Net sales in the third quarter were $3.2 million as compared with $5.2 million in the same period last year. The net loss for the quarter was ($1,889,000) or ($0.30) per share as compared with a net loss of ($340,000) or ($0.05) per share in the prior period.

Net sales for the nine months ended June 30, 2006 were $11.1 million as compared with $20.9 million in the same period last year. The net loss for the nine months ended June 30, 2006 was ($3.2) million or ($0.52) per share as compared with a net loss of ($282,000) or ($0.05) per share in the prior period.

Net sales for the quarter decreased 39% to $3.2 million as compared with $5.2 million in the same prior year period, due to decreased gaming sales of $2,146,000, primarily from the Company's Australian affiliate which has reduced its short-term inventory requirements to better manage current market conditions, partially offset by increased sales of $138,000 to the beverage and vending market. Gross profit decreased to ($18,000), or (0.6%) of sales this quarter, as compared with $1,261,000, or 24.4% of sales in the same year ago period. This decrease in gross profit was primarily the result of sales incentives to reduce Aurora inventory levels as well as attempting to increase market share with Aurora, and the effects of a 38% decrease in sales while manufacturing costs were virtually unchanged and an increase of the inventory reserve of $444,000.

Operating expenses increased to $1,982,000, as compared with $1,816,000 in the same year ago period, primarily the result of a severance payment accrued for a former officer and increased expenditures for patents and prototypes as a result of new product development. Net interest income was $5,000, as compared with $2,000 in the same year ago period.

During the quarter the Company's equity in income of unconsolidated affiliates was positively impacted by reduced inventory at its Australian affiliate. This resulted in income of $140,000 as compared with $135,000 in the prior year period, based upon the Company's recognition of its proportionate share of the related gross profit on product sales to its affiliates, which have been sold by the affiliates to third party end users. The Company's share of its affiliates' net income was ($32,000) as compared with $78,000 in the same year ago period.

Stephen Nevitt, GPT's President and CEO stated, "The continued uncertainties related to gaming regulations in Russia and inventory reductions at our Australian affiliate have had a negative effect on sales for the third quarter and we see this softness continuing in the fourth quarter. We have customer interest in our SA-4 product and orders have begun to increase for shipments in the fourth quarter of this year and the first quarter of next fiscal year. Our senior vice president of engineering and operations along with our team of engineers are working on new products to be introduced in our next fiscal year. In addition, I am confident in the interest for GPT products and that demand will pick up when permanent regulations are in place."

William McMahon, GPT's Vice President and CFO stated, "The Company has determined that it should concentrate its efforts on product development and manufacturing expertise. As a result, GPT has entered into negotiations to sell its 50% non-controlling interest in its Australian affiliate, Global Payment Technologies Australia Pty. Ltd. ("GPTA") to GPTA's controlling shareholder and current distributor. In addition, the Company has entered into negotiations to sell its 35% interest in eCash Holdings Pty. Ltd. ("eCash") to one of its shareholders. The company expects to receive in the aggregate, approximately $1.7 million in cash upon the closing of the transactions and an additional $280 thousand at the one year anniversary of the close. The Company will enter into a long term exclusive arrangement with GPTA to be responsible for the sales and service of the Company's products in Australia, Asia and the Pacific Rim. There can be no assurance that this transaction will be completed or that it will be completed under the same terms and conditions as described."

Mr. McMahon further stated, "GPT has its $2.5 million credit line available and no amounts were outstanding on its facility as of June 30, 2006. As a result of its credit facility and the $1.7 million in cash at June 30, 2006, we believe the Company has sufficient resources to pay its obligations as they come due for the next twelve months."Download the document now 31.5 kb (Adobe Acrobat Document)