U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Mark One
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 0-25148
GLOBAL PAYMENT TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Delaware 11-2974651
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
20 East Sunrise Highway, Suite 201, Valley Stream, New York 11581
(Address of principal executive office) (Zip Code)
Issuer's telephone number 516-256-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Check whether the issuer (1) 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 [ ]
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. [ ]
For the fiscal year ended September 30, 1997, the net sales of the
registrant were $23.9 million.
The aggregate market value of the Common Stock of the registrant held by
nonaffiliates of the registrant, based on the average bid and asked prices on
December 17, 1997, was approximately $29,150,000.
As of December 17, 1997, the registrant had a total of 5,506,500 Common
Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the year ended September 30, 1997 are
incorporated by reference into Part III.
Transitional Small Business Disclosure format (Check one): Yes [ ] No [X]
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PART I
Item 1. Description of Business
General
Global Payment Technologies, Inc. (the "Company") was originally incorporated in
New York in 1988 under the name Coin Bill Validator, Inc. In March 1997, the
Company's shareholders approved a change of the Company's name and state of
incorporation from New York to Delaware, effected through the merger of the
Company into the Company's wholly-owned subsidiary, Global Payment Technologies,
Inc., a Delaware corporation.
The Company designs and manufactures currency validation systems including paper
currency validators and related paper currency stackers, and sells its products
in the United States and numerous international markets. Validators receive and
authenticate paper currencies in a variety of automated machines, including
gaming machines and beverage and vending machines, which dispense products,
services, coinage and other currencies. Note stackers are sold with most
validators and are designed to store validated paper currency and, in some
cases, record and store information on contents, usually in secure removable
cassettes. Although the Company knows of no commercially available validator
that is counterfeit-currency-proof, the Company's validators and stackers offer
significant protection against tampering and counterfeit currencies and provide
tamper-evident storage of validated currency. The Company's validators are
adaptable to a wide variety of OEM (original equipment manufacturer)
applications and have been engineered into the design of most major gaming
machines sold worldwide. The Company's products offer a highly competitive level
of performance and are designed to provide ease of maintenance and repair.
In August 1996, the Company acquired a 50% non-controlling interest in a South
African affiliate, Global Payment Technologies South Africa Pty. Ltd. This
entity is responsible for sales and service of the Company's products in the
South African region, on an exclusive basis.
In January 1997, the Company acquired a 50% non-controlling interest in a
China-based affiliate, Hangzhou CBV Plastics Corp. Ltd. This entity manufactures
plastic and metal components, some of which are used by the Company in its
production.
In August 1997, the Company acquired a 50% non-controlling interest in an
Australian affiliate, Global Payment Technologies Australia Pty. Ltd. This
entity is responsible for sales and service of the Company's products in
Australia and New Zealand, on an exclusive basis.
Background and History
In the 1980s, a general trend developed with respect to an increase in the
incorporation of paper currency validators in a large number of beverage, food
and novelty vending machines that offered primarily low-priced items. Subsequent
technological improvements in the sensory capabilities of validators created the
ability to process high volumes of larger denomination
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notes which led to the extensive use of validators in casino gaming machines.
This trend accelerated during the 1990s as a result of overall growth in the
worldwide gaming industry.
Since incorporation, the Company's net sales have grown from approximately
$35,000 in fiscal 1989 to approximately $16.7 million in fiscal 1996, and to
approximately $23.9 million in fiscal 1997. Prior to January 1993, the Company's
marketing efforts were directed primarily towards domestic distribution and
end-users that focused on the replacement and retrofit markets for validators in
amusement and gaming machines. Commencing in January 1993, the Company began to
focus its marketing efforts on OEMs of gaming machines and automated vending
machines that dispense beverages, telephone cards and postage stamps. In
addition, since January 1993, the Company has progressively increased its
marketing efforts to the international market for currency validation systems,
in particular targeting the international gaming industry. The Company's
international sales amounted to approximately 73 percent of net sales in both
fiscal 1997 and 1996. Management believes the international market for currency
validation systems may grow at a faster rate than in the United States and,
therefore, may represent the Company's best long-term growth opportunity.
Marketing Strategy
In the past, the Company has focused its marketing efforts on those segments of
the marketplace requiring a relatively high degree of security and substantial
custom design work that was often not efficiently served by larger competitors
who focused primarily on the broader, higher-volume market for standardized
product configurations. This "niche" strategy allowed the Company to develop
domestic and international customers who were too new or too small to attract
larger competitors. During fiscal 1997, the Company began to redefine and
broaden its niche strategy and was successful in establishing itself as a
leading provider of validators to the international gaming market. As a result,
the Company's validators have been engineered into the design of most major
OEMs' gaming machines worldwide. Therefore, the difficult first step of being
able to have its products offered as an option has been accomplished. During
fiscal 1998, the Company's marketing strategy will focus both on the OEMs and on
the end-users (operators) who purchase machines from the OEMs to help assure
that the Company's validator products will be specified as the product of choice
in new machine orders. In the domestic gaming market, along with opportunities
for sales to OEMs, the Company will focus on the retrofit market in key
geographic regions, such as Nevada, where gaining market penetration will
provide the Company with improved visibility and credibility in the overall
domestic gaming marketplace.
In the first quarter of fiscal 1997, the Company announced the creation of a new
division to focus additional sales and marketing efforts on the beverage and
vending industries, where the Company's market presence has been limited. The
primary focus of this division, and the sales successes achieved during the
year, have been and will continue to be in developing the international market
for validator products in vending equipment, particularly in emerging new
markets in the Pacific Rim and Eastern Europe. Management believes this strategy
will assist in providing the Company with increased visibility and credibility
in the overall beverage and
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vending industries such that a base of business can be established from which
the large and highly competitive domestic marketplace might then be addressed.
The Company's overall sales and marketing strategy in both the worldwide gaming
and beverage and vending markets is to deliver a high quality product supported
by a local sales and service organization in order to make the Company's
products the market standard for currency validation products. The Company has
successfully pursued this strategy in Australia with its largest customer, with
whom the Company has an exclusive supply agreement, and in the South African
gaming market where the Company's products are accepted as the industry
standard. Also toward this end, during fiscal 1996 and fiscal 1997, the Company
established 50%-owned joint ventures which provide local sales and service in
both Australia and South Africa and strengthened its distributor relationship in
Italy.
The continued success of the Company may be dependent upon the use of paper or
simulated paper currency in automated payment systems for gaming and beverage
and vending applications. A substantial diminution of the use of paper currency
as a means of payment through a return to extensive use of high-value,
metal-based coinage or the widespread adoption of electronic funds transfer
systems based on credit, debit or "smart-cards" could materially and adversely
affect the Company's future growth until and unless the Company develops other
products that are not solely dependent on the use of paper or simulated paper
currency. The Company believes that aspects of its technology and manufacturing
expertise - for example, the technology applicable to electro-optical scanning
and certain of its patented technologies and proprietary algorithms, may be
applicable to products and systems for conducting transactions using other than
paper currency. The Company is currently investigating and will continue to
investigate such opportunities and endeavor to develop new product applications
where markets for such products may exist. However, no assurance can be given
that the Company will be able to successfully develop and market such new
products and systems.
Products
Since inception, the Company has endeavored, through its research and
development and manufacturing efforts, to provide products that meet the
specific performance requirements of its customers. These requirements are
continually evolving as the markets for currency validators continue to grow and
as technological advances are incorporated into the products' design. The
Company spent approximately $245,000 and $61,000 during fiscal 1997 and fiscal
1996, respectively, on research and development. The Company's research and
development consists primarily of efforts to expand its product lines into new
applications and markets. The Company's new product development efforts are
focused on the design of its next generation of validator products, which the
Company anticipates will be commercially available sometime in the second half
of calendar 1998. Included among the new generation of validators, the Company
plans to introduce new product models designed specifically to address the
requirements of the highly competitive beverage and vending marketplace. These
products, along with new products for the international gaming market, are
intended to allow the
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Company to increase its overall market penetration and share in the domestic and
international marketplace.
During fiscal 1997, the Company's principal products included three basic
validator models, a wide range of comprehensive currency databases and note
stacker configurations. Throughout fiscal 1997, the Company's planned shift in
demand towards its Generation II product line continued, and such sales
accounted for approximately 58 percent of unit sales for the year then ended.
This shift is expected to continue during fiscal 1998. The Company believes it
is adequately reserved for inventory obsolescence for the anticipated shift in
demand towards its Generation II products.
The Model 125 ("M-125") is the Company's first generation multi-country,
multi-denominational validator model specifically designed for the beverage and
vending industries where its space-saving upstack design makes it popular for
use in machines where space is at a premium. The M-125's note stackers are fully
detachable and available with capacities of 150, 300 and 600 notes. During
fiscal 1997, M-125 sales were particularly strong in vending applications in
Italy, helping to grow the Company's presence and credibility in that important
European market.
The Model IVO ("M-IVO") is the Company's first generation multi-country,
multi-denominational validator designed to fit machines where space is available
either to the rear or downward. The M-IVO is available with locking removable
cassette bill stackers in 500, 1,000 and 2,000 bill capacities and is United
States Postal Service, Department of Gaming Enforcement (New Jersey, USA) and
Gaming Laboratories, Inc. approved.
The Company's Generation II product line features several technological advances
designed specifically to meet the exacting requirements of the gaming industry.
During fiscal 1997, the Generation II line was extended and includes the
Company's "IDS," "IDUS," "IBS," and "IBSi," validators. The IBSi has been
positioned as a replacement for the Company's first generation M-IVO validator.
Generation II products have been approved by Gaming Laboratories, Inc. as well
as by a number of U.S. and international test labs.
Generation II validators are offered in a wide variety of configurations which
can provide solutions for most worldwide gaming markets as well as many beverage
and vending markets. Generation II validators can be configured for down-stack
applications which allow the note stacker, a security removable cassette, to be
reached through a separate front entrance in the gaming machine. Rear stacker
configurations are also available. The front section of all Generation II
validator units can be opened easily to allow for maintenance, repair or
clearance of the currency pathway without violating the integrity of the
associated security stacker. Generation II validators offer currency acceptance
of notes up to 3.34 inches (85 mm) in width and have enhanced features for
gaming and high security applications. These features include a multi-level high
security validation process with patent pending side-looking sensors, an
animated bill runway with "smart visuals" for customer attraction and
diagnostics, a user-selectable currency denomination acceptance and an optional
bar-code reader for tickets and coupons. The Generation II line also offers a
"soft drop analyzer" ("SDA") option. The
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patented SDA feature allows the note stacker cassette to maintain and track
specific information such as currency or coupons in the cassette by quantity and
denomination; the specific machine or game that the cassette was removed from;
the acceptance rate of the validator; and time-in/time-out of the cassette from
the gaming machine. This information can be easily downloaded, via a docking
station provided by the Company, to a personal computer allowing instant
feedback/tracking for the machine operator.
Product Performance and Warranties
The Company's validator and note stacker products are generally covered by a
one-year warranty against defects in materials or workmanship, which the Company
believes is standard for the industry. The Company will repair or replace, at
its factory, any units which require warranty service. The Company does not
warrant that its validators will reject all counterfeit currencies and believes
that there is no commercially available validator that is
counterfeit-currency-proof or warranteed as such. To support its increasing
international market presence, the Company, during fiscal 1997, expanded its
warranty and non-warranty support coverage to provide in-country capability in
key worldwide markets (e.g. Australia and South Africa). In these countries, the
local sales and service joint venture partners provide all warranteed labor
while the Company's primary product support is in the form of warranty parts.
Marketing and Sales
An "in-house" sales force consisting of sales representatives, sales/product
technicians and customer service support personnel conducts the Company's
primary sales and marketing efforts in both the domestic and international
markets. During the latter part of fiscal 1996 and during fiscal 1997, the
Company established 50%-owned joint ventures providing local sales and service
in the key markets of South Africa and Australia and a Company-owned sales and
service office was opened in the important Las Vegas, Nevada market. The overall
sales and service network provides effective international coverage for the
Company's products and customers and is an indication of the Company's
commitment to providing superior service worldwide.
During fiscal 1997, the Company expanded the internal sales and marketing
structure to include a "Technical Services Group" to address new market
opportunities. The Company also established a new, dedicated "Customer Service
Group" to serve as the focal point of all post-sale customer inquiries. During
fiscal 1998, the Company anticipates further expansion of the sales and
marketing structure to support additional sales opportunities worldwide.
Customer Concentration
During fiscal 1997, the Company's largest customer accounted for approximately
54 percent of net sales. Net sales to the gaming industry accounted for
approximately 79 percent of the Company's revenues, with the remaining 21
percent primarily from product applications in the beverage and vending
industries. The Company anticipates reducing its dependence on its largest
customer and the gaming industry, by expanding its customer base, when its next
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generation of validation products is introduced and has had an opportunity to
penetrate the market.
Manufacturing
Since 1995, the Company's operations have been conducted from a leased facility
of 40,000 square feet housing manufacturing and administrative functions in
Hauppauge, New York. During fiscal 1997, due to the need for increased
production space to meet ongoing and anticipated future sales growth, the
Company leased an additional 4,400 square feet of space located adjacent to the
existing Hauppauge facility.
The Company's manufacturing operations consist primarily of mechanical and
electro-optical assembly and the provision of wiring harnesses between
components and between the validator and the OEM machine in which the finished
product is to be used. The Company routinely tests all components and has
extensive "burn-in" procedures for both the electronic components and the final
assembled product. Direct control over fabrication and testing permits the
Company to shorten its production cycle and protect patented and proprietary
technology. During fiscal 1997, the Company significantly improved its overall
manufacturing productivity as measured by a production capacity increase of
approximately 60 percent achieved without adding a production shift. Management
believes additional productivity improvements can be realized and will continue
to focus the Company's efforts on achieving production efficiencies while
maintaining high quality standards for its products and the work environment for
its associates.
The Company depends on a limited number of suppliers for various stamped or
formed housings, gears, cogs and wheels and electronic assemblies or components,
including certain microprocessor chips. The Company believes that concentrating
its purchases from its existing suppliers provides, in certain cases, better
prices, better quality and consistency and more reliable deliveries. The Company
maintains on-going communications with its suppliers to prevent interruptions in
supply and, to date, generally has been able to obtain adequate supplies in a
timely manner. The Company has entered into volume blanket purchase agreements
with selected suppliers to guard against shortages of unique components, thereby
limiting the Company's exposure to business interruptions. Furthermore, many of
the electronic components used by the Company, including its microprocessors,
are widely used in many applications and are available from a number of sources.
However, the short wavelength light source which forms a critical part of the
Company's optical scanning device is now commercially available from only a very
limited number of suppliers. The Company believes that if such supply were to
become unavailable, its units could be redesigned to use other light sources and
still remain competitive in the marketplace. However, any interruption in the
supply of key components which cannot be quickly remedied could have a
materially adverse effect on the Company's results of operations.
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Competition
The market for the Company's products is very competitive. A number of
competitors have significantly greater financial, technical, sales and marketing
resources than the Company. A number of competitors offer products that target
the same markets as do the Company's products. In the domestic market, certain
competitors are divisions or affiliates of manufacturers of vending machines.
For example, Royal Vendors, Inc. is an affiliate of Coin Acceptors, Inc.
("Coinco") and Rowe Validator ("Rowe") is a division of Rowe International, Inc.
Accordingly, such validator manufacturers enjoy a competitive advantage in
providing for the significant validator requirements of their affiliates. For
validators sold for use in beverage, food, snack and lower-priced goods or
amusement vending, the market is dominated by Coinco, with Mars Electronics
International ("MEI"), Ardac, Inc. ("Ardac") and Rowe also being significant
competitors. The largest supplier of validators used in gaming machines for the
domestic market is Japan Cash Machines Co., Ltd. ("JCM"). The Company has
focused its marketing efforts on the higher-priced domestic validator market and
competes on the basis of quality, durability and performance while maintaining a
reasonable level of protection against tampering and counterfeit currencies, as
well as a competitive price point.
In the international markets, the Company competes for gaming machine business
with JCM, Ardac, Cashcode Company, Inc., MEI and Diversified Systems, Inc.,
while for product and service vending machines, the Company competes with these
competitors as well as Coinco, Sanyo Electric Company (primarily in the Middle
East), Conlux USA Corporation, Coegis, Innovative Technology, Ltd. and various
smaller local manufacturers. The Company historically has been more willing to
address smaller markets than its larger competitors and expects to encounter
increased competition as the markets addressed by its products continue to grow.
The Company believes that performance, quality and protection against tampering
and counterfeit currency are relatively more important and price relatively less
important, as competitive factors in the international marketplace.
Intellectual Property
The Company relies on certain proprietary know-how and trade secrets to protect
its technology. Important components of this proprietary information are the
Company's library of distinguishing characteristics of the currencies which its
validators scan and validate and its proprietary algorithms. The Company has
entered into non-disclosure and secrecy agreements with all of its key employees
having access to this technology.
In addition, the Company holds six U.S. patents as follows: "Paper Currency
Acceptor and Method of Handling Paper Currency for Vending Machines and the
Like," granted December 5, 1989; "Bill Accumulating and Stacking Device,"
granted June 21, 1994; "Method of Insuring Alignment of Currency in Currency
Validators," granted June 18, 1996; design for "Escrow Box for Coin Operated
Machines," granted April 22, 1986; "Anti-fraud Currency Acceptor," granted
November 9, 1993; and "Soft Count Tracking System," granted May 5, 1997. The
first three patents cover technology used in the Company's first and second
generation validator product lines and the remaining patents cover technology
used in certain special models. The
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Company has also applied for four additional U.S. patents, the most important of
which covers the use of side looking sensors as an anti-fraud feature and the
use of short wave-length light in a validator to discern the color and other
characteristics of bills being scanned.
In addition to its U.S. patents and patents pending, the Company has also
applied for patent protection for its soft count tracking system in a large
number of international markets. If issued, and if corresponding foreign patents
are obtained, the Company believes these patents could provide important
protection for certain technological advantages its validators have in
international markets. However, the Company believes that it will not be
materially and adversely affected if these patents are not issued. No assurances
can be given that any patent applications will result in the issuance of
additional patents. As of this date, the Company has received no foreign
patents.
Although the Company has not received any claims that its products infringe on
the proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company in the future or
that any such assertion may not require the Company to enter into royalty
arrangements or result in protracted or costly litigation.
Government Regulation
As a supplier of paper currency validators to customers subject to gaming
regulations and postal regulations, the Company is indirectly subject to such
regulations that are reflected in customer purchase orders or customer
specifications. The Company believes that it is in full compliance with such
regulations. Any failure to comply with such regulations, however, could have a
materially adverse effect on the results of operations of the Company.
Employees
On December 15, 1997, the Company had 184 employees, including 6 executives; 12
sales and customer service representatives; 30 engineers and software
developers; 28 materials, quality control and quality assurance personnel; 6
administrative personnel; 8 clerical personnel; and 94 assembly/factory workers.
The Company believes its relationship with its employees is good.
Special Note Regarding Forward-Looking Statements
A number of statements contained in this report 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; dependence on a limited base of
customers for a significant portion of sales; the risks that its current and
future products may contain errors or defects that would be difficult and costly
to detect and correct; potential difficulties in manufacturing operations;
potential shortages of key parts and/or raw materials; potential difficulties in
managing growth;
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dependence on key personnel; the possible impact of competitive products and
pricing; possible risks of product inventory obsolescence; uncertainties with
respect to the Company's business strategy; general economic conditions in the
domestic and international markets; and other risks described in the Company's
Securities and Exchange Commission filings.
Item 2. Description of Property
The Company leases approximately 44,400 square feet housing manufacturing and
administrative functions in Hauppauge, New York, for a term expiring March 31,
2000, at an annual base rental of $240,000, increasing annually to approximately
$300,000 in the final year of the term. The Company believes this facility is
adequate for its manufacturing needs for the foreseeable future. The Company
leases approximately 6,600 square feet in Valley Stream, New York, for a term
expiring February 28, 2002, at an annual base rental of $150,000 increasing
annually to approximately $170,000 in the final year of the term. This facility
houses the executive, accounting and certain sales functions of the Company. The
Company also leases approximately 2,300 square feet in Las Vegas, Nevada, for a
term expiring April 30, 2000, at an annual base rental of $19,700 increasing
annually to approximately $21,700 in the final year of the term. This facility
houses certain sales and service functions of the Company.
Item 3. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
a) Market Information
The Company's Common Stock is listed and trades on the NASDAQ National Market
System under the symbol GPTX. The following table sets forth, on a per share
basis, the high and low sale prices for the Company's Common Stock for each
quarter of fiscal 1997 and fiscal 1996.
Common Stock
---------------------
Quarter Ended High* Low*
------------- ----- ----
December 31, 1995 4 7/16 3
March 31, 1996 3 5/8 2 3/4
June 30, 1996 6 3/4 2 3/4
September 30, 1996 5 7/8 3 11/16
December 31, 1996 5 3/4 4 7/16
March 31, 1997 6 5/16 4 3/4
June 30, 1997 9 1/2 4 5/16
September 30, 1997 12 1/4 7 1/2
*All prices give retroactive effect to a two-for-one stock split, in
the form of a stock dividend, distributed on September 4, 1997.
b) Holders
The approximate number of beneficial holders of the Company's Common Stock as of
December 16, 1997, was 860.
c) Dividends
The holders of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. The Company has never in the past
declared or paid any cash dividends and does not expect to declare or pay any
cash dividends in the foreseeable future.
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Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Fiscal year ended September 30, 1997 compared with September 30, 1996
For the fiscal year ended September 30, 1997, the Company's net income was
$1,475,000, or $0.25 per share, as compared with $272,000, or $0.05 per share,
for the fiscal year ended September 30, 1996. Fiscal 1996 net income and net
income per share figures reflect a pre-tax inventory write-down of $1.1 million
related to certain early generation products, the future sales of which
management believes have been and will be adversely impacted by sales of newly
released products. Excluding the effect of the inventory write-down, fiscal 1997
net income increased 63% compared with pro forma net income of $906,000, or
$0.16 per share, in fiscal 1996. (Net income per share figures give retroactive
effect in all periods to a two-for-one stock split, in the form of a stock
dividend, distributed on September 4, 1997.) At the end of fiscal 1996 and
during fiscal 1997, the Company purchased 50% non-controlling interests in local
sales and service organizations in South Africa and Australia and in a plastics
manufacturing firm in China. Included in the results of operations for fiscal
1997 are the Company's share of the profits and losses of these three
unconsolidated affiliates.
Net sales for fiscal 1997 increased by 43% to $23.868 million as compared with
$16.693 million in fiscal 1996. The sales growth in fiscal 1997 is attributed to
increased demand for the Company's bill validator products primarily in the
international gaming industry and reflects a substantial increase in sales to
the Company's largest customer which accounted for 54% and 37% of net sales in
fiscal 1997 and fiscal 1996, respectively. While the Company anticipates
increasing sales to its largest customer, management is working to develop a
broader customer base, which will serve to reduce its dependence on any one
customer. Net sales to international customers accounted for 73% of net sales in
both fiscal 1997 and fiscal 1996.
Gross profit increased to $8.986 million, or 37.6% of net sales, in fiscal 1997
as compared with $5.257 million, or 31.5% of net sales, in the 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 38.3%. 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, which was substantially offset by operational
efficiencies.
Operating expenses in fiscal 1997 increased by 33.5% to $6.378 million as
compared with $4.777 million in fiscal 1996. This increase was principally due
to increased staffing and related payroll costs necessary to support the sales
growth in fiscal 1997 as well as to support the Company's growth strategy in
fiscal 1998 and beyond. In addition, the Company incurred commission expense in
the fourth quarter of fiscal 1997 of approximately $300,000 as compared with
none in fiscal 1996. These commissions were primarily in the form of payments to
the Company's new Australian affiliate, which is responsible for sales and
service
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in Australia and New Zealand, on an exclusive basis. As a percent of sales, the
Company has reduced its operating expenses to 26.7% in fiscal 1997 as compared
with 28.6% in fiscal 1996, as the infrastructure recently put in place has been
able to efficiently support the Company's growth.
Fiscal year ended September 30, 1996 compared with September 30, 1995
For the fiscal year ended September 30, 1996, the Company's net income was
$272,000, or $0.05 per share, as compared with $1.551 million for the fiscal
year ended September 30, 1995. On a pro forma basis, assuming a C Corporation
income tax provision for the entire year, the Company earned $1.116 million, or
$0.23 per share, in fiscal 1995. (Net income per share figures give retroactive
effect in all periods to a two-for-one stock split, in the form of a stock
dividend, distributed on September 4, 1997.) This year-to-year decline in net
income is primarily attributable to an inventory write-down taken in the second
quarter of fiscal 1996 in the approximate amount of $1.1 million, on a pre-tax
basis. This write-down relates to certain early generation products, the future
sales of which management believes will be adversely impacted by sales of newly
released products. The decline also reflects increased operating expenses
associated with higher facility costs and investments in additional personnel.
Excluding the impact of the inventory write-down, net income would have been
$906,000, or $0.16 per share, in fiscal 1996.
Net sales increased by 18.2%, or $2.568 million, to $16.693 million in fiscal
1996 as compared with $14.125 million in fiscal 1995. The increase is
attributable to increased sales of the Company's new product line of paper
currency validators and related paper currency stackers to domestic and
international OEM customers, primarily in the gaming industry. Net sales to
international customers increased substantially in fiscal 1996 and represented
73% of net sales as compared with 37% of net sales in fiscal 1995.
Gross profit decreased by 6.6% to $5.257 million, or 31.5% of net sales, in
fiscal 1996 as compared with $5.629 million, or 39.9% of net sales, in fiscal
1995. The decrease was primarily due to the inventory write-down previously
described as well as the result of increased overhead costs associated with the
Company's new facility and increased direct and indirect labor costs. Excluding
the effect of the inventory write-down, the Company's gross profit in fiscal
1996 would have been $6.389 million, or 38.3% of net sales.
Operating expenses increased by 31.9% to $4.777 million in fiscal 1996 as
compared with $3.622 million in fiscal 1995. As a percent of sales, operating
expenses increased to 28.6% in fiscal 1996 as compared with 25.6% in fiscal
1995. This increase was principally due to increased staffing and related
payroll costs to support the expansion of engineering and new product
development efforts, increased benefit costs due to the introduction of certain
employee benefits and additional bad debt expense recorded due to the financial
condition of certain customers with which the Company has since changed selling
terms to include letters of credit and other forms of security.
14
<PAGE>
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 unused credit facility with The Chase Manhattan Bank
(the "Bank"), should be sufficient to meet its obligations as they become due
and permit continuation of its planned expansion throughout fiscal 1998 and
beyond.
In September 1996, the Company entered into an agreement with the Bank for a
secured line of credit in the aggregate amount of $5,000,000 with the intent of
borrowings to be made when necessary to meet short-term working capital needs.
Outstanding borrowings will bear interest at rates to be determined based on the
amount of the borrowings. The rate will range between the Bank's prime rate plus
one-quarter of one percent per annum and, for borrowings greater than $500,000,
the option of the Reserve Adjusted London Interbank Offering Rate (LIBOR) plus
275 basis points per annum. The line of credit is secured by a first priority
perfected security interest in the assets of the Company. As of September 30,
1997, and during the year then ended, no amounts were outstanding under this
line of credit. This line of credit will expire on March 31, 1998, and the
Company has begun discussions with the Bank and anticipates an extension of this
credit facility. At September 30, 1997, the Company had cash of $1.913 million.
Net cash provided by operating activities amounted to $380,000 in fiscal 1997.
Net income of the Company, adjusted for noncash items, was $1.889 million in
fiscal 1997. This amount was augmented by an increase in accounts payable of
$1.495 million and an increase in accrued expenses and other liabilities of
$679,000, and was offset by an increase in accounts receivable of $2.012
million, an increase in inventory of $1.365 million and a decrease in income
taxes payable of $488,000. Net cash provided by operating activities amounted to
$1.580 million in fiscal 1996. Net income of the Company, adjusted for noncash
items, was $2.075 million in fiscal 1996. This amount was offset primarily by an
increase in deferred income taxes and income taxes payable of $284,000, a
decrease in accounts payable and accrued expenses of $98,000 and an increase in
inventory of $147,000, excluding the effect of the inventory writedown.
Net cash used in investing activities amounted to $1.217 million in fiscal 1997
as compared with $664,000 in fiscal 1996. The Company funded its joint ventures
with approximately $426,000 during fiscal 1997, predominantly in the form of
loans. The remaining investing activities of $791,000 in fiscal 1997 and all
investing activities in fiscal 1996 were for the purchase of property and
equipment.
Net cash provided by financing activities amounted to $23,000 in fiscal 1997,
which represented proceeds from the exercise of stock options. There was no net
cash provided by financing activities during fiscal 1996.
15
<PAGE>
Fiscal 1997 saw continued moderation in the level of inflation. In order to
offset the resulting rise in the costs of operations, the Company is currently
attempting to reduce product manufacturing costs thereby increasing profit
margins. In addition, the Company is attempting to improve its operations to
gain efficiencies and reduce operating costs. The Company expects to continue
this approach to cope with future cost changes.
Year 2000
In July 1996, the Emerging Issues Task Force of the Financial Accounting
Standards Board (FASB) reached a consensus on Issue 96-14, "Accounting for the
Costs Associated with Modifying Computer Software for the Year 2000," which
requires that costs associated with modifying computer software for the Year
2000 be expensed as incurred. The Company believes, based upon its internal
reviews and other factors, that future external and internal costs to be
incurred relating to the modification of internal-use software for the Year 2000
will not have a material effect on the Company's results of operations or
financial position.
Item 7. Financial Statements
The financial statements of the Company required by this item are set forth
beginning on page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
16
<PAGE>
PART III
Items 9 through 12 inclusive are omitted per General Instruction E. The
information required by Part III shall be incorporated by reference from the
Registrant's definitive proxy statement pursuant to Regulation 14A for the
fiscal year ended September 30, 1997.
Item 13. Exhibits, List and Reports on Form 8K
(a) Exhibits
Exhibit No.
3.1 Certificate of Incorporation (6)
3.2 Certificate of Merger (6)
3.3 By-Laws (6)
10.1 Lease dated September 21, 1994 between the Company and
Heartland Associates (1)
10.2 Amendment dated July 31, 1997 to lease dated September 21,
1994 between the Company and Heartland Associates (6)
10.3 Employment Agreement dated January 31, 1993 between the
Company and William H. Wood (1)
10.4 1994 Stock Option Plan (5)
10.5 1996 Stock Option Plan (5)
10.6 Employment Agreement dated December 1, 1994 between the
Company and Robert W. Nader (2)
10.7 Credit Agreements dated September 9, 1996 and September 10,
1996 between the Company and The Chase Manhattan Bank (4)
10.8 Security Agreement dated September 9, 1996 between the Company
and The Chase Manhattan Bank (4)
10.9 Agreement between the Company and certain shareholders
establishing lines of credit (2)
10.10 Employment Agreement dated September 30, 1997 between the
Company and Stephen Katz (6)
21 List of Subsidiaries (6)
23 Consent of Independent Public Accountants (6)
27 Financial Data Schedule (6)
- --------------------------
(1) Incorporated by reference to the company's initial filings of
the Registration Statement on Form SB-2 (File #33-86352-NY).
(2) Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form SB-2 (File #33-86352-NY).
(3) Incorporated by reference to the Company's Current Report on
Form 8-K dated June 7, 1996.
(4) Incorporated by reference to the Company's Annual Report on
Form 10-KSB dated September 30, 1996.
(5) Incorporated by reference to the Company's Registration
Statement on Form S-8 (File #333-30829).
(6) Filed herewith.
17
<PAGE>
(b) Reports on Form 8-K
No Reports on Form 8-K have been filed during the last quarter covered by this
Report.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/Stephen Katz
-----------------------------
Stephen Katz
Chairman of the Board and
Chief Executive Officer
Date: December 29, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Date Title
--------- ---- -----
<S> <C> <C>
s/Stephen Katz December 29, 1997 Chairman of the Board
- --------------------------- and Chief Executive Officer
Stephen Katz
s/William H. (Bill) Wood December 29, 1997 President and Director
- ---------------------------
William H. (Bill) Wood
s/Edward Seidenberg December 29, 1997 Director and
- --------------------------- Chief Operating Officer
Edward Seidenberg
s/Jay Goldberg December 29, 1997 Director
- ---------------------------
Jay Goldberg
s/Richard Gerzof December 29, 1997 Director
- ---------------------------
Richard Gerzof
s/Henry Ellis December 29, 1997 Director
- ---------------------------
Henry Ellis
s/Martin Kern December 29, 1997 Director
- ---------------------------
Martin Kern
s/Thomas McNeill December 29, 1997 Chief Financial Officer and
- --------------------------- Principal Accounting Officer
Thomas McNeill
</TABLE>
19
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
(formerly Coin Bill Validator, Inc.)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants F - 1
Balance Sheets as of September 30, 1997 and 1996 F - 2
Statements of Income for the years ended September 30, 1997 and 1996 F - 3
Statements of Shareholders' Equity for the years ended September 30, 1997 and 1996 F - 4
Statements of Cash Flows for the years ended September 30, 1997 and 1996 F - 5
Notes to Financial Statements F - 6
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Global Payment Technologies, Inc.
(formerly Coin Bill Validator, Inc.):
We have audited the accompanying balance sheets of Global Payment Technologies,
Inc.(formerly Coin Bill Validator, Inc.) (a Delaware corporation) as of
September 30, 1997 and 1996, and the related statements of income, shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Payment Technologies,
Inc. as of September 30, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
Melville, New York
November 24, 1997
F-1
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
(formerly Coin Bill Validator, Inc.)
BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND 1996
(in 000s, except share data)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,913 $ 2,727
Accounts receivable, less allowance for doubtful accounts of $225 and
$268, respectively 4,840 2,789
Inventory, less allowance for obsolescence of $742 and $1,069, respectively 5,120 3,794
Prepaid expenses 110 83
Deferred income tax benefit 421 570
------- -------
Total current assets 12,404 9,963
PROPERTY AND EQUIPMENT, net 1,335 887
INVESTMENT IN UNCONSOLIDATED AFFILIATES 355 --
OTHER ASSETS 60 53
------- -------
Total assets $14,154 $10,903
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,302 $ 807
Accrued expenses and other current liabilities 1,230 551
Income taxes payable 109 597
------- -------
Total current liabilities 3,641 1,955
------- -------
DEFERRED INCOME TAXES 96 29
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, 20,000,000 shares authorized; $.01 par value, 5,506,200 and
5,500,000 shares issued and outstanding, respectively 55 55
Additional paid-in capital 7,974 7,951
Retained earnings 2,388 913
------- -------
Total shareholders' equity 10,417 8,919
------- -------
Total liabilities and shareholders' equity $14,154 $10,903
======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-2
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
(formerly Coin Bill Validator, Inc.)
STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(in 000s, except share and per share data)
1997 1996
----------- -----------
NET SALES $ 23,868 $ 16,693
COST OF SALES 14,882 11,436
----------- -----------
Gross profit 8,986 5,257
OPERATING EXPENSES 6,378 4,777
----------- -----------
INCOME FROM OPERATIONS 2,608 480
EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES (71) --
INTEREST INCOME, net 51 6
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,588 486
PROVISION FOR INCOME TAXES 1,113 214
----------- -----------
NET INCOME $ 1,475 $ 272
=========== ===========
NET INCOME PER SHARE $ .25 $ .05
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,794,215 5,500,000
=========== ===========
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
(formerly Coin Bill Validator, Inc.)
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(in 000s, except share data)
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-in Retained
Shares Amount Capital Earnings Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 5,500,000 $ 55 $ 7,951 $ 641 $ 8,647
Net income -- -- -- 272 272
--------- --------- --------- --------- ---------
BALANCE AT SEPTEMBER 30, 1996 5,500,000 55 7,951 913 8,919
Exercise of common stock options 6,200 -- 23 -- 23
Net income -- -- -- 1,475 1,475
--------- --------- --------- --------- ---------
BALANCE AT SEPTEMBER 30, 1997 5,506,200 $ 55 $ 7,974 $ 2,388 $ 10,417
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
(formerly Coin Bill Validator, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(in 000s)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,475 $ 272
------- -------
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in loss of unconsolidated affiliates 71 --
Depreciation and amortization 343 237
(Recovery of) provision for losses on accounts receivable (39) 434
Provision for inventory obsolescence 39 1,132
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,012) 100
Increase in inventory (1,365) (147)
Increase in prepaid expenses (27) (72)
Decrease (increase) in deferred income taxes 216 (422)
(Increase) decrease in other assets (7) 6
Increase (decrease) in accounts payable 1,495 (322)
Increase in accrued expenses and other current liabilities 679 224
(Decrease) increase in income taxes payable (488) 138
------- -------
TOTAL ADJUSTMENTS (1,095) 1,308
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 380 1,580
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment, net of proceeds from disposals (791) (664)
Investments in unconsolidated affiliates (426) --
------- -------
NET CASH USED IN INVESTING ACTIVITIES (1,217) (664)
------- -------
FINANCING ACTIVITIES:
Proceeds from notes payable to bank -- 500
Repayment of notes payable to bank -- (500)
Issuance of stock upon exercise of stock options 23 --
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 23 --
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (814) 916
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,727 1,811
------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,913 $ 2,727
======= =======
CASH PAID DURING THE YEAR FOR:
Interest $ -- $ 15
======= =======
Income taxes $ 1,400 $ 497
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
(formerly Coin Bill Validator, Inc.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
1. ORGANIZATION AND NATURE OF BUSINESS:
Global Payment Technologies, Inc. (formerly Coin Bill Validator, Inc.) (the
"Company"), was established in 1988. The Company designs, manufactures and
markets paper currency validating equipment used in vending and gaming machines
in the United States and other countries.
Substantially all of the Company's revenues are derived from the sale of paper
currency validators and related bill stackers, specifically the Company's M-IVO,
IDS, IUS and M-125 validator models. Fluctuations in the Company's results of
operations may be caused by various factors, including the timing and market
acceptance of new products introduced by the Company and its competitors, the
size and timing of product orders and shipments, the relative mix of products
sold by the Company, specific economic conditions in the gaming industry, from
which the Company derives a substantial portion of its revenues, and general
economic conditions. Additionally, the Company depends on a single or limited
number of suppliers for certain housings, parts and components, including
certain microprocessor chips and short wave-length light sources. The Company
has entered into volume blanket purchase agreements with suppliers to guard
against unique component shortages, limiting the Company's exposure to business
interruptions.
Significant Customers
The Company's largest customer represented 54% and 37% of net sales in fiscal
year 1997 and 1996, respectively. There were no other customers that represented
10% or more of net sales in either fiscal year.
The accounts receivable of this customer as of September 30, 1997 and 1996
represented 62% and 2% of total accounts receivable, respectively.
Net sales to international customers were 73% of net sales in both fiscal 1997
and 1996.
2. SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
Cash equivalents are stated at cost which approximated market value. Highly
liquid investments with maturities of three months or less at the purchase date
are considered cash equivalents for purposes of the balance sheets and
statements of cash flows.
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
introduction of new technology or products by the Company and its competitors.
F-6
<PAGE>
Property and Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets (Note 4) or,
in the case of leasehold improvements, the life of the related lease, whichever
is shorter. Maintenance and repair costs are charged to expense as incurred.
Expenditures which significantly increase value or extend useful asset lives are
capitalized.
Long-Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS No. 121"), 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 adoption of SFAS No.
121 in fiscal 1997 did not have a material effect on the Company's results of
operations or financial position.
Investments in Unconsolidated Affiliates
In August 1996, the Company acquired a 50% non-controlling interest in a South
African affiliate, in which funding commenced in June 1997. This entity is
responsible for sales and service of the Company's products in the South African
region, on an exclusive basis. During fiscal 1997, the Company loaned $178,000
to this entity, none of which was repaid prior to September 30, 1997. This
amount is included as part of the Company's investment in unconsolidated
affiliates in the accompanying balance sheet as of September 30, 1997. The
Company's results of operations for fiscal 1997 include the Company's equity in
the loss of this affiliate in the amount of $78,000, net of any intercompany
profits.
In January 1997, the Company acquired a 50% non-controlling interest in a
China-based affiliate. This entity manufactures plastic and metal components,
some of which are used by the Company in its production. In addition, the
Company is obligated to loan up to an aggregate of $299,000 to this entity,
which will bear interest at the rate of 1.5% above the prime rate prevailing
from time to time at the Company's bank, per annum. During fiscal 1997, the
Company loaned $219,000 to this entity, none of which was repaid prior to
September 30, 1997. This amount is included as part of the Company's investment
in unconsolidated affiliates in the accompanying balance sheet as of September
30, 1997. The Company's results of operations for fiscal 1997 include the
Company's equity in the loss of this affiliate in the amount of $42,000, net of
any intercompany profits.
In August 1997, the Company acquired a 50% non-controlling interest in an
Australian affiliate. This entity is responsible for sales and service of the
Company's products in Australia and New Zealand, on an exclusive basis. The
Company's results of operations for fiscal 1997 include the Company's equity in
the income of this affiliate in the amount of $49,000, net of any intercompany
profits.
Research and Development
Research and development costs incurred by the Company are included in operating
expenses in the year incurred. Such costs amounted to $245,000 and $61,000 in
the years ended September 30, 1997 and 1996, respectively.
Costs aggregating $350,000 related to certain research and development for
product development were funded by a customer through fiscal 1995. The terms of
the Company's agreement with its customer provided for repayment of such costs
as sales of the Company's products were made to this customer. All units under
the contract were sold and billed accordingly by September 30, 1996 and all
related accounts receivable have been collected.
F-7
<PAGE>
Warranty Policy
The Company warrants that its products are free from defects in material and
workmanship for a period of one year 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. Warranty costs within one year of purchase have historically been
immaterial to the Company's results of operations. Warranty costs beyond one
year from the date of initial purchase are charged to the Company's customers.
Income Taxes
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes" (Note 7). 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.
Net Income Per Share
Net income per share for fiscal 1997 and 1996 was computed by dividing the
Company's net income by the weighted average number of shares of common stock
and common stock equivalents outstanding during the year. The impact of common
stock equivalents (Note 6) was not included in the calculation of net income per
share for fiscal 1996, as the effect of their inclusion would have been
anti-dilutive. Fully diluted net income per share for both fiscal 1997 and
fiscal 1996 has not been presented because the dilution from primary net income
per share was less than 3 percent in both years.
Stock-Based Compensation
In fiscal 1997, the Company adopted the provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation", by continuing to apply the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees", while providing the required pro forma disclosures as if the fair
value method had been applied (Note 6).
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Actual results could differ from those estimates.
Reclassifications
Certain prior year financial statement amounts have been reclassified to conform
to the current year's presentation.
F-8
<PAGE>
New Accounting Pronouncement
In March 1997, the Financial Accounting Standards Board issued 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 No. 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.
3. INVENTORY:
The following is a summary of the composition of inventory:
September 30,
-------------------------
1997 1996
------ ------
(in 000s)
Raw materials $1,894 $2,257
Work-in-process 2,631 1,278
Finished goods 595 259
------ ------
$5,120 $3,794
====== ======
4. PROPERTY AND EQUIPMENT, NET:
Major classifications of property and equipment are as follows:
September 30,
---------------------
Useful Lives 1997 1996
------------ ------- -------
(in 000s)
Leasehold improvements 5 years $ 155 $ 129
Furniture and fixtures 3 - 7 years 310 131
Machinery and equipment 5 - 10 years 738 453
Computer software 5 years 459 370
Computer hardware 3 years 443 231
------- -------
2,105 1,314
Less: Accumulated depreciation
and amortization (770) (427)
------- -------
$ 1,335 $ 887
======= =======
F-9
<PAGE>
5. NOTES PAYABLE TO BANK:
Line of Credit
In September 1996, the Company entered into an agreement with a bank for a
secured line of credit in the aggregate amount of $5,000,000 with the intent of
borrowings to be made when necessary to meet short-term working capital needs.
Outstanding borrowings will bear interest at rates to be determined based on the
amount of the borrowings. The rate will range between the bank's prime rate plus
one-quarter of one percent per annum and, for borrowings greater than $500,000,
the option of the LIBOR plus 275 basis points per annum. The line of credit is
secured by a first priority perfected security interest in the assets of the
Company. As of September 30, 1997, no amounts were outstanding under this line
of credit. This line of credit will expire on March 31, 1998, and the Company
has begun discussions with the bank to extend this credit facility.
Bank Loan
In March 1996, the Company borrowed $500,000 from a bank under a business loan
agreement. The loan was to be repaid in thirty-six consecutive monthly
installments of principal and interest commencing April 1, 1996 and thereafter
through March 1, 1999. The note bore interest at an annual rate of eight and
one-half percent. The proceeds of the note were used to satisfy working capital
requirements for an interim period. The note was repaid in its entirety in July
1996.
6. SHAREHOLDERS' EQUITY:
Stock Split
In July 1997, the Company's Board of Directors approved a two-for-one stock
split, in the form of a stock dividend, to the Company's common shareholders of
record at August 18, 1997. The new shares were issued to such shareholders of
record on September 4, 1997. Par value remained at $.01 per share. All
information contained in the financial statements and related footnotes has been
retroactively restated to give effect to this stock split.
Stock Option Plans
In October 1994, the Company adopted the 1994 Stock Option Plan (the "1994
Plan") covering up to 300,000 of the Company's common shares pursuant to which
officers, directors and key employees of the Company and consultants to the
Company are eligible to receive incentive and/or non-qualified stock options. In
March 1996, the Board of Directors adopted the 1996 Stock Option Plan (the "1996
Plan"), subject to shareholder approval, which was subsequently obtained. The
purpose and provisions of the 1996 Plan are essentially the same as the 1994
Plan. The 1996 Plan originally covered 400,000 of the Company's common shares.
The total shares available for grant under the 1996 Plan were subsequently
increased to 900,000, as resolved by the Board of Directors, in September 1996.
Both the 1994 Plan, which expires on October 17, 2004, and the 1996 Plan, which
expires on March 18, 2006, will be administered by the Compensation and Stock
Option Committee of the Board of Directors. The selection of participants, grant
of options, determination of price and other conditions relating to the exercise
of options will be determined by the Compensation and Stock Option Committee of
the Board of Directors.
F-10
<PAGE>
Incentive stock options granted under both the 1994 and 1996 Plans are
exercisable for a period of up to 10 years from the date of grant at an exercise
price which is not less than the fair market value of the common shares on the
date of the grant, except that the term of an incentive stock option granted
under each of the plans to a shareholder owning more than 10% of the outstanding
common shares may not exceed five years and its exercise price may not be less
than 110% of the fair market value of the common shares on the date of the
grant.
During fiscal 1996, 100,000 incentive stock options and 100,000 non-qualified
options were granted to the Chairman and Chief Executive Officer of the Company
under the 1994 Plan. Pursuant to an employment agreement dated September 30,
1997, these options became immediately exercisable as of September 30, 1997.
During fiscal 1996, a total of 413,500 options were granted under the 1996 Plan,
including 200,000 non-qualified options to the Chairman and Chief Executive
Officer which also became immediately exercisable as of September 30, 1997, and
57,500 non-qualified options to various employees, consultants and non-employee
directors of the Company. With the exception of 22,000 options which became
exercisable in March 1997, these non-qualified options will become exercisable
over three or five year periods in equal amounts commencing with the first
anniversary from the date of grant. The incentive stock options issued under the
1996 Plan all have five year vesting periods.
During fiscal 1997, a total of 60,000 incentive stock options were granted under
the 1996 Plan. These options will become exercisable over a four year period in
equal amounts commencing with the first anniversary from the date of grant,
except for 24,000 options, which will vest on the same basis over a five year
period.
The Company accounts for option awards granted to employees and directors under
APB Opinion No. 25, under which compensation cost is recognized for stock
options granted at an exercise price less than the market value of the options
on the grant date. Had compensation cost for all stock option grants in fiscal
years 1997 and 1996 been determined consistent with SFAS No. 123, the Company's
net income and earnings per share would have been:
1997 1996
---- ----
(in 000s, except per share data)
Net income: As Reported $1,475 $272
Pro Forma 958 160
Earnings per share: As Reported $.25 $.05
Pro Forma .17 .03
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to option awards
granted prior to fiscal year 1996, and additional awards in future years are
anticipated.
F-11
<PAGE>
Transactions involving the Stock Option Plans are summarized as follows:
<TABLE>
<CAPTION>
For the Fiscal Years Ended September 30,
------------------------------------------------
1997 1996
----------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning of year 693,500 $3.64 80,000 $5.50
Granted 60,000 8.93 613,500 3.40
Exercised (6,200) 3.78 -- --
Forfeited (20,900) 3.78 -- --
-------- --------
Outstanding at end of year 726,400 4.08 693,500 3.64
======== ========
Exercisable at end of year 501,400 3.45 32,000 5.50
======== ========
Weighted average fair value of options
granted (a) $ 5.08 N/A $ 1.92 N/A
======== ========
</TABLE>
(a) The fair value of each stock option grant is estimated as of the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
1997 1996
---- ----
Risk-free interest rates 6.19% 6.31%
Expected lives 5 years 5 years
Expected volatility 58.0% 58.0%
Expected dividend yields -- --
The following table summarizes information about stock options outstanding:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- ---------------------------
Number Weighted Weighted Number Weighted
Outstanding Average Average Exercisable Average
at September Remaining Exercise at September Exercise
Range of Exercise Prices 30, 1997 Contractual Life Price 30, 1997 Price
------------------------ -------- ---------------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
$ 3.00 to $ 4.50 587,400 8.78 $ 3.39 453,400 $ 3.24
$ 5.00 to $ 5.50 103,000 7.77 5.39 48,000 5.50
$ 11.56 36,000 9.99 11.56 -- 11.56
-------- -------
$ 3.00 to $ 11.56 726,400 8.51 4.08 501,400 3.45
======== =======
</TABLE>
At September 30, 1997, there were 20,000 shares available for grant under the
1994 Plan and 447,400 shares available for grant under the 1996 Plan.
Underwriters' Warrants
In connection with the Company's initial public offering of common stock in
February 1995, the Company granted warrants to purchase 150,000 shares of common
stock at $6.60 per share to the underwriters of that public offering. The
exercise price of $6.60 per share represented in excess of 110% of the initial
public offering price. As of September 30, 1997, all of these warrants were
exercisable and none were exercised.
F-12
<PAGE>
7. INCOME TAXES:
The provision for income taxes is comprised of the following:
For the Fiscal Years
Ended September 30,
----------------------------
1997 1996
------- -------
(in 000s)
Current:
Federal $ 670 $ 558
State and local 223 197
------- -------
893 755
------- -------
Deferred:
Federal 153 (400)
State and local 67 (141)
------- -------
220 (541)
------- -------
Total $ 1,113 $ 214
======= =======
Significant components of deferred tax assets and liabilities are as follows:
As of September 30,
--------------------
1997 1996
----- -----
(in 000s)
Non-current deferred tax liability:
Depreciation $ (96) $ (29)
----- -----
Current deferred tax assets:
Accounts receivable 101 111
Inventory 320 438
Accrued liabilities -- 21
----- -----
421 570
----- -----
Net deferred tax asset $ 325 $ 541
===== =====
The Company believes that, based upon its consistent history of profitable
operations, it is probable that the net deferred tax assets will be realized,
primarily from the generation of future taxable income.
Reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate is as follows:
For the Fiscal Years
Ended September 30,
-----------------
1997 1996
---- ----
U.S. Federal statutory rate 34.0% 34.0%
State income taxes, net of Federal benefit 7.5 7.6
All other, net 1.5 2.4
---- ----
Effective income tax rate 43.0% 44.0%
==== ====
F-13
<PAGE>
8. COMMITMENTS AND CONTINGENCIES:
Minimum Lease Commitments
The operations of the Company are conducted in leased premises, one of which is
leased from an affiliate owned partially by the Company's Chairman. The Company
also leases various office equipment. At September 30, 1997, the approximate
minimum annual rentals under these leases, which expire in fiscal year 2002,
were as follows:
Total
(including related Related
For the Fiscal Year Party Commitments) Party Commitments)
Ended September 30, (in 000s)
------------------- ------------------ ------------------
1998 $473 $150
1999 483 150
2000 319 150
2001 150 150
2002 62 62
Total rent expense for all operating leases was $388,000 and $278,000 in fiscal
1997 and 1996, respectively, including $65,000 and none, respectively, paid to
the affiliate. The Company's management believes this lease with the affiliate
is on terms which approximate fair market value.
Employment Agreements
The Company has entered into various employment agreements with four officers
and two other employees of the Company expiring through the end of fiscal 2000,
with minimum compensation requirements as follows:
For the Fiscal Year
Ended September 30, (in 000s)
------------------- ---------
1998 $609
1999 411
2000 54
Litigation
There are various claims, lawsuits and disputes with third parties against the
Company incident to the operation of its business. It is the opinion of
management and its counsel that their ultimate resolution will not have a
materially adverse effect on the Company's financial position or results of
operations.
F-14
CERTIFICATE OF INCORPORATION
OF
GLOBAL PAYMENT TECHNOLOGIES, INC.
FIRST: The name of the Corporation is:
GLOBAL PAYMENT TECHNOLOGIES, INC.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
19805-1297. The name of its registered agent at such address is Corporation
Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the laws of the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is Twenty Million (20,000,000) shares of Common
Stock, par value $.01 per share.
FIFTH: The name and address of the sole incorporator is as follows:
Name Address
---- -------
Ralph D. Mosley, Jr. 405 Lexington Avenue
New York, New York 10174
SIXTH: Unless required by law or determined by the chairman of the meeting
to be advisable, the vote by stockholders on any matter, including the election
of directors, need not be by written ballot.
<PAGE>
SEVENTH: The Corporation reserves the right to increase or decrease its
authorized capital stock, or any class or series thereof, and to reclassify the
same, and to amend, alter, change or repeal any provision contained in the
Certificate of Incorporation under which the Corporation is organized or in any
amendment thereto, in the manner now or hereafter prescribed by law, and all
rights conferred upon stockholders in said Certificate of Incorporation or any
amendment thereto are granted subject to the aforementioned reservation.
EIGHTH: The Board of Directors shall have the power at any time, and from
time to time, to adopt, amend and repeal any and all By-laws of the Corporation.
NINTH: 1. Indemnification.
The Corporation shall, and does hereby, indemnify to the fullest extent
permitted or authorized by the Delaware General Corporation Law or judicial or
administrative decisions, as the same exists or may hereafter be amended or
interpreted differently in the future (but, in the case of any such amendment or
interpretation, only to the extent that such amendment or interpretation permits
the Corporation to provide broader indemnification rights than permitted prior
thereto), each person (including the current and future heirs, beneficiaries,
personal representatives and estate of such person) who was or is a party, or is
threatened to be made a party, or was or is a witness, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding") and whether the basis of such
Proceeding is an
-2-
<PAGE>
allegation of an action in an official capacity of such person related to the
Corporation or any other capacity while such person is serving as an officer,
director, employee or agent of the Corporation, against any liability (which for
purposes of this Article shall include any judgment, settlement, penalty or
fine) or cost, charge or expense (including attorneys' fees) asserted against
him or incurred by him by reason of the fact that such indemnified person (1) is
or was a director, officer or employee of the Corporation or (2) is or was an
agent of the Corporation as to whom the Corporation, by action of its Board of
Directors, has agreed to grant such indemnity or (3) is or was serving, at the
request of the Corporation, as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise (including
serving as a fiduciary of any employee benefit plan) or (4) is or was serving as
an agent of such other corporation, partnership, joint venture, trust or other
enterprise described in clause (3) hereof as to whom the corporation, by action
of its Board of Directors, has agreed to grant such indemnity. Each director,
officer, employee or agent of the Corporation to whom indemnification rights
under this Section 1 of this Article have been granted shall be referred to as
an "Indemnified Person."
Notwithstanding the foregoing, except as specified in Section 3 of this
Article, the Corporation shall not be required to indemnify an Indemnified
Person in connection with a Proceeding (or any part thereof) initiated by such
Indemnified Person unless such authorization for such Proceeding (or any part
-3-
<PAGE>
thereof) was not denied by the Board of Directors of the Corporation prior to
sixty (60) days after receipt of notice thereof from such Indemnified Person
stating his intent to initiate such Proceeding and only upon such terms and
conditions as the Board of Directors may deem appropriate.
2. Advance of Costs, Charges and Expenses
Costs, charges and expenses (including attorneys' fees) incurred by an
officer, director, employee or agent who is an Indemnified Person in defending a
Proceeding shall be paid by the Corporation to the fullest extent permitted or
authorized by the Delaware General Corporation Law or judicial or administrative
decisions, as the same exists or may hereafter be amended or interpreted
differently in the future (but, in the case of any such future amendment or
interpretation, only to the extent that such amendment or interpretation permits
the Corporation to provide broader rights to advance costs, charges and expenses
than permitted prior thereto), in advance of the final disposition of such
Proceeding, upon receipt of an undertaking by or on behalf of the Indemnified
Person to repay all amounts so advanced in the event that is shall ultimately
be determined by final judicial decision that such person is not entitled to be
indemnified by the Corporation as authorized in this Article and upon such other
terms and conditions, in the case of an agent as to whom the Corporation has
agreed to grant such indemnity, as the Board of Directors may deem appropriate.
The Corporation may, upon approval of the Indemnified Person, authorize the
Corporation's counsel to represent such person in any Proceeding,
-4-
<PAGE>
whether or not the Corporation is a party to such Proceeding. Such authorization
may be made by the Board of Directors by majority vote, including directors who
are parties to such Proceeding.
3. Procedure for Indemnification
Any indemnification or advance under this Article shall be made promptly
and in any event within sixty (60) days upon the written request of the
Indemnified Person (except in the case of a claim for an advancement of costs,
charges or expenses, in which case the applicable period shall be twenty (20)
days). The right to indemnification or advances as granted by this Article shall
be enforceable by the Indemnified Person in any court of competent jurisdiction
if the Corporation denies such request under this Article, in whole or in part,
or if no disposition thereof is made within sixty (60) days or twenty (20) days,
as may be applicable. Such Indemnified Person's costs and expenses incurred in
connection with successfully establishing his right to indemnification or
advancement of costs, charges or expenses, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense to
any such action that the claimant has not met the standard of conduct, if any,
required by the Delaware General Corporation Law or judicial or administrative
decisions, as the same exists or may hereafter be amended or interpreted
differently in the future (but, in the case of any such future amendment or
interpretation, only to the extent that such amendment or interpretation does
not impose a more stringent standard of conduct than permitted prior thereto),
-5-
<PAGE>
but the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors or any committee
thereof, its independent legal counsel, and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant or advancement for the claimant is proper in the circumstances
because he has met the applicable standard of conduct, if any, nor the fact that
there has been an actual determination by the Corporation (including its Board
of Directors or any committee thereof, its independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
4. Non-Exclusivity; Survival of Indemnification
The indemnification and advancement provided by this Article shall not be
deemed exclusive of any other rights to which those Indemnified Persons may be
entitled under any agreement, vote of stockholders or disinterested directors or
recommendation of counsel or otherwise, both as to actions in such person's
official capacity and as to actions in any other capacity while holding such
office or position, and shall continue as to an Indemnified Person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, beneficiaries, personal representatives and the estate of
such person. All rights of indemnification and advancement under this Article
shall be deemed to be a contract
-6-
<PAGE>
between the Corporation and each Indemnified Person who serves or served in such
capacity at any time while this Article is in effect. Any repeal or modification
of this Article or any repeal or modification of relevant provisions of the
Delaware General Corporation Law or any other applicable laws shall not in any
way diminish any rights to indemnification of such Indemnified Person, or the
obligations of the Corporation arising hereunder, for claims relating to matters
occurring prior to such repeal or modification.
5. Insurance
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (including serving as a fiduciary of an employee benefit plan)
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or the applicable provisions of the Delaware General
Corporation Law.
6. Savings Clause
If this Article or any portion hereof shall be invalidated on any ground by
any court of competent jurisdiction, then the Corporation shall nevertheless
indemnify and advance costs to each Indemnified Person as to costs, charges and
-7-
<PAGE>
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any Proceeding, including an action by or in the
right of the Corporation, to the full extent permitted by any applicable portion
of this Article that shall not have been invalidated and as permitted by the
Delaware General Corporation Law.
TENTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for any monetary damages for breaches of
fiduciary duty as a director, provided that this provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders; (ii) for acts or ommissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the General Corporation Law of the State of
Delaware; or (iv) for any transaction from which the director derived an
improper personal benefit. No repeal or amendment of this Article shall
adversely affect any rights of any person pursuant to this Article TENTH which
existed at the time of such repeal or amendment with respect to acts or
ommissions occurring prior to such repeal or amendment.
-8-
<PAGE>
The undersigned incorporator hereby affirms that the statements made herein are
true under penalties of perjury, and is hereby executing this Certificate of
Incorporation this 12th day of march, 1997.
/s/ Ralph D. Mosley, Jr. (L.S.)
-----------------------------
Ralph D. Mosley, Jr.
Incorporator
-9-
Exhibit 3.2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 05/30/1997
971177503 -- 2717415
CERTIFICATE OF MERGER
of
COIN BILL VALIDATOR, INC.
(a New York Corporation)
into
GLOBAL PAYMENT TECHNOLOGIES, INC.
(a Delaware Corporation)
It is hereby certified, upon behalf of each of the constituent corporations
herein named, that:
1. The constituent business corporations participating in the merger herein
certified are:
(i) Coin Bill Validator, Inc., which is incorporated under the laws of
the State of New York; and
(ii) Global Payment Technologies, Inc., which is incorporated under
the laws of the State of Delaware.
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed, and acknowledged by each of the aforesaid constituent corporations in
accordance with the provisions of subsection (c) of Section 252 of the General
Corporation Law of the State of Delaware, to wit, by Coin Bill Validator, Inc.,
in accordance with the laws of the State of its incorporation and by Global
Payment Technologies, Inc. in the same manner as is provided in Section 251 of
the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation in the merger herein certified is
Global Payment Technologies, Inc., which will continue its existence as said
surviving corporation under its present name upon the effective date of said
merger pursuant to the provisions of the General Corporation Law of the State of
Delaware.
4. The Certificate of Incorporation of Global Payment Technologies, Inc.,
as now in force and effect, shall continue to be the Certificate of
Incorporation of said surviving corporation until amended and changed pursuant
to the provisions of the General Corporation Law of the State of Delaware.
<PAGE>
5. The executed Agreement and Plan of merger between the aforesaid
constituent corporations is on file at the principal place of business of the
aforesaid surviving corporation, the address of which is as follows:
Global Payment Technologies, Inc.
425-B Oser Avenue
Hauppauge, New York 11788
6. A copy of the aforesaid Agreement and Plan of Merger will be furnished
by the aforesaid surviving corporation, on request, and without cost, to any
stockholder of each of the aforesaid constituent corporations.
7. The authorized capital stock of Coin Bill Validator, Inc. consists of
20,000,000 shares of Common Stock, $.01 par value.
8. Pursuant to the terms and conditions of the Agreement and Plan of
Merger, the merger shall be effective as of May 31, 1997.
Dated: May 27, 1997.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By: /s/ Stephen Katz
-------------------------
Stephen Katz, Chairman and Chief
Executive Officer
Dated: May 27, 1997.
COIN BILL VALIDATOR, INC.
By: /s/ Stephen Katz
-------------------------
Stephen Katz, Chairman and Chief
Executive Officer
-2-
GLOBAL PAYMENT TECHNOLOGIES, INC.
BY-LAWS
ARTICLE I
OFFICES
1. The location of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
and the name of its registered agent at such address is Corporation Service
Company.
2. The Corporation shall in addition to its registered office in the State
of Delaware establish and maintain an office or offices at such place or places
as the Board of Directors may from time to time find necessary or desirable.
ARTICLE II
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed thereon the name
of the Corporation and may be in such form as the Board of Directors may
determine. Such seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
ARTICLE III
MEETINGS OF STOCKHOLDERS
1. All meetings of the stockholders shall be held at the registered office
of the Corporation in the State of Delaware or at such other place as shall be
determined from time to time by the Board of Directors.
2. The annual meeting of stockholders shall be held on such day and at such
time as may be determined from time to time by resolution of the Board of
Directors, when they shall elect by plurality vote, a Board of Directors to hold
office until the annual meeting of stockholders held next after their election
and their successors are respectively elected and qualified or until their
earlier resignation or removal. Any other proper business may be transacted at
the annual meeting.
3. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all
<PAGE>
meetings of the stockholders for the transaction of business, except as
otherwise expressly provided by statute, by the Certificate of Incorporation or
by these By-laws. If, however, such majority shall not be present or represented
at any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting (except as
otherwise provided by statute). At such adjourned meeting at which the requisite
amount of voting stock shall be represented any business may be transacted which
might have been transacted at the meeting as originally notified.
4. At all meetings of the stockholders each stockholder having the right to
vote shall be entitled to vote in person, or by proxy appointed by an instrument
in writing subscribed by such stockholder and bearing a date not more than three
years prior to said meeting, unless such instrument provides for a longer
period.
5. At each meeting of the stockholders each stockholder shall have one vote
for each share of capital stock having voting power, registered in his name on
the books of the Corporation at the record date fixed in accordance with these
By-laws, or otherwise determined, with respect to such meeting. Except as
otherwise expressly provided by statute, by the Certificate of Incorporation or
by these By-laws, all matters coming before any meeting of the stockholders
shall be decided by the vote of a majority of the number of shares of stock
present in person or represented by proxy at such meeting and entitled to vote
thereat, a quorum being present.
6. Notice of each meeting of the stockholders shall be mailed to each
stockholder entitled to vote thereat not less than 10 nor more than 60 days
before the date of the meeting. Such notice shall state the place, date and hour
of the meeting and, in the case of a special meeting, the purposes for which the
meeting is called.
7. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the Board of Directors
or by the Chairperson, or, if there is none, by the Chief Executive Officer or,
if there is none, by the President, and shall be called by the Secretary at the
request in writing of stockholders owning a majority of the amount of the entire
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request by stockholders shall state the purpose or purposes of the proposed
meeting.
8. Business transacted at each special meeting shall be confined to the
purpose or purposes stated in the notice of such meeting.
9. The order of business at each meeting of stockholders shall be
determined by the presiding officer.
-2-
<PAGE>
ARTICLE IV
DIRECTORS
1. The business and affairs of the Corporation shall be managed under the
direction of a Board of Directors, which may exercise all such powers and
authority for and on behalf of the Corporation as shall be permitted by law, the
Certificate of Incorporation or these By-laws. Each of the directors shall hold
office until the next annual meeting of stockholders and until his successor has
been elected and qualified or until his earlier resignation or removal.
2. The Board of Directors may hold their meetings within or outside of the
State of Delaware, at such place or places as it may from time to time
determine.
3. The number of directors comprising the Board of Directors shall be such
number as may be from time to time fixed by resolution of the Board of
Directors. In case of any increase, the Board shall have power to elect each
additional director to hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or his earlier resignation or
removal. Any decrease in the number of directors shall take effect at the time
of such action by the Board only to the extent that vacancies then exist; to the
extent that such decrease exceeds the number of such vacancies, the decrease
shall not become effective, except as further vacancies may thereafter occur,
until the time of and in connection with the election of directors at the next
succeeding annual meeting of the stockholders.
4. If the office of any director becomes vacant, by reason of death,
resignation, disqualification or otherwise, a majority of the directors then in
office, although less than a quorum, may fill the vacancy by electing a
successor who shall hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or his earlier resignation or
removal.
5. Any director may resign at any time by giving written notice of his
resignation to the Board of Directors. Any such resignation shall take effect
upon receipt thereof by the Board, or at such later date as may be specified
therein. Any such notice to the Board shall be addressed to it in care of the
Secretary.
ARTICLE V
COMMITTEES OF DIRECTORS
1. By resolutions adopted by a majority of the whole Board of Directors,
the Board may designate an Executive Committee and one or more other committees,
each such committee to consist of one or more directors of the Corporation. The
Executive Committee shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Corporation
(except as otherwise expressly limited by statute),
-3-
<PAGE>
including the power and authority to declare dividends and to authorize the
issuance of stock, and may authorize the seal of the Corporation to be affixed
to all papers which may require it. Each other committee shall have such of the
powers and authority of the Board as may be provided from time to time in
resolutions adopted by a majority of the whole Board.
2. The requirements with respect to the manner in which the Executive
Committee and each such other committee shall hold meetings and take actions
shall be set forth in the resolutions of the Board of Directors designating the
Executive Committee or such other committee.
ARTICLE VI
COMPENSATION OF DIRECTORS
The directors shall receive such compensation for their services as may be
authorized by resolution of the Board of Directors, which compensation may
include an annual fee and a fixed sum for expense of attendance at regular or
special meetings of the Board or any committee thereof. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
ARTICLE VII
MEETINGS OF DIRECTORS; ACTION WITHOUT A MEETING
1. Regular meetings of the Board of Directors may be held without notice at
such time and place, either within or without the State of Delaware, as may be
determined from time to time by resolution of the Board
2. Special meetings of the Board of Directors shall be held whenever called
by the Board of Directors or the Chairperson, or, if there is none, by the Chief
Executive Officer or, if there is none, by the President of the Corporation on
at least 24 hours' notice to each director. Except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these By-laws, the purpose or purposes of any such special meeting need not be
stated in such notice, although the time and place of the meeting shall be
stated.
3. At all meetings of the Board of Directors, the presence in person of a
majority of the members of the Board of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and, except
as otherwise provided by statute, by the Certificate of Incorporation or by
these Bylaws, if a quorum shall be present the act of a majority of the
directors present shall be the act of the Board.
4. Any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting if all
the members of the Board or such Committee, as the case may be, consent thereto
in writing and the writing or
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<PAGE>
writings are filed with the minutes of proceedings of the Board or committee.
Any director may participate in a meeting of the Board, or any committee
designated by the Board, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
sentence shall constitute presence in person at such meeting.
ARTICLE VIII
OFFICERS
1. The officers of the Corporation shall be chosen by the Board of
Directors and shall be a Chairperson, a Chief Executive Officer, President, one
or more Vice Presidents, a Secretary and a Chief Financial Officer. The Board
may also choose a Vice Chairperson and one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as it shall deem necessary. Any
number of offices may be held by the same person.
2. The salaries of all officers of the Corporation shall be fixed by the
Board of Directors, or in such manner as the Board may prescribe.
3. The officers of the Corporation shall hold office until their successors
are elected and qualified, or until their earlier resignation or removal. Any
officer may be at any time removed from office by the Board of Directors, with
or without cause. If the office of any officer becomes vacant for any reason,
the vacancy may be filled by the Board of Directors.
4. Any officer may resign at any time by giving written notice of his
resignation to the Board of Directors. Any such resignation shall take effect
upon receipt thereof by the Board or at such later date as may be specified
therein. Any such notice to the Board shall be addressed to it in care of the
Secretary.
ARTICLE IX
CHAIRPERSON
The Chairperson shall preside at all meetings of the Board of Directors,
unless the Chairperson delegates these powers to another director. The
Chairperson shall exercise the powers and perform the duties usual to a
Chairperson and shall be the person, on behalf of the Board, to whom the Chief
Executive Officer and the Chief Financial Officer report. The Chairperson shall
see that all orders and resolutions of the Board of Directors are carried into
effect; and shall do and perform such other duties as from time to time may be
assigned to the Chairperson by the Board of Directors. The Chairperson shall
have the power to execute bonds, mortgages and other contracts, agreements and
instruments of the Corporation. Unless otherwise ordered by the Board of
Directors, the Chairperson, or another officer of the Corporation designated by
the Chairperson, shall have full power and authority on behalf of the
Corporation to attend and to act and to vote at any meetings of security holders
of corporations in which the
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<PAGE>
Corporation may hold securities, and at such meetings shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities, and which, as the owner thereof, the Corporation might have
possessed and exercised, if present. The Board of Directors by resolution from
time to time may confer like powers upon any other person or persons.
ARTICLE X
VICE CHAIRPERSON
The Vice Chairperson shall, in the absence of the Chairperson, act as
chairperson of all meetings of the Board of Directors and at all special and
annual meetings of the stockholders. The Vice Chairperson shall perform such
other duties as may from time to time be assigned to the Vice Chairperson by the
Board. In the event that the position of Vice Chairperson shall be vacant, the
duties of the Vice Chairperson shall be performed by the Chief Executive
Officer.
ARTICLE XI
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall have general supervision and discretion
of the business and affairs of the Corporation, subject to the control of the
Board. The Chief Executive Officer may execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments. The Chief Executive
Officer shall, when requested, counsel and advise the other officers of the
Corporation and shall perform such other duties as the Board may from time to
time determine. In the event that the position of Chief Executive Officer shall
be vacant, the duties of the Chief Executive Officer shall be performed by the
Chairperson or, if there is none, by the President.
ARTICLE XII
PRESIDENT
The President shall be the chief operating officer of the Corporation and
shall be in charge of the day to day operations and affairs of the Corporation.
The President may execute in the name of the Corporation contracts and other
instruments in connection with the day to day operations and affairs of the
Corporation. The President shall perform such other duties as the Chairperson,
the Chief Executive Officer or the Board may from time to time determine.
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<PAGE>
ARTICLE XIII
VICE PRESIDENTS
The Vice Presidents shall have such powers and duties as may be delegated
to them by the Chairperson, the Chief Executive Officer or the President.
ARTICLE XIV
SECRETARY
1. The Secretary shall attend all meetings of the Board of Directors and of
the stockholders, and shall record the minutes of all proceedings in a book to
be kept for that purpose. He shall perform like duties for the committees of the
Board when required.
2. The Secretary shall give, or cause to be given, notice of meetings of
the stockholders, of the Board of Directors and of the committees of the Board.
He shall keep in safe custody, the seal of the Corporation, and when authorized
by the Chairperson, the Chief Executive Officer, the President or a Vice
President, shall affix the same to any instrument requiring it, and when so
affixed it shall be attested by his signature or by the signature of an
Assistant Secretary. He shall have such other powers and duties as may be
delegated to him by the Chairperson, the Chief Executive Officer, the President
or any Vice President.
ARTICLE XV
CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall be the chief financial and accounting
officer and treasurer of the Corporation and shall have the custody of the
corporate funds and securities, and shall deposit or cause to be deposited under
his direction all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors or pursuant to authority granted by it. He shall render to the
Chairperson, the Chief Executive Officer, the President and the Board whenever
they may require it an account of all his transactions as Treasurer and Chief
Financial Officer and of the financial condition of the Corporation. He shall
have such other powers and duties as may be delegated to him by the Chairperson.
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<PAGE>
ARTICLE XVI
CERTIFICATES OF STOCK
The certificates of stock of the Corporation shall be numbered and shall be
entered in the books of the Corporation as they are issued. They shall exhibit
the holder's name and number of shares and shall be signed by the Chairperson,
the President or Vice President, and by the Chief Financial Officer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary.
ARTICLE XVII
CHECKS
All checks, drafts and other orders for the payment of money and all
promissory notes and other evidences of indebtedness of the Corporation shall be
signed by such officer or officers or such other person as may be designated by
the Board of Directors or pursuant to authority granted by it.
ARTICLE XVIII
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from time to time
by resolution duly adopted by the Board of Directors.
ARTICLE XIX
NOTICES AND WAIVERS
1. Whenever by statute, by the Certificate of Incorporation or by these
Bylaws it is provided that notice shall be given to any director or stockholder,
such provision shall not be construed to require personal notice, but such
notice may be given in writing, by mail, by depositing the same in the United
States mail, postage prepaid, directed to such stockholder or director at his
address as it appears on the records of the Corporation, and such notice shall
be deemed to be given at the time when the same shall be thus deposited. Notice
of regular or special meetings of the Board of Directors may also be given to
any director by telephone or by telex, telegraph or cable, and in the latter
event the notice shall be deemed to be given at the time such notice, addressed
to such director at the address hereinabove provided, is transmitted by telex
(with confirmed answerback), or delivered to and accepted by an authorized
telegraph or cable office.
2. Whenever by statute, by the Certificate of Incorporation or by these
Bylaws a notice is required to be given, a written waiver thereof, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice.
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<PAGE>
Attendance of any stockholder or director at any meeting thereof shall
constitute a waiver of notice of such meeting by such stockholder or director,
as the case may be, except as otherwise provided by statute.
ARTICLE XX
INDEMNIFICATION
All persons who the Corporation is empowered to indemnify pursuant to the
provisions of Section 145 of the General Corporation Law of the State of
Delaware (or any similar provision or provisions of applicable law at the time
in effect) shall be indemnified by the Corporation to the full extent permitted
thereby. The foregoing right of indemnification shall not be deemed to be
exclusive of any other such rights to which those seeking indemnification from
the Corporation may be entitled, including, but not limited to, any rights of
indemnification to which they may be entitled pursuant to any agreement,
insurance policy, other By-Law or charter provision, vote of stockholders or
directors, or otherwise. No repeal or amendment of this Article XX shall
adversely affect any rights of any person pursuant to this Article XX which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
ARTICLE XXI
ALTERATION OF BY-LAWS
The By-Laws of the Corporation may be altered, amended or repealed, and new
By-laws may be adopted, by the stockholders or by the Board of Directors.
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LEASE AMENDMENT
AGREEMENT, made as of the 31st day of July, 1997, by and between HEARTLAND
ASSOCIATES, a New York partnership, with an office at 1 Executive Drive,
Edgewood, New York, 11717, (hereafter "Landlord") and GLOBAL PAYMENT
TECHNOLOGIES Inc., formerly known as COIN BILL VALIDATOR, INC., a corporation
duly organized and existing under the law of the State of New York, with an
office at 425 Oser Avenue, Hauppauge, New York 11788, (hereafter "Tenant")
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into an Agreement of Lease, dated as
of September 21, 1994, for the leasing by Landlord and the hiring by Tenant, of
those certain premises in the building known as 425 Oser Avenue, Hauppauge, New
York, as more particularly described in Exhibit "A" to the Agreement of Lease,
for the term, for the rent and on such other terms and conditions as set forth
in the Agreement of Lease (the "Lease"); and
WHEREAS, the Lease is currently in full force and effect and Tenant is
occupying the premises in the building 425 Oser Avenue as set forth on Exhibit
"A" attached to and made part of the Lease; and
WHEREAS, Tenant desires to hire from Landlord additional space within the
building in which the premises are located, on all of the terms and conditions
as set forth in the Lease and as set forth herein; and
WHEREAS, Landlord is agreeable to letting to Tenant additional space within
the building in which the premises are located, on all of the terms and
conditions as set forth in the Lease and as set forth herein;
NOW, THEREFORE, in consideration of the Lease, the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
agrees as follows:
1. Landlord and Tenant hereby ratify and confirm the recitals.
2. In addition to the premises originally leased to Tenant, Landlord hereby
leases to Tenant and Tenant hereby hires from Landlord, for the period from the
Unit "C" Commencement Date (as
<PAGE>
hereafter defined) through and including March 31, 2000, on all of the terms and
conditions of this Lease, Unit "C" as more particularly cross-hatched in red on
Exhibit "A" attached to this Lease Amendment. Unit "C" contains approximately
4,216 square feet. The Unit "C" Commencement Date shall be August 1, 1997, or
such later date when possession of Unit "C" shall be delivered to Tenant. If
possession of Unit "C" is not delivered to Tenant by October 1, 1997 then, after
October 1, 1997 but prior to November 1, 1997, Tenant may send Landlord written
notice of its desire to cancel the hiring of Unit "C" on that date which is
thirty (30) days from the date of Tenant's notice. In the event Tenant timely
sends the required notice to Landlord, and possession of Unit "C" is not
delivered to Tenant prior to the date in Tenant's notice, then on the date in
Tenant's notice the hiring of Unit "C" shall come to an end and be of no further
force and effect but the Lease as to the original premises leased to Tenant (as
more particularly cross-hatched in red on Exhibit "A" attached to the Lease,
dated September 21, 1994) shall continue to survive and remain and be in full
force and effect as if this Lease Amendment had never been executed, and
Landlord shall have no liability to Tenant by reason thereof. In the event
Tenant fails to timely send the required notice or Landlord has, prior to the
date in Tenant's notice, delivered possession of Unit "C" to Tenant this Lease
Amendment and the Lease shall be and remain in full force and effect.
3. Paragraph 41 (A) of the Lease is amended by deleting subparagraphs (iv),
(v) and (vi) thereof in their entirety and adding the following subparagraphs
thereto in place and instead thereof:
(iv) In addition to the Base Rent payable by Tenant under subparagraph
(iii), for the period from the Unit "C" Commencement Date through December 31,
1997, Tenant shall also pay Base Rent in the amount of two thousand two hundred
thirty-seven and 99/100 ($2,237.99) dollars per month.
(v) For the Lease Year January 1, 1998 through December 31, 1998, Base Rent
shall be two hundred eighty-nine thousand nine hundred eleven and 44/100
($289,911.44) Dollars, payable twenty-four thousand one hundred fifty-nine and
29/100 ($24,159.29) Dollars monthly.
(vi) For the Lease Year January 1, 1999 through December 31, 1999, Base
Rent shall be two hundred ninety-eight thousand five hundred eighty and 11/100
($298,580.11) Dollars, payable twenty-four thousand eight hundred eighty-one and
68/100 ($24,881.68) Dollars monthly.
(vii) For the period January 1, 2000 through March 31, 2000, Base Rent
shall be twenty-four thousand eight hundred eighty-one and 68/100 ($24,881.68)
Dollars monthly.
2
<PAGE>
4 4. From and after the Unit "C" Commencement Date, whenever and wherever
reference is made in the Lease and this Lease Amendment to "premises", the same
shall mean the premises originally leased to Tenant under the Lease (as more
particularly cross-hatched in red on Exhibit "A" attached to the Lease, dated
September 21, 1994), plus Unit "C" as more particularly cross-hatched in red on
Exhibit "A" to this Lease Amendment. Unit "C" contains approximately 4,216
square feet. From and after the Unit "C" Commencement Date, whenever and
wherever reference is made in the Lease and this Lease Amendment to Tenant's
Share, Tenant's proportionate share and Tenant's pro rata share, the same shall
be thirty-six and 84/100 (36.84%) percent, provided, however, only with respect
to the payment of Real Estate Taxes, and not as to any of Tenant's other
obligations under the Lease, Tenant's Share shall remain as thirty-three and
33/100 (33.33%) percent and Tenant shall pay Real Estate Taxes for Unit "C" as
hereinafter provided. In addition to Tenant's obligation to pay thirty-three and
33/100 (33.33%) percent of the increase in Real Estate Taxes for the premises
originally let to Tenant under the Lease (as more particularly cross-hatched in
red on Exhibit "A" attached to the Lease, dated September 21, 1994) in
accordance with paragraph 42 of the Lease, and in addition to all of Tenant's
other payment obligations under the Lease, during each and every year during the
term of this Lease from and after the Unit "C" Commencement Date, and for so
long as Tenant's occupancy of Unit "C" continues, Tenant hereby agrees to also
pay and shall also pay, as additional rent, at the same time and in the same
manner as Tenant's obligation for payment of Real Estate Taxes in accordance
with paragraph 42 of the Lease, three and 51/100 (3.51%) percent of any and all
increases in Real Estate Taxes (as defined in paragraph 42 of the Lease), and
increased assessments above those for the period December 1, 1996 through
November 30, 1997 imposed on 425 Oser Avenue or, if Real Estate Taxes are not
separately assessed for or imposed upon 425 Oser Avenue, the tax lot(s) of which
Unit "C" is or becomes a part, as the case may be.
5. Tenant and Landlord each warrant and represent to the other that there
was no broker instrumental in bringing about or consummating this Lease
Amendment and neither Tenant nor Landlord have had any conversations with any
broker(s) in connection with this Lease Amendment. Tenant agrees to indemnify,
defend and hold Landlord harmless from and against any and all costs,
commissions, expenses, claims, suits, actions, judgments, etc., including
attorneys fees, of or by any broker for a commission or fee in connection with
this Lease Amendment by reason of a breach by the Tenant of the warranty or
representation contained herein.
6. Tenant acknowledges and agrees that Landlord has not offered to do, and
Landlord has no obligation to do, any work or make any repairs, alterations,
modifications, improvements, changes or additions to the premises and/or Unit
"C" in connection with this Lease Amendment. Tenant further acknowledges that
Landlord has made no representations and is unwilling to make any
3
<PAGE>
representations at all with regard to Unit "C", including the condition thereof,
and Tenant, having had a full and fair opportunity to inspect the same. Tenant's
occupancy of Unit "C" shall be a certification to Landlord that Tenant has
accepted Unit "C" in "as is" condition.
7. Tenant warrants and represents to Landlord that it has no cause of
action, whether at law or in equity, including without limitation, any
offset(s), counterclaim(s), or defense(s), with respect to the Lease.
8. From and after the date hereof, paragraph 43 of the rider to the Lease
is amended by deleting the third subparagraph thereof (with regard to waiver of
subrogation) in its entirety. The foregoing shall not affect or impair any other
language contained in paragraph 9 of the pre-printed lease form, which remains
in full force and effect.
9. Subparagraphs (1) and (2) of paragraph 53 (D) shall not be applicable to
any corporation whose shares are publicly traded on a nationally recognized
exchange.
10. This Lease Amendment may only be modified by a writing executed by the
parties hereto.
11. The covenants, conditions and agreement of this Lease Amendment shall
bind and inure to the benefit of Landlord and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in the Lease, their assigns.
12. This Lease Amendment and the Lease contain the entire understanding and
agreement between Landlord and Tenant; all prior agreements, both oral and
written, are merged herein and therein and are superseded hereby and thereby.
13. Except as amended, changed or modified hereby, the Lease is, and shall
remain, in full force and effect in accordance with
4
<PAGE>
its terms, and each and every agreement, term, covenant and condition thereof is
hereby ratified, confirmed and continued.
IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their respective
hands as of the day and year first above written.
LANDLORD: HEARTLAND ASSOCIATES
By: /s/ Gerald Wolkoff
------------------------------
Gerald Wolkoff, Partner
TENANT: GLOBAL PAYMENT TECHNOLOGIES, INC. (formerly known as)
COIN BILL VALIDATOR INC.
By: /s/ Stephen Katz
-----------------------------
Stephen Katz
Chairman of the Board
and Chief Executive Officer
5
<PAGE>
Exhibit "A"
425 Oser Avenue
Hauppauge
[GRAPHIC OMITTED - FLOOR PLAN]
TENANTS
- -------
(A) Linotype - Hell
(B) Coin Bill Validator
(C)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of September 30,
1997, is entered into by and between GLOBAL PAYMENT TECHNOLOGIES INC., a
Delaware corporation, with executive offices at 20 East Sunrise Highway, Valley
Stream, New York 11582 (the "Company"), and STEPHEN KATZ, residing at 1308
Auerbach Avenue, Hewlett Harbor, New York 11557 (the "Executive").
WITNESSETH:
WHEREAS, the Company has determined that it desires to continue the
employment of the Executive as Chief Executive Officer and Chairman of the Board
of the Company; and
WHEREAS, the Company and the Executive desire to enter into an agreement
relating to such employment;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT
1.1 The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to accept employment with the Company, upon the terms and
conditions herein contained, as the Company's Chief Executive Officer and
Chairman of the Board of Directors of the Company (the "Board of Directors"). In
such capacity, the Executive shall be the highest ranking officer of the Company
and Chairman of the Board of Directors and shall have full authority and
responsibility for formulating the plans and policies of the Company and for
administering the same and shall have the duties and responsibilities normally
inherent in such capacity in public corporations of similar size and character.
The Executive shall also serve, if elected or appointed, as a member of any
committee of the Board of Directors, its subsidiaries or affiliates.
1.2 The term of employment under this Agreement shall commence on September
30, 1997 and, subject to the terms hereof, shall terminate two years thereafter;
provided, however, that the term of this Agreement shall automatically be
extended for an additional one-year term beyond the initial two-year term unless
and until either the Company or the Executive provides 90 days' advance written
notice to the other of its or his desire to terminate this Agreement as of the
end of the then current fiscal year of the Company (such term of employment
(including any extensions thereto) is referred to hereinafter as the "Employment
Term"). It is the intent of the parties to negotiate an extension of this
Agreement commencing on or about 18 months after the effective date hereof.
1.3 Throughout the Employment Term, the Executive shall devote such efforts
to the business and affairs of the Company as the Executive shall believe
necessary to fulfill his
<PAGE>
obligations hereunder. In this connection, the Company recognizes that the
Executive has other interests, business and otherwise, and that nothing
contained herein shall prohibit the Executive from engaging in other business
endeavors and from spending time and attention with respect thereto, whether
business, charitable, philanthropic, or otherwise. The Company understands that
the Executive is the Chief Executive Officer and a member of the Board of
Directors of Cellular Technical Services Company, Inc. ("CTS"), a publicly
traded company, and that the Executive spends time and attention with respect to
the business of CTS. In the event that such involvement by the Executive
requires the Executive (as determined by the Board of Directors) to devote less
than the required time to carry out his responsibilities to the Company, then
the Board of Directors, upon 30 day's advance written notice, may propose an
adjustment to the compensation of the Executive provided hereunder to reflect
such circumstances. Such adjustment, if any, shall become final and binding if
the Executive does not dispute it within 30 days. If, within 30 days of the
Board of Director's determination, the Executive disputes such adjustment, then
a third party mutually agreeable and knowledgeable in the area of executive
compensation will determine the adjustment, if any, which determination shall be
final and binding on the parties.
1.4 The duties and services to be performed by the Executive hereunder
shall be rendered at the Company's current headquarters or any new headquarters
(provided that any new headquarters are located within a radius of 25 miles of
Valley Stream, New York), except for reasonable travel on the Company's business
incident to the performance of the Executive's duties. The Executive shall not
be required to perform any duties or services that require him to relocate his
current principal residence.
2. SALARY
During the Employment Term, the Executive shall be entitled to receive a
base salary at a rate of $150,000 per annum payable in accordance with the
Company's regular payroll practice for senior executives of the Company.
3 ANNUAL BONUSES
During the Employment Term, for each fiscal year of the Company (October 1
through September 30), the Executive shall be eligible to receive a bonus in an
amount to be determined by the Board of Directors of the Company, in its sole
discretion.
4. ADDITIONAL COMPENSATION
4.1 Each year the Executive will be eligible to receive stock options made
available to other officers in an amount determined by the Board of Directors.
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<PAGE>
4.2 Upon the execution of this Agreement, the Executive's outstanding stock
options to purchase an aggregate of 400,000 shares of the Company's Common Stock
heretofore granted under the Company's 1994 and 1996 Stock Option Plans shall,
to the extent not currently exercisable, become fully exercisable.
5. TERMINATION WITHOUT CAUSE OR GOOD REASON
5.1 If the Executive's employment is terminated by the Company other than
for "Cause" (as hereinafter defined) or the Executive terminates his employment
for "Good Reason" (as hereinafter defined) prior to the end of the Employment
Term, the Executive shall receive his base salary and all other payments and
benefits hereunder as if such employment had not been terminated.
5.2 Upon termination of employment pursuant to Section 5.1, the Executive
shall be entitled to continued participation for the remainder of the Employment
Term in the medical reimbursement plans of the Company available generally to
senior executives, provided that if the Executive is eligible for similar
coverage under another employer's plan, any such coverage by the Company shall
cease.
6. PERMANENT DISABILITY OR DEATH
6.1 If, prior to the end of the Employment Term, the Executive shall suffer
a "Permanent Disability" (as hereinafter defined), the Company may terminate the
Employment Term by notice in the manner described below. If so terminated, the
Executive shall receive a bonus for the fiscal year in which his Permanent
Disability occurred equal to the pro rata portion of the bonus determined by the
Board of Directors pursuant to Section 3 hereof based on the Executive's efforts
from the beginning of that fiscal year to the date on which the Permanent
Disability occurred. Such bonus shall be paid in a lump sum as soon as possible
following the determination of said bonus, but in no event later than December
31 following the end of such fiscal year. In addition, the Executive shall
receive any portion of the bonus attributable to any completed fiscal year which
has accrued but has not yet been paid. In addition, the Executive shall continue
to receive compensation payable monthly equal to the Executive's then current
base salary until the end of the Employment Term; provided that the Company's
current group LTD policy (or its equivalent) remains in force, which the
Executive has acknowledged is acceptable to him, shall be used to offset the
Company's liability under this Section 6.1. The foregoing obligations may be
paid out monthly or in lump sum as determined by the Board of Directors in its
sole discretion. The amounts payable under this Section 6.1 shall be in lieu of
any amount to which the Executive is entitled under Sections 2 and 3 of this
Agreement. In the event the Company is successful in obtaining an individual
long-term disability insurance policy for the Executive, which insurance policy
is reasonably satisfactory to the Executive, then the amounts received under any
such insurance policy shall be in lieu of the Company's obligation to pay the
monthly amounts to the Executive described above.
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<PAGE>
Any termination by the Company on account of the Executive's Permanent
Disability shall be communicated to the Executive by a Notice of Disability
Termination 30 days in advance of the proposed termination date. For purposes of
this Agreement, a "Notice of Disability Termination" shall mean a written notice
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under this Section
6.1. For purposes of this Agreement, no such purported termination by the
Company shall be effective without such Notice of Disability Termination.
For purposes of this Agreement, the Executive shall be deemed to have
suffered a "Permanent Disability" if the Executive, by reason of physical or
mental illness, shall have been unable to perform satisfactorily the services to
be rendered by him hereunder for a consecutive period of 180 days. Such
determination shall be made by the Board of Directors upon the advice of a
qualified physician appointed by the Board of Directors. The Executive (or, if
applicable, the person or persons legally empowered to make such decisions on
behalf of the Executive) shall have the opportunity to select a qualified
physician of his own choice and if such physician does not support the
conclusions of the physician appointed by the Board of Directors, then a third
qualified physician, mutually agreed upon by the Board of Directors and the
Executive, shall be appointed and such third physician's determination shall be
final and binding on both parties.
6.2 If, prior to the expiration of the Employment Term, the Executive shall
die, the Executive's estate, designated beneficiaries or legal representative
shall receive a bonus for the fiscal year in which his death occurred equal to
the pro rata portion of the bonus determined by the Board of Directors pursuant
to Section 3 hereof based on the Executive's efforts from the beginning of that
fiscal year to the date on which death occurred. Such bonus shall be paid in a
lump sum as soon as possible following the determination of said bonus, but in
no event later than December 31 following the end of such fiscal year. The
preceding two sentences shall have no application or effect on the Executive's
right to receive any portion of the bonus attributable to any prior fiscal year
which has accrued but has not yet been paid. In addition, the Executive's
estate, designated beneficiaries or legal representative shall continue to
receive compensation payable monthly equal to the Executive's base salary at the
time of his death until the end of the Employment Term; provided, however, that
the foregoing payments shall not become payable if the Executive's estate,
designated beneficiaries or legal representative receives no less than $500,000
from the life insurance the Company will make its reasonable efforts to obtain
under this Agreement. The amounts payable under this Section 6.2 shall be in
lieu of any amounts to which the Executive is entitled under Sections 2 and 3 of
this Agreement.
6.3 The Company shall have the right to fund all of the foregoing
obligations with insurance as it shall determine and the Executive shall fully
cooperate with respect thereto.
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<PAGE>
7. TERMINATION FOR GOOD REASON
The Executive may terminate his employment hereunder for Good Reason at any
time during the Employment Term, in which event the Executive shall be deemed to
have to resigned from all of his positions with the Company. For purposes of
this Agreement "Good Reason" shall mean any of the following (without the
Executive's express prior written consent):
(a) The assignment to the Executive by the Company of duties
inconsistent with the Executive's position as Chief Executive Officer and
Chairman of the Board of Directors or any reduction in his duties or
responsibilities, or any removal of the Executive from any of his positions
as Chief Executive Officer and Chairman of the Board of Directors, or any
failure to continue the Executive as a member of the Board of Directors, or
any amendment to the By-Laws of the Company as in effect at the
commencement of the Employment Term materially and adversely affecting the
Executive's position, responsibilities and duties as Chief Executive
Officer and Chairman of the Board, except in connection with the
termination of the Executive's employment for Cause, Permanent Disability
or as a result of the Executive's death or termination by the Executive
other than for Good Reason;
(b) A reduction by the Company in the Executive's base salary as in
effect at the commencement of the Employment Term or as the same may be
increased from time to time during the Employment Term;
(c) (i) A relocation of the Company's principal executive offices to a
location outside of a radius of 25 miles from Valley Stream, New York,
unless such relocation is required by the Company in order to carry out the
operations of the Company as determined by the Board of Directors; (ii) the
Company's requiring the Executive to be based anywhere other than a
location within such radius, except for reasonable travel on the Company's
business incident to the performance of the Executive's duties.
(d) The taking of any action by the Company which would deprive the
Executive of any material fringe benefit enjoyed by the Executive at the
commencement of the Employment Term after the Executive has provided the
Company written notice of his objection and such action has not been
rescinded in a reasonable period of time;
(e) Any material breach by the Company of any provision of this
Agreement after the Executive has provided the Company written notice of
the breach and such breach has not been cured in a reasonable period of
time; or
(f) Any order by the Company to the Executive, including pressure of
sufficient force to have the effect of an order, requiring the Executive to
perform any act which the Executive reasonably believes and would in fact
constitute a civil or criminal violation of any law, regulation, court
decision, administrative decision, or other pronouncement having the force
of law, but not a mere suggestion of the Company that the Executive
consider a course of action
-5-
<PAGE>
considered illegal by the Executive and after the Executive has advised the
Company of his belief and the Company nonetheless requires the Executive to
perform such act or course of conduct.
8. DISCHARGE FOR CAUSE
8.1 If the Company terminates the employment of the Executive for Cause,
its obligations under this Agreement to make any further payments to the
Executive shall thereupon cease and terminate, except for any obligations
accrued but which remain unpaid.
8.2 As used herein, the term "Cause" shall mean (a) any act or failure to
act which constitutes a breach of the Executive's fiduciary duty to the Company;
(b) any act of willful malfeasance by the Executive having a material adverse
effect on the Company; or (c) any failure to act by the Executive involving
willful malfeasance having a material adverse effect on the Company; provided
that (b) and (c) shall be inapplicable if the Executive reasonably believed his
conduct to be consistent with the best interests of the Company or if his
conduct occurred under circumstances entitling the Executive to indemnification
under the Certificate of Incorporation, the Company's By-Laws, or applicable
law.
8.3 Termination of the Executive for Cause pursuant to this Section 8 shall
be communicated by a Notice of Termination. For purposes of this Agreement, a
"Notice of Termination" shall mean delivery to the Executive of a copy of a
resolution duly adopted by the affirmative vote of not less than three quarters
(3/4) of the entire membership of the Board of Directors (excluding the
Executive) at a meeting of the Board of Directors called and held for the
purpose (after reasonable notice to the Executive and reasonable opportunity for
the Executive, together with the Executive's counsel, to be heard before the
Board of Directors prior to such vote), finding that in the good faith opinion
of the Board of Directors, the Executive was guilty of conduct set forth in
Section 8.2 above and specifying the particulars thereof in reasonable detail.
For purposes of this Agreement, no such purported termination of Executive's
employment shall be effective without such Notice of Termination.
9. EXPENSES
The Executive is authorized to incur reasonable expenses for promoting the
business of the Company, including expenses for travel and similar items. The
Company will reimburse the Executive for all of the above expenses upon
presentation by the Executive from time to time of an itemized account of such
expenditures in accordance with the Company's reasonable procedures as in effect
from time to time.
10. EMPLOYEE BENEFITS
10.1 The Executive shall be provided, to the extent eligible, with all
benefits coverage afforded by the Company to its senior executives, including,
without limitation, life
-6-
<PAGE>
insurance (in an amount of not less than $500,000), health and hospitalization
insurance, individual long-term disability insurance, travel insurance and
vacations.
10.2 In all events, and notwithstanding any termination of this Agreement
for any reason other than Cause, the Company shall, for a six-month period
commencing on the date of termination of this Agreement, pay all premiums of a
life insurance policy (in an amount of not less than $500,000) on the life of
the Executive with the beneficiaries to be designated by the Executive. At the
end of the aforementioned six-month period, the Executive shall have the right
to purchase the insurance policy or policies of his life owned by the Company by
agreeing to pay and paying all future premiums due under such policy or
policies.
10.3 The Executive shall be included in all pension, profit sharing,
incentive or other similar or comparable plans, programs and arrangements
applicable generally to senior executives of the Company in accordance with the
terms thereof and shall be provided with the benefits provided by the Company
under such plans, programs and arrangements as allowed by law.
10.4 The Executive shall be provided with the full-time use of an
automobile and shall be reimbursed by the Company for all expenses related to
such automobile.
11. RESTRICTIVE COVENANTS
11.1 Similar Business. During the Employment Term and during the one-year
period thereafter, the Executive will not directly or indirectly own, manage, be
employed by, engage in, carry on, or be connected in any like manner with any
other business similar to the type of business conducted by the Company within
100 miles of any office or job site of the Company within its trade territory,
or engage in any other conduct which would interfere with or disrupt the
operations of the Company.
11.2 Customers. The Executive will not at any time, either directly or
indirectly, make known or divulge to any person, firm or corporation the names
or addresses of any of the customers of the Company at the time the Executive
entered the employ of the Company or with whom the Executive became acquainted
after entering the employ of the Company. Furthermore, the Executive will not,
during the period of one year immediately after termination of employment,
directly or indirectly, either for himself or for any other person, firm, or
corporation, call upon, solicit, divert, or take away or attempt to solicit,
divert or take away any of the customers or patrons of the Company upon whom the
Executive called, whom he solicited, to whom he catered, or with whom he became
acquainted during his employment with the Company.
11.3 Employees. The Executive will not, during the one-year period
immediately after termination of employment, directly or indirectly, either for
himself or for any other person, firm, or corporation, approach any employee of
the Company holding the position of Vice President or higher, as a prospective
employee of the Executive, nor shall the Executive
-7-
<PAGE>
within the same period accept an employment application or grant a job interview
to any such employee of the Company.
11.4 Information. The Executive will not at any time, in any fashion, form,
or manner, either directly or indirectly, divulge, disclose, or communicate to
any person, firm, or corporation in any manner whatsoever any information of any
kind, nature, or description concerning any matters affecting or relating to the
business of the Company, including, without limitation, the names of any of its
customers, the prices it obtains or has obtained or at which it sells or has
sold its products, or any other information concerning the business of the
Company, its manner of operation, or its plans, processes, or other data of any
kind, nature, or description, without regard to whether any or all of the
foregoing matters would be deemed confidential, material, or important.
11.5 Records. All books, records, reports, accounts, and documents relating
in any manner to the Company's business or customers, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of employment or at the Company's request at any time.
11.6 Breach. The parties hereby stipulate that, as between them, each of
the foregoing matters are important, material, and confidential, and gravely
affect the effective and successful conduct of the business of the Company, and
its goodwill, and that any breach of the terms of this Section 11 is a material
breach of this Agreement, from which the Executive may be enjoined and for which
the Executive shall also pay to the Company all damages (including, but not
limited to, compensatory, incidental, consequential and lost profits damages),
which arise from the breach, together with interest, costs and attorney's fees
to collect such damages. Any lawsuit for breach may be brought in Nassau County,
New York, which shall be a proper venue.
11.7 Savings Clause. To the extent that any of the foregoing restrictive
covenants are inconsistent with New York law, as to either time or geography,
they shall be reformed and enforced in accordance with New York law in any
arbitration or legal proceedings arising hereunder. This Section 11 is severable
from all other sections in this Agreement, and all of the subsections herein
(11.1 through 11.7, inclusive) are severable from one another.
12. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement shall
be settled by arbitration in accordance with the Rules of the American
Arbitration Association, one arbitrator, and shall be enforceable in any court
having competent jurisdiction.
13. NOTICES
All notices or communications hereunder shall be in writing, addressed as
follows:
-8-
<PAGE>
To the Company:
Global Payment Technologies, Inc.
20 East Sunrise Highway
Valley Stream, New York 11582
To the Executive:
Stephen Katz
1308 Auerbach Avenue
Hewlett Harbor, New York 11 557
All such notices or communications shall be sent certified or registered
mail, return receipt requested, postage prepaid, addressed as above (or to such
other address as such party may designate in writing from time to time), and the
actual date of receipt as shown by the receipt therefor, shall determine the
time at which notice was given.
14. SEPARABILITY; LEGAL FEES
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof which shall remain in full force and
effect. The Company shall pay all legal fees and other fees and expenses which
the Executive may incur in entering into this Agreement, if executed (provided
the amount of such legal fees shall not exceed $25,000), or in obtaining, or
attempting to obtain (if ultimately successful), compensation or other benefits
under this Agreement.
15. BINDING EFFECT; ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the heirs
and representatives of the Executive and the assigns and successors of the
Company, but neither this Agreement nor any rights hereunder shall be assignable
or otherwise subject to hypothecation by the Executive or by the Company. The
Company shall not assign this Agreement to any successor or assign of the
Company without the written consent of the Executive.
16. GOVERNING LAW
This Agreement shall be construed, interpreted, and governed in accordance
with the laws of the State of New York.
-9-
<PAGE>
17. ENTIRE AGREEMENT
This Agreement represents the entire agreement of the parties and shall
supersede any and all previous contracts, arrangements or understandings between
the Company and the Executive with respect to the subject matter hereof. The
Agreement may be amended at any time by mutual written agreement of the parties
hereto.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By /s/ Edward Seidenberg, VP
----------------------------------
Name: Edward Seidenberg
Title: Vice President & COO
/s/ Stephen Katz
----------------------------------
Stephen Katz
-10-
Exhibit 21
Principal Subsidiaries of Global Payment Technologies, Inc.
<TABLE>
<CAPTION>
Jurisdiction Percentage Ownership
Name of Subsidiary Incorporation by the Registrant
------------------ ------------- -----------------
<S> <C> <C>
Global Payment Technologies South Africa Pty. Ltd. South Africa 50%
Global Payment Technologies Australia Pty. Ltd. Australia 50%
CBV China Venture Limited Delaware 50%
- Hangzhou CBV Plastics Corp. Ltd. China 100%
</TABLE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-KSB, into the Company's previously filed
Registration Statement File Nos. 333-30829 and 33-86352-NY.
ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
Melville, New York
December 29, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 1,913
<SECURITIES> 0
<RECEIVABLES> 5,065
<ALLOWANCES> 225
<INVENTORY> 5,120
<CURRENT-ASSETS> 12,404
<PP&E> 2,105
<DEPRECIATION> 770
<TOTAL-ASSETS> 14,154
<CURRENT-LIABILITIES> 3,641
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 10,362
<TOTAL-LIABILITY-AND-EQUITY> 14,154
<SALES> 23,868
<TOTAL-REVENUES> 23,868
<CGS> 14,882
<TOTAL-COSTS> 21,260
<OTHER-EXPENSES> (71)
<LOSS-PROVISION> (39)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,588
<INCOME-TAX> 1,113
<INCOME-CONTINUING> 1,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,475
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
