UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 Commission File No. 0-25148
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Global Payment Technologies, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 11-2974651
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
20 East Sunrise Highway, Suite 201, Valley Stream, New York 11581
- ----------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(516) 256-1000
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(Issuer's telephone number, including area code)
Former name: Coin Bill Validator, Inc.
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 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 August 13, 1997 2,750,000
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<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
INDEX
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PART I. FINANCIAL INFORMATION
- -----------------------------
Page Number
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Item 1. Financial Statements
Balance Sheets - June 30, 1997 and September 30, 1996 3
Statements of Income - Nine Months ended June 30, 1997
and 1996 4
Statements of Income - Three Months ended June 30, 1997
and 1996 5
Statements of Cash Flows - Nine Months ended June 30, 1997
and 1996 6
Notes to Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-11
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K 12
INDEX OF EXHIBITS 13
- -----------------
SIGNATURES 14
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2
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
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(Dollar amounts in thousands,
except per share data)
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,174 $ 2,727
Accounts receivable, less allowance for doubtful accounts
of $276 and $268, respectively 3,943 2,789
Inventory, less allowance for obsolescence of $880 and
$1,069, respectively 5,547 3,794
Prepaid expenses 52 83
Deferred income taxes 459 570
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Total current assets 11,175 9,963
Property and equipment, net 1,230 887
Other assets 63 53
Equity in unconsolidated affiliates 230 --
------- -------
Total assets $12,698 $10,903
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 1,477 $ 807
Accrued expenses and other current liabilities 1,185 551
Income taxes payable 172 597
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Total current liabilities 2,834 1,955
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Deferred income taxes 29 29
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Shareholders' equity (See Note B):
Common stock, 20,000,000 shares authorized; $.01 par value,
5,500,000 shares issued and outstanding 55 55
Additional paid-in capital 7,951 7,951
Retained earnings 1,829 913
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Total shareholders' equity 9,835 8,919
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Total liabilities and shareholders' equity $12,698 $10,903
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
STATEMENTS OF INCOME
--------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Nine Months ended June 30,
--------------------------------
1997 1996
----------- -----------
(Dollar amounts in thousands,
except per share data)
<S> <C> <C>
Net sales $ 16,376 $ 11,921
Cost of sales 10,321 8,578
----------- -----------
Gross profit 6,055 3,343
Operating expenses 4,415 3,471
----------- -----------
Income (loss) from operations 1,640 ( 128)
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Other income (expense):
Equity in loss of unconsolidated affiliates ( 17) --
Interest income, net 29 6
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Total other income 12 6
----------- -----------
Income (loss) before provision (credit) for income taxes 1,652 ( 122)
Provision (credit) for income taxes 736 ( 49)
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Net income (loss) $ 916 ($ 73)
=========== ===========
PER SHARE DATA (See Note B):
- ----------------------------
Net income (loss) per share $ .16 ($ .01)
=========== ===========
Weighted average common shares outstanding 5,726,588 5,500,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
STATEMENTS OF INCOME
--------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months ended June 30,
--------------------------------
1997 1996
----------- -----------
(Dollar amounts in thousands,
except per share data)
<S> <C> <C>
Net sales $ 6,376 $ 4,381
Cost of sales 3,910 2,681
----------- -----------
Gross profit 2,466 1,700
Operating expenses 1,524 1,275
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Income from operations 942 425
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Other (expense) income:
Equity in loss of unconsolidated affiliates ( 30) --
Interest income (expense), net 5 ( 8)
----------- -----------
Total other (expense) ( 25) ( 8)
----------- -----------
Income before provision for income taxes 917 417
Provision for income taxes 417 167
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Net income $ 500 $ 250
=========== ===========
PER SHARE DATA (See Note B):
- ----------------------------
Net income per share $ .09 $ .05
=========== ===========
Weighted average common shares outstanding 5,744,442 5,500,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Nine Months ended June 30,
--------------------------
1997 1996
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(Dollar amounts in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 916 ($ 73)
------- -------
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
Equity in loss of unconsolidated affiliates 17 --
Depreciation and amortization 250 209
Provision for losses on accounts receivable 12 --
Provision for inventory obsolescence 25 1,132
Changes in operating assets and liabilities:
(Increase) in accounts receivable ( 1,166) ( 139)
(Increase) in inventory ( 1,778) ( 381)
Decrease (increase) in prepaid expenses 31 ( 63)
Decrease (increase) in deferred income taxes 111 ( 15)
(Increase) in other assets ( 10) ( 16)
Increase (decrease) in accounts payable 670 ( 612)
Increase (decrease) in accrued expenses 634 ( 22)
(Decrease) in income taxes payable ( 425) ( 340)
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Total adjustments ( 1,629) ( 247)
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NET CASH USED IN OPERATING ACTIVITIES ( 713) ( 320)
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INVESTING ACTIVITIES:
Investments in unconsolidated affiliates ( 247) --
Purchases of property, plant and equipment, net of proceeds from
disposals ( 593) ( 477)
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NET CASH USED IN INVESTING ACTIVITIES ( 840) ( 477)
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FINANCING ACTIVITIES:
Increase in notes payable to bank -- 462
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NET CASH PROVIDED BY FINANCING ACTIVITIES -- 462
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NET DECREASE IN CASH AND CASH EQUIVALENTS ( 1,553) ( 335)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,727 1,811
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,174 $ 1,476
======= =======
CASH PAID DURING THE PERIOD FOR:
Interest $ -- $ 9
======= =======
Income taxes $ 1,050 $ 499
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Global Payment Technologies, Inc.
Notes to Financial Statements
June 30, 1997
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements of Global Payment Technologies,
Inc. (the "Company"), including the September 30, 1996 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-QSB and Rule 310 of Regulation SB.
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 nine-month and three-month periods ended June 30, 1997
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the period ended September 30, 1996.
NOTE B - SUBSEQUENT EVENT (STOCK SPLIT)
- ---------------------------------------
In August 1997, the Company announced a two-for-one stock split of its Common
Stock. The split will be effected by a 100% dividend for each holder of Common
Stock on August 18, 1997, the record date. The distribution date is September 4,
1997. All information contained in the financial statements has been
retroactively restated to give effect to this stock split.
NOTE C - EQUITY IN UNCONSOLIDATED AFFILIATES
- --------------------------------------------
In August 1996, the Company acquired a 50% non-controlling interest in a South
African affiliate. This entity is responsible for sales and service of the
Company's products in the South African region, on an exclusive basis. The
results of operations for the nine months and three months ended June 30, 1997
include equity in loss of this affiliate in the amounts of $17,000 and $30,000,
respectively.
During the second quarter of 1997, the Company acquired a 50% non-controlling
interest in a China-based affiliate, through the Company's Delaware affiliate,
CBV China Venture Limited. This entity manufactures plastic components, some of
which are used by the Company in its production. In addition, the Company is
obligated to loan up to $300,000 on the following terms; loans shall bear
interest at the rate of 1 1/2% above the prime rate prevailing from time to time
at Chase Manhattan Bank. The Delaware affiliate will repay principal and
interest on the loan, in amounts not less than 60% of its China-based
subsidiary's net income, on a quarterly basis. During the second and third
quarters of 1997, the Company has loaned $220,000 to this entity, none of which
has been repaid as of this date.
NOTE D - INVENTORY OBSOLESCENCE
- -------------------------------
During the second quarter of 1996, the Company wrote down inventory in the
amount of $1.1 million associated with early generation products, the future
sales of which management believed would be adversely impacted by sales of newly
released products. This writedown was charged to cost of sales.
7
<PAGE>
Global Payment Technologies, Inc.
Notes to Financial Statements (continued)
June 30, 1997
NOTE E - NET INCOME (LOSS) PER SHARE
- ------------------------------------
For the nine months and three months ended June 30, 1997, net income per share
includes the impact of 226,588 and 244,442 weighted average common stock
equivalents, respectively, based on stock options outstanding using the treasury
stock method. Primary and fully diluted net income per share are the same
amounts for the nine months and three months ended June 30, 1997. For the nine
months and three months ended June 30, 1996, common stock equivalents, as
calculated using the treasury stock method, were anti-dilutive and therefore not
included in the net income (loss) per share calculation.
NOTE F - RECENTLY ISSUED ACCOUNTING STANDARDS
- ---------------------------------------------
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
("EPS"), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of operations. Under this new standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and earlier application is not
permitted. When adopted, the Company will be required to restate its EPS data
for all prior periods presented. The Company does not expect the impact of the
adoption of this statement to be material to previously reported EPS amounts.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
Nine months ended June 30, 1997 compared to nine months ended June 30, 1996
- ---------------------------------------------------------------------------
Sales
Net sales increased by 37.4%, or $4,455,000, to $16,376,000 in the nine months
ended June 30, 1997 from $11,921,000 in the comparative prior year period. The
Company attributed the strong revenue growth to increased demand for its bill
validator products primarily in the international gaming industry.
Gross Profit
Gross profit increased to $6,055,000 or 37.0% of net sales, in the nine months
ended June 30, 1997 from $3,343,000, or 28.0% of net sales, in the comparative
prior year period. The prior year's results were significantly impacted by an
inventory writedown of approximately $1.1 million. Excluding this writedown, the
Company's gross profit as a percent of sales was 37.5%. This decrease in gross
profit as a percent of sales is due to increased product costs, manufacturing
labor and benefit costs as well as a reduced gross profit on sales to a new
customer in the beverage and vending division, substantially offset by
operational efficiencies.
Operating Expenses
Operating expenses increased to $4,415,000 in the nine months ended June 30,
1997 from $3,471,000 in the comparative prior year period. This increase was
principally due to increased staffing and related payroll costs to support
expansion of engineering efforts as well as increased selling and administrative
expenses to support marketing activities associated with the Company's growth
strategy. As a percentage of sales, the Company has reduced its operating
expenses to 27.0% from 29.1% as the infrastructure recently put in place has
been able to efficiently support the Company's growth.
Other Income
Other income was $12,000 in the nine months ended June 30, 1997 as compared with
$6,000 in the comparative prior year period. This increase was due principally
to increased interest income of $23,000, offset by $17,000 equity in loss of an
unconsolidated affiliate in South Africa.
Net Income (Loss)
Net income for the nine months ended June 30, 1997 was $916,000, or $.16 per
share, as compared with a loss of ($73,000), or ($.01) per share, in the
comparative prior year period. The increased net income for the nine months
ended June 30, 1997 was primarily attributable to the pre-tax inventory
writedown recorded in the prior year. Excluding the impact of the inventory
writedown, net income would have been $606,000, or $.11 per share, in the nine
months ended June 30, 1996. The Company continues to reinvest a large portion of
increased gross profit dollars into its operations to support its sales growth
and increased spending on research and development for new products.
9
<PAGE>
Results of Operations (continued)
- ---------------------------------
Three months ended June 30, 1997 compared to three months ended June 30, 1996
- -----------------------------------------------------------------------------
Sales
Net sales increased by 45.5%, or $1,995,000, to $6,376,000 in the three months
ended June 30, 1997 from $4,381,000 in the comparative prior year period. The
Company attributed the strong revenue growth to increased demand for its bill
validator products primarily in the international gaming industry.
Gross Profit
Gross profit increased to $2,466,000 or 38.7% of net sales, in the three months
ended June 30, 1997 from $1,700,000, or 38.8% of net sales, in the comparative
prior year period.
Operating Expenses
Operating expenses increased to $1,524,000 in the three months ended June 30,
1997 from $1,275,000 in the comparative prior year period. This increase was
principally due to increased staffing and related payroll costs to support
expansion of engineering efforts and increased selling and administrative
expenses to support marketing activities associated with the Company's growth
strategy. As a percentage of sales, the Company has reduced operating expenses
to 23.9% from 29.1% as the infrastructure recently put in place has been able to
efficiently support the Company's growth.
Other Expenses
Other expenses were $25,000 in the three months ended June 30, 1997 as compared
with $8,000 in the comparative prior year period. This increase was due to
$30,000 equity in loss of an unconsolidated affiliate in South Africa, offset by
an increase in interest income of $13,000.
Net Income
Net income for the quarter was $500,000, or $.09 per share, as compared with
$250,000, or $.05 per share, in the comparative prior year period. The Company
continues to reinvest a large portion of increased gross profit dollars into its
operations to support its sales growth and increased spending on research and
development for new products.
Liquidity and Capital Resources
- -------------------------------
The Company's capital requirements consist primarily of those necessary to
continue to expand and improve manufacturing and product development
capabilities, sales and marketing operations, investments in affiliates, and to
a lesser extent, interest payments should the Company decide to utilize
borrowings to fund future growth. The Company believes that its available
resources, including its credit facility, should be sufficient to meet its
obligations as they become due and permit continuation of its planned expansion
throughout fiscal 1997 and beyond.
10
<PAGE>
Liquidity and Capital Resources (continued)
- -------------------------------------------
At June 30, 1997, the Company's cash and cash equivalents were $1,174,000
compared with $2,727,000 at September 30, 1996. The Company has a $5,000,000
secured line of credit from a financial institution, none of which was
outstanding at June 30, 1997 or at September 30, 1996. Such line of credit
expires on March 31, 1998.
Cash used in operations was $713,000 in the nine months ended June 30, 1997.
This cash used was primarily attributable to increased accounts receivable of
$1,166,000, increased inventories of $1,778,000 and decreased income taxes
payable of $425,000, offset by increased accounts payable of $670,000, increased
accrued expenses of $634,000 and net income of $916,000. During the nine months
ended June 30, 1996, cash used in operations was $320,000. This use of cash was
primarily attributable to the net loss of $73,000, increased inventory of
$381,000, decreased accounts payable of $612,000 and decreased income taxes
payable of $340,000, offset by a provision for inventory obsolescence of
$1,132,000.
Cash used in investing activities for the nine months ended June 30, 1997
amounted to $840,000 compared with $477,000 in the prior year period. In 1997,
the Company loaned $220,000 to a China-based plastic manufacturing entity
through its Delaware affiliate. The Company also loaned $27,000 to an affiliate
in South Africa. The remaining investing activities of $593,000 in the nine
months ended June 30, 1997 and all investing activities in the comparable prior
period of $477,000 were for the purchase of property and equipment.
Cash provided by financing activities in the nine months ended June 30, 1996 was
related to borrowings of $462,000, which were subsequently repaid by September
30, 1996.
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; dependence on a limited number of suppliers for key components and
raw materials; potential difficulties in managing growth; dependence on key
personnel; the Company's limited customer base and reliance on a relatively
small number of customers for a significant portion of its sales; the possible
impact of competitive products and pricing; and other risks described in the
Company's Securities and Exchange Commission filings.
11
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
--------
See Index of Exhibits (page 13) for a listing filed with this
Quarterly Report on Form 10-QSB.
b) Reports on Form 8-K
-------------------
The Company filed a Current Report on Form 8-K, the date of which
was July 7, 1997, under Item 5 of such Report, relating to the
merger into a Delaware corporation effective June 25, 1997.
12
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
INDEX OF EXHIBITS
-----------------
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule.
13
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
---------------------------------
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Global Payment Technologies, Inc.
By: s/ Edward Seidenberg
-------------------------
Vice President and
Chief Operating Officer
Dated: August 13, 1997
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,174
<SECURITIES> 0
<RECEIVABLES> 4,219
<ALLOWANCES> 276
<INVENTORY> 5,547
<CURRENT-ASSETS> 11,175
<PP&E> 1,907
<DEPRECIATION> 677
<TOTAL-ASSETS> 12,698
<CURRENT-LIABILITIES> 2,834
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 9,780
<TOTAL-LIABILITY-AND-EQUITY> 12,698
<SALES> 16,376
<TOTAL-REVENUES> 16,376
<CGS> 10,321
<TOTAL-COSTS> 14,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,652
<INCOME-TAX> 736
<INCOME-CONTINUING> 916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 916
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
