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, 2003
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
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 Securities 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 |_|
Shares of Common Stock outstanding on May 5, 2003 5,550,516
Global Payment Technologies, Inc.
Index
PART I. FINANCIAL INFORMATION
Page Number
-----------
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2003 and September 30, 2002 3
Consolidated Statements of Income - Six Months ended March 31, 2003 and 2002 4
Consolidated Statements of Income - Three Months ended March 31, 2003
and 2002 5
Consolidated Statements of Cash Flows - Six Months ended March 31, 2003
and 2002 6
Notes to Consolidated Financial Statements 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
See Item 2 Above.
Item 4. Controls and Procedures 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 21
2
GLOBAL PAYMENT TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
March 31, September 30,
2003 2002
--------- -------------
(Dollar amounts in thousands,
except share data)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,863 $ 1,604
Accounts receivable, less allowance for doubtful accounts
of $183 and $177, respectively 3,026 1,557
Accounts receivable from affiliates 4,826 4,982
Inventory, less allowance for obsolescence of $688 and
$812, respectively 5,098 5,301
Prepaid expenses and other current assets 153 177
Income taxes receivable 1,056 863
Deferred income taxes - current -- 836
-------- --------
Total current assets 16,022 15,320
Property and equipment, net 3,039 3,115
Investments in unconsolidated affiliates 2,920 2,426
Capitalized software costs 2,426 2,678
Deferred income taxes - non current 1,382 --
Intangible assets 365 405
Other assets 77 86
-------- --------
Total assets $ 26,231 $ 24,030
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,875 $ 3,512
Accounts payable 4,134 2,061
Accrued expenses and other current liabilities 1,840 1,431
-------- --------
Total current liabilities 8,849 7,004
Long-term debt 1,500 --
-------- --------
Total liabilities 10,349 7,004
-------- --------
Shareholders' equity:
Common Stock, 20,000,000 shares authorized; $.01 par value;
5,821,400 and 5,815,100 shares issued and outstanding, respectively 58 58
Additional paid-in capital 9,801 9,761
Retained earnings 7,452 8,650
Accumulated other comprehensive income 70 56
-------- --------
17,381 18,525
Less: Treasury stock, at cost, 278,984 shares (1,499) (1,499)
-------- --------
Total shareholders' equity 15,882 17,026
-------- --------
Total liabilities and shareholders' equity $ 26,231 $ 24,030
======== ========
The accompanying notes are an integral part of these financial statements.
3
GLOBAL PAYMENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months ended March 31,
-----------------------------------------
2003 2002
----------- -----------
(Dollar amounts in thousands,
except share and per share data)
Net sales
Affiliates $ 7,044 $ 7,305
Non-affiliates 5,988 9,393
----------- -----------
13,032 16,698
Cost of sales 10,519 12,204
----------- -----------
Gross profit 2,513 4,494
Operating expenses 4,677 4,317
----------- -----------
(Loss) income from operations (2,164) 177
Other income (expense):
Equity in income of unconsolidated affiliates 342 236
Interest expense, net (155) (143)
----------- -----------
Total other income 187 93
----------- -----------
(Loss) income before provision for income taxes (1,977) 270
(Benefit from) provision for income taxes (779) 26
----------- -----------
Net (loss) income ($ 1,198) $ 244
=========== ===========
Net (loss) income per share:
Basic ($ .22) $ .04
=========== ===========
Diluted ($ .22) $ .04
=========== ===========
Common shares used in computing net (loss) income
per share amounts:
Basic 5,539,997 5,527,331
=========== ===========
Diluted 5,539,997 5,674,733
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
GLOBAL PAYMENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months ended March 31,
------------------------------------
2003 2002
----------- -----------
(Dollar amounts in thousands,
except share and per share data)
Net sales
Affiliates $ 3,391 $ 4,035
Non-affiliates 3,681 4,373
----------- -----------
7,072 8,408
Cost of sales 5,949 6,037
----------- -----------
Gross profit 1,123 2,371
Operating expenses 2,565 2,265
----------- -----------
(Loss) income from operations (1,442) 106
Other income (expense):
Equity in income of unconsolidated affiliates 135 109
Interest expense, net (89) (68)
----------- -----------
Total other income 46 41
----------- -----------
(Loss) income before provision for income taxes (1,396) 147
(Benefit from) provision for income taxes (538) 21
----------- -----------
Net (loss) income ($ 858) $ 126
=========== ===========
Net (loss) income per share:
Basic ($ .15) $ .02
=========== ===========
Diluted ($ .15) $ .02
=========== ===========
Common shares used in computing net (loss) income
per share amounts:
Basic 5,542,416 5,527,397
=========== ===========
Diluted 5,542,416 5,779,771
=========== ===========
The accompanying notes are an integral part of these financial statements.
5
GLOBAL PAYMENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended March 31,
----------------------------
2003 2002
------- -------
(Dollar amounts in thousands)
OPERATING ACTIVITIES:
Net (loss) income ($1,198) $ 244
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Equity in income of unconsolidated affiliates (342) (236)
Depreciation and amortization 703 530
Provision for losses on accounts receivable 39 24
Provision for inventory obsolescence 105 43
Deferred income taxes (535) 33
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,187) 500
Decrease (increase) in inventory 98 (372)
Increase in capitalized software costs -- (245)
Decrease (increase) in prepaid expenses and other assets 33 (75)
Increase in accounts payable 2,073 217
Increase (decrease) in accrued expenses and other current liabilities 409 (242)
Increase in income taxes receivable (193) --
Decrease in income taxes payable -- (39)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5 382
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net of proceeds from disposals (336) (594)
Distributions from unconsolidated affiliate 21 --
Investments in unconsolidated affiliates (323) (874)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (638) (1,468)
------- -------
FINANCING ACTIVITIES:
Net borrowings of note payable from bank 863 1,100
Issuance of stock upon exercise of stock options and warrants 29 1
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 892 1,101
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 259 15
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,604 1,069
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,863 $ 1,084
======= =======
CASH PAID DURING THE PERIOD FOR:
Interest $ 158 $ 155
======= =======
Income taxes $ -- $ --
======= =======
NON-CASH FINANCING ACTIVITIES
Tax benefit from exercise of stock options $ 11 $ --
======= =======
The accompanying notes are an integral part of these financial statements.
6
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements
March 31, 2003
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Global Payment
Technologies, Inc. (the "Company"), including the September 30, 2002
consolidated balance sheet which has been derived from audited financial
statements and the summary financial information for GPT Australia PTY Limited
and eCash PTY Limited, 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 three and six-month periods ended March 31, 2003 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 2003. 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, 2002.
NOTE B - RECLASSIFICATIONS AND RESTATEMENT
Effective September 30, 2002, the Company reclassified certain costs, previously
included in inventory, related to the development of software used in its
products and to the acquisition of molds and tooling for production. As a
result, the Company's statement of cash flows for the six months ended March 31,
2002 reflects the reclassification of $175,000 and $245,000 in expenditures
related to the acquisition of molds and tooling and software costs respectively.
This reclassification has not changed the Company's net income (loss), total
assets or equity for any period.
NOTE C - 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, capitalized software and provisions for warranties.
Actual results could differ from those estimates.
NOTE D - COMPREHENSIVE INCOME
The Company observes the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which requires
companies to report all changes in equity during a period, except those
resulting from investments by owners and distributions to owners, for the period
in which they are recognized. 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.
Comprehensive and other comprehensive income must be reported on the face of
annual financial statements or in the case of interim reporting, the footnote
approach may be utilized. For the three and six months ended March 31, 2002, the
Company's operations did not give rise to material items includable in
comprehensive income which were not already included in net income. Accordingly,
the Company's comprehensive income is the same as its net income for that
period.
For the three and six months ended March 31, 2003, the Company's comprehensive
income (loss) was as follows:
three months ended 3/31/03 six months ended 3/31/03
-------------------------- ------------------------
$000
- ----
Net (loss) $(858) $(1,198)
Other comprehensive income (a) 2 14
----- -------
Comprehensive (loss) $(856) $(1,184)
====== =======
(a) Consisting of cumulative translation adjustments related to the Company's
investments in unconsolidated affiliates.
7
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
March 31, 2003
NOTE E - NET INCOME PER COMMON SHARE
The Company accounts for earnings per share pursuant to SFAS No. 128, "Earnings
Per Share". In accordance with SFAS No. 128, net income per common share amounts
("basic EPS") were computed by dividing net income by the weighted average
number of common shares outstanding for the period. Net income per common share
amounts, assuming dilution ("diluted EPS"), were computed by reflecting the
potential dilution from the exercise of stock options and stock warrants. SFAS
No. 128 requires the presentation of both basic EPS and diluted EPS on the face
of the income statement.
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net income appears below:
Six Months Ended Six Months Ended
March 31, 2003 March 31, 2002
(In thousands, except per share data) (In thousands, except per share data)
------------------------------------------ -------------------------------------------
Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- --------- ----------- ------------- --------
Net income ($1,198) $ 244
------- -------
BASIC EPS
Net income attributable to Common Stock (1,198) 5,539.9 ($ .22) 244 5,527.3 $ .04
EFFECT OF DILUTIVE SECURITIES
Stock options and warrants -- -- -- -- 147.4 --
------- ------- ------- ------- ------- -------
DILUTED EPS
Net income attributable to Common
Stock and assumed option and warrant
exercises ($1,198) 5,539.9 ($ .22) $ 244 5,674.7 $ .04
======= ======= ======= ======= ======= =======
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
(In thousands, except per share data) (In thousands, except per share data)
------------------------------------------ -------------------------------------------
Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- --------- ----------- ------------- --------
Net (loss) income ($ 858) $ 126
------- -------
BASIC EPS
Net income attributable to Common Stock (858) 5,542.4 ($ .15) 126 5,527.4 $ .02
EFFECT OF DILUTIVE SECURITIES
Stock options and warrants -- -- -- -- 252.4 --
------- ------- ------- ------- ------- -------
DILUTED EPS
Net income attributable to Common
Stock and assumed option and warrant
exercises ($ 858) 5,542.4 ($ .15) $ 126 5,779.8 $ .02
======= ======== ======= ======= ======= =======
Options to purchase 273,800 and 273,800 shares of Common Stock in the six months
and three months ended March 31, 2003, respectively, and options to purchase
395,700 and 395,700 shares of Common Stock in the six months and three months
ended March 31, 2002, were not included in the computation of diluted EPS
because the exercise prices exceeded the average market price of the common
shares for these periods. These options were still outstanding at the end of the
related periods. Diluted EPS for the six months and three months ended March 31,
2003, is the same as basic EPS, as the inclusion of the impact of any common
stock equivalents then outstanding, would be anti-dilutive.
8
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
March 31, 2003
NOTE F - EMPLOYEE STOCK-BASED COMPENSATION
As of March 31, 2003, the Company had established a number of share incentive
programs as discussed in more detail in our annual report on Form 10-K for the
year ended September 30, 2002. The Company applies the intrinsic value method as
outlined in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations in accounting for stock
options and share units granted under these programs. Under the intrinsic value
method, no compensation expense is recognized if the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of the grant. Accordingly, no compensation cost has been recognized.
Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for
Stock-Based Compensation", requires that the Company provide pro forma
information regarding net earnings and net earnings per common share as if
compensation cost for the Company's stock option programs had been determined in
accordance with the fair value method prescribed therein. The Company adopted
the disclosure portion of SFAS No. 148, "Accounting for Stock-Based Compensation
- - Transition and Disclosure" requiring quarterly SFAS No. 123 pro forma
disclosure. The following table illustrates the effect on net income and
earnings per share as if the fair value method had been applied to all
outstanding and unvested awards in each period presented.
Three Months Ended Six Months Ended
March 31 March 31
------------------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
(Unaudited)
(In millions, except per share data)
Net earnings attributable to common stock, as reported ($ 858) $126 ($1,198) $244
Deduct: Total stock-based employee compensation expense
determined under fair value method for all awards,
net of related tax effects (144) (96) (290) (157)
------- --- ------ ----
Pro forma net earnings, attributable to common stock ($1,002) $ 30 ($1,488) $ 87
Earnings per common share:
Basic - as reported ($ .15) $.02 ($ .22) $.04
Basic - pro forma ($ .18) $.01 ($ .27) $.02
Diluted - as reported ($ .15) $.02 ($ .22) $.04
Diluted - pro forma ($ .18) $.01 ($ .27) $.02
9
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
March 31, 2003
NOTE G - ACCOUNTS RECEIVABLE AND SALES DATA FOR UNCONSOLIDATED AFFILIATES
Net sales to unconsolidated affiliates for the three and six months
ended March 31, 2003 and 2002 respectively, and accounts receivable
from unconsolidated affiliates as of March 31, 2003 and September 30,
2002 respectively, are as follows:
Net sales to affiliates
-----------------------
Three months ended
--------------------
3/31/03 3/31/02
------- -------
Australia $3,293 $3,983
Abacus-UK -- 6
South Africa 98 46
------ ------
Total $3,391 $4,035
====== ======
Net sales to affiliates
-----------------------
Six months ended
---------------------
3/31/03 3/31/02
------- -------
Australia $6,637 $7,110
Abacus-UK -- 6
South Africa 407 189
------ ------
Total $7,044 $7,305
====== ======
Accounts receivable from affiliates as of
----------------------------------------------
March 31, 2003 Sept. 30, 2002
--------------------- ----------------------
Australia $4,371 $4,686
Abacus-UK 138 131
South Africa 317 165
-------------- --------------------- ----------------------
Total $4,826 $4,982
============== ===================== ======================
10
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
March 31, 2003
NOTE H - SUMMARY FINANCIAL INFORMATION FOR GPT AUSTRALIA PTY LTD AND ECASH PTY
LTD
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.
Six Months Ended
December 31, 2002
-----------------
Net sales $12,608,731
Operating income 585,845
Net income 467,880
As of December 31, 2002
-----------------------
Current assets $10,152,298
Non-current assets 177,781
Current liabilities 7,547,024
Non-current liabilities --
Net assets 2,783,055
NOTE I - RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity," under which a liability for an exit cost was recognized at
the date of an entity's commitment to an exit plan. SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
at fair value when the liability is incurred. The provision of this statement
are effective for exit or disposal activities that are initiated after December
31, 2002. The Company has adopted SFAS No. 146 as of January 1, 2003; the impact
of the adoption was not material to the consolidated financial statements.
In December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation
- - Transition and Disclosure" ("SFAS 148"). SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation as originally provided by SFAS No. 123
"Accounting for Stock-Based Compensation". Additionally, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure in both the
annual and interim financial statements about the method of accounting for
stock-based compensation and the effect of the method used on reported results.
The transitional requirements of SFAS 148 will be effective for all financial
statements for fiscal years ending after December 15, 2002. The disclosure
requirements shall be effective for financial reports containing condensed
financial statements for interim periods beginning after December 31, 2002. The
Company adopted the disclosure portion of this statement for the fiscal quarter
ending March 31, 2003. The application of the disclosure portion of this
standard had no impact on the Company's consolidated financial position or
results of operations. The Financial Accounting Board recently indicated that
they will require stock-based employee compensation to be recorded as a charge
to earnings pursuant to a standard they are currently deliberating, which they
believe will become effective on January 1, 2004. We will continue to monitor
their progress on the issuance of this standard.
11
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
March 31, 2003
NOTE J - ACCRUED WARRANTY OBLIGATIONS
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 requires that the guarantor
recognize, at the inception of certain guarantees, a liability for the fair
value of the obligation undertaken in issuing such guarantee. FIN 45 also
requires additional disclosure requirements about the guarantor's obligations
under certain guarantees that it has issued. The initial recognition and
measurement provisions of this interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The disclosure
requirements of this interpretation are effective for financial statement
periods ending after December 15, 2002. The Company adopted the disclosure
requirements of this interpretation in the current quarter. The adoption of this
interpretation did not have a material impact on its consolidated financial
position, results of operations or cash flows. 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 reporting
period:
Beginning Balance as of October 1, 2002 $ 340,053
Deduct: Payments (129,962)
Add: Provision 68,449
---------
Ending Balance as of March 31, 2003 $ 278,540
=========
NOTE K - SUBSEQUENT EVENT: SALE OF A SIGNIFICANT PORTION OF INVESTMENTS IN SOUTH
AFRICAN AFFILIATES
In April 2003, the Company sold a significant portion of its investments in its
South African affiliates. The Company received approximately $1.9 million in
cash for the sale of its entire interest in the cash handling division of
International Payment Systems Pty Ltd. and a major portion of its interest in
Global Payment Technologies Holdings (Pty) Ltd. ("GPTHL"), its South African
gaming affiliate. As a result of this transaction, which did not result in a
gain or loss, the Company's ownership interest in GPTHL has been reduced from
24.2% to 5%. GPTHL's Vukani division is one of the two licensed operators in the
South African route market province of Mpumalanga. The cash received was a
return of all of the Company's advances and investments resulting in the Company
recovering the carrying value of such advances and investments. The Company will
account for this remaining investment prospectively on a cost basis.
12
Global Payment Technologies, Inc.
March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Six months ended March 31, 2003 compared with six months ended March 31, 2002
Sales
Net sales decreased by 22.0%, or $3,666,000, to $13,032,000 in the six months
ended March 31, 2003 as compared with $16,698,000 in the comparative prior-year
period. This decrease was primarily due to lower demand for the Company's Argus
gaming product in Eastern Europe, due principally to product issues, which have
since been resolved, and lower sales in other parts of the world, offset in part
by increased sales of the Company's beverage and vending products. Sales of the
Company's beverage and vending products for the six months ended March 31, 2003
were $2,202,000, or 16.9% of net sales, as compared with $1,252,000, or 7.5% of
net sales, in the comparable prior-year period. This increase was the result of
the Company's new Aurora beverage and vending product for which sales
principally commenced in January 2003. Sales of the Company's gaming products
for the six months ended March 31, 2003 were $10,830,000 or 83.1% of net sales,
as compared with $15,446,000, or 92.5% of net sales in the comparable prior-year
period.
Gross Profit
Gross profit decreased to $2,513,000, or 19.3% of net sales, in the six months
ended March 31, 2003 from $4,494,000, or 26.9% of net sales, in the comparative
prior-year period. This decrease in gross profit, as a percentage of net sales,
was primarily the result of substantial startup costs relating to new products,
principally higher initial purchasing costs and less efficient manufacturing
operations on the Company's new beverage and vending product. In this six-month
period the Company's new Aurora product accounted for approximately 16.9% of net
sales as compared to none in the same prior year-period. While improvement from
lower purchasing costs and manufacturing efficiencies is expected in the future,
the Company's margins will continue to be affected by the mix of products sold
as well as sales volumes.
Operating Expenses
Operating expenses increased to $4,677,000, or 35.9% of net sales, in the six
months ended March 31, 2003 as compared with $4,317,000, or 25.9% of net sales,
in the comparative prior-year period. This increase of $360,000 includes a
$130,000 charge for remaining contractual payments to the Company's former
Chairman and CEO, as well as the closing of the Company's Valley Stream office.
In addition, the Company had higher engineering costs of $287,000, increased
professional fees of $125,000 and increased recruiting costs of $87,000, offset
in part by lower staffing costs.
Income Taxes
With respect to the provision for income taxes, the effective rate was 39.4% as
compared to 9.6% in the prior-year period. This increase in the effective rate
is the result of the Company's change in mix of earnings of its own operations
and earnings from its foreign affiliates.
Net Income
Net (loss) income for the six months ended March 31, 2003, was ($1,198,000), or
($0.22) per share, as compared to $244,000, or $0.04 per share, in the
comparative prior-year period. As an extension of its operations, the Company
owns non-controlling minority interests in various unconsolidated affiliates in
key regions of the world, all of which are accounted for using the equity
method. Included in the results of operations for the six months ended March 31,
2003 and 2002 are the Company's share of net profits of these affiliates of
$342,000 and $236,000, respectively. In the six months ended March 31, 2003 and
2002, equity in income of unconsolidated affiliates increased by approximately
$165,000 and $100,000, respectively, which represents the recognition of the
Company's previously deferred share of the gross profit on intercompany sales to
its affiliates that have now been recognized by these affiliates. Excluding the
intercompany gross profit adjustment, the Company's share of net income of these
unconsolidated affiliates was $177,000 and $136,000 for the six months ended
March 31, 2003 and 2002, respectively.
13
Global Payment Technologies, Inc.
March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
RESULTS OF OPERATIONS (continued)
In addition, the Company owns 100% of Global Payment Technologies (Europe)
Limited and holds a majority interest in Abacus Financial Management Systems,
Ltd., USA, whose results are consolidated in the Company's financial statements.
Three months ended March 31, 2003 compared with three months ended March 31,
2002
Sales
Net sales decreased by $1,336,000, to $7,072,000 in the three months ended March
31, 2003 as compared with $8,408,000 in the comparative prior-year period. This
decrease was primarily due to lower demand for the Company's Argus gaming
product in Eastern Europe, due principally to product issues, which have since
been resolved, and decreased sales in South America, offset in part by increased
sales of the Company's beverage and vending products. Sales of the Company's
beverage and vending products for the three months ended March 31, 2003 were
$1,893,000, or 26.8% of net sales, as compared with $687,000, or 8.2% of net
sales, in the comparable prior-year period. This increase was the result of the
Company's new Aurora beverage and vending product for which sales principally
commenced in January 2003. Sales of the Company's gaming products for the three
months ended March 31, 2003 were $5,179,000 or 73.2% of net sales, as compared
with $7,721,000, or 91.8% of net sales in the comparable prior-year period.
Gross Profit
Gross profit decreased to $1,123,000, or 15.9% of net sales, in the three months
ended March 31, 2003 from $2,371,000, or 28.2% of net sales, in the comparative
prior-year period. This decrease in gross profit, as a percentage of net sales,
was primarily the result of substantial startup costs relating to new products,
principally higher initial purchasing costs and less efficient manufacturing
operations on its new beverage and vending product. In this three-month period
the Company's new Aurora product accounted for approximately 26.8% of net sales
as compared to none in the same prior year-period. While improvement from lower
purchasing costs and manufacturing efficiencies is expected in the future, the
Company's margins will continue to be affected by the mix of products sold as
well as sales volumes.
Operating Expenses
Operating expenses increased to $2,565,000, or 36.3% of net sales, in the three
months ended March 31, 2003 as compared with $2,265,000, or 26.9% of net sales,
in the comparative prior-year period. This increase of $300,000 includes a
$130,000 charge for remaining contractual payments to the Company's former
Chairman and CEO, as well as the closing of the Company's Valley Stream office.
In addition the Company had higher engineering costs of $140,000, increased
professional fees of $79,000 and increased recruiting costs of $90,000, offset
in part by lower staffing costs.
Income Taxes
With respect to the provision for income taxes, the effective rate was 38.5% as
compared to 14.3% in the prior-year period. This increase in the effective rate
is the result of the Company's change in mix of earnings of its own operations
and earnings from its foreign affiliates.
14
Global Payment Technologies, Inc.
March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
RESULTS OF OPERATIONS (continued)
Net Income
Net (loss) income for the quarter was ($858,000), or ($0.15) per share, as
compared with $126,000, or $0.02 per share, in the comparative prior-year
period. As an extension of its operations, the Company owns interests in various
unconsolidated affiliates in key regions of the world, all of which are
accounted for using the equity method. Included in the results of operations for
the three months ended March 31, 2003 and 2002 are the Company's share of net
profits of these affiliates of $135,000 and $109,000, respectively. In the three
months ended March 31, 2003 and 2002, equity in income of unconsolidated
affiliates increased by approximately $40,000 and $50,000, respectively, which
represents the recognition of the Company's previously deferred share of the
gross profit on sales to its affiliates that have now been recognized by these
affiliates. Excluding the intercompany gross profit adjustment, the Company's
share of net income of these unconsolidated affiliates was $95,000 and $59,000
for the three months ended March 31, 2003 and 2002, respectively. In addition,
the Company owns 100% of Global Payment Technologies (Europe) Limited and holds
a majority interest in Abacus Financial Management Systems, Ltd., USA, whose
results are consolidated in the Company's 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, investments in affiliates and new
ventures, and to a lesser degree, interest payments on the Company's
indebtedness. The Company believes that its available resources, including its
credit facilities, should be sufficient to meet its obligations as they become
due and permit continuation of its planned expansion throughout fiscal 2003 and
beyond.
At March 31, 2003, the Company's cash and cash equivalents were $1,863,000 as
compared with $1,604,000 at September 30, 2002. On September 10, 2002, the
Company entered into a new credit facility with its existing bank. The total
facility was $7,000,000 and replaced all existing bank loans. It is secured by
the Company's accounts receivable. This facility is comprised of a $3.5 million,
three year revolving line of credit "RLC" with interest at the bank's prime rate
or LIBOR plus a range of 0 to 350 basis points, the existing term loan totaling
$1,466,654 with a rate of interest of 7.66% plus a range of 0 to 175 basis
points, and a new five-year term loan totaling $2,033,000, payable in equal
monthly installments with an interest rate of LIBOR plus a range of 150 to 350
basis points. As of March 31, 2003, outstanding borrowings under the term loans
and the RLC were $2,796,000 and $1,500,000 respectively.
In May 2003, the Company reached an agreement with its bank and received a
waiver of its covenants for the period ended March 31, 2003. In addition, it
amended its credit facility which includes new financial covenants the Company
expects it will meet. Further, the Company will use the proceeds of $1,900,000
from the sale of its South African affiliate to pay down its newest term loan
and the Revolving line of credit by $1,400,000 and $500,000, respectively. The
monthly payments on both term loans will remain the same. In addition, based
upon the Company's analysis of its cash flow it reduced its RLC facility from
$3.5 million to $2.0 million and has provided the bank additional security in
its inventory and cash. The term loans have been classified as a short term
liability due to the agreed upon repayment terms. The RLC has been classified as
a long term liability because no payments are due within the next twelve months.
15
Global Payment Technologies, Inc.
March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
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. Net cash provided by operating activities was $382,000
in the six months ended March 31, 2002. This amount is due to net income for the
period, adjusted for non-cash items, of $638,000, decreased accounts receivable
of $500,000 and increased accounts payable of $217,000, offset, in part by,
increased capitalized software costs of $245,000, decreased accrued expenses and
other current liabilities of $242,000, increased inventory of $372,000,
increased prepaid expenses and other assets of $75,000 and a decrease in income
taxes payable of $39,000. As the Company sells its product primarily to
international markets, it sells its products on terms generally greater than 30
days. Further the Company has agreements with its affiliates, which extend terms
in excess of 90 days. Based upon history, and the Company's current review of
its accounts receivable, it believes it is adequately reserved for potentially
uncollected accounts.
Cash used in investing activities for the six months ended March 31, 2003
amounted to $638,000 as compared with $1,468,000 in the prior-year period.
Investments in property and equipment in the six months ended March 31, 2003
amounted to $336,000 as compared with $594,000 in 2002. In addition, the Company
advanced its joint ventures $323,000 in the six months ended March 31, 2003 as
compared to net investments of $874,000 in the prior year period. In the six
months ended March 31, 2003 the Company received a dividend from its South
African affiliate in the amount of $21,000.
Cash provided by financing activities in the six months ended March 31, 2003
consisted of net borrowings of $863,000 and proceeds of $29,000 received from
the exercise of stock options. Cash provided by financing activities in the six
months ended March 31, 2002 consisted of primarily from net borrowings of
$1,100,000.
At March 31, 2003, 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:
Fiscal Operating Debt
Year Leases Repayments
---- ------ ----------
2003 $195,000 $2,079,000
2004 367,000 796,000
2005 360,000 1,500,000
2006 278,000 --
2007 -- --
In addition to the chart above, and in the normal course of business, purchase
orders are generated which obligate the Company for future inventory
requirements. As of March 31, 2003, purchase order commitments approximated $9.7
million and will be used for production requirements up to, and in excess of,
six months.
The Company has terminated its related party lease and has fully accrued for all
obligations from such lease as of March 31, 2003.
Anticipated cash flows from operations and affiliates, together with existing
lines of credit, should be adequate to meet the Company's working capital
requirements and service the long term debt as it matures.
16
Global Payment Technologies, Inc.
March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
CRITICAL ACCOUNTING POLICIES
This management 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.
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.
17
Global Payment Technologies, Inc.
March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
CRITICAL ACCOUNTING POLICIES (continued)
RESERVE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE:
At March 31, 2003, the Company's accounts receivable balance was $7.9 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. 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 the year. 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", which requires that long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of those assets may not be recoverable. 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 its 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 (loss) mix derived from the core business and
from its share of income from foreign affiliates that may have different tax
rates. Realizability of deferred tax assets are dependent upon the Company's
future profitability. To the extent the Company experiences continued losses the
recoverability of its deferred tax assets may be impaired.
RELATED PARTY TRANSACTIONS:
In addition to the related-party transactions described in "Revenue Recognition"
and "Investments in Unconsolidated Affiliates", the Company leases space, which
has been terminated effective August 31, 2003, from an entity partially owned by
the Company's former Chairman and Chief Executive Officer. The Company believes
that all such transactions are effected on an arms-length basis. See Note F for
a summary of affiliate balances and transactions.
18
Global Payment Technologies, Inc.
March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
CRITICAL ACCOUNTING POLICIES (continued)
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity," under which a liability for an exit cost was recognized at
the date of an entity's commitment to an exit plan. SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
at fair value when the liability is incurred. The provision of this statement
are effective for exit or disposal activities that are initiated after December
31, 2002. The Company has adopted SFAS No. 146 as of January 1, 2003; the impact
of the adoption was not material to the consolidated financial statements.
In December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation
- - Transition and Disclosure" ("SFAS 148"). SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation as originally provided by SFAS No. 123
"Accounting for Stock-Based Compensation". Additionally, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure in both the
annual and interim financial statements about the method of accounting for
stock-based compensation and the effect of the method used on reported results.
The transitional requirements of SFAS 148 will be effective for all financial
statements for fiscal years ending after December 15, 2002. The disclosure
requirements shall be effective for financial reports containing condensed
financial statements for interim periods beginning after December 31, 2002. The
Company adopted the disclosure portion of this statement for the fiscal quarter
ending March 31, 2003. The application of the disclosure portion of this
standard had no impact on the Company's consolidated financial position or
results of operations. The Financial Accounting Board recently indicated that
they will require stock-based employee compensation to be recorded as a charge
to earnings pursuant to a standard they are currently deliberating, which they
believe will become effective on January 1, 2004. We will continue to monitor
their progress on the issuance of this standard.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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, 2002.
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; the
Company's dependence on a limited base of customers for a significant portion of
sales; 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 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; and other risks described
in the Company's Securities and Exchange Commission ("SEC") filings.
19
Global Payment Technologies, Inc.
March 31, 2003
Item 4. Controls and Procedures
The Company's management maintains disclosure controls and procedures that are
designed to ensure (1) that information required to be disclosed by us in the
reports we file or submit under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), is recorded, processed, summarized, and reported within
the time periods specified in the Securities and Exchange Commission's ("SEC")
rules and forms, and (2) that this information is accumulated and communicated
to our management, including our Interim Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In March 2003, under the supervision and review of our Interim Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our disclosure controls and procedures. Based on that
evaluation, our Interim Chief Executive Officer and our Chief Financial Officer
have concluded that our disclosure controls and procedures are effective in
alerting them in a timely manner to material information regarding us (including
our consolidated subsidiaries) that is required to be included in our periodic
reports to the SEC. In addition, there have been no significant changes in our
internal controls or in other factors that could significantly affect those
controls since our March 2003 evaluation. We cannot assure you, however, that
our system of disclosure controls and procedures will always achieve its stated
goals under all future conditions, no matter how remote.
20
Global Payment Technologies, Inc.
March 31, 2003
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit - 99.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit - 4.1(i) Amendment and Waiver dated May 14, 2003 to the Credit
Agreement dated September 10, 2002 issued to the Company by JP Morgan
Chase.
Exhibit - 4.1(j) Amended and Restated Security Agreement dated May 14,
2003 by the Company and JPMorgan Chase
Exhibit - 4.1(k) First Note Modification Agreement dated May 14, 2003 by
the Company and JP Morgan Chase
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K
On March 20, 2003, the Company filed a Current Report on Form 8-K dated
March 19, 2003 under Item 5, announcing that Stephen Katz resigned from
his position as the Company's Chief Executive Officer.
On April 14, 2003, the Company filed a Current Report on Form 8-K dated
April 14, 2003 under Item 5, announcing that Edward Seidenberg was
appointed as a director of the Company.
On April 22, 2003, the Company filed a Current Report on Form 8-K dated
April 17, 2003 under Item 5, announcing that that the Company sold a
significant portion of its South African affiliates for which it
received approximately $1.9 million in cash.
On May 5, 2003, the Company filed a Current Report on Form 8-K dated May
5, 2003 under Item 12 announcing the Company's financial results for the
quarter ended March 31, 2003. This filing included the Company's
financial statements (balance sheet and income statements).
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has 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 15, 2003
21
I, Martin Kern, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Global Payment
Technologies, Inc. ("GPT");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. GPT's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for GPT and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to GPT, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of GPT's disclosure controls and procedures
as of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. GPT's other certifying officer and I have disclosed, based on our most recent
evaluation, to GPT's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect GPT's ability to record, process,
summarize and report financial data and have identified for GPT's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in GPT's internal controls; and
6. GPT's other certifying officer and I have indicated in this quarterly report
whether there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 15, 2003 S/ Martin H. Kern
-----------------
Interim CEO
22
I, Thomas McNeill, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Global Payment
Technologies, Inc. ("GPT");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. GPT's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for GPT and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to GPT, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of GPT's disclosure controls and procedures
as of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. GPT's other certifying officer and I have disclosed, based on our most recent
evaluation, to GPT's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect GPT's ability to record, process,
summarize and report financial data and have identified for GPT's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in GPT's internal controls; and
6. GPT's other certifying officer and I have indicated in this quarterly report
whether there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 15, 2003 S/ Thomas McNeill
-----------------
Vice President and CFO
23