.
March 31, 2004
Included in interest expense is a non-cash charge of $19,000 related to the
amortization of debt discount on the Company's $1.5 million secured convertible
term note and 200,000 warrants issued pursuant to the Securities Purchase
Agreement. This amount represents amortization expense for the period March 16,
2004 through March 31, 2004. Future amounts are expected to be substantially
higher (see Note C to the Condensed Consolidated Financial Statements).
Three months ended March 31, 2004 compared with three months ended March 31,
- ----------------------------------------------------------------------------
2003
- ----
Sales
Net sales decreased by 19.2%, or $1,360,000, to $5,712,000 in the three months
ended March 31, 2004 as compared with $7,072,000 in the comparative prior-year
period. This decrease was primarily due to $2.3 million in lower sales of the
Company's gaming products to its Australian affiliate and a reduction of sales
to the vending market of $350,000, offset in part by a $450,000 increase in
sales of its Aurora product to the gaming market and a $400,000 increase in
sales to the South African gaming market. Gaming sales for the three months
ended March 31, 2004 was $4,323,000, or 75.7% of sales, as compared with
$5,345,000, or 75.6% of sales, in the prior year period. Beverage and vending
sales for the three months ended March 31, 2004 were $1,389,000, or 24.3% of
sales, as compared with $1,727,000, or 24.4 % of sales, in the prior year
period.
Gross Profit
Gross profit decreased to $1,025,000, or 17.9% of net sales, in the three months
ended March 31, 2004 as compared with $1,123,000, or 15.9% of net sales, in the
comparative prior-year period. For the three months ended March 31, 2004,
indirect costs were reduced by approximately $100,000 due to cost reduction
initiatives completed in December 2003. The increase in gross profit, as a
percentage of sales, was primarily the result of improvements in margins on the
Company's Aurora product, which in the quarter ended March 31, 2003 had
significant startup costs, including higher purchase costs as well as less
efficient manufacturing. Historically, the Company's gross profit as a
percentage of sales for the quarters ended March 2003, June 2003, September
2003, December 2003 and March 2004, were 15.9%, 16.2%, 7.5% (which included an
increased inventory writedown based upon management's decisions to discontinue
and transition from earlier generation products), 18.8% and 17.9%, respectively.
While the Company has executed product cost reductions, and continues to further
reduce costs to improve the margin on its Aurora product, as well as other
products, until such time as these benefits are substantially realized the
margins in the future will continue to be affected by the mix of products as
well as sales volumes.
Operating Expenses
Operating expenses decreased to $1,805,000, or 31.6% of sales, in the three
months ended March 31, 2004 as compared with $2,565,000, or 36.3% of sales, in
the comparative prior-year period. This decrease of $760,000 is primarily the
result of the Company's completion of its cost reduction initiatives in December
2003. The Company expects to realize cost savings of approximately $3 million on
an annualized basis.
Income Taxes
With respect to the provision (benefit) for income taxes, the effective rate was
a provision of .7% as compared to a benefit of 38.5% in the prior-year period.
This change in the effective rate is primarily due to operating losses in the
three months ended March 31, 2004 for which no benefit has been recognized. The
Company has provided a full valuation allowance against its deferred income tax
assets in the fourth quarter of fiscal 2003, and continues to provide a full
valuation allowance at March 31, 2004, due to the Company's continued losses and
the uncertainty as to the Company's ability to generate sufficient taxable
income to realize the full value of those assets.
14
Global Payment Technologies, Inc.
March 31, 2004
The valuation allowance is subject to adjustment based upon the Company's
ongoing assessment of its future taxable income and may be wholly or partially
reversed in the future.
Net Loss
Net loss for the quarter was ($711,000), or ($0.13) per share, as compared with
($858,000), or ($0.15) per share, in the comparative prior-year period. In
addition to its operations, the Company owns interests in unconsolidated
affiliates in Australia, South Africa and the United Kingdom, all of which are
accounted for using the equity method, except for South Africa which effective
April 2003 was accounted for on a cost basis. Included in the results of
operations for the three months ended March 31, 2004 and 2003 are the Company's
share of net profits of these affiliates of $41,000 and $135,000, respectively,
which includes $25,000 and $40,000, respectively, of the Company's proportionate
share of the related gross profit on product sales to its affiliates, which have
been sold by the affiliates to third party end users. Excluding this
intercompany gross profit adjustment, the Company's share of net income of these
unconsolidated affiliates was $16,000 and $95,000 for the three months ended
March 31, 2004 and 2003, respectively. In addition, on January 15, 2004, the
Company sold its remaining 5% ownership interest in its investment in its South
African affiliate and recognized a gain on the sale of $78,000.
Included in interest expense is a non-cash charge of $19,000 related to the
amortization of debt discount on the Company's $1.5 million secured convertible
term note and 200,000 warrants issued pursuant to the Securities Purchase
Agreement. This amount represents amortization expense for the period March 16,
2004 through March 31, 2004. Future amounts are expected to be substantially
higher (see Note C of the Condensed Consolidated Financial Statements).
Liquidity and Capital Resources
- -------------------------------
The Company's capital requirements consist primarily of those necessary to
continue to expand and improve product development and manufacturing
capabilities, sales and marketing operations and service principal and interest
payments on the Company's indebtedness. At March 31, 2004, the Company's cash
and cash equivalents were $1,740,000 as compared to $1,220,000 at September 30,
2003. A significant portion of the Company's cash balance consists of currency
used to test the Company's products and, although it could be available, it is
not anticipated to be utilized for working capital purposes in the normal course
of business. The Company has initiated outsourcing some of its manufactured
product in an effort to improve gross margin percentages as well as its cash
flow. In addition the Company expects to realize cost savings from its cost
reduction initiatives completed in December 2003. As a result of these savings
and the available funds under the credit facility with Laurus discussed below,
the Company believes that its available resources should be sufficient to meet
its obligations as they become due and permit continuation of its planned
product development and operations for the next 12 months.
On March 16, 2004, the Company received aggregate proceeds of $1,500,000 from
the sale to Laurus Master Fund Ltd. ("Laurus") of a $1,500,000 principal amount
secured convertible term note due in March 2007 (the "CTN"), pursuant to a
Securities Purchase Agreement. The CTN is convertible into common stock of the
Company at any time at the rate of $4.26 of principal for one share of common
stock and is collateralized by substantially all assets of the Company. The note
provides for monthly principal payments of $25,000 from July 2004 to March 2005,
$45,000 from April 2005 to September 2005 and $55,833 from October 2005 to March
2007. Interest is payable monthly at the prime rate plus 1.5%, with a minimum
rate of 6%. In addition, Laurus received 7 year warrants to purchase an
aggregate of 200,000 shares of the Company's common stock at prices of $4.87,
$5.28 and $5.68 for 100,000, 60,000 and 40,000 warrants, respectively. The
Company utilized approximately $1,200,000 of the proceeds to repay amounts
outstanding under a previous credit agreement.
The value allocated to the warrants resulted in a debt discount of $506,000 that
is being recognized as interest expense over the term of the note. Additionally,
by allocating value to the warrants, Laurus received a beneficial conversion
feature in the amount of $304,000 that resulted in additional debt discount that
is being recognized as interest expense over the term of the note. Interest
expense is computed utilizing the interest method, which results in an effective
yield over the term of the note. The amortization amounted to $19,000 for the
three months ended March 31, 2004 and the six months ended March 31, 2004. As of
March 31, 2004, the unamortized debt discount amounted to approximately
$791,000. Amortization of debt discount for the next four fiscal quarters will
approximate $115,000, $110,000, $105,000 and 100,000, which will be charged to
operations. In the event that the CTN, or any portion of the CTN, is converted
prior to maturity, the unamortized discount related to the amount converted will
be immediately recognized as interest expense and charged to operations.
15
Global Payment Technologies, Inc.
March 31, 2004
On March 16, 2004, the Company also entered into a Security Agreement with
Laurus which provides for a credit facility of $2,500,000 consisting of a
secured revolving note of $1,750,000 (the "RN") and a secured convertible
minimum borrowing note of $750,000 (the "MBN"), both due in March 2007 (both
notes collectively referred to as the "LOC"). At closing, the Company borrowed
$750,000 under the MBN. Funds available under the LOC are determined by a
borrowing base equal to 85% and 70% of eligible domestic and foreign accounts
receivable, respectively, and 50% of eligible inventory. Outstanding amounts
under the RN and MBN are convertible into common stock of the Company at any
time at the rate of $4.26 of principal for one share of common stock and are
collateralized by substantially all assets of the Company. Interest is payable
monthly at the prime rate plus 1.5%, with a minimum rate of 6%. At March 31,
2004, the Company has $1,750,000 available under the RN.
Net cash provided by operating activities was $20,000 in the six months ended
March 31, 2004. This amount is due to decreased accounts receivable of
$2,361,000, primarily due to lower sales this period and continued steady
collections of prior accounts receivable, offset, in part by, a net loss for the
period, adjusted for non-cash items of ($1,103,000), decreased accrued expenses
and other current liabilities of $476,000, an increase in prepaid expenses and
other assets of $320,000 (primarily the result of $226,000 of bank closing fees
paid and being amortized over the life of the loan), decreased accounts payable
of $218,000, increased inventory of $212,000 and increased income taxes
receivable of $12,000. Net cash provided by operating activities was $5,000 in
the six months ended March 31, 2003. This amount is due to the net loss for the
period, adjusted for non-cash items, of ($1,228,000), increased accounts
receivable of $1,187,000, and increased income taxes receivable 193,000, reduced
by, increased accounts payable of $2,073,000, increased accrued expenses and
other current liabilities of $409,000, decreased inventory of $98,000, and
decreased prepaid expenses and other assets of $33,000.
Cash used in investing activities for the six months ended March 31, 2004
amounted to $81,000 as compared with $638,000 in the prior-year period.
Investments in property and equipment in the six months ended March 31, 2004
amounted to $184,000 as compared with $336,000 in 2003. In addition, for the six
months ended March 31, 2004 the Company invested $51,000 in its South African
affiliate for working capital purposes as compared with $323,000 in 2003. On
January 15, 2004, the Company sold its remaining 5% interest in its South
African affiliate and received proceeds of $154,000 and recognized a gain on the
sale of $78,000. The Company also received a dividend distribution of $21,000
from its South African affiliate in the six months ending March 31, 2003.
Cash provided by financing activities in the six months ended March 31, 2004 and
2003 includes net loan borrowings of $457,000 and $863,000, respectively. As
discussed above, on March 16, 2004, the Company received proceeds of $1,500,000
from the sale of convertible debt and warrants and also entered into a
$2,500,000 credit facility, of which $1,750,000 was available at March 31, 2004.
In the six months ended March 31, 2004 and 2003, the Company received $124,000
and $29,000, respectively, from the exercise of stock options.
16
Global Payment Technologies, Inc.
March 31, 2004
At March 31, 2004, future minimum payments under noncancellable operating leases
and payments to be made for long-term bank debt maturing over the next five
years are as follows in ($000):
Fiscal Year Operating Lease Debt Repayments
----------- --------------- ---------------
2004 $244 $75
2005 415 420
2006 285 670
2007 - 1,085
Thereafter - -
---- ------
Total $944 $2,250
---- ------
In addition to the amounts above, and in the normal course of business, purchase
orders are issued which obligate the Company for future inventory purchases. As
of March 31, 2004, purchase order commitments approximated $8.9 million and will
be used for production requirements up to, and in excess of, six months.
Critical Accounting Policies
- ----------------------------
Management's discussion and analysis is based on our consolidated financial
statements which are prepared using certain critical accounting policies that
require management to make judgments and estimates that are subject to varying
degrees of uncertainty. While we believe that these accounting policies and
management's judgments and estimates are reasonable, actual future events can
and often do result in outcomes that can be materially different from
management's current judgments and estimates. We believe that the accounting
policies and related matters described in the paragraphs below are those that
depend most heavily on management's judgments and estimates.
Inventory:
- ----------
Inventory is stated at the lower of cost (first-in, first-out method) or net
realizable value. The Company analyzes the net realizable value of its inventory
on an ongoing basis. In determining whether the net realizable value of its
inventory is impaired, the Company considers historical sales performance and
expected future product sales, market conditions in which the Company
distributes its products, changes in product strategy and the potential for the
introduction of new technology or products by the Company and its competitors.
These items, as well as the introduction of new technology on products, could
result in future inventory obsolescence.
Software Capitalization Costs:
- ------------------------------
Based upon achieving technological feasibility through a detailed program design
for Argus(TM) and Aurora products, the Company has capitalized the cost of
software coding and development of these products, and reflects the amortization
of these costs in cost of sales. The annual amortization is calculated using the
greater of (a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product including the period being reported on. The estimation of both future
sales of products as well as the life of the product are critical estimates that
are affected by both internal and external factors that might affect the
Company's estimates. If the useful life is reduced, or sales projections fall
short of the estimation, amortization expense will increase or accelerate.
Revenue Recognition:
- --------------------
The Company recognizes revenue upon shipment of products to its customers and
the passage of title, including shipments to its unconsolidated affiliates, or
at the time services are completed with respect to repairs not covered by
warranty agreements. With respect to sales to its unconsolidated affiliates, the
Company defers its pro rata share of gross profit on those sales until such time
as its affiliates sell to a third party customer. The timing of sales to
affiliates can have an effect on the Company's recognized profitability.
17
Global Payment Technologies, Inc.
March 31, 2004
Warranty Policy:
- ----------------
The Company provides for the estimated cost of product warranty at the time
related sales revenue is recognized. Furthermore, the Company warrants that its
products are free from defects in material and workmanship for a period of one
year, or almost two years relating to its Argus and Aurora products, from the
date of initial purchase. The warranty does not cover any losses or damage that
occur as a result of improper installation, misuse or neglect and repair or
modification by anyone other than the Company and its appointed service centers.
Repair costs beyond the warranty period are charged to the Company's customers.
Reserve for Uncollectible Accounts Receivable:
- ----------------------------------------------
At March 31, 2004, the Company's accounts receivable balance was approximately
$4.0 million. The Company's accounting policy is to reserve for the accounts
receivable of specific customers based on our assessment of certain customers'
financial condition. We make these assessments using our knowledge of the
industry coupled with current circumstances or known events and our past
experiences. This policy is based on our past collection experience. To the
extent that our experience changes, global economic conditions deteriorate or
our customers experience financial difficulty, our reserve may need to increase.
Investments in Unconsolidated Affiliates:
- -----------------------------------------
The Company applies the equity method of accounting to its investments
(including advances) in entities where the Company has non-controlling ownership
interests of 50% or less and exercises a significant influence on that entity.
The Company's share of these affiliates' earnings or losses is included in the
consolidated statements of operations. The Company eliminates its pro rata share
of gross profit on sales to its affiliates for inventory on hand at the
affiliates at the end of each reporting period. For investments in which no
public market exists, the Company reviews the operating performance, financing
and forecasts for such entities in assessing the net realizable values of these
investments.
Long-Lived Assets:
- ------------------
The Company accounts for long-lived assets pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". This Statement requires that long-lived assets
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the asset. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated. The Company reviews its long-lived assets, at
least annually, for indicators of impairment or upon actual impairment events or
indicators.
Income Taxes:
- -------------
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes". SFAS No. 109 requires an asset and liability approach for financial
reporting for income taxes. Under SFAS No. 109, deferred taxes are provided for
temporary differences between the carrying values of assets and liabilities for
financial reporting and tax purposes at the enacted rates at which these
differences are expected to reverse. The effective tax rate for the Company is
affected by the income mix derived from the core business and from its share of
income from foreign affiliates that may have different tax rates. Realization of
deferred tax assets is primarily dependent upon the Company's future
profitability, and the Company has, consequently, provided a full valuation
allowance against its deferred income tax assets due to recurring losses and
uncertainty as to the ability to generate future taxable income to sufficiently
realize those assets. The amounts of the valuation allowances for deferred tax
assets at September 30, 2003 and March 31, 2004 were $2,569,000 and $3,185,000,
respectively. To the extent the Company's profitability improves, the valuation
allowance may be wholly or partially reversed. At such time that the Company
believes that it will realize sufficient taxable income the valuation allowance
will be reassessed.
18
Global Payment Technologies, Inc.
March 31, 2004
Debt Discounts:
- ---------------
Pursuant to the Securities Purchase Agreement in which the Company received
proceeds of $1,500,000 from the issuance of a convertible note in the principal
amount of $1,500,000 and 7 year warrants to purchase 200,000 shares of the
Company's common stock, the value allocated to the warrants resulted in a debt
discount of $506,000 that is being recognized as interest expense over the term
of the note. Additionally, by allocating value to the warrants, the purchaser
received a beneficial conversion feature in the amount of $ 304,000 that
resulted in additional debt discount that is being recognized as interest
expense over the term of the note. Interest expense is computed utilizing the
interest method, which results in an effective yield over the term of the note.
In the event that the CTN, or any portion of the CTN, is converted prior to
maturity, the unamortized discount related to the amount converted will be
immediately recognized as interest expense and charged to operations. As of
March 31, 2004, the unamortized debt discount amounted to approximately
$791,000.
Special Note Regarding Forward-Looking Statements:
- --------------------------------------------------
A number of statements contained in this discussion and analysis are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties that could
cause actual results to differ materially from those expressed or implied in the
applicable statements. These risks and uncertainties include but are not limited
to: the Company's dependence on the paper currency validator market and its
potential vulnerability to technological obsolescence; the risks that its
current and future products may contain errors or defects that would be
difficult and costly to detect and correct; potential manufacturing
difficulties; possible risks of product inventory obsolescence; potential
shortages of key parts and/or raw materials; potential difficulties in managing
growth; dependence on key personnel; the Company's dependence on a limited base
of customers for a significant portion of sales; the possible impact of
competitive products and pricing; uncertainties with respect to the Company's
business strategy; general economic conditions in the domestic and international
markets in which the Company operates; the relative strength of the United
States currency; and other risks described in the Company's Securities and
Exchange Commission filings.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company's quantitative and
qualitative disclosures about market risk since the filing of the Company's
Annual Report on Form 10-K for the year ended September 30, 2003.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures that is
designed to provide reasonable assurance that information, which is required to
be disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is accumulated and communicated to
management in a timely manner. The Company's Chief Executive Officer and Chief
Financial Officer have evaluated this system of disclosure controls and
procedures as of the end of the period covered by this quarterly report and
believe that the system is operating effectively to ensure appropriate
disclosure. There have been no changes in the Company's internal control over
financial reporting during the most recent fiscal year that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
19
Global Payment Technologies, Inc.
March 31, 2004
PART II. OTHER INFORMATION
-------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 2004 Annual Meeting of Stockholders held on March 23, 2004,
stockholders elected the following two persons to serve as Class III Directors
of the Company by the following vote:
For Against Withheld
--- ------- --------
Stuart S. Levy 5,300,917 167,350 0
Thomas Oliveri 5,315,317 152,950 0
Richard Gerzof, a Class I Director, and Edward Seidenberg, a Class II
Director, continue to serve as directors whose terms expire at the
2005 Annual Meeting and 2006 Annual Meeting, respectively.
No other matters were voted upon at the meeting.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit- 4.1(a) Amendment No. 1, dated April 29, 2004, to Securities Purchase Agreement (1)
Exhibit- 4.1(b) Amendment No. 1, dated April 29, 2004, to Common Stock Purchase Warrant (1)
Exhibit- 4.1(c) Amendment No. 1, dated April 29, 2004, to Secured Convertible Minimum Borrowing Note (1)
Exhibit- 4.1(d) Amendment No. 1, dated April 29, 2004, to Secured Revolving Note (1)
Exhibit- 4.1(e) Amendment No. 1, dated April 29, 2004, to Secured Convertible Term Note (1)
Exhibit- 10.5 Employment Agreement dated May 1, 2004 between the Company and Thomas McNeill (1)
Exhibit- 10.6 Employment Agreement dated April 5, 2004 between the Company and Thomas Oliveri (1)
Exhibit - 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
Exhibit - 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
Exhibit - 32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
(1) filed herewith
b) Reports on Form 8-K
-------------------
On January 13, 2004 the Company filed a Current Report on Form 8-K dated
January 13, 2004 under item 12 announcing the Company's financial results
for the year ended September 30, 2003.
On February 12, 2004, the Company filed a Current Report on Form 8-K dated
February 12, 2004 under Item 12 announcing the Company's financial results
for the quarter ended December 31, 2003.
On March 16, 2004, the Company filed a Current Report on Form 8-K dated
March 10, 2004 under Item 4 announcing a change in the Company's
Independent Accountant and Audtiors.
On March 18, 2004, the Company filed a Current Report on Form 8-K dated
March 16, 2004 under Item 2 announcing the Company's completion of its $4
million secured Convertible financing arrangement.
On May 13, the Company furnished a Current Report on Form 8-K dated May 13,
2004 under Item 12 announcing the Company's financial results for the
quarter ended March 31, 2004.
20
Global Payment Technologies, Inc.
March 31, 2004
Signatures
----------
In accordance with 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, thereunto duly authorized.
Global Payment Technologies, Inc.
By: /s/ Thomas McNeill
-----------------------------
Vice President,
Chief Financial Officer and
Principal Accounting Officer
Dated: May 13, 2004
21