UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period
ended December 31, 1997 Commission File No. 0-25148
Global Payment Technologies, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2974651
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
20 East Sunrise Highway, Suite 201, Valley Stream, New York 11581
(Address of principal executive offices) (Zip Code)
(516) 256-1000
(Issuer's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. YES _X_ NO ___
Shares of Common Stock outstanding on February 11, 1998 5,506,500
<PAGE>
Global Payment Technologies, Inc.
Index
PART I. FINANCIAL INFORMATION
Page Number
-----------
Item 1. Financial Statements
Balance Sheets - December 31, 1997 and September 30, 1997 3
Statements of Income - Three Months ended December 31, 1997
and 1996 4
Statements of Cash Flows - Three Months ended December 31,
1997 and 1996 5
Notes to Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31, September 30,
1997 1997
------------ -------------
(Dollar amounts in thousands,
except share data)
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,416 $ 1,913
Accounts receivable, less allowance for doubtful accounts
of $239 and $225, respectively 5,356 4,840
Inventory, less allowance for obsolescence of $776 and
$742, respectively 5,736 5,120
Prepaid expenses 146 110
Deferred income taxes 428 421
------- -------
Total current assets 13,082 12,404
Property and equipment, net 1,381 1,335
Investment in unconsolidated affiliates 489 355
Other assets 60 60
------- -------
Total assets $15,012 $14,154
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,029 $ 2,302
Accrued expenses and other current liabilities 1,544 1,230
Income taxes payable 342 109
------- -------
Total current liabilities 3,915 3,641
------- -------
Deferred income taxes 96 96
------- -------
Shareholders' equity:
Common stock, 20,000,000 shares authorized; $.01 par value,
5,506,500 and 5,506,200 shares issued and outstanding 55 55
Additional paid-in capital 7,975 7,974
Retained earnings 2,971 2,388
------- -------
Total shareholders' equity 11,001 10,417
------- -------
Total liabilities and shareholders' equity $15,012 $14,154
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
STATEMENTS OF INCOME
(Unaudited)
Three Months ended Dec. 31,
---------------------------
1997 1996
---------- ----------
(Dollar amounts in
thousands, except share
and per share data)
Net sales $ 7,686 $ 4,681
Cost of sales 4,385 3,005
---------- ----------
Gross profit 3,301 1,676
Operating expenses 2,449 1,396
---------- ----------
Income from operations 852 280
Other income:
Equity in income of unconsolidated affiliates 57 25
Interest income, net 27 15
---------- ----------
Total other income 84 40
---------- ----------
Income before provision for income taxes 936 320
Provision for income taxes 353 131
---------- ----------
Net income $ 583 $ 189
========== ==========
Net income per share:
Basic $ .11 $ .03
========== ==========
Diluted $ .10 $ .03
========== ==========
Common shares used in computing net income
per share amounts:
Basic 5,506,377 5,500,000
========== ==========
Diluted 5,997,837 5,709,728
========== ==========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Dec. 31,
1997 1996
------- -------
(Dollar amounts in thousands)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 583 $ 189
------- -------
Adjustments to reconcile net income to net cash used in
operating activities:
Equity in income of unconsolidated affiliates (57) (25)
Depreciation and amortization 150 78
Provision for losses on accounts receivable 39 17
Provision for inventory obsolescence 34 0
Changes in operating assets and liabilities:
Increase in accounts receivable (555) (45)
Increase in inventory (650) (155)
Increase in prepaid expenses and other assets (36) (38)
Increase in deferred income taxes (7) (19)
(Decrease) increase in accounts payable (273) 336
Increase (Decrease) in accrued expenses and other current liabilities 314 (55)
Increase (Decrease) in income taxes payable 233 (528)
------- -------
Total adjustments (808) (434)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (225) (245)
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net of proceeds from disposals (196) (192)
Investments in unconsolidated affiliates (77) 0
------- -------
NET CASH USED IN INVESTING ACTIVITIES (273) (192)
------- -------
FINANCING ACTIVITIES:
Issuance of stock upon exercise of stock options 1 0
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1 0
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (497) (437)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,913 2,727
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,416 $ 2,290
======= =======
CASH PAID DURING THE PERIOD FOR:
Interest $ 0 $ 0
======= =======
Income taxes $ 189 $ 677
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Global Payment Technologies, Inc.
Notes to Financial Statements
December 31, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Global Payment Technologies,
Inc. (the "Company"), including the September 30, 1997 balance sheet which has
been derived from audited financial statements, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Rule 310 of Regulation SB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
operating results for the three-month period ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-KSB for the period ended September 30, 1997.
NOTE B - STOCK SPLIT
In August 1997, the Company announced a two-for-one stock split of its Common
Stock. This split was effected by a 100% stock dividend on August 18, 1997, the
record date. The distribution date was September 4, 1997. All information
contained in these financial statements for periods prior thereto has been
retroactively restated to give effect to this stock split.
NOTE C - NET INCOME PER COMMON SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per share". In accordance with
SFAS No. 128, net income per common share amounts ("basic EPS") were computed by
dividing net income by the weighted average number of common shares outstanding
for the period. Net income per common share amounts, assuming dilution ("diluted
EPS"), were computed by reflecting the potential dilution from the exercise of
stock options and stock warrants. SFAS No. 128 requires the presentation of both
basic EPS and diluted EPS on the face of the income statement. Net income per
share amounts for the same prior-year periods have been restated to conform to
the provisions of SFAS No. 128.
6
<PAGE>
Global Payment Technologies, Inc.
Notes to Financial Statements
December 31, 1997
NOTE C - NET INCOME PER COMMON SHARE (continued)
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net income is as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1997
(In thousands, except per share data)
-------------------------------------
Net Income Shares Per Share
(Numerator) (Denominator) Amounts
----------- ------------- -------
<S> <C> <C> <C>
Net income $583
----
Basic EPS
Net income attributable to common stock 583 5,506.4 $ .11
Effect of dilutive securities
Stock options and warrants -- 491.4 .01
---- ------- -------
Diluted EPS
Net income attributable to common
stock and assumed option and warrant
exercises $583 5,997.8 $ .10
==== ======= =======
<CAPTION>
Three Months Ended
December 31, 1996
(In thousands, except per share data)
-------------------------------------
Net Income Shares Per Share
(Numerator) (Denominator) Amounts
----------- ------------- -------
<S> <C> <C> <C>
Net income $189
----
Basic EPS
Net income attributable to common stock 189 5,500.0 $ .03
Effect of dilutive securities
Stock options and warrants -- 209.7 --
---- ------- -------
Diluted EPS
Net income attributable to common
stock and assumed option and warrant
exercises $189 5,709.7 $ .03
==== ======= =======
</TABLE>
Options to purchase 36,000 shares of common stock in the quarter ended December
31, 1997 were not included in the computation of diluted EPS because the
exercise prices exceeded the average market price of the common shares for this
period. These options were still outstanding at the end of the period.
7
<PAGE>
Global Payment Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three months ended December 31, 1997 compared with three months ended
December 31, 1996
Sales
Net sales increased by 64.2%, or $3,005,000, to $7,686,000 in the three months
ended December 31, 1997 from $4,681,000 in the comparative prior year period.
The Company attributed the strong revenue growth to increased demand for its
bill validator products primarily in the international gaming industry, as well
as gains in product acceptance in the beverage and vending industries.
Gross Profit
Gross profit increased to $3,301,000, or 42.9% of net sales, in the three months
ended December 31, 1997 from $1,676,000, or 35.8% of net sales, in the
comparative prior year period. The increase in gross profit as a percentage of
sales was primarily the result of increased operating efficiencies and reduced
product costs.
Operating Expenses
Operating expenses increased to $2,449,000, or 31.9% of net sales, in the three
months ended December 31, 1997 from $1,396,000, or 29.8% of net sales, in the
comparative prior year period. This increase was, in part, due to continued
increased staffing and related payroll costs to support the sales growth in
fiscal 1997 as well as support the Company's growth strategy in fiscal 1998 and
beyond. The primary reason for the increase in operating expenses is the result
of commission expense of $566,000 in the first quarter of fiscal 1998. These
commissions were paid to distributors of the Company's products, including
certain 50%-owned affiliates providing in-country sales and service in Australia
and South Africa.
Net Income
Net income for the quarter was $583,000, or $.10 per share, on a diluted basis,
as compared with $189,000, or $.03 per share, on a diluted basis, in the
comparative prior year period. The Company owns 50% non-controlling interests in
local sales and service organizations in South Africa and Australia and a
manufacturing firm in China. Included in the results of operations for the
quarters ended December 31, 1997 and 1996 are the Company's share of profits
(net of losses) of these affiliates of $57,000 and $25,000, respectively.
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 and sales and marketing operations, and make interest payments
should the Company decide to utilize borrowings to fund future growth. The
Company believes that its available resources, including its credit facility,
should be sufficient to meet its obligations as they become due and permit
continuation of its planned expansion throughout fiscal 1998 and beyond.
At December 31, 1997, the Company's cash and cash equivalents were $1,416,000
compared with $1,913,000 at September 30, 1997. On February 6, 1998, the Company
renewed its $5,000,000 secured line of credit with The Chase Manhattan Bank.
This facility had been upgraded to allow borrowings on an unsecured basis at
reduced interest rates and expires on March 31, 1999. Outstanding borrowings
will bear interest at the bank's prime rate per annum or, at the Company's
option, for borrowings greater than $500,000, LIBOR plus 175 basis points per
annum. No amounts were outstanding under this or the prior line of credit at
December 31, 1997 or at September 30, 1997.
8
<PAGE>
Global Payment Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Net cash used in operating activities in the three months ended December 31,
1997 was $225,000. This amount is due to increased inventory of $650,000 and
increased accounts receivable of $555,000, offset, in part, by net income for
the period, adjusted for non-cash items, of $749,000 and an increase in income
taxes payable of $233,000. Net cash used in operating activities in the three
months ended December 31, 1996 was $245,000. This amount is due primarily to a
decrease in income taxes payable of $528,000 and increased inventory of
$155,000, offset, in part, by net income for the period, adjusted for non-cash
items, of $259,000 and an increase in accounts payable and accrued expenses of
$281,000.
Cash used in investing activities for the three months ended December 31, 1997
amounted to $273,000 as compared with $192,000 in the prior year period.
Investments in property and equipment for the quarter ended December 31, 1997
amounted to $196,000 as compared with $192,000 in 1996. In addition, the Company
funded its joint ventures with approximately $77,000 in the quarter ended
December 31, 1997 in the form of loans.
Special Note Regarding Forward-Looking Statements: A number of statements
contained in this discussion and analysis are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied in the applicable statements. These risks and
uncertainties include but are not limited to: the Company's dependence on the
paper currency validator market and its potential vulnerability to technological
obsolescence; the risks that its current and future products may contain errors
or defects that would be difficult and costly to detect and correct; potential
manufacturing difficulties; potential shortages of key parts and/or raw
materials; possible risks of product inventory obsolescence; potential
difficulties in managing growth; dependence on key personnel; the Company's
dependence on a limited base of customers for a significant portion of sales;
the possible impact of competitive products and pricing; uncertainties with
respect to the Company's business strategy; general economic conditions in the
domestic and international markets in which the Company operates; and other
risks described in the Company's Securities and Exchange Commission filings.
9
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit # Description
27 Financial Data Schedule (1)
- ----------
(1) Filed herewith.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
10
<PAGE>
Global Payment Technologies, Inc.
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Global Payment Technologies, Inc.
By: s/ Thomas McNeill
-------------------------------
Vice President,
Chief Financial Officer and
Principal Accounting Officer
Dated: February 12, 1998
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Global Payment Technologies, Inc.- Financial Data Schedule for Period Ending
December 31, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,416
<SECURITIES> 0
<RECEIVABLES> 5,595
<ALLOWANCES> 239
<INVENTORY> 5,736
<CURRENT-ASSETS> 13,082
<PP&E> 2,300
<DEPRECIATION> 919
<TOTAL-ASSETS> 15,012
<CURRENT-LIABILITIES> 3,915
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 10,946
<TOTAL-LIABILITY-AND-EQUITY> 15,012
<SALES> 7,686
<TOTAL-REVENUES> 7,686
<CGS> 4,385
<TOTAL-COSTS> 6,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 39
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 936
<INCOME-TAX> 353
<INCOME-CONTINUING> 583
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 583
<EPS-PRIMARY> .11
<EPS-DILUTED> .10
</TABLE>
