---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-KSB



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



For the year ended December 31, 2002



-OR-



| ̈ |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 0-21738



---



GLOBAL
EPOINT, INC.

(Name of small business issuer as specified in its charter)



|NEVADA                                                         |  | 33-0423037                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer identification No.)



1370
W. SAN MARCOS BLVD. SUITE 100, SAN MARCOS, CALIFORNIA 92069

(Address of principal executive offices)



(760) 510-4900

(Issuers telephone number)



---



Securities
registered pursuant to section 12 (b) of the Act: None



Securities registered pursuant to section 12(g) of the Act: Common Stock, par value $.03 per share



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding twelve
months (or if 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 ̈



Check if disclosure of delinquent filers in response to item
405 of regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in part III of this form
10-KSB ̈



The registrants revenues for fiscal year ended December 31, 2002 were $507,546



The aggregate market value of the registrants common
stock held by nonaffiliates of the Registrant as of March 21, 2003, was $5,849,311



The number of shares outstanding of the Registrants common stock as of March 21, 2003, was 4,824,709



Documents incorporated by reference: None



---



---

ITEM 1.    BUSINESS



General



Global ePoint, Inc. (the Company or we) is in the process of a major transition. We
are undergoing a series of transactions intended to transform the Company and to strategically move forward with new market opportunities that can better enhance shareholder value. The Company had been primarily engaged in the lottery industry for
approximately 10 years and was one of the largest providers in the world of vending machines for the sale of instant-winner lottery tickets. In 2000, the Company began the process of selling its lottery business in order to acquire the cash
necessary to transition the Company into other business activities that could provide more diversified and larger market opportunities.



On June 1, 2001, the Company completed the sale of its lottery business to Interlott Technologies, Inc. (Interlott). Under the
agreement with Interlott, the Company sold all of the assets used in its existing lottery business, relating to the manufacture, sale, lease, and service of instant lottery ticket vending machines in exchange for up to approximately $28 million,
including cash of approximately $13 million at closing and the potential of deferred and earn-out amounts of up to $15 million (which are subject to certain conditions). A more detailed description of the agreement with Interlott is under
Agreement with Interlott. As a result of the sale, the Company changed its name from On-Point Technology Systems, Inc. to Global ePoint, Inc.



The Companys revenues through June 1, 2001 had been primarily generated from (i) sales of vending terminals (ii) leases of vending
terminals (iii) performance of service on vending terminals (iv) upgrades to vending terminals, and (v) sales of associated parts. The Companys products were sold or leased to a limited number of customers worldwide. As a result, the Company
had experienced fluctuations in its financial results and capital expenditures because of the timing of significant individual contract awards and customer orders as well as associated product delivery schedules. The Companys sales cycle
could, at times, be relatively long due to the lead time required for business opportunities to result in signed sales or lease agreements. Operating results were affected by such lead time as well as working capital requirements associated with
manufacturing vending terminals pursuant to new orders, increased competition, and the extended time which could elapse between the customers firm order and the receipt of revenue from the sale or lease of the applicable vending terminals. In
addition, there had been an accelerating trend by customers to lease rather than purchase vending terminal equipment. Leasing vending terminals required the Company to invest capital or otherwise finance the manufacture of the vending terminals. All
of these factors, as well as general competitive conditions, restrictive capital markets, and research and development costs, were considered in the determination to sell the lottery business and transition into new market opportunities.



Since June 1, 2001, we have been in the process
of establishing new strategic initiatives and preparing the Company to transition into new business activities. In that connection, during 2002 the Company has been actively reviewing (i) opportunities that involve the acquisition of or merger with
companies that have new business activities with high growth potential, and (ii) marketing plans to maximize the value of the Companys existing non-lottery related products, which consist primarily of card dispensing equipment (see Debit
Card Retailer herein).



With respect to the
card dispensing equipment, during 2002 the Company has been undergoing restructuring costs that primarily relate to readying the Companys existing inventory of card dispensing equipment for redeployment and/or sale. We have been expending
costs to retrieve and refurbish approximately 2,000 card-dispensing machines that were previously on lease with a customer and deployed at retail locations throughout various states. That customer was liquidated under bankruptcy proceedings in 2000.
Once the equipment has been retrieved, we have been refurbishing it to ready it for redeployment and/or sale. We believe we have completed approximately 80% of the retrieval process and approximately 70% of the refurbishment process. Once fully
completed, the restructuring costs associated with this process will end.



2



---



The Company
also intends to distribute and sell prepaid phone cards under arrangements to be negotiated with the prospective purchasers of the Companys card dispensing equipment. In order to pursue this business activity, the Company formed a subsidiary
called Global Telephony, Inc. In July 2002, the Company commenced initial operations of this subsidiary in a small region in California in order to evaluate the market and determine whether expansion of those operations would be beneficial. As a
result of the Companys merger negotiations, described below, in December 2002, the Company choose to transfer management and ownership of those operations to a third party, which has entered into a marketing agreement with the Company to
market and purchase, under certain conditions, the Companys card dispensing equipment. The third party, as part of the agreement, has purchased during the first quarter of 2003 approximately 140 card dispensing machines from the Company. The
Company has delayed further actions with respect to the redeployment and sale of the card dispensing equipment until the direction of the Companys pending merger has been further defined.



During 2002 the Company also reviewed a variety of new market
opportunities that could provide it with the ability to accelerate the initial development phase generally required of a new product. In that regard, management throughout 2002 reviewed the possibilities of merging with an established business
and/or acquiring a developed product line. The Companys goal with respect to securing a new market opportunity is to identify which opportunities best leverage its management expertise, technological property, international relationships and
corporate value, while maximizing its abilities to enhance shareholder value. The Company anticipates that if a new business opportunity is completed, a further restructuring of its operations may be required. The extent of the restructuring and the
effect on the Companys financial statements will depend on the particular business opportunity.



In connection with its review of new market opportunities, the Company entered into a letter of intent on January 18, 2003 with Sequent
Technologies, Inc. Best Logic, Inc. and McDigit, Inc. (the Target Companies) to acquire 100 percent of the issued and outstanding stock or membership interest, as applicable, of the Target Companies in an all-stock transaction.
Initially, it is anticipated that the number of shares of common stock to be issued to the shareholders and members of the Target Companies would be equal to a percentage ownership of the Company of 50.1 percent of the total outstanding shares of
the Company at the time of closing. However, that percentage may be reduced to approximately 40 percent if certain performance levels for the Target Companies are not achieved for the year ended December 31, 2002. The shareholders and members of the
Target Companies can receive additional shares of the Companys common stock if they meet certain net income performance requirements over the next three years.



Sequent Technologies, Inc. is a start-up company that provides mobile visual telecommunication systems using
advanced compression and encryption techniques. Best Logic, Inc. is a specialized manufacturer of computing solutions for industrial applications. Best Logics primary markets include the electronic security market and x-ray scanning equipment
for the airline industry. McDigit is a start-up marketing company primarily focused on the distribution, sale and marketing of Sequents and Best Logics products in key security markets.



The merger is subject to a number of conditions, including the
completion of a definitive agreement, approval by the Companies respective boards of directors and approval by the Companys shareholders. As such, there can be no assurance that the Company will enter into a definitive agreement with the
Target Companies or that the merger will be consummated.



Also during 2002, the Company was awarded a judgment against the Commonwealth of Pennsylvania (Pennsylvania) for a previous action filed against them by the Company in the Pennsylvania Board of Claims relating to a breach
of a 1993 lottery contract and a breach of a disputed contract under a 1995 RFP that Pennsylvania awarded to the Company. The Board of Claims found that Pennsylvania had acted in bad faith, that the 1993 Contract was breached, that a contract had
been entered into with respect to the 1995 RFP and that the Company relied on Pennsylvanias bad faith in attempting to perform under the contract. As a result, the Board of Claims awarded approximately $4.5 million in damages plus interest in
excess of $1 million. Pennsylvania filed an appeal with the Pennsylvania Commonwealth Court during 2002 and in March 2003 the Commonwealth



3



---

Court reversed the award for damages relating to the 1995 contract based on their finding that no contract was executed. The Company is
preparing to file a motion for the Commonwealth Court to reconsider the damages and alternative claims made by the Company with respect to the 1995 contract and will seek to appeal the case to the Pennsylvania Supreme Court. The Company continues to
believe that Pennsylvania breached its duties under a 1995 RFP that was awarded to the Company, that a contract had been formed, and that the Company should be awarded the full contract damages. However, there can be no assurances as to the ultimate
outcome of the appeal.



About Global ePoint



We are a Nevada Corporation organized in
March 1990. Our executive offices are located at 1370 W. San Marcos Blvd, Suite 100, San Marcos, California, telephone (760) 510-4900.



Forward-Looking Statements



Some of the statements in this report are forward looking statements about what may happen in the future. They include statements
regarding our current beliefs, plans, expectations and assumptions about matters such as our expected financial position and operating results, our business strategy and our financing plans. These statements can sometimes be identified by our use of
forward looking words such as anticipate, believe, estimate, expect, intend, plan, seek, should, and similar expressions. We cannot guarantee that our
forward-looking statements will turn out to be correct or that our beliefs, plans, expectations and assumptions will not change. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the
private securities litigation act of 1995. Investors are cautioned that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, the
successful completion of proposed funding raises, which may be necessary for us to implement our plans to develop new market opportunities, continued acceptance of our products and services in the marketplace, competitive factors, new products and
technological changes, our successful entry into new markets, our ability to increase our customer base, as well as general political and other uncertainties related to customer purchases, instability in market rates in the telecommunication
industries, our ability to sustain adequate cash flow from operations, the ultimate outcome of pending litigation, and other risks described in risk factors, managements discussion and analysis of financial condition and
results of operations elsewhere in this report.



Risk Factors



The
following risk factors apply to the Company and its intended business operations. If any of the following risks actually occurs, the Companys business, financial condition or results of operations could be materially adversely affected.



WE MAY EXPERIENCE FLUCTUATIONS IN OUR
FINANCIAL RESULT

AND, AS A RESULT, OUR STOCK PRICE.



As a result of the sale of our core business in 2001, the Company intends to commence new business
operations, which may experience significant fluctuations in financial results. Since the Company had insignificant revenue from its non-lottery product lines in the last three years, there can be no certainty that additional revenue can be
generated from these or other new product lines in the future.





4



---

PART OF OUR CURRENT BUSINESS PLANS WILL DEPEND UPON CONTINUED MARKET ACCEPTANCE OF DCRs
AND PREPAID PHONE CARDS.



Our ability to
generate additional revenues and earnings from our proposed telephony operations will depend upon the successful sale and deployment of DCRs and the sale of prepaid phone cards as well as other related revenue generating opportunities as pursued by
the Company. We cannot assure you that demand for DCRs and prepaid phone cards will continue. Any significant decline in the market for these products will adversely affect our ability to market these products and our value of our equipment.



WE MAY NOT BE ABLE TO ADAPT TO CHANGES IN
TECHNOLOGY,

PRODUCTS AND INDUSTRY STANDARDS.



The markets in which we compete are characterized by rapidly changing technology and evolving industry
practices. Competitors may introduce other types of prepaid telephone calling card products or technologies. If we are unable to develop or obtain the rights to developing technologies and use such technologies to enhance our present products and
develop new products in a timely manner, we may be unable to retain our present customers or attract new customers.



THE DCR AND PREPAID PHONE CARD MARKETS ARE VERY COMPETITIVE.



The DCR and prepaid phone card markets are relatively mature markets that grew rapidly during the mid to late 1990s, but have slowed in
growth in the most recent years. We may not be able to compete successfully against current or future competitors, many of whom may have greater resources and experience than us. The long distance market and prepaid phone cards may face competition
from other types of communications products, including cellular phones, facsimile, e-mail and other on-line products. Furthermore, it may be necessary for us to expand our presence internationally or risk a competitive disadvantage relative to our
competitors. We may incur substantial costs in such expansion with no assurance that we will recover those costs through increased business. In addition, increased competition could cause us to increase our selling and marketing expenses and
research and development costs. We may not be able to offset the effects of any such increased costs through contracts and higher revenue from sales and leases of DCRs, and we may not have the resources to compete successfully. These developments
could have a material adverse effect on our business, financial condition and results of operation.



THE SUCCESS OF OUR INTERNATIONAL ACTIVITIES IS SUBJECT

TO MANY UNCERTAINTIES.



In
2002 and 2001, our sales and leases of DCRs outside the United States represented a small portion of our total revenues. However, we may attempt to increase our marketing activities in international jurisdictions, including expansion into several
countries. Our ability to expand our business into international markets and be successful in those markets may be adversely affected by the following:



| |  |  | Customizing our products for use in international countries;
| | - |  | ------------------------------------------------------------



| |  |  | Longer accounts receivable payment cycles;
| | - |  | ------------------------------------------



| |  |  | Difficulties in managing international operations;
| | - |  | --------------------------------------------------



| |  |  | Availability of trained personnel to install and implement our systems;
| | - |  | -----------------------------------------------------------------------



| |  |  | Exchange rate fluctuations;
| | - |  | ---------------------------



5



---



| |  |  | Political instability;
| | - |  | ----------------------



| |  |  | Tariffs and other trade barriers;
| | - |  | ---------------------------------



| |  |  | Potentially adverse tax obligations;
| | - |  | ------------------------------------



| |  |  | Restrictions on the repatriation of earnings; and
| | - |  | -------------------------------------------------



| |  |  | The burdens of complying with a wide variety of international laws and regulations.
| | - |  | -----------------------------------------------------------------------------------



In addition, the laws of some countries do not protect our intellectual property rights to as great an extent
as the laws of the United States. Such factors could have a material adverse effect on our international revenues and earnings and our overall financial performance.



WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR PROPRIETARY RIGHTS OR AVOIDING

CLAIMS THAT WE INFRINGE THE PROPRIETARY RIGHTS OF OTHERS.



In the past, we have principally relied upon patent, copyright, trademark and trade secret laws, license
agreements and employee nondisclosure agreements to protect our proprietary rights and technology. These laws and contractual provisions provide only limited protection. Although we currently have no critical proprietary rights or patents, we could
incur substantial costs and diversion of management resources in the defense of any claims relating to the proprietary rights of others, which could have a material adverse effect on our business, financial condition and results of operations.



FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC
MARKET COULD ADVERSELY

AFFECT OUR STOCK PRICE AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.



The market price of our common stock could drop as a result of
sales of large numbers of shares in the market, or the perception that such sales could occur. This is particularly true due to our relatively small number of stockholders and the resulting low trading volume of our common stock in the public
market. These factors, together with the low price of our common stock, also could make it more difficult for us to raise funds through future offerings or maintain our listing on the Nasdaq Small Cap Market System.



FUTURE ACQUISITIONS AND/OR MERGERS MAY USE SIGNIFICANT
RESOURCES,

MAY BE UNSUCCESSFUL AND COULD EXPOSE US TO UNFORESEEN LIABILITIES.



As part of our strategic plans, we intend to selectively
pursue acquisitions and/or merger candidates to accelerate our entry into new markets. These transactions may involve significant cash expenditures, debt occurrence, additional operating losses, amortization of certain intangible assets, dilutive
issuances of equity securities and expenses that could have a material adverse effect on our financial condition and results of operations.



THE OUTCOME OF PENDING LITIGATION IS UNCERTAIN AND COULD

HAVE ADVERSE FINANCIAL CONSEQUENCES



During 2002, the Company was involved in four significant matters of litigation in which it was a defendant. The Company has subsequently resolved three of those matters without material adverse
consequences, but there is no assurance that the other unresolved matter can be resolved without adverse financial consequences to the Company or that other unknown matters that could have a material adverse financial consequence could be brought
against the Company.



6



---



Agreement
with Interlott



On February 23, 2001, we
entered into the asset purchase agreement with Interlott. The asset purchase agreement was filed as an exhibit to our Form 8-K, with an event date of February 23, 2001. The following is a summary of the asset purchase agreement, but this summary is
qualified in its entirety by reference to the full text of the asset purchase agreement.



Terms Of The Asset Purchase Agreement    Pursuant to the asset purchase agreement, we sold to Interlott all of our lottery assets. These assets included:



| |  |  | Our agreements with the lotteries in four states and two foreign countries pursuant to which we leased and serviced high-security automated point of sale transaction
vending terminals for the sale of instant-winner lottery tickets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our contractual rights under our agreements with our distributors.
| | - |  | ------------------------------------------------------------------



| |  |  | Our inventory and equipment relating to the lottery business.
| | - |  | -------------------------------------------------------------



| |  |  | Our accounts receivables relating to the lottery business.
| | - |  | ----------------------------------------------------------



| |  |  | Our intellectual property rights relating to the lottery business, including our patents, our trademarks and the name On-Point Technology Systems
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our leases for our facilities relating to the lottery business, but not the lease for our corporate headquarters.
| | - |  | -----------------------------------------------------------------------------------------------------------------



In consideration for the transfer of the lottery assets,
Interlott paid us approximately $12.8 million at closing ($13.5 million less $.7 million of closing adjustments).



In addition, Interlott is to pay us, subject to a number of conditions:



| |  |  | A deferred payment of up to $9.0 million, based on gross profits from new sales and leases under existing contracts, payable over a five-year period.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An earnout of up to $6.0 million based on Interlotts revenue from the sale of our lottery products.
| | - |  | ----------------------------------------------------------------------------------------------------



Interlott agreed to assume our obligations that arise after
the closing under the contracts that it assumed, but only to the extent that the obligations do not arise from a condition which existed on the closing date. We will continue to be responsible for those liabilities that existed on the closing date.



Deferred Payment and
Earnout    Interlott has agreed to pay us up to $9.0 million as a deferred payment and up to $6.0 million as an earnout. The deferred payment is payable at the rate of $150,000 per month during the five-year period
commencing with the first full month following the closing. However, the amount of each payment to us is subject to adjustment. The asset purchase agreement sets forth benchmark gross profit levels from revenue derived from a combination of contract
extensions and new orders from our existing lottery clients. These gross profit levels are cumulative from the beginning of the five-year period. We will receive the full $150,000 payment monthly payment only as long as Interlotts cumulative
gross profit from these contract extensions or new contracts equals or exceeds the cumulative benchmark gross profit level. If the cumulative gross profit is less than the benchmark cumulative gross profit, the $150,000 is subject to reduction in
accordance with the formula. If, during the five-year period when the deferred payment is being made, Interlotts gross profit from these sales subsequently reaches or exceeds the benchmark cumulative gross profit level, we will recover any
previous reductions taken from the monthly payments. We cannot assure you that we will collect all or any significant portion of the $9.0 million deferred payment. For the period reported by Interlott to the Company through December 31, 2002,
Interlott paid us $29,395. However, based on the most recent schedule provided to the Company from Interlott, we believe that additional deferred payments will begin for the first quarter of 2003. The amount of those payments will not be known until
the end of the first quarter of 2003.



7



---



The earnout is
payable in two stages during the five years following the closing date. In the first stage, for which the maximum earnout is $3.0 million, we receive 10% of Interlotts gross revenue from new sales and leases of PlayPoint, CounterPoint and
other of our lottery equipment. The second stage begins after we have received $3 million from Interlotts gross revenue from these products. In the second stage, we are entitled to receive 10% of Interlotts gross revenue only from new
sales and leases of CounterPoint products during the remainder of the five-year period. If Interlott generates revenue from these products and the revenue is used in the calculation of the deferred payment, which is described in the previous
paragraph, we are not entitled to a payment under the earnout from that revenue. No amounts under this provision have been paid to us through December 31, 2002.



On-Line Technology Agreement    Pursuant to the asset purchase agreement,
we transferred to Interlott our patents and technology relating to our on-line technology. At the closing, we entered into an on-line technology agreement, pursuant to which:



| |  |  | We retained the nonexclusive perpetual royalty-free right to sell, license, market, distribute or otherwise deal with, but not manufacture, our on-line technology
which is based on claims included in the patents for on-line technology which are transferred to Interlott. This technology relates to the enhancement of instant ticket dispensing in order to enable the point of sale automated on-line activation and
validation of instant winner lottery tickets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interlott also has the right to market the on-line technology and will be the exclusive manufacturer of products incorporating the on-line technology.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interlott is to pay us a royalty based on Interlotts gross profit generated from the sale or lease of products that utilize the on-line technology. The
percentage royalty payable by Interlott ranges from 2.0% to 7.0% depending on Interlotts gross margins from those products.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interlott agreed not to activate the technology on any products unless the end users agree to pay us a royalty equal to one-half of one percent of revenue derived
from the use of the on-line technology.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Noncompetition Agreement    At the closing, we and Mr. Frederick Sandvick entered into an agreement not to compete with Interlott during the five-year period following the closing. The noncompetition
agreement does not, however, prohibit us or Mr. Sandvick from owning or operating lotteries.



Indemnification Provisions    Pursuant to the asset purchase agreement, we made representations and warranties concerning our financial statements, the operation of
our business, the property, including intellectual property, owned by us, our compliance with applicable law and agreement to which we are a party and other matters relating to our business. With certain exceptions, our maximum liability to
Interlott in the event that Interlott incurs any damage as a result of our breach of the representations and warranties is limited to $2 million from the payment made at closing. There is no limit to the potential amount that can be offset against
the deferred payment or earnout.



Commercial
Products



Currently the only commercial
product manufactured and marketed by the Company consists of card vending machines (DCRs), which are marketed principally for the resale of prepaid phone cards. As a result of our primary focus in the last several years on the
development of our next generation lottery products, we did not aggressively pursue the development or sale of the DCR products. However, we have been evaluating plans during 2002 that would begin the deployment and/or sale of our DCRs as well as
commencement of the distribution of prepaid phone cards. Those plans have been placed on temporary hold pending further definition of our current proposed merger.



The Phone Card Industry    Prepaid phone cards are sold by telephone
companies worldwide. Outside the United States, these cards generally contain a pre-programmed amount of credit and can be inserted into certain



8



---

pay telephones. The customer can use all or a portion of the credit on the card to make telephone calls. These card-receptive pay telephones
do not hold cash, thus eliminating security or internal theft concerns for the owners of the telephones. The cards are either disposable or reusable and are sold in varying denominations. In the United States card reader telephones are not in
abundance. Therefore, most of the prepaid calling cards in use in the United States use an 800 number that is called for verification of the card by entering a PIN number located on the card.



Prepaid telephone cards generally allow card purchasers to buy
blocks of calling time at a discount. The cards are more convenient, and the use of prepaid cards eliminates the need to maintain cash on hand to feed the pay telephone when making a call. Prepaid telephone cards also reduce the risk of credit card
fraud or theft, since a theft of a prepaid phone card results only in the loss of the face value of the card less any time already used.



It is our understanding that public awareness of prepaid phone cards was minimal in the early 1990s, but increased dramatically
thereafter. We believe dispensing machines became an important element of the distribution network of prepaid phone cards by the mid-1990s, providing visual recognition and 24-hour convenient access to the product. An important aspect of the vending
machine is that its design must promote product awareness to effectively sell cards, not merely dispense them. In 1997 we repackaged our DCR technology into a new cabinet styling. In 1998 we expanded our DCR product line to include 3 and 8 card
terminals in response to the specific application needs of our customers. However, because of the diminishing demand for these types of new high-security vending terminals in 1998, partly due to the entry into the market of lower-cost and
lower-featured vending machines from competitors, the Company redirected its efforts beginning in 1998 away from any significant further development or marketing in this area. However, the Company now believes that, because its DCRs have proven to
be robust and reliable, and because it appears that a continuing need exists in the market for a more organized and wide-spread deployment of card dispensing machines and prepaid phone cards, we can redeploy our inventory of DCRs under a program
that will include the distribution of prepaid phone cards. In addition to our own programs for which we are considering the implementation, we have entered into a marketing arrangement with a third party to deploy and/or sell the DCRs.



Although the Company intends to focus its efforts on the
United States market, it will continue to review opportunities in foreign countries. In many foreign countries, especially those less developed than the United States, the majority of residents does not own telephones and rely on public pay
telephones. Management estimates that commercial and government entities in over 100 countries now use or are in the process of evaluating the purchase of telephones equipped to accept prepaid phone cards. We believe many of these entities are
looking to dispensing machines capable of handling prepaid phone cards to widen the acceptance and availability of the prepaid phone cards. The foreign market for prepaid phone card vending machines is in its infancy, however, and there can be no
assurances that we will be successful in developing this market.



In addition to prepaid phone cards, there are many other debit cards, which can be dispensed using the DCR terminal, including bus and subway passes. Several countries have begun using a multi-purpose debit card to provide easy
access to pay telephones, gasoline pumps, subway passes and bus passes. Global ePoint has provided terminals to both Hong Kong and Brazil that dispense such multi-purpose cards, or different types of cards or passes, including smart
cards.



Debit Card
Retailer    In 1993 Global ePoint recognized the potential to utilize its lottery technology in the evolving prepaid phone card industry and developed its DCR-2000 debit card vending machine. We later developed other DCR
models. Most of the Companys revenues in this market were generated from the sale or lease of DCR machines between 1993 and 1998. To date, these terminals have been placed in many different types of establishments where there is a market for
prepaid phone or debit cards. However, as additional companies have deployed similar machines, management did not focus significant attention on the sale or lease of new machines from 1998 to 2001. As a result, Companys sales of DCR products
and services totaled only $6,000 and $32,000 for the years ended December 31, 2002 and 2001 respectively. Those sales were primarily to foreign customers in each year. However, in 2003, the Company has already sold over $100,000 worth of DCRs at
prices above the Companys underlying cost basis to a third party under a marketing arrangement.



9



---



The DCR
Machine    The DCR is designed to provide high security and high visibility using a minimum of floor or counter-top space. The machines are available in several models, which house either one, two or more bins and are
able to accept various denominations of foreign and domestic currency. Although the DCRs currently undergoing refurbishment by the company accommodate only bill currencies, they can be manufactured to accommodate coins. The customer inserts a bill
or coin into the DCR, receives credit, and then selects the denomination of prepaid phone card or other card/pass by pressing the button located immediately under the appropriate card display. The DCR dispenses a single card to the buyer.



Each card dispenser in a DCR stores
approximately 400 cards, depending on the thickness of the cards, thus providing a maximum capacity of about 1,600 cards in our 4-card machine. The DCR includes a display that shows instructional and promotional messages and can also be equipped
with the Grabber, a multi-color LED sign, which is mounted on top of the machine and includes a built in memory. A customized message typically is input prior to installation of the machines. These messages can be changed on site using a
hand-held remote control or loaded from a remote site with our optional Shadow communication program.



Lease Agreements



Although currently the Company has no significant lease agreements with customers, in the past, the Company has offered in-house financing
for commercial customers under two types of contractual arrangements: Sales-type Lease Agreements and Operating Lease Agreements.



Sales-Type Lease Agreements    Under the typical Sales-type Lease Agreement, we deliver DCR machines and
provide ancillary support services to customers. These contracts generally provide for scaled payments, based upon the type of machine purchased and the total number of machines sold under the agreement. Sometimes the Sales Agreements provide for
the payment of monthly service fees for product repair, routine maintenance and customer service activities (based upon the number of machines installed).



Operating Lease Agreements    While the Operating Lease Agreements are similar to the Sales-type Lease
Agreements with respect to our installation, maintenance and service obligations, they are for shorter terms and ownership of the machines remains with the Company after the lease term. The lease amount may or may not include a monthly maintenance
fee. Typically, the lessee is given the option to extend the leases in one-year increments.



Service Agreements



Although currently the Company has no significant service agreements with customers, in the past, the Company had provided services in the states of: Illinois, Missouri, New York, and Virginia, which
were provided through service facilities at its San Marcos, California headquarters and in each of those states. These facilities provided installation and relocation services, performed repairs and responded to service calls. We maintained
toll-free telephone lines staffed by service personnel to assist retailers and, where possible, resolve minor service problems over the telephone. If the problem could not be resolved easily, a field technician was immediately paged and a service
call scheduled. Each agreement provided for a specified response or service time. A function of the field service operation was to provide installation and retailer training on the operation and use of the machine. We generally provided a warranty
period of one year on our terminals and provided an option for an extended warranty period if purchased by the customer. Warranty costs were generally included within our service agreements and not separately provided in product sales. In connection
with the sale of the lottery business, the Company transferred substantially all of its service operations to Interlott.



The Company is currently evaluating plans regarding the servicing of its DCRs once they are redeployed and sold. Although no decisions
have been made, we currently intend to subcontract most field service functions.



The modular designs of the DCRs promote cost-effective, timely repair. All three of the major modular components (the currency acceptor, card dispenser and electronics module) are easily removed from
the DCR.



10



---

Service technicians are instructed to replace malfunctioning components if they are unable to repair a machine within 30 minutes. Any
replaced parts can be sent to a service center, where they can be examined and repaired in-house or returned to the manufacturer.



Support



Marketing And Sales    We intend to market the Companys DCRs and distribute prepaid phone cards,
domestically, through a combination of in-house and outside contracted marketing and sales efforts and, internationally, if pursued, primarily through distributorships and joint ventures. The Company is currently moving forward domestically with an
arrangement whereby a marketing group would sell substantially all of the Companys DCRs and a vending company would redeploy the DCRs in strategically located retail establishments. Under the arrangements, the Company would maintain, under
short-term contracts, the right to distribute prepaid phone cards to all of the locations in which DCRs are placed. We also intend to solicit interest in the machines through direct contact with customers. The initial marketing package is
anticipated to consist of product brochures and other supportive documentation. References from other customers using the Companys machines will be routinely supplied, along with an offer to demonstrate and test the machines. We will also
provide comprehensive product information on our Web-site at www.globalepoint.com.



International Marketing    Internationally, foreign telephone companies do not typically use a formal bidding process, but rather negotiate proposals with one or more
potential vendors. In 2002 and 2001 we delivered machines and parts to various telecommunication service providers. Nonetheless, our foreign operations remained relatively small, and no assurance can be provided that a meaningful international
market for our machines will develop.



Research and Development



General research and development expenditures totaled $137 thousand in 2001. The Company had no research and development costs in 2002. The 2001 expenditures were primarily directed towards the development of lottery related
products, PlayPoint and CounterPoint. These products were subsequently sold to Interlott as part of their overall purchase of our lottery business.



Patents were filed and/or received for PlayPoints and CounterPoints proprietary features. These include:



PlayPoint Enclosure Design,
3345-2230awarded July 11, 2000, D-428,060

On-Line Instant Ticket, Patent 5,772,510awarded June
1998



Other patents filed through December 2001:



| |  |  | Ticket Dispenser and Vending Machine, 3345-2130
| | - |  | -----------------------------------------------



| |  |  | Ticket Distribution System and Method, 3345-2140
| | - |  | ------------------------------------------------



| |  |  | Ticket Dispensing Module and Method, 3345-2170
| | - |  | ----------------------------------------------



| |  |  | Gaming Device and Method, 3345-2180
| | - |  | -----------------------------------



| |  |  | Ticket Dispensing Device, Installation and Displays, 3345-2210
| | - |  | --------------------------------------------------------------



| |  |  | CheckWriter Design, 3345-2212
| | - |  | -----------------------------



These products and patents were transferred to Interlott as a result of the sale of the Companys lottery business in 2001.



None of the Companys general research and
developments costs was borne directly by our customers. Prior to the sale of the lottery business, the Companys research and development department, augmented by contract



11



---

employees, designed hardware and software for new products, and maintained hardware and software support for existing products. Software was
continually enhanced to satisfy customer requests. Many new features, which were evolved from the sales, process (e.g., access code requirements, security features such as alarm and theft detection, report capabilities, and display features). Once
developed, those features generally were incorporated as standard items in the product line. Software upgrades have included diagnostics for field service and memory management and configuration control. Hardware enhancements included features to
provide local control, remote control, field upgrade expansion and memory upgrades for software and data storage. Other hardware developments have focused on the physical size, look and ergonomics of the machines, and conformance with the
requirements of the American Disabilities Act. Subsequent to the sale of the Companys lottery business, the Company has maintained only those development costs necessary to refurbish the Companys existing DCRs.



Manufacturing and Supply



The Companys DCRs are designed in a modular form to
facilitate manufacturing assembly and serviceability. We use vendors to manufacture and supply some components and sub-assemblies, including the bill acceptor and electronic modules. Final assembly and quality control of the terminals is performed
by Company personnel at its San Marcos facility. Currently, the Company is not manufacturing new DCRs, but rather is focused on refurbishing existing DCRs. Therefore, the Company has no critical key vendors at this time.



Employees



As of March 21, 2003, the Company had 3 full-time and 1
part-time employees, of whom 3 were in executive or administrative positions and 1 in quality control and production.



Facilities



The Company occupies approximately 32,000 square feet of space in San Marcos, California. The premises include office, manufacturing and
warehouse space. We currently pay monthly rent of $19,492 for this space. This lease terminates December 31, 2008. We believe that current facilities are adequate to meet our anticipated needs through the term of the lease. However, in 2003 we plan
to down size our space needs and sublease part or all of this facility.



OTHER BUSINESS INFORMATION



Competition



In the
United States, the prepaid phone card and, more generally, the debit card market involve a number of machines for many small to mid-sized privately held companies. Consequently, it is difficult to identify all the competitors in this market.
Although we believe we have developed a product with some of the best features in the market, there are many lower-cost, lower featured products that have had more recent success in selling to the industry. At present, our principal competitors are
Technik, VendTek and Opal, in addition to a number of smaller vending machine companies. There is also a substantial risk of additional market entry by domestic and foreign competitors, especially if the United States customers response to the
use of debit cards and pre-paid phone cards is favorable. The prepaid phone card and debit card market may also face competition from other types of products, such as low cost prepaid cellular phones.



We believe our new strategic plan for the sale and deployment
of card dispensing machines and the distribution of prepaid phone cards has not yet been attempted in a similar manner by any other company. However, there are numerous private companies that deploy card-dispensing machines and sell prepaid phone
cards. There can be no assurance that the Companys strategic plan will be successful.



12



---



Government
Regulation



It remains unclear what
telecommunication regulations, if any, relate to the sale of prepaid phone cards or to the dispensing of those cards using vending machines. There appears to be a strong movement towards requiring certification as a reseller in states where entities
sell prepaid phone cards. In addition, some states subject DCR terminals and machines to use or similar taxes.



ITEM 2.    DESCRIPTION OF PROPERTIES



The Company leases a 32,000 sq. ft facility at 1370 West San Marcos Blvd., San Marcos, California, where its executive offices,
manufacturing and primary warehouse facilities are located, pursuant to a lease that expires in 2008. The current annual rent for this facility is approximately $234,000, which is subject to annual increases. The Company is in the process of
negotiating the sublease of approximately 26,000 sq. ft of the facility under an arrangement in which the sublessee would cover all the rent for the entire 32,000 sq. ft. through the term of the lease. The Company would retain the remaining 6,000
sq. ft. rent free. The Company believes that if it finalizes the arrangements with the sublessee, it may need additional storage space for its card dispensing equipment until they have been redeployed or sold.



ITEM 3.    LEGAL PROCEEDINGS



Global ePoint is a party to legal proceedings in the ordinary
course of its business; the most significant of which are described below.



In October of 2001, Loeb & Loeb, LLP, a law firm, instituted arbitration proceedings in Los Angeles, California against Global ePoint alleging in excess of $200,000 in legal fees and costs were
owed in connection with a proposed merger transaction. The Company filed counter-claims against Loeb & Loeb in the arbitration proceedings for malpractice and breach of contract. Loeb & Loeb and the Company settled the matter in February
2003 for an amount the Company had already accrued as of December 31, 2002. Therefore, no additional expense was recognized by the Company upon settlement.



On April 20, 2000, a shareholder class action was filed against Global ePoint and certain officers and directors in the U.S. District
Court, Southern District of California. The action, which requested an unspecified amount of damages on behalf of all similarly situated shareholders, alleged that the Company violated federal securities laws by the dissemination of materially false
and misleading financial statements. Subsequent cases alleging substantially the same claims, and also filed in the same court, were consolidated before the same judge. The defendants entered into an amended settlement agreement with the class for
all matters, and the court approved the amended settlement agreement in 2001. The Company and other defendants denied the liability claims as part of the amended settlement, but believed that settling the cases quickly was in the best interests of
the Company in order for management to more effectively proceed with its strategic business plans. Under the amended settlement agreement, the Company paid, in 2002, $50,000 in cash and, in 2003, will issue 519,125 shares, which were equal to
$950 thousand in value on the determination date.



In December 2001, a previous supplier to the Companys lottery division, Embertons Machine & Tool, Inc., initiated an action against the Company in the State of California Superior Court, El Cajon Division, alleging
approximately $56,000 in costs for goods they contend should have been supplied to the Company. The parties entered into mediation and settled the matter. The Company issued warrants to purchase 6,600 shares at an exercise price of $1.15 per share,
exercisable over 30 months, as part of the settlement.



In September 2002, ePlus Group, Inc., formerly known as MLC Group, Inc., initiated an action against the Company in the United States District Court, Eastern District of the Commonwealth of Virginia, alleging that they are due moneys
in excess of $75,000 under a Master Agreement, which was signed in September of 1992. The Company responded denying all liability and filed a counterclaim for breach of contract, intentional



13



---

interference with prospective economic opportunity and contractual relationship, and intentional fraud. The plaintiff filed a motion to
dismiss the Companys counterclaim and the Company filed a motion to dismiss plaintiffs claim. The court denied both motions and the actions remain pending. The Company intends to vigorously contest the basis of the complaint.



In October 2002, A & S, LLC, the property
owner for the Companys leased premises, initiated an action against the Company in the State of California Superior Court, County of San Diego, North County Branch, alleging that the Company failed to reimburse A & S, LLC for additional
tenant improvements totaling $82,950. In February, the Company and A & S negotiated a proposed settlement, subject to a new tenant entering into a sublease agreement with the Company. The action remains pending and will continue unless the new
settlement is finalized.



ITEM
4.    SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS



The Companys Annual Meeting of Stockholders was held on December 19, 2002. All of the members slated for election were elected to the Companys Board of Directors for the ensuing year
(Frederick Sandvick, Keith A. Cannon, Darrell L. Richardson and Owen Lee Barnett). In addition, the following matters were acted upon:



|Matter               |  | Votes For |  | Votes Against |  | Abstain
|-------------------- |  | --------- |  | ------------- |  | -------
|Approval of Auditors |  | 3,141,822 |  | 786,482       |  | 2,165  



14



---

PART II



ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



Global ePoints common stock is traded on the Nasdaq
National Market under the symbol: GEPT. The following table sets forth the high and low bid prices for Global ePoints common stock, as reported on NASDAQ, for the quarters presented. The bid prices represent inter-dealer quotations, without
adjustments for retail mark-ups, markdowns or commissions and may not necessarily represent actual transactions. All share and per share information reflects the one-for-three reverse split, which became effective in November 2000.



|               |  | 2002 |      | 2001
|-------------- |  | ---- | ---- | ----
|               |  | High |      | Low 
|First Quarter  |  | $    | 1.70 |     
|Second Quarter |  |      | 1.94 |     
|Third Quarter  |  |      | 1.57 |     
|Fourth Quarter |  |      | 1.39 |     



The
number of stockholders of record of Global ePoints common stock, par value $.03 per share, as of March 21, 2003, was 865. The approximate number of beneficial shareholders was 1,432.



Global ePoint has never paid any cash dividends on its common stock and does not anticipate that it will do
so in the foreseeable future. The future payment of dividends, if any, on the common stock is within the discretion of the Board of Directors and will depend on earnings, capital requirements, financial condition and other relevant factors.



Global ePoint had the following unregistered
sales of securities during the last three years. These securities were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.



| |  |  | In July 2000, Finova Mezzanine Capital Inc. received warrants to purchase 116,667 shares of Global ePoints Common Stock at $3.75 per share pursuant to a
settlement agreement whereby Finova withdrew its claim to a security interest in the DCR machines leased by Global ePoint to Solutioneering, Inc. The warrants are immediately exercisable and expire 3 years from date of issuance. No placement agent
was engaged in connection with such issuances and no commissions or discounts were paid to any person.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On October 31, 2000, the Company completed a private placement for the sale of 666,668 shares of the Companys common stock at $1.50 per share. Net proceeds of
the transaction aggregated $1,000,000. The placement was solely to no more than five foreign offerees, all of whom were accredited investors. The principal purchaser was Investa AG, a European money management fund, which also acted as placement
agent. The proceeds were used for working capital purposes. Investa AG received five-year warrants to purchase 33,333 shares of Global ePoints Common Stock at $3.00 per share pursuant to an agreement for the placement of the $1 million equity
offering. Investa exercised the warrants in December 2000 and purchased 33,333 shares for an aggregate amount of $100,000. Questos Ltd., a consulting company used in connection with the placement of the $1 million equity offering, received warrants
to purchase 66,667 shares of Global ePoints Common Stock at $1.50 per share pursuant to an agreement for services rendered in connection with the equity placement. The warrants are immediately exercisable and expire on October 31, 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2000, Galt Asset Management, LLC, a money management fund and certain private investors received warrants to purchase 179,167 shares of Global
ePoints Common Stock at $1.80 per share in connection with the extension of certain debt due from Global ePoint. No placement agent was engaged in connection with such issuances and no commissions or discounts were paid to any person.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In January 2002, Direct Sales, a previous supplier to the Company, received warrants to purchase 6,000 shares of Global ePoints Common Stock at $1.59 per
share, exercisable over 34 months, as part of a settlement agreement.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15



---



| |  |  | In December 2002, Embertons Machine & Tool, a previous supplier to the Company, received warrants to purchase 6,600 shares of Global ePoints Common
Stock at $1.15 per share, exercisable over 30 months, as part of a settlement agreement.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 6. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



General    The Company is now in the process of a major transition. The Company is undergoing a series of actions intended to transform the Company and to strategically move forward with new market
opportunities that can better enhance shareholder value. The Company had been engaged in the lottery industry for approximately 10 years and was one of the largest providers of vending machines for the sale of instant-winner lottery tickets.



On June 1, 2001, the Company completed the sale
of its lottery business to Interlott. This agreement is described in Item 1 under the heading Agreement with Interlott. Since our lottery business accounted for substantially all of our business through June 1, 2001, the discussions
relating to the results of operations should be read in this context. Subsequent to finalization of the sale on June 1, 2001, we have no longer been engaged in the business of manufacturing, selling, leasing and servicing of lottery vending machines
and the discussion of our discontinued operations for 2001 will not relate to our ongoing business activities.



The Company is now positioned to proceed with further actions designed to transform itself into a more diversified company. In that
regard, the Company has been moving forward with marketing plans for the redeployment and sale of its existing non-lottery related products (primarily card dispensing machines). The Companys remaining manufacturing and quality control
personnel have been focused on preparing approximately 2,000 of the Companys existing card dispensing machines for redeployment into the market and restructuring of the Companys operations.



During 2002, we have reviewed a variety of new market
opportunities that could provide the Company with the ability to accelerate the initial development stage generally required of a new product. In that respect, the Company entered into a letter of intent on January 18, 2003 with Sequent
Technologies, Inc. Best Logic, Inc. and McDigit, Inc. to acquire 100 percent of the issued and outstanding stock or membership interest, as applicable, of those companies (see Item 1. Business herein). The Company anticipates that if the current
proposed merger or some other new business opportunity is completed, a further restructuring of its operations could result. The extent of the restructuring and the effect on the Companys financial statements would depend on the particular
business opportunity.



Results of
Operations2002 Compared To 2001



Continuing Operations    Prior to the sale of the Companys lottery business on June 1, 2001, the Company had no significant revenue from continuing operations. Although the Company had
non-lottery products, substantially all of its focus in that period had been on its lottery-related business. Subsequent to the sale of the lottery assets on June 1, 2001, the Company has been moving forward with and reviewing (i) opportunities that
involve the acquisition of or merger with companies that have new business activities with high growth potential, and (ii) marketing plans to maximize value from the Companys non-lottery related products, which consist primarily of card
dispensing equipment. The Company has been retrieving and refurbishing its card dispensing equipment, which was previously on lease with a customer that dissolved in 2000.



During the 2002 year, the Company generated revenue from continuing operations of $508 thousand versus
revenue of $435 thousand in the 2001 year. The increase in revenue was primarily the result of the commencement in July 2002 of the sale of prepaid phone cards through vending machines and over-the-counter manual distribution in retail locations
located in a small region in California. The operations were commenced primarily to evaluate the market and determine whether expansion of those types of operations would be beneficial to the Company. As a result of the Companys merger
negotiations in December 2002, which resulted



16



---

in the letter of intent with the Target Companies, the Company choose to transfer management and ownership of those operations to a third
party, which has entered into a marketing agreement with the Company to market and purchase, under certain conditions, the Companys card dispensing equipment. The Company believes allowing third parties to market and deploy the Companys
equipment and manage prepaid phone card sales will better allow the Company to focus on its primary goal of moving forward with a larger business opportunity. The Company has delayed further actions with respect to the redeployment and sale of the
card dispensing equipment until the direction of the Companys pending merger has been further defined. Although the Company believes these new strategies will allow it to successfully redeploy and sell the card dispensing equipment, no
assurances can be given as to the success of these new strategies.



Total operating expenses decreased in the 2002 period to $2.2 million from $2.3 million primarily as the result of lower selling, general and administrative costs and lower interest expense. Selling, general and
administrative costs and expenses for 2002 decreased by $689 thousand primarily due to reduced personnel and related expenses. The reduced personnel and related costs resulted as the Company downsized its administration subsequent to the sale of its
lottery business. Interest expense decreased by $292 thousand due to the effect of decreased borrowings. The reduced costs and expenses were offset by restructuring costs of $832 thousand in 2002 and $477 thousand in 2001 that included payroll,
facilities costs, refurbishment costs, asset valuation allowances and certain other charges incremental to restructuring operations and preparing for new business activities. The increase in restructuring costs for 2002 was primarily due to the fact
that it covered 12 months in 2002 and only 7 months in 2001. No significant further restructuring costs are anticipated in 2003, subject to the Companys final merger or acquisition plans.



Also included in operating expenses for 2002 were abandoned
project costs of $350 thousand. The Company had been pursuing certain international projects as a result of certain strategic initiatives started in 2000. As a result of the recent changes in the social-political environment in the countries in
which the Company was attempting to do business, we determined that it was in the best interest of the Company not to continue proceeding with those international projects.



As a net result of the above, the Company reported a net loss from continuing operations of $1.7 million in
2002 versus a net loss of $1.9 million from continuing operations in 2001. Without restructuring costs and abandoned project costs, the net loss would have been approximately $523 thousand in 2002 and $1.4 million in 2001.



Discontinued
Operations    Prior to the Companys change in business strategy, the Company had been primarily engaged in the lottery industry. The companys customer base in the lottery business remained
relatively constant between the 2001 year. Although income in 2001 decreased from prior years, primarily as a result of decreases in sales and sales-type leases of its existing lottery product line and a shorter period of operations in 2001. The
Company was in the process of marketing its new next generation lottery products and the decreases in sales partly relate to the transitioning required in the introduction of the new products. Further, because the lottery business was sold on June
1, 2001, revenue was for only five months.



The
disposal of assets of the lottery operations is being accounted for as discontinued operations. The results of operations for 2001 are summarized as follows:



|Results of Operations: |  |   |      
|---------------------- |  | - | -----
|Net sales              |  | $ | 2,944
|Gross profit           |  |   | 610  
|Operating expenses     |  |   | 212  
|                       |  |   |      
|Net Income             |  | $ | 398  
|                       |  |   |      



Gross
profit, operating expenses and net income were all lower in the 2001 periods as the result of lower sales during 2001 and the shorter reporting period in 2001. On June 1, 2001, the Company completed the sale of its lottery business and, as a result,
recognized a gain from the sale of approximately $2.7 million.



17



---



As a net
result of both continuing and discontinued operations, the Company reported a net loss of approximately $1.4 million for 2002, versus a net gain in 2001 of approximately $1.2 million.



Liquidity and Capital Resources



As a result of the proceeds generated by the sale of lottery assets, the Company had working capital of
approximately $3.2 million and cash and cash equivalents of approximately $4.3 million as of December 31, 2002. Management believes the Company has sufficient liquidity to fund its existing operations, redeploy and sell its card dispensing machines,
begin its planned new business activities and provide a basis for new business opportunities.



ITEM 7.    CONSOLIDATED FINANCIAL STATEMENTS



The Consolidated Financial Statements are filed as part of this Annual Report on Form 10-KSB.



18



---

INDEPENDENT AUDITORS REPORT



To the Board of Directors and Shareholders of
Global ePoint, Inc:



We have audited the
accompanying consolidated balance sheet of Global ePoint, Inc. and Subsidiaries as of December 31, 2002, and the related consolidated statements of operations, shareholders equity and cash flows for the years ended December 31, 2002 and 2001.
These consolidated financial statements are the responsibility of Global ePoint, Inc.s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Global ePoint, Inc. and Subsidiaries as of
December 31, 2002, and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 2002 and 2001 in conformity with accounting principles generally accepted in the United States of America.



/s/    ROTHSTEIN, KASS & COMPANY, PC




Roseland, New Jersey

February 26, 2003



19



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEET



AS OF DECEMBER 31, 2002



|(Thousands of dollars, except share amounts)                                                           |  |   |        
|------------------------------------------------------------------------------------------------------ |  | - | -------
|Current Assets:                                                                                        |  |   |        
|Cash and cash equivalents                                                                              |  | $ | 4,357  
|Accounts receivable, net                                                                               |  |   | 16     
|Other current assets                                                                                   |  |   | 22     
|                                                                                                       |  |   |        
|Total current assets                                                                                   |  |   | 4,395  
|                                                                                                       |  |   |        
|Plant, property and equipment, net                                                                     |  |   | 82     
|Card dispensing equipment                                                                              |  |   | 3,188  
|Parts inventory, net                                                                                   |  |   | 636    
|Other assets, net                                                                                      |  |   | 500    
|                                                                                                       |  |   |        
|Total assets                                                                                           |  | $ | 8,801  
|                                                                                                       |  |   |        
|Liabilities and shareholders equity:                                                                  |  |   |        
|Current liabilities:                                                                                   |  |   |        
|Accounts payable                                                                                       |  | $ | 349    
|Accrued expenses and other current liabilities                                                         |  |   | 819    
|                                                                                                       |  |   |        
|Total current liabilities                                                                              |  |   | 1,168  
|                                                                                                       |  |   |        
|Shareholders equity:                                                                                  |  |   |        
|Preferred stock, no par value, 2,000,000 shares authorized, no shares issued or
outstanding            |  |   |        
|Common stock, $.03 par value, 13,333,334 shares authorized and 4,305,584 shares issued
and outstanding |  |   | 129    
|Amount for shares to be issued                                                                         |  |   | 950    
|Additional paid-in capital                                                                             |  |   | 33,128 
|Accumulated deficit                                                                                    |  |   | (26,574
|                                                                                                       |  |   |        
|Total shareholders equity                                                                             |  |   | 7,633  
|                                                                                                       |  |   |        
|Total liabilities and shareholders equity                                                             |  | $ | 8,801  
|                                                                                                       |  |   |        



See
accompanying notes to consolidated financial statements.



20



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS



FOR THE YEARS ENDED DECEMBER 31, 2002 and 2001



|                                                        |  | 2002 |        |   | 2001 |  
|------------------------------------------------------- |  | ---- | ------ | - | ---- | -
|(Thousands of dollars/shares, except per share amounts) |  |      |       
|Revenues:                                               |  |      |        |   |      |  
|Sales                                                   |  | $    | 175    |   |      | $
|Interest income                                         |  |      | 138    |   |      |  
|Other income                                            |  |      | 195    |   |      |  
|                                                        |  |      |        |   |      |  
|Total revenues                                          |  |      | 508    |   |      |  
|                                                        |  |      |        |   |      |  
|Operating expenses:                                     |  |      |        |   |      |  
|Cost of sales                                           |  |      | 150    |   |      |  
|Selling, general and administrative                     |  |      | 881    |   |      |  
|Interest expense                                        |  |      |        |   |      |  
|Restructuring costs                                     |  |      | 832    |   |      |  
|Cost of abandoned projects                              |  |      | 350    |   |      |  
|                                                        |  |      |        |   |      |  
|Total operating expenses                                |  |      | 2,213  |   |      |  
|                                                        |  |      |        |   |      |  
|Loss from continuing operations                         |  |      | (1,705 | ) |      |  
|                                                        |  |      |        |   |      |  
|Discontinued operations:                                |  |      |        |   |      |  
|Income                                                  |  |      |        |   |      |  
|Gain on sale                                            |  |      |        |   |      |  
|                                                        |  |      |        |   |      |  
|Net income (loss)                                       |  | $    | (1,705 | ) |      | $
|                                                        |  |      |        |   |      |  
|Earnings (loss) per shareBasic and Diluted:            |  |      |        |   |      |  
|Loss from continuing operations                         |  | $    | (.35   | ) |      | $
|Income from discontinued operations                     |  |      |        |   |      |  
|                                                        |  |      |        |   |      |  
|Net (income) loss                                       |  | $    | (.35   | ) |      | $
|                                                        |  |      |        |   |      |  
|Weighted average shares                                 |  |      | 4,825  |   |      |  
|                                                        |  |      |        |   |      |  



See
accompanying notes to consolidated financial statements.



21



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY



FOR THE YEARS ENDED DECEMBER 31, 2002 and
2001



|                                                          |  | Common Stock |  | Amount for Shares to be Issued |     | Additional Paid-in Capital |   | Accumulated Deficit |  |   | Total  | 
|--------------------------------------------------------- |  | ------------ |  | ------------------------------ | --- | -------------------------- | - | ------------------- |  | - | ------ | 
|                                                          |  | Shares       |  | Amount                         |     |                            |   |                    
|(Thousands of shares/dollars)                             |  |              | 
|Balances, December 31, 2000                               |  | 4,305        |  | $                              | 129 |                            | $ | 950                 |  | $ | 33,124 | 
|Net income                                                |  |              |  |                                |     |                            |   |                     |  |   |        | 
|                                                          |  |              |  |                                |     |                            |   |                     |  |   |        | 
|Balances, December 31, 2001                               |  | 4,305        |  |                                | 129 |                            |   | 950                 |  |   | 33,124 | 
|Issuance of stock warrants in connection with settlements |  |              |  |                                |     |                            |   |                     |  |   | 4      | 
|Net loss                                                  |  |              |  |                                |     |                            |   |                     |  |   |        | 
|                                                          |  |              |  |                                |     |                            |   |                     |  |   |        | 
|Balances, December 31, 2002                               |  | 4,305        |  | $                              | 129 |                            | $ | 950                 |  | $ | 33,128 | 
|                                                          |  |              |  |                                |     |                            |   |                     |  |   |        | 





See accompanying notes to consolidated financial statements.



22



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



FOR THE YEARS ENDED DECEMBER 31, 2002 and 2001



|                                                                                  |  | 2002 |        |   | 2001 |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | -
|(Thousands of dollars)                                                            |  |      |       
|Cash flows from operating activities:                                             |  |      |        |   |      |  
|Loss from continuing operations                                                   |  | $    | (1,705 | ) |      | $
|Income from discontinued operations                                               |  |      |        |   |      |  
|Adjustments to reconcile income (loss) to net cash used for operating
activities: |  |      |        |   |      |  
|Gain on sale of discontinued operations                                           |  |      |        |   |      |  
|Depreciation and amortization                                                     |  |      | 48     |   |      |  
|Expense related to options and warrants for services provided                     |  |      | 4      |   |      |  
|Asset reserves                                                                    |  |      | 353    |   |      |  
|Cost of abandoned projects                                                        |  |      | 350    |   |      |  
|Changes in assets and liabilities:                                                |  |      |        |   |      |  
|Accounts receivable                                                               |  |      | (15    | ) |      |  
|Other current assets                                                              |  |      | (20    | ) |      |  
|Parts inventory                                                                   |  |      | 253    |   |      |  
|Other assets                                                                      |  |      | 92     |   |      |  
|Accounts payable                                                                  |  |      | 139    |   |      |  
|Accrued expenses and other current liabilities                                    |  |      | (231   | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Net cash used for operating activities                                            |  |      | (732   | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Cash flows from investing activities:                                             |  |      |        |   |      |  
|Purchases of plant, property and equipment                                        |  |      | (250   | ) |      |  
|Net investment in sales-type leases                                               |  |      |        |   |      |  
|Net proceeds from sale of discontinued operations, including gain of
$2,744       |  |      |        |   |      |  
|Investments                                                                       |  |      | (50    | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Net cash provided by (used for) investing activities                              |  |      | (300   | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Cash flows from financing activities:                                             |  |      |        |   |      |  
|Repayments of line of credit, net                                                 |  |      |        |   |      |  
|Repayments of notes payable                                                       |  |      |        |   |      |  
|                                                                                  |  |      |        |   |      |  
|Net cash used for financing activities                                            |  |      |        |   |      |  
|                                                                                  |  |      |        |   |      |  
|Increase (decrease) in cash and cash equivalents                                  |  |      | (1,032 | ) |      |  
|                                                                                  |  |      |        |   |      |  
|Cash and cash equivalents at beginning of period                                  |  |      | 5,389  |   |      |  
|                                                                                  |  |      |        |   |      |  
|Cash and cash equivalents at end of period                                        |  | $    | 4,357  |   |      | $
|                                                                                  |  |      |        |   |      |  
|Supplemental cash flow information:                                               |  |      |        |   |      |  
|Cash paid during the year for interest                                            |  |      |        |   |      | $
|                                                                                  |  |      |        |   |      |  



See
accompanying notes to consolidated financial statements.



23



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



YEARS ENDED DECEMBER 31, 2002 AND 2001



1.    Summary of Significant
Accounting Policies



Organization and
Business    Global ePoint, Inc. and Subsidiaries, (collectively, the Company or Global ePoint) has designed, manufactured, and serviced vending terminals for retail sale and leasing over the past
10 years. The Companys core business (its lottery business) through June 1, 2001 was with the Instant Ticket Retailer (ITR) product line, which sold or leased instant-winner lottery terminals to state and provincial governments in the
United States and Canada and to foreign governments and their licensees. The Company also, on a minimal basis over the past four years, provided a Debit Card Retailer (DCR) product line, which sold or leased vending machines for prepaid telephone
cards and other specialty retail products generally to commercial customers in the United States and in foreign markets. On June 1, 2001, the Company completed the sale of its lottery business to Interlott Technologies, Inc. (Interlott).
Subsequent to the sale, the Company has been focused on actively reviewing (i) opportunities that involve the acquisition of or merger with companies that have new business activities with high growth potential, and (ii) marketing plans to maximize
the value of the Companys existing non-lottery related products, which consist primarily of card dispensing equipment (DCRs).



Basis of Presentation    The accounting and reporting policies of Global ePoint, Inc. and subsidiaries
(collectively referred to as the Company) conform to accounting principles generally accepted in the United States of America.



New Accounting Pronouncement    During 2002, the Financial Accounting Standards Board (FASB)
issued SFAS No. 146, Accounting for costs associated with exit or disposal activities and No. 148, Accounting for Stock-Based CompensationTransition and Disclosure. SFAS No. 146, which is not effective until the year
ending December 31, 2003, addresses financial accounting and reporting for costs associated with exit or disposal activities. The Company does not believe that SFAS No. 146 will have a significant impact on its consolidated financial position,
results of operations or cash flows.



SFAS No.
148 amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require
more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Companys management currently does not
plan to transition to the fair value method of accounting for employee stock options. Accordingly, the Companys management does not believe that portion of SFAS No. 148 will impact the Company. However, the Company has provided the required
disclosures (see Note 7).



Principles of
Consolidation    The consolidated financial statements include the accounts of Global ePoint and all majority owned subsidiaries after elimination of significant intercompany balances and transactions.



Cash and Cash
Equivalents    Cash equivalents consist of highly liquid investments purchased with original maturities of three months or less and which are readily convertible into cash.



Inventories    Inventories
include the cost of material, direct labor, manufacturing overhead, parts and supplies, and terminals assembled or in the process of assembly. Inventories are stated at the lower of cost, on a first-in, first-out basis or market.



Plant, Property and
Equipment    Plant, property and equipment are stated at cost less accumulated depreciation and amortization. Accumulated depreciation and amortization are provided using the straight-line method, over estimated useful
lives of 2 to 10 years. Maintenance and repairs are expensed as incurred.



24



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Patents    Patents are capitalized and amortized on a straight-line basis over 17 years.



Leases    Property held under lease agreements are stated at cost. Depreciation is provided using the
straight-line method, over estimated useful lives of 2-5 years.



Revenue Recognition    Under provision of SFAS No. 131, prior to the sale of the Companys lottery business, Global ePoint had three reportable business segments: Products, Financing and
Service, as described in Note 3. Revenue recognition for each segment was as follows:



Products



Revenues from terminal sales are recognized upon shipment, except where contract terms require Global ePoint to provide installation prior to acceptance, in which case revenue is recognized when the product is installed. Revenues
from sales-type leases are recognized at the present value of the future minimum payments and are recorded as product sales.



Financing



Income from operating leases is recognized as rentals are due according to provisions of the leases. Units under operating leases are
treated as depreciable assets and depreciated over their useful lives, with depreciation on such units charged to cost of sales. Interest income is recognized on sales-type leases as earned, based on amortization schedules. The difference between
the total future minimum payments plus the residual value of the equipment and the present value is recorded as unearned income and amortized over the term of the lease so as to produce a constant rate of return. Subsequent to June 1, 2001, the
Company had no sales-type leases and an insignificant amount of operating leases and, therefore, has discontinued segment reporting.



Service



Global ePoint employed a field service department to service ITR terminals sold or leased to customers. Most service agreements provided
for a preventive maintenance visit at regular intervals (e.g. every 60 to 120 days), covering all labor costs, costs to repair and replace parts, and provided for emergency visits if the terminal was non-operational. Income was recognized
monthly, ratably over the lease term, for all ITR sales. When a terminal was leased to a customer, the service fee was separately identified in the lease agreement or included as a component of a single lease payment. If service was included as a
component of a single lease payment, a service fee was estimated and classified as deferred executory costs. All service revenue was recognized ratably over the service agreement. Global ePoint provided for the estimated amount of future losses on
any service contract. Subsequent to June 1, 2001, this segment was discontinued.



All ITR and DCR sales include a warranty, ranging from one to three years, which includes free repair or replacement of defective parts and may include associated labor costs. Future warranty costs are
estimated and charged to income at time of sale, unless the lease includes a service component, in which case the estimated costs reduces the minimum lease payment. Global ePoint has no commitment under any lease to guarantee performance in a manner
more extensive than the typical product warranty or which effectively protects the lessee from obsolescence.



Restructuring Costs    As a result of the sale of the Companys core business operations on June 1,
2001, the Company has been in the process of establishing new strategic initiatives and transitioning the Company into new business activities. The Company incurred restructuring costs of $832 thousand in 2002 and $477 thousand



25



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



in the 2001 (which was over a seven month period only). The restructuring charges include payroll, facilities costs, refurbishment costs
asset valuation allowances and certain other charges incremental to restructuring operations and preparing for new business activities.



Research and Development    General research and development costs are expensed as incurred and were
$137 thousand in 2001. No expense was incurred in 2002.



Significant Customers and Concentration of Credit    Revenues from the state lotteries of Virginia and Illinois individually accounted for 36% and 47% respectively, of total revenue of discontinued
operations in 2001. In 2001 foreign sales were less than 1% of revenues from discontinued operations. Continuing operations had no significant customers in 2002.



Income Taxes    Deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end. If it is more likely than not that some portion or all of a deferred income tax asset will not be
realized, a valuation allowance is recognized.



Per Share Information    SFAS No. 128 Earnings per Share requires dual presentation of basic and diluted earnings per share for all periods presented. Basic EPS excludes dilution and is
computed using the weighted average shares of common stock outstanding plus contingently issuable shares. Diluted EPS is computed using the weighted average shares outstanding plus additional common shares that would have been outstanding if
dilutive potential common shares had been issued, using the treasury stock method.



Included in the computation for Basic and Diluted EPS for the 2002 and 2001 years are 519,125 and 237,500 shares, respectively, which are the weighted average of the shares that are contingently
issuable pursuant to the settlement agreements for the class action cases (see Note 8 herein). For all the periods presented, options and warrants were not factored into the calculation because they were antidilutive or because the Company had a net
loss.



Fair Value of Financial
Instruments    The following disclosure of estimated fair value was determined by available market information and appropriate valuation methodologies; however, considerable judgment is necessary to interpret market data
and develop the related estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The use of market assumptions and or
estimation methodologies may have a material effect on estimated fair value amounts.



Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses carrying costs reasonably approximates their fair value because of the short maturities of these investments.



Impairment of Long-Lived
Assets    Global ePoint periodically assesses its ability to recover the carrying value of its long-lived assets. If management concludes that the carrying value will not be recovered, an impairment write down is recorded
to reduce the asset to its estimated fair value.



Predevelopment Contract Costs    Costs related to modifications of existing products for a specific contract are capitalized and amortized over the life of the contract as revenues are recognized.



Estimates    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the



26



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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.



2.    Discontinued Operations



Discontinued Operations    On June 1, 2001, the Company sold to Interlott those assets used in its
existing lottery business, relating to the manufacture, sale, lease and service of instant ticket vending machines, including the assignment of the Companys existing lottery contracts pursuant to a definitive agreement executed on February 23,
2001 (the Agreement). Pursuant to the Agreement, the Company received approximately $13.1 million at closing which, after sale related costs of approximately $400 thousand, generated net proceeds of approximately $12.7 million. In
addition, the Company accrued approximately $1.1 million for estimated residual costs of disposal and estimated subsequent purchase price adjustments. The components of the gain on the sale were as follows:



|                                            |  | (In thousands)
|------------------------------------------- |  | --------------
|Proceeds, net of related costs and accruals |  | $             
|Net book value of assets sold               |  |               
|                                            |  |               
|Gain on sale                                |  | $             
|                                            |  |               



The
Agreement also provides for up to $9 million of deferred payments (subject to the performance of certain contracts assigned to Interlott) over five years and earn-out payments of up to $6 million (subject to certain conditions) over five years.
These payments have not been accrued as a receivable but rather will be recorded as income when all the conditions for payment have been met. For the period ended December 31, 2001, Interlott paid the Company $29,395 of deferred payments and no
amounts for earn-out payments. No amounts were paid in the 2002 year. In addition, the Company and Interlott entered into a separate on-line technology agreement to market a proprietary design for an on-line activated instant lottery ticket.



As a result of the sale, the operations related
to the lottery assets have been reflected as discontinued operations in the accompanying condensed consolidated financial statements. The results of discontinued operations for 2001 were as follows:



|                                        |  | 2001
|--------------------------------------- |  | ----
|(in thousands)                          |  |     
|Net sales                               |  | $   
|Gross profit                            |  |     
|Operating expenses                      |  |     
|                                        |  |     
|Net income from discontinued operations |  | $   
|                                        |  |     



Cash
flows provided by discontinued operations were as follows:



|                     |  | 2001
|-------------------- |  | ----
|(in thousands)       |  |     
|Operating activities |  | $   
|Investing activities |  |     
|                     |  |     
|Net cash             |  | $   
|                     |  |     



27



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





The net
assets of discontinued operations that were disposed as of June 1, 2001 were as follows:



|                                      |  | 2001
|------------------------------------- |  | ----
|(in thousands)                        |  |     
|Current assets                        |  | $   
|Plant, property and equipment, net    |  |     
|Net investment in sales-type leases   |  |     
|Property under operating leases, net  |  |     
|Other assets                          |  |     
|                                      |  |     
|Net assets of discontinued operations |  | $   
|                                      |  |     



3.    Segment Information



Global ePoint has adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, which changed the way Global ePoint reported information about its previous operating segments. Global
ePoint had three reportable segments prior to June 1, 2001: product sales, financing and service. The product segment included all products sold by Global ePoint, including ITR and DCR vending machines via product sales and sales-type lease
agreements. The financing segment included revenues and expenses associated with (1) financing the sale of units via sales-type leases and (2) operating leases. The service segment included revenues and expenses associated with its service and
warranty contracts. The Company discontinued segment reporting as of June 1, 2001 as a result of the sale of its lottery business.



4.    Other Financial Data



Details concerning certain balance sheet accounts as of December 31, 2002 follow:



|                                                |  | (in thousands) |       
|----------------------------------------------- |  | -------------- | ------
|Accounts receivable:                            |  |                |       
|Trade accounts receivable                       |  | $              | 46    
|Less allowance for doubtful accounts            |  |                | (30   
|                                                |  |                |       
|Total                                           |  | $              | 16    
|                                                |  |                |       
|Property, plant and equipment:                  |  |                |       
|Computers and equipment                         |  | $              | 1,096 
|Furniture and fixtures                          |  |                | 317   
|Tooling                                         |  |                | 8     
|Building and improvements                       |  |                | 76    
|                                                |  |                |       
|                                                |  |                | 1,497 
|Less accumulated depreciation and amortization  |  |                | (1,415
|                                                |  |                |       
|Total                                           |  | $              | 82    
|                                                |  |                |       
|Other assets:                                   |  |                |       
|Patents                                         |  | $              | 263   
|Deposits                                        |  |                | 18    
|Investments, net of reserves of $150, and other |  |                | 473   
|                                                |  |                |       
|                                                |  |                | 754   
|Less accumulated amortization                   |  |                | (254  
|                                                |  |                |       
|Total                                           |  | $              | 500   
|                                                |  |                |       



28



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





5.    Card Dispensing Equipment



The Companys card dispensing equipment (known as DCR machines) substantially consists of DCR machines that were previously under lease agreements with previous customers of the Company; the
substantial majority of which were previously under lease with a single customer, Solutioneering Inc. (Solutioneering), which filed for bankruptcy in 1999 and was liquidated in 2000. Before the Company began the repossession of the DCR
machines from Solutioneering in 2001, it settled a dispute with Solutioneerings financing lender, so that the Company would have undisputed rights to the property. In exchange for the settlement and the grant to the Company of the undisputed
rights to the DCR machines, in August 2000 the financing lender received warrants to purchase 116,667 shares of the Companys common stock at $3.75 per share exercisable over three years from the date of issuance. The fair value of the warrants
totaled $52 thousand, which was added to the cost basis of the equipment. The Company began the process of collecting the DCR machines in 2001. As of December 31, 2002, the Company had collected approximately 2,000 DCR machines, representing a
substantial majority of the DCR machines previously under lease with Solutioneering and other customers.



Subsequent to the sale of the Companys lottery business on June 1, 2001, the Company began a program to refurbish the repossessed
DCR machines to ready them for redeployment and sale. The Company continues to review marketing plans for the redeployment and sale of DCR machines in 2003, subject to further developments related to the Companys proposed merger (see Note 10).
Management believes that the fair value of the DCR machines exceeded the carrying amount of the machines, which was approximately $3.2 million, net of $300 thousand of reserves, as of December 31, 2002. In January 2003, the Company sold
approximately 140 card dispensing machines at a price exceeding the Companys cost to a third party as part of an overall marketing arrangement with that party. The Company intends to continue pursuing that and similar marketing arrangements in
2003.



As of December 31, 2002, the Company had
parts inventory of $636 thousand, net of $350 thousand of reserve for obsolescence. Parts inventory consists primarily of materials that are used for the refurbishment and repair of DCR machines.



6.    Income Taxes



Following is a reconciliation of the income tax expense
(benefit) expected (based on the statutory federal income tax rate) to the actual income tax provision recorded (in thousands):



|                                                                                     |  | 2002 |      |   | 2001 |  
|------------------------------------------------------------------------------------ |  | ---- | ---- | - | ---- | -
|Tax benefit on loss from continuing operations computed at statutory rate of
34%     |  | $    | (580 | ) |      | $
|Tax expense on income from discontinued operations computed at statutory rate of
34% |  |      |      |   |      |  
|Expenses not deductible for income tax purposes                                      |  |      | 205  |   |      |  
|Change in valuation allowances for deferred income tax assets, net                   |  |      | 375  |   |      |  
|                                                                                     |  |      |      |   |      |  
|Provision for income taxescurrent                                                   |  | $    | 0    |   |      | $
|                                                                                     |  |      |      |   |      |  



Deferred
income tax assets and the related valuation allowance as of December 31, 2002, result from the following temporary differences:



|                                 |  | 2002 |       
|-------------------------------- |  | ---- | ------
|Net operating loss carryforwards |  | $    | 5,365 
|Inventory and other reserves     |  |      | 717   
|Valuation allowance              |  |      | (6,082
|                                 |  |      |       
|Net deferred income tax assets   |  | $    | 0     
|                                 |  |      |       



29



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Due to
significant losses for income tax reporting purposes prior to 2002, as well as the other issues currently being addressed by Global ePoint, management has concluded that it is more likely than not that the deferred tax assets will not be realized
and that a valuation allowance is needed to reduce the carrying value of deferred income tax assets to zero.



At December 31, 2002, Global ePoint has approximately $16 million of operating losses available to offset future federal taxable income,
which begin to expire in 2011.



7.    Shareholders Equity



Preferred Stock    Global ePoint is authorized to issue up to two million shares of Preferred Stock without further shareholder approval; the rights, preferences and
privileges of which would be determined at the time of issuance. No shares have ever been issued.



Private Placement of Common Stock    On October 31, 2000, Global ePoint completed a private placement
for the sale of 666,668 shares of Common Stock at $1.50 per share, the market value on the date of the agreement. Net proceeds of the transaction aggregated $1,000,000 prior to legal fees of approximately $35,000. In addition to the issuance of
666,668 shares, Global ePoint issued 33,333 shares to Investa AG, the European fund manager acting as placement agent, as a commission on the transaction. Global ePoint also issued to Investa warrants to purchase 33,333 shares of Common Stock at a
price of $3.00 per share. In addition, Global ePoint issued warrants to purchase 66,667 shares of Common Stock at a price of $1.50 per share to Questos Ltd., a consulting company used in connection with the transaction. The warrants issued to
Investa and Questos are immediately exercisable and expire on October 31, 2005. In December 2000, Investa exercised all its warrants to purchase 33,333 shares of Common Stock for an aggregate price of $100,000.



Stock Option Plans    Global
ePoint has two employee stock option plans whereby options to purchase 1,157,500 shares of Global ePoints common stock may be granted to certain executives and employees, and an option plan for directors under which options for 175,000 shares
of Global ePoints common stock may be issued to directors of Global ePoint. Information regarding these option plans, including options outstanding for non-employees of 233,333 and 229,999 shares as of December 31, 2002 and 2001, respectively,
follows:



|                                |  | 2002      |   |  | 2001                            |      
|------------------------------- |  | --------- | - |  | ------------------------------- | -----
|                                |  | Shares    |   |  | Weighted Average Exercise Price |      
|Outstanding at January 1        |  | 1,104,334 |   |  | $                               | 2.85 
|Granted                         |  | 80,000    |   |  |                                 | 1.36 
|Exercised                       |  |           |   |  |                                 |      
|Forfeited                       |  | (97,332   | ) |  |                                 | (3.21
|                                |  |           |   |  |                                 |      
|Outstanding at December 31      |  | 1,087,002 |   |  |                                 | 2.77 
|                                |  |           |   |  |                                 |      
|Options exercisable at year end |  | 1,006,833 |   |  | $                               | 2.99 
|                                |  |           |   |  |                                 |      



30



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





The
following table summarizes information about fixed-price stock options outstanding at December 31, 2002:



|                         |  | Options Outstanding            |  | Options Exercisable                    
|------------------------ |  | ------------------------------ |  | ---------------------------------------
|Range of Exercise Prices |  | Number Outstanding at 12/31/02 |  | Weighted Avg Remaining Contractual Life
|$1.12  $3.09            |  | 890,000                        |  | 3.29                                   
|4.23    5.43            |  | 163,335                        |  | 2.26                                   
|5.91    6.27            |  | 334                            |  | 1.58                                   
|22.35                    |  | 33,333                         |  | 2.75                                   
|                         |  |                                |  |                                        
|$1.12  $22.35           |  | 1,087,002                      |  | 2.94                                   
|                         |  |                                |  |                                        



Global
ePoint has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation for employee stock options. Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation for
Global ePoints three stock option plans been determined based on the fair value at the grant date for awards in 2002 consistent with the provisions of SFAS No. 123, Global ePoints net income (loss) and income (loss) per share would have
been decreased (increased) to the pro forma amounts indicated below:



|                                                                                                           |  | 2002 Net Loss |        |   | 2001 Net Income |  
|---------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | - | --------------- | -
|As Reported                                                                                                |  | $             | (1,705 | ) |                 | $
|Stock-based employee compensation determined under the fair value based method, net of
related tax effects |  |               | (23    | ) |                 |  
|                                                                                                           |  |               |        |   |                 |  
|Pro Forma                                                                                                  |  | $             | (1,728 | ) |                 | $
|                                                                                                           |  |               |        |   |                 |  
|Earnings/(loss) per common share, Basic and diluted:                                                       |  |               |        |   |                 |  
|As reported                                                                                                |  | $             | (.35   | ) |                 | $
|Pro Forma                                                                                                  |  | $             | (.36   | ) |                 | $
|                                                                                                           |  |               |        |   |                 |  



In 2002,
the fair value of options granted to employees is estimated at approximately $.40 per share on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for the grants: dividend yield of 0 %;
expected volatility of 28.45%; risk free interest rate of 3.82%; and expected life of 5 years.



In 2001, the fair value of options granted to employees is estimated at approximately $2.90 per share on the date of grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for the grants; dividend yield of 0%; expected volatility of 41%; risk free interest rate of 4.2%; and expected life of 5 years.



31



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Stock Warrants    Global ePoint has, on occasion, granted warrants to purchase common stock to consultants, lenders and creditors. Information regarding these warrants follows:



|                           |  | 2002     |   |  | 2001                            |      
|-------------------------- |  | -------- | - |  | ------------------------------- | -----
|                           |  | Shares   |   |  | Weighted Average Exercise Price |      
|Outstanding at January 1   |  | 632,502  |   |  | $                               | 2.33 
|Granted                    |  | 12,600   |   |  |                                 | 1.36 
|Exercised                  |  |          |   |  |                                 |      
|Forfeited                  |  | (250,001 | ) |  |                                 | (1.98
|                           |  |          |   |  |                                 |      
|Outstanding at December 31 |  | 395,101  |   |  | $                               | 2.51 
|                           |  |          |   |  |                                 |      



All of
the warrants outstanding at December 31, 2002 and 2001 were fully exercisable.



In July 1998, Coast Business Credit received a warrant to purchase 3,333 shares of Global ePoints Common Stock at $4.89 per share pursuant to a financing agreement entered into with Global
ePoint. The warrant has a two-year term and became exercisable in July 1998. These warrants were extended through July 2003 upon the extension of the line of credit through that date. The fair value of the warrant totaled $5 thousand at
the date of grant, which has been amortized over the term of the agreement.



In May 1997, Coast Business Credit and a consultant received warrants to purchase 16,667 shares and 15,000 shares, respectively, of Global ePoints common stock at $6.00 per share and $7.56 per
share, respectively, in consideration for the debt financing. The warrants each had a three-year term and became exercisable in May 1997. The warrants to purchase 16,667 shares to Coast Business Credit were extended through July 2003. The fair value
of the warrants totaled $79 thousand, which has been amortized to expense over the term of the loan. Global ePoint expensed $26 thousand to financing costs in 2000 and the remainder was expensed in prior years.



In December 2000, Galt Asset Management, LLC, a money
management fund and certain private investors received warrants to purchase 179,167 shares of Global ePoints Common Stock at $1.80 per share in connection with the extension of certain debt due from Global ePoint. The fair value of the
warrants totalled $145 thousand, which were capitalized to deferred financing costs as of December 31, 2000. During 2001, the Company repaid the entire debt and expensed the $145 thousand financing costs.



In January 2002, Direct Sales, a previous supplier to the
Company, received warrants to purchase 6,000 shares of Global ePoints Common Stock at $1.59 per share, exercisable over 34 months, as part of a settlement agreement. The fair value of the warrants totalled $2 thousand, which has been
expensed in 2002.



In December 2002,
Embertons Machine & Tool, a previous supplier to the Company, received warrants to purchase 6,600 shares of Global ePoints Common Stock at $1.15 per share, exercisable over 30 months, as part of a settlement agreement. The fair value
of the warrants totalled $2 thousand, which has been expensed in 2002.



32



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





8.    Commitments and Contingencies



Lease Commitments    Global ePoint leases a facilty under an operating lease expiring in December 2008 and leased other facilities in the prior years. Rent expense for
such facilities totaled $226 thousand and $278 thousand for the years ended December 31, 2002 and 2001, respectively. Future minimum rentals under non-cancelable operating leases, as of December 31, 2002, is as follows (in thousands):



|2003       |  | $ | 234  
|---------- |  | - | -----
|2004       |  |   | 242  
|2005       |  |   | 251  
|2006       |  |   | 259  
|2007       |  |   | 267  
|Thereafter |  |   | 279  
|           |  |   |      
|           |  | $ | 1,532
|           |  |   |      



Legal Proceedings    Global ePoint is a party to legal proceedings in the ordinary course of its business; the most significant of which are described below.



In October of 2001, Loeb & Loeb, LLP, a law firm,
instituted arbitration proceedings in Los Angeles, California against Global ePoint alleging in excess of $200,000 in legal fees and costs were owed in connection with a proposed merger transaction. The Company has filed counter-claims against Loeb
& Loeb in the arbitration proceedings for malpractice and breach of contract. Loeb & Loeb and the Company settled the matter in February 2003 for an amount of which the Company already had accrued as of December 31, 2002. Therefore, no
additional expense was recognized by the Company in 2002.



On April 20, 2000, a shareholder class action was filed against On-Point Technology Systems and certain officers and directors in the U.S. District Court, Southern District of California. The action, which requested an unspecified
amount of damages on behalf of all similarly situated shareholders, alleged that the Company violated federal securities laws by the dissemination of materially false and misleading financial statements. Subsequent cases alleging substantially the
same claims, and also filed in the same court, were consolidated before the same judge. The defendants entered into an amended settlement agreement with the class for all matters, and the court approved the amended settlement agreement in 2001. The
Company and other defendants denied the liability claims as part of the amended settlement, but believed that settling the cases quickly was in the best interests of the Company in order for management to more effectively proceed with its strategic
business plans. Under the amended settlement agreement, the Company paid, in 2002, $50,000 in cash and, in 2003, will issue 519,125 shares, which were equal to $950 thousand in value on the determination date.



In December 2001, a previous supplier to the Companys
lottery division, Embertons Machine & Tool, Inc., initiated an action against the Company in the State of California Superior Court, El Cajon Division, alleging approximately $56,000 in costs for goods they contend should have been
supplied to the Company. The parties entered into mediation and settled the matter in 2002. The Company issued warrants in December 2002 to purchase 6,600 shares at an exercise price of $1.15 per share, exercisable over 30 months, as part of the
settlement.



In September 2002, ePlus Group,
Inc., formerly known as MLC Group, Inc., initiated an action against the Company in the United States District Court, Eastern District of the Commonwealth of Virginia, alleging that they are due moneys in excess of $75,000 under a Master Agreement,
which was signed in September of 1992. The Company responded denying all liability and filed a counterclaim for breach of contract, intentional



33



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



interference with prospective economic opportunity and contractual relationship, and intentional fraud. The plaintiff filed a motion to
dismiss the Companys counterclaim and the Company filed a motion to dismiss plaintiffs claim. The court denied both motions. The actions are pending. The Company intends to vigorously contest the basis of the complaint.



In October 2002, A & S, LLC, the property owner for the
Companys leased premises, initiated an action against the Company in the State of California Superior Court, County of San Diego, North County Branch, alleging that the Company failed to reimburse A & S, LLC for additional tenant
improvements totaling $82,950. In February, the Company and A & S negotiated a proposed settlement, subject to a new tenant entering into a sublease agreement with the Company. The action remains pending until the new settlement agreement is
extended.



Executive Compensation
Agreement    Global ePoint has an employment agreement with its Chief Executive Officer (the CEO) for a three-year term that commenced January 9, 1996, and that automatically extends annually for an additional
year unless notice has otherwise been given by Global ePoint. As of December 31, 2002, the term expires on December 31, 2004. While Global ePoint was committed under the agreement to provide for an annual base salary of at least $300 thousand,
plus a bonus equal to 5% of the first million dollars of Global ePoints pre-tax income and 7% thereafter, only $65 thousand was paid to the CEO in 2001 and no bonuses were paid to the CEO. The CEO waived all accrued bonuses and unpaid wages
through December 31, 2001. The amount of accrued wages waived amounted to $331 thousand in 2001. During 2001, the CEO voluntarily amended his employment agreement to provide for a reduced annual salary of $120,000 for the period July 1, 2001 through
June 1, 2002 and $180,000 for the period July 1, 2002 through June 30, 2003 with 10% annual increases thereafter. The reduced salary would be effective only during the time period prior to the commencement of a new business activity. Upon
commencement of a new business activity the CEOs base salary will revert to that under his original agreement. The CEO is also entitled to a bonus of $300,000 upon the commencement of a new business activity approved by the Board of Directors.



The employment agreement with the CEO also
provides for severance upon termination by Global ePoint without cause or termination by the CEO for good reason, as defined, in the amount equal to the base salary the CEO would have earned during the 36 month period commencing on the
date of termination plus three times the CEOs average annual bonus received over the prior three fiscal years. The CEO would also have the right to receive all other benefits that would have been received under his employment arrangement for
that 36-month period. Further, all shares underlying outstanding stock options granted to the CEO would become fully exercisable for a period of 18 months after termination.



9.    Costs of Abandoned Projects



Included in operating costs were costs related to the abandonment of the Companys international
projects. The Company had been pursuing certain international projects as a result of certain strategic initiatives started in 2000. As a result of the recent changes in the social-political environment in the countries in which the Company was
attempting to do business, the Company determined that it was in the best interest of the Company not to continue proceeding with those international projects. As a result, the Company incurred a non-cash charge of approximately $350 thousand in
2002 for costs related to the abandoned projects.



10.    Proposed Merger



On January 18, 2003, the Company entered into a Letter of Intent with Sequent Technologies, Inc., Best Logic, Inc. and McDigit, Inc. (the Target Companies) to acquire 100 percent of the issued and outstanding stock



34



---

GLOBAL EPOINT, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



or membership interest, as applicable The letter of intent regarding the proposed merger with the Target Companies provides that, if the
merger is consummated, the current shareholders and members of the Target Companies would receive shares of Global ePoints common stock. Initially, it is anticipated that the number of shares to be issued to the shareholders and members of the
Target Companies would be equal to a percentage ownership of Global ePoint of 50.1 percent of the total outstanding shares of Global ePoint at the time of closing. However, that percentage may be reduced to approximately 40 percent if certain
performance levels for the Target Companies are not achieved for the year ended December 31, 2002. The shareholders and members of the Target Companies can receive additional shares of Global ePoints common stock if they meet certain net
income performance requirements over the next three years. It is anticipated, depending on the final negotiated terms and the ultimate percentage determination of stock percentages, that the merger will be accounted for as a reverse
acquisition for accounting purposes.



Sequent Technologies is a start up company providing mobile visual telecommunication systems using advanced compression and encryption techniques. Best Logic is a specialized manufacturer of computing solutions for industrial
applications. Best Logics primary markets include the electronic security market and x-ray scanning equipment for the airline industry. McDigit is a start-up marketing company primarily focused on the distribution, sales and marketing of
Sequents and Best Logics products in key security markets.



The merger is subject to a number of other conditions, including the completion of a definitive agreement, approval by the Target Companies respective boards of directors and approval by Global ePoints
shareholders. As such, there can be no assurance that Global ePoint will enter into a definitive agreement with the Target Companies, or that the merger will be consummated.



35



---



|ITEM 8. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- |  | ------------------------------------------------------------------------------------



N/A



PART III.



|ITEM 9. |  | DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
|------- |  | -----------------------------------------------------------------------------------------------------



Executive Officers and Directors



The names, ages and positions of the directors (1), executive officers and key employees of Global ePoint are as follows:



|Name                        |  | Age |  | Position                                         
|--------------------------- |  | --- |  | -------------------------------------------------
|Frederick Sandvick          |  | 45  |  | Chief Executive Officer and Chairman of the Board
|Keith A. Cannon(2)(3)       |  | 62  |  | Director and Secretary                           
|Darrell L. Richardson(2)(3) |  | 53  |  | Director                                         
|Owen Lee Barnett(2)(3)      |  | 63  |  | Director                                         

---

|(1) |  | Each director of Global ePoint holds office until the next annual meeting of shareholders and until a successor has been elected and qualified, or until his earlier
resignation or removal.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Audit Committee Member
|--- |  | ----------------------

|(3) |  | Compensation Committee Member
|--- |  | -----------------------------



Frederick Sandvickhas been the Chief Executive Officer and Chairman of the Board of Global ePoint since January 1996. Mr. Sandvick
is President and the principal stockholder of Vanguard Strategies, Inc., a privately held strategic planning company he founded in 1995. From 1990 to 1995, Mr. Sandvick was Executive Vice President and Chief Financial Officer of JNet Enterprises
(formerly Jackpot Enterprises, Inc.), a company listed on the NYSE and formerly engaged in the gaming/entertainment industry.



Keith A. Cannon has been a securities branch manager at Wilson-Davis and Co. since 1993 where he has supervised trading with a
variety of domestic and international clients. Mr. Cannon has served as a financial and corporate financial consultant for various publicly held companies for over 25 years. Mr. Cannon was appointed to the Board in August 2000.



Darrell L. Richardsonwas appointed to the Board in
September 2002. Mr. Richardson has been the President and Chief Executive Officer of TimeshareBid.com, a private startup Internet Commerce Company focused on time-share sales and exchanges, since its formation in April 1999. Mr. Richardson is also a
partner in Cunningham Group Development Services, LLC, a private real estate development company and was its managing director from 1999 to 2001. Mr. Richardson served as President and Chief Executive Officer of Residency Resorts International,
Inc., a timeshare company, from 1998 to 1999 and he was a financial consultant for Merrill Lynch from 1996 to 1998. Prior to his ten years in real estate, financial and management consulting services, Mr. Richardson spent 20 years in the
telecommunications industry. Mr. Richardson also has managed Richardson Development Group, LLC, a private family holding and investment company, from 1995 to present.



Owen Lee Barnett has been Chief of Resources of Civil Engineering for the 61stAir Base Group of the U.S. Air Force from 2001 to present. Mr. Barnett has been the treasurer of Montgomery Realty Group,
Inc., a publicly traded company, from 1996 to present and has been a member of the Board of Directors and Audit Committee of that company. Mr. Barnett has also been the owner, President and Chief Executive Officer of American Tax Service, a
privately held accounting, tax and management services company, from 1961 to



36



---

present. Mr. Barnett has also been a registered broker-dealer in the securities industry, a college instructor, as well as the President and
Chief Executive Officer of a privately held leasing company and motorcycle retailer. Mr. Barnett is a retired Lieutenant Colonel in the Medical Service Corps of the U.S. Air Force.



ITEM 10.    MANAGEMENT REMUNERATION AND TRANSACTIONS



Executive Compensation



The following information relates to compensation of Global
ePoints Chief Executive Officer for Global ePoints fiscal years ended December 31, 2002, 2001 and 2000. No other executive officer of Global ePoint received total annual salary and bonuses in excess of $100,000 during those fiscal years.



The Compensation Committee did not have a
substantial role in setting compensation in 2002, 2001 and 2000 because the Chief Executive Officer was engaged pursuant to an employment agreement, which fixed compensation. The role of the Compensation Committee and its policies will continue to
increase as employment agreements expire and compensation packages are negotiated with key executives.



SUMMARY COMPENSATION TABLE



|                            |  |                |  | Annual Compensation  |             | Long-Term Compensation Awards
|--------------------------- |  | -------------- |  | -------------------- | ----------- | -----------------------------
|Name and Principal Position |  | Year           |  | Salary ($)           |             |                              
|Frederick Sandvick CEO      |  | 2002 2001 2000 |  | 150,000 64,615 6,923 | (2) (2) (2) |                              

---

|(1) |  | Includes options to purchase 83,333 shares of common stock granted in 1999 and options to purchase 400,000 shares of common stock granted in 2001. The calculated
fair value of the options described above included in Other Annual Compensation was $238,000 in 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | While the terms of the employment contract called for an annual salary of $330,000 and $300,000 in 2001 and 2000, respectively, only $64,613 and $6,923 were paid to
Mr. Sandvick in 2001 and 2000 respectively. Mr. Sandvick waived all other salary and bonuses through December 31, 2001.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Employment Agreements



Mr. Sandvick serves as Chairman of the Board and Chief Executive Officer of Global ePoint pursuant to a three-year employment agreement
that commenced on January 9, 1996. The agreement has been extended and will terminate unless further extended or sooner terminated, on December 31, 2004. The term of the agreement is automatically extended annually for an additional year unless
notice is given by either party that such party does not wish to extend the agreement term. The agreement commenced with an annual base salary of $180,000 through June 30, 1996 with $30,000 annual increases thereafter. Mr. Sandvick is entitled to an
annual bonus equal to 5% of the first $10 million of Global ePoints pre tax income and 7% of Global ePoints pre tax income in excess of $10 million. Pursuant to the agreement, on the commencement of employment Mr. Sandvick was granted a
ten-year option to acquire 290,000 shares of Global ePoints common stock at a price of $2.40 per share, such price representing the greater of (1) the closing price on the date of stock holder approval of the First Amendment to Global
ePoints 1994 Stock Option Plan or (2) the average of the closing sales price for the 20 trading days preceding the effective date of the agreement. All of the options are now fully exercisable. Mr. Sandvick is also entitled to
participate in other employee benefit plans and Global ePoint is obligated to reimburse Mr. Sandvick for, or pay directly, the costs of a personal plan of disability providing for $15,000 per month disability benefits.



During 2000, due to the financial condition of the Company,
Mr. Sandvick agreed to waive substantially all of his compensation for that year and reduce his compensation for 2001 and 2002. The amount of accrued wages



37



---

and bonuses waived amounted to $331 thousand in 2001 and $283 thousand in 2000. During 2001, as a result of the sale of the Companys
lottery business, Mr. Sandvicks employment agreement was amended to provide for a reduced salary until the Company commenced a new business activity. Under the amendment, Mr. Sandvick will be paid an annual base salary of $120,000 commencing
July 1, 2001 through June 30, 2002 and an annual base salary of $180,000 from July 1, 2002 through June 30, 2003, and for annual periods thereafter such salary will increase by 10%. Mr. Sandvick also waived all bonuses payable to him for the periods
through December 31, 2001. Under the amendment, the terms of Mr. Sandvicks compensation arrangement would revert back to the terms of his original agreement upon the commencement of a new business activity by the Company. In addition, within
30 days of commencement of such new business activity, a one-time bonus in the amount of $300,000 will be paid to Mr. Sandvick, provided such new activity is acceptable to the Compensation Committee.



The employment agreement with Mr. Sandvick also provides for
severance upon termination by Global ePoint without cause or termination by Mr. Sandvick for good reason in the amount equal to the base salary Mr. Sandvick would have earned during the 36 month period commencing on the date of
termination plus three times Mr. Sandvicks average annual bonus received over the prior three fiscal years. Mr. Sandvick would also have the right to receive all other benefits that would have been received under his employment arrangement for
that 36-month period. Further, all shares underlying outstanding stock options granted to Mr. Sandvick would become fully exercisable for a period of 18 months after termination. Mr. Sandvick shall have good reason to terminate his
employment if, among other events, (i) Global ePoint fails to comply with any material provision of the employment agreement; (ii) Global ePoint gives Mr. Sandvick notice of nonrenewable; or (iii) for any reason within one year following the
occurrence of a change in control, as defined. Change in control occurs if (i) any person, excluding existing relationships, becomes the beneficial owner of securities representing 20% or more of the combined voting power of Global ePoints
then outstanding voting securities; (ii) a change occurs in the majority of the Board of Directors; (iii) the stockholders approve a merger in which at least 51% of Global ePoints combined voting power is given to a new entity not in Global
ePoints control or the effect of such merger is that any person acquires 20% or more of the combined voting power of Global ePoint.



Option Exercises In Fiscal 2002 And Fiscal Year-End Option Values



The following table presents certain information regarding stock option exercises during fiscal 2002.



|                   |  |                                 |  |                    |  | Number of Securities Underlying Unexercised Option/SARs at
FY-End(1) |  | Value of Unexercised In-the-Money Options/SARs at
FY-End
|------------------ |  | ------------------------------- |  | ------------------ |  | -------------------------------------------------------------------- |  | --------------------------------------------------------
|Name               |  | Shares Acquired on Exercise (#) |  | Value Realized ($) |  | Exercisable                                                          |  | Unexercisable                                           
|Frederick Sandvick |  | 0                               |  | 0                  |  | 1,103,334                                                            |  | 0                                                       

---

|(1) |  | Includes options to purchase 290,000 shares of common stock which vested pursuant to Mr. Sandvicks employment agreement, warrants to purchase 166,667 shares of
common stock in connection with a guarantee of a performance bond, options to purchase 563,333 shares of common stock pursuant to annual employee grants, and warrants to purchase 83,334 shares of common stock granted to Vanguard Strategies, Inc.
(see Certain Relationships and Related Transactions herein).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Compensation of Directors



During 2000 each outside director was automatically granted options to purchase 3,334 shares of Global ePoints common stock pursuant to the July 26, 1996 amendment to the 1994 Stock Option Plan
for Directors which provided a formula for granting options to outside directors. During 2000, certain outside directors received additional options of 6,666 shares and all outside directors received additional options for 10,000 shares each in lieu
of cash compensation as a director pursuant to an amendment to the Directors Plan adopted on December 8, 2000. During 2001, each outside director was automatically granted options to purchase 10,000 share of common stock pursuant to the
December 8, 2000 amendment. On June 30, 2001 each outside



38



---

director was granted options to purchase 20,000 shares of common stock as a special bonus outside of any designated plan. On December 14,
2001, each outside director was granted options to purchase 10,000 shares of common stock in lieu of cash compensation as a director pursuant to an amendment to the Directors Plan adopted on December 14, 2001. On June 30, 2002, each outside director
was granted options to purchase 10,000 shares of common stock pursuant to the automatic grants under the Directors Plan and on December 19, 2002, each outside director was granted options to purchase 10,000 shares of common stock in lieu of
cash compensation as a director pursuant to an amendment to the Directors Plan adopted on December 19, 2002.



1993 Stock Option Plan



On March 1, 1993, Global ePoint adopted the 1993 Stock Option Plan (the Plan) under which 157,500 shares of common stock
may be issued to officers and other key employees who have substantial responsibility for the direction and management of Global ePoint. Options issued under the Plan are either incentive stock options under Section 422 of the Internal Revenue Code
of 1986, as amended (the Code), or non-qualified stock options, as determined in the discretion of the Compensation Committee of the Board of Directors of Global ePoint at the time the options are granted. In addition, the Compensation
Committee, subject to the provisions of the Plan, has authority to determine the employees to whom options will be granted, the time or times at which options will issue, the exercise price of granted options and any conditions for their exercise.
The Plan requires that the exercise price of stock options be not less than the fair market value on the date of grant and that stock options expire not later than ten years from the date of grant. In addition, the Plan provides that no incentive
stock options may be granted to any employee who owns more that 10% of Global ePoints voting securities unless the exercise price is a least 110% of the fair market value of the underlying common stock and the option expires on/before five
years from the date of grant. The Plan contains an anti-dilution provision whereby the shares of common stock, which underlie outstanding options, are increased proportionately in the event of a stock split or dividend. As of December 31, 2002,
36,565 options have been granted under this Plan. No options may be issued under this Plan after March 1, 2003.



1994 Stock Option Plan



On April 21, 1994, Global ePoint adopted the 1994 Stock Option Plan (the Plan) under which 175,000 shares of common stock
may be issued to officers and other key employees who have substantial responsibility for the direction and management of Global ePoint. On January 8, 1996 the plan was amended to increase the shares available for issuance to 500,000. Such amendment
was approved by the stockholders on July 26, 1996. On December 8, 2000, an amendment was approved by the stockholders to increase the shares available for issuance to 1,000,000. Options issued under the Plan are either incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended (the Code), or non-qualified stock options, as determined in the discretion of the Compensation Committee of the Board of Directors of Global ePoint at the time the
options are granted. In addition, the Compensation Committee, subject to the provisions of the Plan, has authority to determine the employees to whom options will be granted, the time or times at which options will issue, the exercise price of
granted options and any conditions for their exercise. The Plan requires that the exercise price of stock options be not less than the fair market value on the date of grant and that stock options expire not later than ten years from the date of
grant. In addition, the Plan provides that no incentive stock options may be granted to any employee who owns more than 10% of Global ePoints voting securities unless the exercise price is at least 110% of the fair market value of the
underlying common stock and the option expires on or before five years from the date of grant. The Plan contains an anti-dilution provision five years from the date of grant. The Plan contains an anti-dilution provision whereby the shares of common
stock, which underlie outstanding options, are increased proportionately in the event of a stock split or dividend. As of December 31, 2002, 852,000 options have been granted under this plan. No options may be granted under this Plan after April 21,
2004.



39



---



1994 Stock
Option Plan for Directors



On April 21,
1994, Global ePoint adopted the 1994 Stock Option Plan for Directors (the Directors Plan) under which 175,000 shares of common stock may be issued to Directors of Global ePoint. Options issued under the Directors Plan are
non-qualified stock options. The Board of Directors, excluding outside Directors who are eligible for the Directors Plan, subject to the provisions of the Directors Plan, has authority to determine the outside Directors to whom Options
will be granted, the time or times at which options will issue, the exercise price of granted options and any conditions for their exercise. The Directors Plan requires that the exercise price of stock options be not less than the fair market
value on the date of grant and that stock options expire not later than ten years from the date of grant. The Directors Plan contains an anti-dilution provision whereby the shares of common stock, which underlie outstanding options, are
increased proportionately in the event of a stock split or dividend. As of December 31, 2002, 143,334 options have been granted under this plan. No options may be granted under this Plan after April 21, 2004.



On July 26, 1996, the Board amended the Directors Plan
to provide for the automatic issuance of options in order to satisfy the requirements of Securities and Exchange Commission Rule 16b-3. The Amendment provided for the automatic issuance of stock options for 10,000 shares to each outside director on
July 26, 1996 and as of each June 30 thereafter. Also, each new outside director is automatically granted stock options for 3,334 shares as of the date of becoming a member of the Board, unless that date falls between April 1 and June 30 of any
year. These options become exercisable six months after grant and expire three-year after date of grant. The exercise price is equal to the fair market value at date of grant, but not less than one dollar.



On July 29, 1999, August 28, 1998 and August 27, 1997, the
Board amended the Directors Plan by modifying the formula for granting options to outside directors by providing for the annual grant of stock options for an additional 3,334 shares in lieu of regular cash compensation for serving as director.
These options become exercisable on the date of the next annual meeting of shareholders and have a three-year life. The one-dollar minimum purchase price was eliminated by an amendment dated May 31, 2000.



On December 8, 2000, the Board amended the Directors
Plan by modifying the formula for granting options to outside directors as follows: (a) the number of stock options automatically issued as of each June 30 or as of the date of becoming a member of the Board as described above was kept at 10,000
shares even after the reverse stock split, (b) certain outside directors who had been on the Board for at least 3 months received a one-time additional grant of stock options for 6,666 shares, (c) similar to prior amendments, outside directors were
issued stock options for 10,000 shares in lieu of regular cash compensation for serving from December 8, 2000 to the 2001 annual meeting of shareholders, and (d) provide for an exercise period of 5 years instead of 3 years for all options issued on
December 8, 2000.



On December 19, 2002 and
December 14, 2001, the Board amended the Directors Plan by modifying the formula for granting options to outside directors by providing for the annual grant of a stock option for an additional 10,000 shares of common stock in lieu of regular
cash compensation for serving as a director. These options become exercisable on the date of the next annual meeting of shareholders and have a five-year life.



Other Stock Options for Outside Directors



Additional options were granted outside the plan after the sale of the lottery business to Interlott as an
additional incentive for outside Directors to remain on the Board while the Company formulated and implemented its future business plans. Options issued are non-qualified stock options outside of a designated plan. Each outside Director received
options to purchase 20,000 shares of common stock on June 30, 2001 and all of these stock options vested on December 30, 2001 and expire on June 30, 2004. The stock options contain an anti-dilution provision whereby the shares of common stock, which
underlie outstanding options, are increased proportionately in the event of a stock split or dividend.



40



---



Bonus
Policy



While Global ePoint has no
established policy, other than as provided in the Chief Executive Officers employment agreement, to award cash or stock bonuses to its officers, it may elect to pay bonuses to reward the performance of its officers. Global ePoint awarded no
cash bonuses in 2002 or 2001.



ITEM
11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



The following table sets forth, as of March 21, 2003, the shares of Global ePoints Capital Stock beneficially owned by each 5% beneficial owner, by each Director or nominee, by each named
executive officer individually, and by all Directors and executive officers as a group:



|Name and Address of Beneficial Owner                            |  | Number of Shares Beneficially Owned(1) |  | Percentage Of Class |  
|--------------------------------------------------------------- |  | -------------------------------------- |  | ------------------- | -
|Frederick Sandvick(2) 108 Ivy Street San Diego, CA 92101        |  | 1,016,668                              |  | 17.91               | %
|                                                               
|Keith Cannon(3) 2300 Shawn Court Carlsbad, CA 92008             |  | 168,467                                |  | 3.43                | %
|                                                               
|Darrel L. Richardson 148 22 North 45th Way Phoenix, AZ 85032    |  | 20,000                                 |  | .41                 | %
|                                                               
|Owen Lee Barnett(4) 1628 E. Palm Avenue #3 El Segundo, CA 90245 |  | 23,134                                 |  | .48                 | %
|                                                               
|All directors and executive officers as a group (4 persons)     |  | 1,228,269                              |  | 21.18               | %

---

|(1) |  | Unless otherwise indicated, all shares are owned beneficially and of record.
|--- |  | ----------------------------------------------------------------------------

|(2) |  | Of the shares of common stock reflected in the table above, 163,334 are registered in Mr. Sandvicks name. The table also includes 853,334 shares of common
stock issuable upon exercise of options.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Of the shares of common stock reflected in the table above, 88,467 are registered in Mr. Cannons name. The table includes options to purchase 80,000 shares of
common stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Of the shares of common stock reflected in the table above, 3,134 are registered in Mr. Barnetts name. The table includes options to purchase 20,000 shares of
common stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



41



---



ITEM
12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



N/A



ITEM
13.    EXHIBITS AND REPORTS ON FORM 8-K



(a)    Exhibits



|Exhibit Numbers |  | Description of Documents                                                                                   
|--------------- |  | -----------------------------------------------------------------------------------------------------------
|               
|3.1             |  | Amended and Restated Articles of Incorporation of Registrant(B)                                            
|               
|3.1.1           |  | Amended and Restated Articles of Incorporation dated March 1,
1993(D)                                      
|               
|3.1.2           |  | Certificate of Amendment to Articles of Incorporation dated August 6,
1996(H)                              
|               
|3.1.3           |  | Certificate of Amendment to Amended and Restated Articles of Incorporation dated
December 22, 2000(R)      
|               
|3.2             |  | Restated By-Laws of Registrant(C)                                                                          
|               
|3.2.1           |  | Restated By-Laws dated March 1, 1993 and Amendment thereto dated May 27,
1993(D)                           
|               
|3.3             |  | Certificate of corporate status dated August 3, 1993(D)                                                    
|               
|4.1             |  | Specimen Stock Certificate(C)                                                                              
|               
|4.1.1           |  | Specimen Stock Certificate(R)                                                                              
|               
|4.2             |  | Form of Representatives Warrant(C)                                                                        
|               
|10.3            |  | ITR Sale and Lease Agreement, dated as of January 12, 1993, between Registrant and
the State of Missouri(C)
|               
|10.3.1          |  | ITR Sale and Lease Agreement, dated as of April 19, 1994, between Registrant and the
State of Missouri(P)  
|               
|10.3.2          |  | Amendment No. 1 to ITR Sale and Lease Agreement between Registrant and the State of
Missouri(P)            
|               
|10.3.3          |  | Amendment No. 2 to ITR Sale and Lease Agreement between Registrant and the State of
Missouri(P)            
|               
|10.3.4          |  | Amendment No. 3 to ITR Sale and Lease Agreement between Registrant and the State of
Missouri(P)            
|               
|10.3.5          |  | Amendment No. 4 to ITR Sale and Lease Agreement between Registrant and the State of
Missouri(P)            
|               
|10.3.6          |  | Amendment No. 5 to ITR Sale and Lease Agreement between Registrant and the State of
Missouri(P)            
|               
|10.3.7          |  | Amendment No. 6 to ITR Sale and Lease Agreement between Registrant and the State of
Missouri(P)            
|               
|10.4.1          |  | ITR Sales and Service Agreement dated October 1, 1998 between Registrant and the
Commonwealth Virginia(P)  
|               
|10.4.2          |  | Amendment No. 1 to ITR Sales and Lease Agreement between Registrant and the
Commonwealth of Virginia(P)    
|               
|10.4.3          |  | Amendment No. 2 to ITR Sales and Lease Agreement between Registrant and the
Commonwealth of Virginia(P)    
|               
|10.7            |  | Form of Indemnification Agreement between Registrant and its officers and
directors(C)                     
|               
|10.8            |  | 1993 Stock Option Plan(A)                                                                                  



42



---

|Exhibit Numbers |  | Description of Documents                                                                                                                                                     
|--------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               
|10.8.1          |  | First Amendment to 1993 Stock Option Plan(C)                                                                                                                                 
|               
|10.10           |  | Technology Transfer Agreement, dated as of April 9, 1993, between the Registrant and
certain of its shareholders (confidential treatment requested as to certain portions)(B)
|               
|10.15           |  | 1993 Stock Option Plan(D)                                                                                                                                                    
|               
|10.16           |  | 1994 Stock Option Plan(E)                                                                                                                                                    
|               
|10.16.1         |  | Third Amendment to 1994 Stock Option Plan(R)                                                                                                                                 
|               
|10.17           |  | 1994 Stock Option Plan for Directors(E)                                                                                                                                      
|               
|10.17.1         |  | Fifth Amendment to the 1994 Stock Option Plan for Directors(R)                                                                                                               
|               
|10.17.2         |  | Sixth Amendment to the 1994 Stock Option Plan for Directors(R)                                                                                                               
|               
|10.17.3         |  | Seventh Amendment to the 1994 Stock Option Plan for Directors(S)                                                                                                             
|               
|10.17.4         |  | Eighth Amendment to the 1994 Stock Option Plan for Directors(T)                                                                                                              
|               
|10.21           |  | Employment agreement with Frederick Sandvick(G)                                                                                                                              
|               
|10.21.1         |  | Amendment to Employment Agreement with Frederick Sandvick(S)                                                                                                                 
|               
|10.24           |  | Loan and Security Agreement between Registrant and Coast Business
Credit(J)                                                                                                  
|               
|10.25           |  | Termination of Agreement between Registrant and Vanguard Strategies,
Inc.(K)                                                                                                 
|               
|10.26           |  | Amendment Nos. 1, 2 and 3 to Loan and Security Agreement between Registrant and Coast
Business Credit(L)                                                                     
|               
|10.26.1         |  | Amendment No. 4 to Loan and Security Agreement between Registrant and Coast Business
Credit dated April 20, 2000(P)                                                          
|               
|10.27           |  | Master Lease Agreement dated March 1, 1995 between the Registrant and Solutioneering,
Inc.(M)                                                                                
|               
|10.27.1         |  | Amendment No. 1 to Master Lease Agreement dated December 24,
1996(M)                                                                                                         
|               
|10.27.2         |  | Amendment No. 2 to Master Lease Agreement dated December 24,
1997(M)                                                                                                         
|               
|10.28           |  | Distributor Agreement between the Registrant and Editec, dated December 30,
1997(M)                                                                                          
|               
|10.28.1         |  | Agreement for the French Lottery Contract dated February 24, 1998 between the
Registrant and Editec(M)                                                                       
|               
|10.28.2         |  | English Translation of Contract with La Francaise Des Jeux, dated January 27,
1999(P)                                                                                        
|               
|10.30           |  | Service Agreement for the Illinois Lottery between the Registrant and IGOR, dated
July 15, 1994(M)                                                                           
|               
|10.30.1         |  | ITR Sale and Lease Agreement between the Registrant and Illinois State Lottery, dated
July 1, 1994(M)                                                                        
|               
|10.31           |  | Agreement and Plan of Merger, dated as of January 7, 2000 with GTECH
Corp.(N)                                                                                                
|               
|10.31.1         |  | Voting Agreement, dated as of January 7, 2000 between Robert L. Burr, John Olbrich,
Brian J. Roberts, Frederick Sandvick and Vanguard Strategies, Inc. and GTECH Corp.(N)    
|               
|10.31.2         |  | Option Agreement, dated as of January 7, 2000 with GTECH
Corp.(N)                                                                                                            
|               
|10.31.3         |  | Note Amendment and mutual release agreement with Gtech Corporation dated August 23,
2000(O)                                                                                  
|               
|10.32           |  | Stipulated judgment against US Telecard, Inc., dated November 12,
1999(P)                                                                                                    
|               
|10.33           |  | Asset Purchase Agreement, dated as of February 23, 2001 between Global ePoint and
Interlott Technologies, Inc.(Q)                                                            
|               
|10.34           |  | 10% Convertible Note Due 2/15/02 between Registrant and Galt Asset Management
LLC(R)                                                                                         



43



---

|Exhibit Numbers |  | Description of Documents                                                                            
|--------------- |  | ----------------------------------------------------------------------------------------------------
|               
|10.35           |  | International VoIP Agreement between Registrant and Fusion Telecommunications
International, Inc.(S)
|               
|99.1            |  | Certification of Chief Executive Officer(T)                                                         

---

|Codes |  | for documents included by reference to previous filings
|----- |  | -------------------------------------------------------

|(A) |  | Incorporated by reference to Registrants Registration Statement on Form S-2 dated April 23, 1993 (Registration No. 33-61442).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

|(B) |  | Incorporated by reference to Registrants Amendment No. 1 to the Registration Statement on Form S-2 filed on June 1, 1993.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

|(C) |  | Incorporated by reference to Registrants Amendment No. 2 to the Registration Statement on Form S-2 filed on June 21, 1993.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(D) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1993.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(E) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1994.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(F) |  | Incorporated by reference to Registrants Quarterly Report on Form 10-QSB for the quarter ended June 30, 1995.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(G) |  | Incorporated by reference to Registrants Quarterly Report on Form 10-QSB for the quarter ended March 31, 1996.
|--- |  | ---------------------------------------------------------------------------------------------------------------

|(H) |  | Incorporated by reference to Registrants Quarterly Report on Form 10-QSB for the quarter ended Sep. 30, 1996.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(I) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1996.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(J) |  | Incorporated by reference to Registrants Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(K) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1997.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(L) |  | Incorporated by reference to Registrants Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(M) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSBA, as restated on March 31, 2000 for the year ended December 31, 1998.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|(N) |  | Incorporated by reference to SC 13D, filed by GTECH Corp on January 18, 2000.
|--- |  | -----------------------------------------------------------------------------

|(O) |  | Incorporated by reference to Registrants Quarterly Report on Form 10-QSB for the quarter ended September 30, 2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------

|(P) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1999.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(Q) |  | Incorporated by reference to Registrants Form 8-K, dated February 23, 2001.
|--- |  | ----------------------------------------------------------------------------

|(R) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSB for the year ended December 31, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(S) |  | Incorporated by reference to Registrants Annual Report on Form 10-KSB for the year ended December 31, 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(T) |  | Included herein.
|--- |  | ----------------



(b)Reports on Form 8-K



N/A





44



---

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this amendment to annual report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |  |  | GLOBAL EPOINT,
INC.
|--------------------- |  |  |  | -------------------
|                     
|Dated: March 26, 2003 |  |  |  | By:                
|                      |  |  |  |                    



Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and dates indicated.



|Dated: March 26, 2003 |  |  |  | By: |  | /s/    KEITH A.
CANNON      
|--------------------- |  |  |  | --- |  | ----------------------------
|                      |  |  |  |     |  |                             
|                     
|Dated: March 26, 2003 |  |  |  | By: |  | /s/    DARRELL L.
RICHARDSON
|                      |  |  |  |     |  |                             
|                     
|Dated: March 26, 2003 |  |  |  | By: |  | /s/    OWEN LEE
BARNETT     
|                      |  |  |  |     |  |                             



45



---



CERTIFICATIONS



I,
Frederick Sandvick, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-KSB of Global ePoint, Inc.;
| | -- |  | -------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known
to us by others within that entity, particularly during the period in which this annual report is being prepared;
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Dated: March 26, 2003 |  |  |  |  |  | /s/    FREDERICK
SANDVICK
|--------------------- |  |  |  |  |  | -------------------------
|                      |  |  |  |  |  |                          





46