U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
Mark One

[ X ]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the Fiscal Year ended September 30, 1997

                                       OR

[   ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                         Commission File Number 0-25148

                        GLOBAL PAYMENT TECHNOLOGIES, INC.
                 (Name of small business issuer in its charter)

              Delaware                                          11-2974651
    (State or other jurisdiction                             (I.R.S. Employer
 of incorporation or organization)                          Identification No.)

        20 East Sunrise Highway, Suite 201, Valley Stream, New York 11581
               (Address of principal executive office) (Zip Code)

Issuer's telephone number  516-256-1000

Securities registered under Section 12(b) of the Exchange Act:

                                      None

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter  period that the  registrant  was required to file such reports) and (2)
has been subject to such filing  requirements for the past 90 days.
 Yes [X] No [ ]

<PAGE>




     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information  statements  incorporated  by  reference  in Part  III of this  Form
10-KSB. [ ]

     For the  fiscal  year  ended  September  30,  1997,  the net  sales  of the
registrant were $23.9 million.

     The aggregate  market value of the Common Stock of the  registrant  held by
nonaffiliates  of the  registrant,  based on the average bid and asked prices on
December 17, 1997, was approximately $29,150,000.

     As of December 17, 1997,  the  registrant  had a total of 5,506,500  Common
Shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy  Statement for the year ended  September 30, 1997 are
incorporated by reference into Part III.

Transitional Small Business Disclosure format (Check one): Yes [ ] No [X]






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<PAGE>

                                                       
                                     PART I

Item 1.  Description of Business

General

Global Payment Technologies, Inc. (the "Company") was originally incorporated in
New York in 1988 under the name Coin Bill  Validator,  Inc. In March  1997,  the
Company's  shareholders  approved  a change of the  Company's  name and state of
incorporation  from New York to  Delaware,  effected  through  the merger of the
Company into the Company's wholly-owned subsidiary, Global Payment Technologies,
Inc., a Delaware corporation.

The Company designs and manufactures currency validation systems including paper
currency validators and related paper currency stackers,  and sells its products
in the United States and numerous international markets.  Validators receive and
authenticate  paper  currencies  in a variety of automated  machines,  including
gaming  machines and beverage and vending  machines,  which  dispense  products,
services,  coinage  and  other  currencies.  Note  stackers  are sold  with most
validators  and are  designed to store  validated  paper  currency  and, in some
cases,  record and store  information on contents,  usually in secure  removable
cassettes.  Although the Company knows of no  commercially  available  validator
that is counterfeit-currency-proof,  the Company's validators and stackers offer
significant  protection against tampering and counterfeit currencies and provide
tamper-evident  storage of validated  currency.  The  Company's  validators  are
adaptable  to  a  wide  variety  of  OEM   (original   equipment   manufacturer)
applications  and have been  engineered  into the  design of most  major  gaming
machines sold worldwide. The Company's products offer a highly competitive level
of performance and are designed to provide ease of maintenance and repair.

In August 1996, the Company acquired a 50%  non-controlling  interest in a South
African  affiliate,  Global  Payment  Technologies  South Africa Pty.  Ltd. This
entity is  responsible  for sales and service of the  Company's  products in the
South African region, on an exclusive basis.

In January  1997,  the  Company  acquired a 50%  non-controlling  interest  in a
China-based affiliate, Hangzhou CBV Plastics Corp. Ltd. This entity manufactures
plastic  and  metal  components,  some of which are used by the  Company  in its
production.

In August  1997,  the  Company  acquired a 50%  non-controlling  interest  in an
Australian  affiliate,  Global  Payment  Technologies  Australia  Pty. Ltd. This
entity is  responsible  for sales  and  service  of the  Company's  products  in
Australia and New Zealand, on an exclusive basis.

Background and History

In the 1980s,  a general  trend  developed  with  respect to an  increase in the
incorporation of paper currency  validators in a large number of beverage,  food
and novelty vending machines that offered primarily low-priced items. Subsequent
technological improvements in the sensory capabilities of validators created the
ability to process  high volumes of larger  denomination


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<PAGE>

notes which led to the extensive  use of  validators in casino gaming  machines.
This trend  accelerated  during  the 1990s as a result of overall  growth in the
worldwide gaming industry.

Since  incorporation,  the  Company's  net sales have  grown from  approximately
$35,000 in fiscal 1989 to  approximately  $16.7  million in fiscal 1996,  and to
approximately $23.9 million in fiscal 1997. Prior to January 1993, the Company's
marketing  efforts were directed  primarily  towards  domestic  distribution and
end-users that focused on the replacement and retrofit markets for validators in
amusement and gaming machines.  Commencing in January 1993, the Company began to
focus its marketing  efforts on OEMs of gaming  machines and  automated  vending
machines  that  dispense  beverages,  telephone  cards and  postage  stamps.  In
addition,  since  January  1993,  the Company has  progressively  increased  its
marketing efforts to the international  market for currency  validation systems,
in  particular  targeting  the  international  gaming  industry.  The  Company's
international  sales amounted to  approximately  73 percent of net sales in both
fiscal 1997 and 1996.  Management believes the international market for currency
validation  systems  may grow at a faster  rate than in the United  States  and,
therefore, may represent the Company's best long-term growth opportunity.

Marketing Strategy

In the past, the Company has focused its marketing  efforts on those segments of
the  marketplace  requiring a relatively high degree of security and substantial
custom design work that was often not efficiently  served by larger  competitors
who focused  primarily on the  broader,  higher-volume  market for  standardized
product  configurations.  This "niche"  strategy  allowed the Company to develop
domestic and  international  customers  who were too new or too small to attract
larger  competitors.  During  fiscal  1997,  the Company  began to redefine  and
broaden  its niche  strategy  and was  successful  in  establishing  itself as a
leading provider of validators to the international  gaming market. As a result,
the  Company's  validators  have been  engineered  into the design of most major
OEMs' gaming machines  worldwide.  Therefore,  the difficult first step of being
able to have its  products  offered as an option has been  accomplished.  During
fiscal 1998, the Company's marketing strategy will focus both on the OEMs and on
the  end-users  (operators)  who purchase  machines from the OEMs to help assure
that the Company's validator products will be specified as the product of choice
in new machine orders. In the domestic gaming market,  along with  opportunities
for  sales  to OEMs,  the  Company  will  focus on the  retrofit  market  in key
geographic  regions,  such as Nevada,  where  gaining  market  penetration  will
provide the Company with  improved  visibility  and  credibility  in the overall
domestic gaming marketplace.

In the first quarter of fiscal 1997, the Company announced the creation of a new
division to focus  additional  sales and  marketing  efforts on the beverage and
vending  industries,  where the Company's market presence has been limited.  The
primary focus of this  division,  and the sales  successes  achieved  during the
year, have been and will continue to be in developing the  international  market
for  validator  products in vending  equipment,  particularly  in  emerging  new
markets in the Pacific Rim and Eastern Europe. Management believes this strategy
will assist in providing the Company with increased  visibility and  credibility
in the overall beverage and 


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<PAGE>

vending  industries  such that a base of business can be established  from which
the large and highly competitive domestic marketplace might then be addressed.

The Company's overall sales and marketing  strategy in both the worldwide gaming
and beverage and vending markets is to deliver a high quality product  supported
by a local  sales  and  service  organization  in order  to make  the  Company's
products the market standard for currency validation  products.  The Company has
successfully pursued this strategy in Australia with its largest customer,  with
whom the Company has an exclusive  supply  agreement,  and in the South  African
gaming  market  where  the  Company's  products  are  accepted  as the  industry
standard.  Also toward this end, during fiscal 1996 and fiscal 1997, the Company
established  50%-owned  joint  ventures which provide local sales and service in
both Australia and South Africa and strengthened its distributor relationship in
Italy.

The continued  success of the Company may be dependent  upon the use of paper or
simulated  paper currency in automated  payment  systems for gaming and beverage
and vending applications.  A substantial diminution of the use of paper currency
as a  means  of  payment  through  a  return  to  extensive  use of  high-value,
metal-based  coinage or the  widespread  adoption of electronic  funds  transfer
systems based on credit,  debit or "smart-cards"  could materially and adversely
affect the Company's  future growth until and unless the Company  develops other
products  that are not solely  dependent on the use of paper or simulated  paper
currency.  The Company believes that aspects of its technology and manufacturing
expertise - for example, the technology  applicable to electro-optical  scanning
and certain of its patented  technologies  and  proprietary  algorithms,  may be
applicable to products and systems for conducting  transactions using other than
paper  currency.  The Company is currently  investigating  and will  continue to
investigate such opportunities and endeavor to develop new product  applications
where  markets for such products may exist.  However,  no assurance can be given
that the  Company  will be able to  successfully  develop  and  market  such new
products and systems.

Products

Since  inception,   the  Company  has  endeavored,   through  its  research  and
development  and  manufacturing  efforts,  to  provide  products  that  meet the
specific  performance  requirements  of its customers.  These  requirements  are
continually evolving as the markets for currency validators continue to grow and
as  technological  advances are  incorporated  into the  products'  design.  The
Company spent  approximately  $245,000 and $61,000 during fiscal 1997 and fiscal
1996,  respectively,  on research and  development.  The Company's  research and
development  consists  primarily of efforts to expand its product lines into new
applications  and markets.  The  Company's new product  development  efforts are
focused on the design of its next  generation of validator  products,  which the
Company  anticipates will be commercially  available sometime in the second half
of calendar 1998.  Included among the new generation of validators,  the Company
plans to  introduce  new product  models  designed  specifically  to address the
requirements of the highly competitive beverage and vending  marketplace.  These
products,  along with new  products for the  international  gaming  market,  are
intended to allow the


                                       5
<PAGE>

Company to increase its overall market penetration and share in the domestic and
international marketplace.

During  fiscal 1997,  the  Company's  principal  products  included  three basic
validator  models,  a wide range of  comprehensive  currency  databases and note
stacker  configurations.  Throughout fiscal 1997, the Company's planned shift in
demand  towards  its  Generation  II  product  line  continued,  and such  sales
accounted  for  approximately  58 percent of unit sales for the year then ended.
This shift is expected to continue  during fiscal 1998. The Company  believes it
is adequately  reserved for inventory  obsolescence for the anticipated shift in
demand towards its Generation II products.

The  Model  125  ("M-125")  is the  Company's  first  generation  multi-country,
multi-denominational  validator model specifically designed for the beverage and
vending  industries where its  space-saving  upstack design makes it popular for
use in machines where space is at a premium. The M-125's note stackers are fully
detachable  and  available  with  capacities  of 150, 300 and 600 notes.  During
fiscal 1997,  M-125 sales were  particularly  strong in vending  applications in
Italy,  helping to grow the Company's presence and credibility in that important
European market.

The  Model  IVO  ("M-IVO")  is the  Company's  first  generation  multi-country,
multi-denominational validator designed to fit machines where space is available
either to the rear or downward.  The M-IVO is available  with locking  removable
cassette bill  stackers in 500,  1,000 and 2,000 bill  capacities  and is United
States Postal Service,  Department of Gaming  Enforcement (New Jersey,  USA) and
Gaming Laboratories, Inc. approved.

The Company's Generation II product line features several technological advances
designed  specifically to meet the exacting requirements of the gaming industry.
During  fiscal  1997,  the  Generation  II line was  extended  and  includes the
Company's  "IDS,"  "IDUS,"  "IBS,"  and  "IBSi,"  validators.  The IBSi has been
positioned as a replacement for the Company's first  generation M-IVO validator.
Generation II products have been approved by Gaming  Laboratories,  Inc. as well
as by a number of U.S. and international test labs.

Generation II validators are offered in a wide variety of  configurations  which
can provide solutions for most worldwide gaming markets as well as many beverage
and vending  markets.  Generation II validators can be configured for down-stack
applications which allow the note stacker, a security removable cassette,  to be
reached  through a separate front entrance in the gaming  machine.  Rear stacker
configurations  are also  available.  The front  section  of all  Generation  II
validator  units  can be  opened  easily  to allow  for  maintenance,  repair or
clearance  of the  currency  pathway  without  violating  the  integrity  of the
associated security stacker.  Generation II validators offer currency acceptance
of notes up to 3.34  inches  (85 mm) in width  and have  enhanced  features  for
gaming and high security applications. These features include a multi-level high
security  validation  process  with  patent  pending  side-looking  sensors,  an
animated  bill  runway  with  "smart   visuals"  for  customer   attraction  and
diagnostics,  a user-selectable currency denomination acceptance and an optional
bar-code  reader for tickets and coupons.  The  Generation II line also offers a
"soft drop analyzer"  ("SDA")  option.  The


                                       6
<PAGE>

patented  SDA feature  allows the note  stacker  cassette to maintain  and track
specific information such as currency or coupons in the cassette by quantity and
denomination;  the specific  machine or game that the cassette was removed from;
the acceptance rate of the validator;  and time-in/time-out of the cassette from
the gaming machine.  This  information can be easily  downloaded,  via a docking
station  provided  by the  Company,  to a  personal  computer  allowing  instant
feedback/tracking for the machine operator.

Product Performance and Warranties

The  Company's  validator and note stacker  products are generally  covered by a
one-year warranty against defects in materials or workmanship, which the Company
believes is standard for the  industry.  The Company will repair or replace,  at
its factory,  any units which  require  warranty  service.  The Company does not
warrant that its validators will reject all counterfeit  currencies and believes
that    there    is   no    commercially    available    validator    that    is
counterfeit-currency-proof  or  warranteed  as such.  To support its  increasing
international  market presence,  the Company,  during fiscal 1997,  expanded its
warranty and non-warranty  support coverage to provide in-country  capability in
key worldwide markets (e.g. Australia and South Africa). In these countries, the
local sales and service  joint venture  partners  provide all  warranteed  labor
while the Company's primary product support is in the form of warranty parts.

Marketing and Sales

An "in-house"  sales force  consisting of sales  representatives,  sales/product
technicians  and customer  service  support  personnel  conducts  the  Company's
primary  sales and  marketing  efforts in both the  domestic  and  international
markets.  During the latter  part of fiscal  1996 and during  fiscal  1997,  the
Company  established  50%-owned joint ventures providing local sales and service
in the key markets of South Africa and Australia and a  Company-owned  sales and
service office was opened in the important Las Vegas, Nevada market. The overall
sales and service  network  provides  effective  international  coverage for the
Company's  products  and  customers  and  is  an  indication  of  the  Company's
commitment to providing superior service worldwide.

During  fiscal  1997,  the Company  expanded the  internal  sales and  marketing
structure  to  include a  "Technical  Services  Group"  to  address  new  market
opportunities.  The Company also established a new, dedicated  "Customer Service
Group" to serve as the focal point of all post-sale customer  inquiries.  During
fiscal  1998,  the  Company  anticipates  further  expansion  of the  sales  and
marketing structure to support additional sales opportunities worldwide.

Customer Concentration

During fiscal 1997, the Company's  largest customer  accounted for approximately
54  percent  of net  sales.  Net  sales to the  gaming  industry  accounted  for
approximately  79 percent  of the  Company's  revenues,  with the  remaining  21
percent  primarily  from  product  applications  in  the  beverage  and  vending
industries.  The Company  anticipates  reducing  its  dependence  on its largest
customer and the gaming industry,  by expanding its customer base, when its next

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<PAGE>

generation of validation  products is introduced  and has had an  opportunity to
penetrate the market.

Manufacturing

Since 1995, the Company's  operations have been conducted from a leased facility
of 40,000  square feet housing  manufacturing  and  administrative  functions in
Hauppauge,  New  York.  During  fiscal  1997,  due to  the  need  for  increased
production  space to meet  ongoing and  anticipated  future  sales  growth,  the
Company leased an additional  4,400 square feet of space located adjacent to the
existing Hauppauge facility.

The Company's  manufacturing  operations  consist  primarily of  mechanical  and
electro-optical   assembly  and  the  provision  of  wiring  harnesses   between
components  and between the  validator and the OEM machine in which the finished
product  is to be used.  The  Company  routinely  tests all  components  and has
extensive "burn-in" procedures for both the electronic  components and the final
assembled  product.  Direct  control over  fabrication  and testing  permits the
Company to shorten its  production  cycle and protect  patented and  proprietary
technology.  During fiscal 1997, the Company significantly  improved its overall
manufacturing  productivity  as measured by a  production  capacity  increase of
approximately 60 percent achieved without adding a production shift.  Management
believes additional productivity  improvements can be realized and will continue
to focus the  Company's  efforts  on  achieving  production  efficiencies  while
maintaining high quality standards for its products and the work environment for
its associates.

The Company  depends on a limited  number of  suppliers  for various  stamped or
formed housings, gears, cogs and wheels and electronic assemblies or components,
including certain  microprocessor chips. The Company believes that concentrating
its purchases from its existing  suppliers  provides,  in certain cases,  better
prices, better quality and consistency and more reliable deliveries. The Company
maintains on-going communications with its suppliers to prevent interruptions in
supply and, to date,  generally has been able to obtain  adequate  supplies in a
timely manner.  The Company has entered into volume blanket purchase  agreements
with selected suppliers to guard against shortages of unique components, thereby
limiting the Company's exposure to business interruptions.  Furthermore, many of
the electronic  components used by the Company,  including its  microprocessors,
are widely used in many applications and are available from a number of sources.
However,  the short  wavelength  light source which forms a critical part of the
Company's optical scanning device is now commercially available from only a very
limited  number of suppliers.  The Company  believes that if such supply were to
become unavailable, its units could be redesigned to use other light sources and
still remain  competitive in the marketplace.  However,  any interruption in the
supply  of  key  components  which  cannot  be  quickly  remedied  could  have a
materially adverse effect on the Company's results of operations.



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<PAGE>


Competition

The  market  for  the  Company's  products  is very  competitive.  A  number  of
competitors have significantly greater financial, technical, sales and marketing
resources than the Company.  A number of competitors  offer products that target
the same markets as do the Company's products.  In the domestic market,  certain
competitors are divisions or affiliates of  manufacturers  of vending  machines.
For  example,  Royal  Vendors,  Inc. is an  affiliate  of Coin  Acceptors,  Inc.
("Coinco") and Rowe Validator ("Rowe") is a division of Rowe International, Inc.
Accordingly,  such  validator  manufacturers  enjoy a  competitive  advantage in
providing for the significant  validator  requirements of their affiliates.  For
validators  sold for use in  beverage,  food,  snack and  lower-priced  goods or
amusement  vending,  the market is  dominated by Coinco,  with Mars  Electronics
International  ("MEI"),  Ardac,  Inc.  ("Ardac") and Rowe also being significant
competitors.  The largest supplier of validators used in gaming machines for the
domestic  market is Japan Cash  Machines  Co.,  Ltd.  ("JCM").  The  Company has
focused its marketing efforts on the higher-priced domestic validator market and
competes on the basis of quality, durability and performance while maintaining a
reasonable level of protection against tampering and counterfeit currencies,  as
well as a competitive price point.

In the international  markets,  the Company competes for gaming machine business
with JCM, Ardac,  Cashcode  Company,  Inc., MEI and Diversified  Systems,  Inc.,
while for product and service vending machines,  the Company competes with these
competitors as well as Coinco,  Sanyo Electric Company  (primarily in the Middle
East), Conlux USA Corporation,  Coegis, Innovative Technology,  Ltd. and various
smaller local  manufacturers.  The Company historically has been more willing to
address  smaller  markets than its larger  competitors  and expects to encounter
increased competition as the markets addressed by its products continue to grow.
The Company believes that performance,  quality and protection against tampering
and counterfeit currency are relatively more important and price relatively less
important, as competitive factors in the international marketplace.

Intellectual Property

The Company relies on certain proprietary  know-how and trade secrets to protect
its technology.  Important  components of this  proprietary  information are the
Company's library of distinguishing  characteristics of the currencies which its
validators  scan and validate and its  proprietary  algorithms.  The Company has
entered into non-disclosure and secrecy agreements with all of its key employees
having access to this technology.

In addition,  the Company  holds six U.S.  patents as follows:  "Paper  Currency
Acceptor  and Method of Handling  Paper  Currency  for Vending  Machines and the
Like,"  granted  December 5, 1989;  "Bill  Accumulating  and  Stacking  Device,"
granted  June 21,  1994;  "Method of Insuring  Alignment of Currency in Currency
Validators,"  granted  June 18, 1996;  design for "Escrow Box for Coin  Operated
Machines,"  granted  April 22, 1986;  "Anti-fraud  Currency  Acceptor,"  granted
November 9, 1993;  and "Soft Count  Tracking  System,"  granted May 5, 1997. The
first three patents  cover  technology  used in the  Company's  first and second
generation  validator  product lines and the remaining  patents cover technology
used in certain special models. The 


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<PAGE>

Company has also applied for four additional U.S. patents, the most important of
which covers the use of side looking  sensors as an  anti-fraud  feature and the
use of short  wave-length  light in a  validator  to discern the color and other
characteristics of bills being scanned.

In  addition  to its U.S.  patents  and  patents  pending,  the Company has also
applied  for patent  protection  for its soft count  tracking  system in a large
number of international markets. If issued, and if corresponding foreign patents
are  obtained,  the Company  believes  these  patents  could  provide  important
protection  for  certain   technological   advantages  its  validators  have  in
international  markets.  However,  the  Company  believes  that it  will  not be
materially and adversely affected if these patents are not issued. No assurances
can be given  that any  patent  applications  will  result  in the  issuance  of
additional  patents.  As of this  date,  the  Company  has  received  no foreign
patents.

Although the Company has not  received any claims that its products  infringe on
the  proprietary  rights of third parties,  there can be no assurance that third
parties will not assert infringement claims against the Company in the future or
that any such  assertion  may not  require  the  Company to enter  into  royalty
arrangements or result in protracted or costly litigation.

Government Regulation

As a  supplier  of paper  currency  validators  to  customers  subject to gaming
regulations and postal  regulations,  the Company is indirectly  subject to such
regulations  that  are  reflected  in  customer   purchase  orders  or  customer
specifications.  The Company  believes that it is in full  compliance  with such
regulations. Any failure to comply with such regulations,  however, could have a
materially adverse effect on the results of operations of the Company.

Employees

On December 15, 1997, the Company had 184 employees,  including 6 executives; 12
sales  and  customer   service   representatives;   30  engineers  and  software
developers;  28 materials,  quality control and quality assurance  personnel;  6
administrative personnel; 8 clerical personnel; and 94 assembly/factory workers.
The Company believes its relationship with its employees is good.

Special Note Regarding Forward-Looking Statements

A number of statements  contained in this report are forward-looking  statements
within the meaning of the Private Securities  Litigation Reform Act of 1995 that
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those expressed or implied in the applicable  statements.  These
risks  and  uncertainties  include,  but  are  not  limited  to:  the  Company's
dependence   on  the  paper   currency   validator   market  and  its  potential
vulnerability  to  technological  obsolescence;  dependence on a limited base of
customers  for a  significant  portion of sales;  the risks that its current and
future products may contain errors or defects that would be difficult and costly
to detect and  correct;  potential  difficulties  in  manufacturing  operations;
potential shortages of key parts and/or raw materials; potential difficulties in
managing growth; 


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<PAGE>

dependence on key personnel;  the possible  impact of  competitive  products and
pricing;  possible risks of product inventory  obsolescence;  uncertainties with
respect to the Company's business strategy;  general economic  conditions in the
domestic and international  markets;  and other risks described in the Company's
Securities and Exchange Commission filings.

Item 2.  Description of Property

The Company leases  approximately  44,400 square feet housing  manufacturing and
administrative  functions in Hauppauge,  New York, for a term expiring March 31,
2000, at an annual base rental of $240,000, increasing annually to approximately
$300,000 in the final year of the term.  The Company  believes  this facility is
adequate for its  manufacturing  needs for the foreseeable  future.  The Company
leases  approximately  6,600 square feet in Valley Stream,  New York, for a term
expiring  February  28,  2002,  at an annual base rental of $150,000  increasing
annually to approximately  $170,000 in the final year of the term. This facility
houses the executive, accounting and certain sales functions of the Company. The
Company also leases  approximately 2,300 square feet in Las Vegas, Nevada, for a
term  expiring  April 30, 2000,  at an annual base rental of $19,700  increasing
annually to  approximately  $21,700 in the final year of the term. This facility
houses certain sales and service functions of the Company.

Item 3.  Legal Proceedings

The Company is not a party to any material legal proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders

Not applicable.


                                       11
<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

a)       Market Information

The Company's  Common Stock is listed and trades on the NASDAQ  National  Market
System under the symbol GPTX.  The  following  table sets forth,  on a per share
basis,  the high and low sale  prices for the  Company's  Common  Stock for each
quarter of fiscal 1997 and fiscal 1996.

                                                          Common Stock
                                                      ---------------------
         Quarter Ended                                High*            Low*
         -------------                                -----            ----
         December 31, 1995                           4 7/16           3
         March 31, 1996                              3 5/8            2 3/4
         June 30, 1996                               6 3/4            2 3/4
         September 30, 1996                          5 7/8            3 11/16
         December 31, 1996                           5 3/4            4  7/16
         March 31, 1997                              6 5/16           4 3/4
         June 30, 1997                               9 1/2            4 5/16
         September 30, 1997                          12 1/4           7 1/2

         *All prices give  retroactive  effect to a two-for-one  stock split, in
         the form of a stock dividend, distributed on September 4, 1997.

b)   Holders

The approximate number of beneficial holders of the Company's Common Stock as of
December 16, 1997, was 860.

c)   Dividends

The holders of Common  Stock are  entitled to receive  such  dividends as may be
declared by the Company's Board of Directors.  The Company has never in the past
declared  or paid any cash  dividends  and does not expect to declare or pay any
cash dividends in the foreseeable future.


                                       12
<PAGE>


Item 6.  Management's Discussion and Analysis of Financial    
         Condition  and Results of Operations

Results of Operations

Fiscal year ended September 30, 1997 compared with September 30, 1996

For the fiscal year ended  September  30,  1997,  the  Company's  net income was
$1,475,000,  or $0.25 per share, as compared with $272,000,  or $0.05 per share,
for the fiscal year ended  September  30,  1996.  Fiscal 1996 net income and net
income per share figures reflect a pre-tax inventory  write-down of $1.1 million
related  to  certain  early  generation  products,  the  future  sales  of which
management  believes have been and will be adversely  impacted by sales of newly
released products. Excluding the effect of the inventory write-down, fiscal 1997
net income  increased  63% compared  with pro forma net income of  $906,000,  or
$0.16 per share, in fiscal 1996. (Net income per share figures give  retroactive
effect in all  periods  to a  two-for-one  stock  split,  in the form of a stock
dividend,  distributed  on  September  4,  1997.) At the end of fiscal  1996 and
during fiscal 1997, the Company purchased 50% non-controlling interests in local
sales and service  organizations in South Africa and Australia and in a plastics
manufacturing  firm in China.  Included in the results of operations  for fiscal
1997  are  the  Company's  share  of the  profits  and  losses  of  these  three
unconsolidated affiliates.

Net sales for fiscal 1997  increased by 43% to $23.868  million as compared with
$16.693 million in fiscal 1996. The sales growth in fiscal 1997 is attributed to
increased  demand for the Company's  bill  validator  products  primarily in the
international  gaming  industry and reflects a substantial  increase in sales to
the Company's  largest  customer which accounted for 54% and 37% of net sales in
fiscal  1997 and  fiscal  1996,  respectively.  While  the  Company  anticipates
increasing  sales to its largest  customer,  management  is working to develop a
broader  customer  base,  which will serve to reduce its  dependence  on any one
customer. Net sales to international customers accounted for 73% of net sales in
both fiscal 1997 and fiscal 1996.

Gross profit increased to $8.986 million,  or 37.6% of net sales, in fiscal 1997
as  compared  with  $5.257  million,  or 31.5% of net  sales,  in the prior year
period.  The prior year's  results were  significantly  impacted by an inventory
writedown of approximately $1.1 million. Excluding this writedown, the Company's
gross profit as a percent of sales was 38.3%. This decrease in gross profit as a
percent of sales is due to  increased  product  costs,  manufacturing  labor and
benefit  costs,  as well as a reduced gross profit on sales to a new customer in
the beverage and vending division, which was substantially offset by operational
efficiencies.

Operating  expenses  in fiscal  1997  increased  by 33.5% to $6.378  million  as
compared with $4.777 million in fiscal 1996.  This increase was  principally due
to increased  staffing and related  payroll costs necessary to support the sales
growth in fiscal 1997 as well as to support  the  Company's  growth  strategy in
fiscal 1998 and beyond. In addition,  the Company incurred commission expense in
the fourth  quarter of fiscal 1997 of  approximately  $300,000 as compared  with
none in fiscal 1996. These commissions were primarily in the form of payments to
the Company's  new  Australian  affiliate,  which is  responsible  for sales and
service


                                       13
<PAGE>

in Australia and New Zealand,  on an exclusive basis. As a percent of sales, the
Company has reduced its  operating  expenses to 26.7% in fiscal 1997 as compared
with 28.6% in fiscal 1996, as the infrastructure  recently put in place has been
able to efficiently support the Company's growth.

Fiscal year ended September 30, 1996 compared with September 30, 1995

For the fiscal year ended  September  30,  1996,  the  Company's  net income was
$272,000,  or $0.05 per share,  as compared  with $1.551  million for the fiscal
year ended  September 30, 1995.  On a pro forma basis,  assuming a C Corporation
income tax provision for the entire year, the Company earned $1.116 million,  or
$0.23 per share, in fiscal 1995. (Net income per share figures give  retroactive
effect in all  periods  to a  two-for-one  stock  split,  in the form of a stock
dividend,  distributed on September 4, 1997.) This  year-to-year  decline in net
income is primarily  attributable to an inventory write-down taken in the second
quarter of fiscal 1996 in the approximate  amount of $1.1 million,  on a pre-tax
basis. This write-down relates to certain early generation products,  the future
sales of which management  believes will be adversely impacted by sales of newly
released  products.  The decline  also  reflects  increased  operating  expenses
associated with higher  facility costs and investments in additional  personnel.
Excluding  the impact of the  inventory  write-down,  net income would have been
$906,000, or $0.16 per share, in fiscal 1996.

Net sales increased by 18.2%,  or $2.568  million,  to $16.693 million in fiscal
1996  as  compared  with  $14.125  million  in  fiscal  1995.  The  increase  is
attributable  to  increased  sales of the  Company's  new product  line of paper
currency  validators  and  related  paper  currency  stackers  to  domestic  and
international  OEM  customers,  primarily in the gaming  industry.  Net sales to
international  customers increased  substantially in fiscal 1996 and represented
73% of net sales as compared with 37% of net sales in fiscal 1995.

Gross profit  decreased  by 6.6% to $5.257  million,  or 31.5% of net sales,  in
fiscal 1996 as compared with $5.629  million,  or 39.9% of net sales,  in fiscal
1995.  The decrease was  primarily due to the  inventory  write-down  previously
described as well as the result of increased  overhead costs associated with the
Company's new facility and increased direct and indirect labor costs.  Excluding
the effect of the inventory  write-down,  the  Company's  gross profit in fiscal
1996 would have been $6.389 million, or 38.3% of net sales.

Operating  expenses  increased  by 31.9% to $4.777  million  in  fiscal  1996 as
compared with $3.622  million in fiscal 1995.  As a percent of sales,  operating
expenses  increased  to 28.6% in fiscal  1996 as  compared  with 25.6% in fiscal
1995.  This  increase  was  principally  due to  increased  staffing and related
payroll  costs  to  support  the  expansion  of  engineering   and  new  product
development efforts,  increased benefit costs due to the introduction of certain
employee  benefits and additional bad debt expense recorded due to the financial
condition of certain  customers with which the Company has since changed selling
terms to include letters of credit and other forms of security.


                                       14
<PAGE>

Liquidity and Capital Resources

The  Company's  capital  requirements  consist  primarily of those  necessary to
continue  to  expand  and   improve   manufacturing   and  product   development
capabilities, sales and marketing operations,  investments in affiliates and, to
a lesser  extent,  interest  payments  should  the  Company  decide  to  utilize
borrowings  to fund future  growth.  The  Company  believes  that its  available
resources,  including its unused credit  facility with The Chase  Manhattan Bank
(the "Bank"),  should be sufficient to meet its  obligations  as they become due
and permit  continuation  of its planned  expansion  throughout  fiscal 1998 and
beyond.

In September  1996,  the Company  entered into an agreement  with the Bank for a
secured line of credit in the aggregate  amount of $5,000,000 with the intent of
borrowings to be made when necessary to meet  short-term  working capital needs.
Outstanding borrowings will bear interest at rates to be determined based on the
amount of the borrowings. The rate will range between the Bank's prime rate plus
one-quarter of one percent per annum and, for borrowings  greater than $500,000,
the option of the Reserve Adjusted London  Interbank  Offering Rate (LIBOR) plus
275 basis  points per annum.  The line of credit is secured by a first  priority
perfected  security  interest in the assets of the Company.  As of September 30,
1997,  and during the year then ended,  no amounts were  outstanding  under this
line of  credit.  This line of credit  will  expire on March 31,  1998,  and the
Company has begun discussions with the Bank and anticipates an extension of this
credit facility. At September 30, 1997, the Company had cash of $1.913 million.

Net cash provided by operating  activities  amounted to $380,000 in fiscal 1997.
Net income of the Company,  adjusted for noncash  items,  was $1.889  million in
fiscal 1997.  This amount was  augmented  by an increase in accounts  payable of
$1.495  million and an increase in accrued  expenses  and other  liabilities  of
$679,000,  and was  offset  by an  increase  in  accounts  receivable  of $2.012
million,  an increase in  inventory  of $1.365  million and a decrease in income
taxes payable of $488,000. Net cash provided by operating activities amounted to
$1.580 million in fiscal 1996.  Net income of the Company,  adjusted for noncash
items, was $2.075 million in fiscal 1996. This amount was offset primarily by an
increase  in deferred  income  taxes and income  taxes  payable of  $284,000,  a
decrease in accounts  payable and accrued expenses of $98,000 and an increase in
inventory of $147,000, excluding the effect of the inventory writedown.

Net cash used in investing  activities amounted to $1.217 million in fiscal 1997
as compared with $664,000 in fiscal 1996.  The Company funded its joint ventures
with  approximately  $426,000 during fiscal 1997,  predominantly  in the form of
loans.  The  remaining  investing  activities of $791,000 in fiscal 1997 and all
investing  activities  in fiscal  1996 were for the  purchase  of  property  and
equipment.

Net cash  provided by financing  activities  amounted to $23,000 in fiscal 1997,
which represented proceeds from the exercise of stock options.  There was no net
cash provided by financing activities during fiscal 1996.


                                       15
<PAGE>

Fiscal 1997 saw  continued  moderation  in the level of  inflation.  In order to
offset the resulting rise in the costs of  operations,  the Company is currently
attempting  to reduce  product  manufacturing  costs thereby  increasing  profit
margins.  In addition,  the Company is attempting  to improve its  operations to
gain  efficiencies  and reduce  operating costs. The Company expects to continue
this approach to cope with future cost changes.

Year 2000

In July  1996,  the  Emerging  Issues  Task  Force of the  Financial  Accounting
Standards  Board (FASB) reached a consensus on Issue 96-14,  "Accounting for the
Costs  Associated  with  Modifying  Computer  Software for the Year 2000," which
requires that costs  associated  with modifying  computer  software for the Year
2000 be expensed as  incurred.  The Company  believes,  based upon its  internal
reviews  and other  factors,  that  future  external  and  internal  costs to be
incurred relating to the modification of internal-use software for the Year 2000
will not have a  material  effect on the  Company's  results  of  operations  or
financial position.

Item 7.  Financial Statements

The  financial  statements  of the  Company  required by this item are set forth
beginning on page F-1.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

None


                                       16
<PAGE>


                                    PART III

Items 9  through  12  inclusive  are  omitted  per  General  Instruction  E. The
information  required by Part III shall be  incorporated  by reference  from the
Registrant's  definitive  proxy  statement  pursuant to  Regulation  14A for the
fiscal year ended September 30, 1997.

Item 13. Exhibits, List and Reports on Form 8K

(a)  Exhibits

Exhibit No.

3.1               Certificate of Incorporation (6)
3.2               Certificate of Merger (6)
3.3               By-Laws (6)
10.1              Lease dated September 21, 1994 between the Company and 
                  Heartland Associates (1) 
10.2              Amendment  dated July 31,  1997 to lease  dated  September 21,
                  1994 between  the Company and Heartland Associates (6)
10.3              Employment Agreement dated January 31, 1993 between the 
                  Company and William H. Wood (1) 
10.4              1994 Stock Option Plan (5)
10.5              1996 Stock Option Plan (5)
10.6              Employment Agreement dated December 1, 1994 between the 
                  Company and Robert W. Nader (2) 
10.7              Credit Agreements dated September 9, 1996 and September 10,
                  1996 between the Company and The Chase Manhattan Bank (4)
10.8              Security Agreement dated September 9, 1996 between the Company
                  and The Chase Manhattan Bank (4)
10.9              Agreement between the Company and certain shareholders 
                  establishing lines of credit (2)
10.10             Employment Agreement dated September 30, 1997 between the 
                  Company and Stephen Katz (6)
21                List of Subsidiaries (6)
23                Consent of Independent Public Accountants (6)
27                Financial Data Schedule (6)
--------------------------
(1)               Incorporated by reference to the company's  initial filings of
                  the Registration Statement on Form SB-2 (File #33-86352-NY).
(2)               Incorporated  by reference to Amendment No. 2 to the Company's
                  Registration Statement on Form SB-2 (File #33-86352-NY).
(3)               Incorporated  by reference to the Company's  Current Report on
                  Form 8-K dated June 7, 1996.
(4)               Incorporated  by reference to the  Company's  Annual Report on
                  Form 10-KSB dated September 30, 1996.
(5)               Incorporated  by  reference  to  the  Company's   Registration
                  Statement on Form S-8 (File #333-30829).
(6)               Filed herewith.


                                       17
<PAGE>


(b)  Reports on Form 8-K

No Reports on Form 8-K have been filed during the last  quarter  covered by this
Report.


                                       18
<PAGE>


                                   SIGNATURES

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

                                            Global Payment Technologies, Inc.

                                            By:    s/Stephen Katz
                                                   -----------------------------
                                                   Stephen Katz
                                                   Chairman of the Board and
                                                   Chief Executive Officer
Date:  December 29, 1997

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
         Signature                     Date                       Title
         ---------                     ----                       -----
<S>                             <C>                       <C>
s/Stephen Katz                  December 29, 1997         Chairman of the Board
---------------------------                               and Chief Executive Officer
Stephen Katz                                              

s/William H. (Bill) Wood        December 29, 1997         President and Director
---------------------------
William H. (Bill) Wood

s/Edward Seidenberg             December 29, 1997         Director and
---------------------------                               Chief Operating Officer
Edward Seidenberg                                         

s/Jay Goldberg                  December 29, 1997         Director
---------------------------
Jay Goldberg

s/Richard Gerzof                December 29, 1997         Director
---------------------------
Richard Gerzof

s/Henry Ellis                   December 29, 1997         Director
---------------------------
Henry Ellis

s/Martin Kern                   December 29, 1997         Director
---------------------------
Martin Kern

s/Thomas McNeill                December 29, 1997         Chief Financial Officer and
---------------------------                               Principal Accounting Officer
Thomas McNeill             
</TABLE>



                                       19
<PAGE>

                        GLOBAL PAYMENT TECHNOLOGIES, INC.
                      (formerly Coin Bill Validator, Inc.)

                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                      <C>
Report of Independent Public Accountants                                                 F - 1

Balance Sheets as of September 30, 1997 and 1996                                         F - 2

Statements of Income for the years ended September 30, 1997 and 1996                     F - 3

Statements of Shareholders' Equity for the years ended September 30, 1997 and 1996       F - 4

Statements of Cash Flows for the years ended September 30, 1997 and 1996                 F - 5

Notes to Financial Statements                                                            F - 6
</TABLE>






<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To Global Payment Technologies, Inc.
(formerly Coin Bill Validator, Inc.):


We have audited the accompanying balance sheets of Global Payment  Technologies,
Inc.(formerly  Coin  Bill  Validator,  Inc.)  (a  Delaware  corporation)  as  of
September 30, 1997 and 1996, and the related statements of income, shareholders'
equity and cash flows for the years then ended.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Global Payment  Technologies,
Inc. as of September 30, 1997 and 1996,  and the results of its  operations  and
its cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.




                                                   ARTHUR ANDERSEN LLP

                                                   /s/ ARTHUR ANDERSEN LLP

Melville, New York
November 24, 1997



                                      F-1
<PAGE>


                        GLOBAL PAYMENT TECHNOLOGIES, INC.
                      (formerly Coin Bill Validator, Inc.)

                                 BALANCE SHEETS

                        AS OF SEPTEMBER 30, 1997 AND 1996

                          (in 000s, except share data)

<TABLE>
<CAPTION>
                                           ASSETS                                    1997         1996
                                                                                    -------      -------
<S>                                                                                 <C>          <C>    
CURRENT ASSETS:
   Cash and cash equivalents                                                        $ 1,913      $ 2,727
   Accounts receivable, less allowance for doubtful accounts of $225 and
      $268, respectively                                                              4,840        2,789
   Inventory, less allowance for obsolescence of $742 and $1,069, respectively        5,120        3,794
   Prepaid expenses                                                                     110           83
   Deferred income tax benefit                                                          421          570
                                                                                    -------      -------
                  Total current assets                                               12,404        9,963

PROPERTY AND EQUIPMENT, net                                                           1,335          887

INVESTMENT IN UNCONSOLIDATED AFFILIATES                                                 355         --

OTHER ASSETS                                                                             60           53
                                                                                    -------      -------

                  Total assets                                                      $14,154      $10,903
                                                                                    =======      =======

                            LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                                 $ 2,302      $   807
   Accrued expenses and other current liabilities                                     1,230          551
   Income taxes payable                                                                 109          597
                                                                                    -------      -------
                  Total current liabilities                                           3,641        1,955
                                                                                    -------      -------

DEFERRED INCOME TAXES                                                                    96           29
                                                                                    -------      -------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Common stock, 20,000,000 shares authorized; $.01 par value, 5,506,200 and
     5,500,000 shares issued and outstanding, respectively                               55           55
   Additional paid-in capital                                                         7,974        7,951
   Retained earnings                                                                  2,388          913
                                                                                    -------      -------
                  Total shareholders' equity                                         10,417        8,919
                                                                                    -------      -------

                  Total liabilities and shareholders' equity                        $14,154      $10,903
                                                                                    =======      =======
</TABLE>

      The accompanying notes are an integral part of these balance sheets.


                                      F-2
<PAGE>


                                             GLOBAL PAYMENT TECHNOLOGIES, INC.
                                           (formerly Coin Bill Validator, Inc.)

                              STATEMENTS OF INCOME

                 FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996

                   (in 000s, except share and per share data)



                                                       1997              1996
                                                   -----------       -----------

NET SALES                                          $    23,868       $    16,693

COST OF SALES                                           14,882            11,436
                                                   -----------       -----------

                  Gross profit                           8,986             5,257

OPERATING EXPENSES                                       6,378             4,777
                                                   -----------       -----------

INCOME FROM OPERATIONS                                   2,608               480

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES                (71)             --

INTEREST INCOME, net                                        51                 6
                                                   -----------       -----------

INCOME BEFORE PROVISION FOR INCOME TAXES                 2,588               486

PROVISION FOR INCOME TAXES                               1,113               214
                                                   -----------       -----------

NET INCOME                                         $     1,475       $       272
                                                   ===========       ===========

NET INCOME PER SHARE                               $       .25       $       .05
                                                   ===========       ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           5,794,215         5,500,000
                                                   ===========       ===========




        The accompanying notes are an integral part of these statements.


                                      F-3
<PAGE>

                        GLOBAL PAYMENT TECHNOLOGIES, INC.
                      (formerly Coin Bill Validator, Inc.)

                       STATEMENTS OF SHAREHOLDERS' EQUITY

                 FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996

                          (in 000s, except share data)


<TABLE>
<CAPTION>
                                              Common Stock            Additional
                                        -----------------------        Paid-in       Retained
                                          Shares         Amount        Capital        Earnings        Total
                                        ---------      ---------      ---------      ---------      ---------
<S>                                     <C>            <C>            <C>            <C>            <C>      
BALANCE AT SEPTEMBER 30, 1995           5,500,000      $      55      $   7,951      $     641      $   8,647

  Net income                                 --             --             --              272            272
                                        ---------      ---------      ---------      ---------      ---------

BALANCE AT SEPTEMBER 30, 1996           5,500,000             55          7,951            913          8,919

  Exercise of common stock options          6,200           --               23           --               23

  Net income                                 --             --             --            1,475          1,475
                                        ---------      ---------      ---------      ---------      ---------

BALANCE AT SEPTEMBER 30, 1997           5,506,200      $      55      $   7,974      $   2,388      $  10,417
                                        =========      =========      =========      =========      =========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                      F-4
<PAGE>


                        GLOBAL PAYMENT TECHNOLOGIES, INC.
                      (formerly Coin Bill Validator, Inc.)

                            STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
                                    (in 000s)
<TABLE>
<CAPTION>
                                                                                            1997         1996
                                                                                          -------       -------
<S>                                                                                       <C>           <C>    
OPERATING ACTIVITIES:
   Net income                                                                             $ 1,475       $   272
                                                                                          -------       -------
   Adjustments to reconcile net income to net cash provided by operating activities:
     Equity in loss of unconsolidated affiliates                                               71          --
     Depreciation and amortization                                                            343           237
     (Recovery of) provision for losses on accounts receivable                                (39)          434
     Provision for inventory obsolescence                                                      39         1,132
     Changes in operating assets and liabilities:
       (Increase) decrease in accounts receivable                                          (2,012)          100
       Increase in inventory                                                               (1,365)         (147)
       Increase in prepaid expenses                                                           (27)          (72)
       Decrease (increase) in deferred income taxes                                           216          (422)
       (Increase) decrease in other assets                                                     (7)            6
       Increase (decrease) in accounts payable                                              1,495          (322)
       Increase in accrued expenses and other current liabilities                             679           224
       (Decrease) increase in income taxes payable                                           (488)          138
                                                                                          -------       -------
TOTAL ADJUSTMENTS                                                                          (1,095)        1,308
                                                                                          -------       -------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                     380         1,580
                                                                                          -------       -------

INVESTING ACTIVITIES:
   Purchases of property and equipment, net of proceeds from disposals                       (791)         (664)
   Investments in unconsolidated affiliates                                                  (426)         --
                                                                                          -------       -------
NET CASH USED IN INVESTING ACTIVITIES                                                      (1,217)         (664)
                                                                                          -------       -------

FINANCING ACTIVITIES:
   Proceeds from notes payable to bank                                                       --             500
   Repayment of notes payable to bank                                                        --            (500)
   Issuance of stock upon exercise of stock options                                            23          --
                                                                                          -------       -------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                                      23          --
                                                                                          -------       -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                         (814)          916

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                              2,727         1,811
                                                                                          -------       -------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                                  $ 1,913       $ 2,727
                                                                                          =======       =======

CASH PAID DURING THE YEAR FOR:
   Interest                                                                               $  --         $    15
                                                                                          =======       =======
   Income taxes                                                                           $ 1,400       $   497
                                                                                          =======       =======
</TABLE>


        The accompanying notes are an integral part of these statements.


                                      F-5
<PAGE>


                        GLOBAL PAYMENT TECHNOLOGIES, INC.
                      (formerly Coin Bill Validator, Inc.)
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1997 AND 1996


1.   ORGANIZATION AND NATURE OF BUSINESS:

Global Payment  Technologies,  Inc.  (formerly Coin Bill  Validator,  Inc.) (the
"Company"),  was  established in 1988.  The Company  designs,  manufactures  and
markets paper currency validating  equipment used in vending and gaming machines
in the United States and other countries.

Substantially  all of the Company's  revenues are derived from the sale of paper
currency validators and related bill stackers, specifically the Company's M-IVO,
IDS, IUS and M-125 validator  models.  Fluctuations in the Company's  results of
operations  may be caused by various  factors,  including  the timing and market
acceptance of new products  introduced by the Company and its  competitors,  the
size and timing of product  orders and  shipments,  the relative mix of products
sold by the Company,  specific economic conditions in the gaming industry,  from
which the Company  derives a substantial  portion of its  revenues,  and general
economic  conditions.  Additionally,  the Company depends on a single or limited
number of  suppliers  for  certain  housings,  parts and  components,  including
certain  microprocessor  chips and short wave-length light sources.  The Company
has entered into volume  blanket  purchase  agreements  with  suppliers to guard
against unique component shortages,  limiting the Company's exposure to business
interruptions.

Significant Customers

The Company's  largest  customer  represented 54% and 37% of net sales in fiscal
year 1997 and 1996, respectively. There were no other customers that represented
10% or more of net sales in either fiscal year.

The  accounts  receivable  of this  customer as of  September  30, 1997 and 1996
represented 62% and 2% of total accounts receivable, respectively.

Net sales to  international  customers were 73% of net sales in both fiscal 1997
and 1996.

2.   SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

Cash  equivalents  are stated at cost which  approximated  market value.  Highly
liquid  investments with maturities of three months or less at the purchase date
are  considered  cash  equivalents  for  purposes  of  the  balance  sheets  and
statements of cash flows.

Inventory

Inventory  is stated at the lower of cost  (first-in,  first-out  method) or net
realizable value. The Company analyzes the net realizable value of its inventory
on an ongoing  basis.  In determining  whether the net  realizable  value of its
inventory is impaired,  the Company  considers  historical sales performance and
expected  future  product  sales,   market   conditions  in  which  the  Company
distributes  its  products,  changes in product  strategy and the  potential for
introduction of new technology or products by the Company and its competitors.


                                      F-6
<PAGE>


Property and Equipment and Depreciation

Property and equipment are stated at cost.  Depreciation is calculated using the
straight-line  method over the estimated useful lives of the assets (Note 4) or,
in the case of leasehold improvements,  the life of the related lease, whichever
is shorter.  Maintenance  and repair  costs are charged to expense as  incurred.
Expenditures which significantly increase value or extend useful asset lives are
capitalized.

Long-Lived Assets

Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of"
("SFAS  No.  121"),  requires  that  long-lived  assets,   certain  identifiable
intangibles and goodwill related to those assets to be held and used be reviewed
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying amount of those assets may not be recoverable. The adoption of SFAS No.
121 in fiscal 1997 did not have a material  effect on the  Company's  results of
operations or financial position.

Investments in Unconsolidated Affiliates

In August 1996, the Company acquired a 50%  non-controlling  interest in a South
African  affiliate,  in which  funding  commenced  in June 1997.  This entity is
responsible for sales and service of the Company's products in the South African
region,  on an exclusive basis.  During fiscal 1997, the Company loaned $178,000
to this  entity,  none of which was repaid prior to  September  30,  1997.  This
amount  is  included  as  part of the  Company's  investment  in  unconsolidated
affiliates  in the  accompanying  balance  sheet as of September  30, 1997.  The
Company's  results of operations for fiscal 1997 include the Company's equity in
the loss of this  affiliate  in the amount of $78,000,  net of any  intercompany
profits.

In January  1997,  the  Company  acquired a 50%  non-controlling  interest  in a
China-based  affiliate.  This entity manufactures  plastic and metal components,
some of which  are used by the  Company  in its  production.  In  addition,  the
Company is  obligated  to loan up to an  aggregate  of $299,000 to this  entity,
which will bear  interest  at the rate of 1.5%  above the prime rate  prevailing
from time to time at the Company's  bank,  per annum.  During  fiscal 1997,  the
Company  loaned  $219,000  to this  entity,  none of which was  repaid  prior to
September 30, 1997. This amount is included as part of the Company's  investment
in unconsolidated  affiliates in the accompanying  balance sheet as of September
30,  1997.  The  Company's  results of  operations  for fiscal 1997  include the
Company's equity in the loss of this affiliate in the amount of $42,000,  net of
any intercompany profits.

In August  1997,  the  Company  acquired a 50%  non-controlling  interest  in an
Australian  affiliate.  This entity is responsible  for sales and service of the
Company's  products in Australia  and New Zealand,  on an exclusive  basis.  The
Company's  results of operations for fiscal 1997 include the Company's equity in
the income of this affiliate in the amount of $49,000,  net of any  intercompany
profits.

Research and Development

Research and development costs incurred by the Company are included in operating
expenses in the year  incurred.  Such costs  amounted to $245,000 and $61,000 in
the years ended September 30, 1997 and 1996, respectively.

Costs  aggregating  $350,000  related to certain  research and  development  for
product  development were funded by a customer through fiscal 1995. The terms of
the Company's  agreement with its customer  provided for repayment of such costs
as sales of the Company's  products were made to this customer.  All units under
the contract  were sold and billed  accordingly  by  September  30, 1996 and all
related accounts receivable have been collected.


                                      F-7
<PAGE>


Warranty Policy

The Company  warrants  that its  products  are free from defects in material and
workmanship  for a period of one year  from the date of  initial  purchase.  The
warranty  does not cover any losses or damage that occur as a result of improper
installation,  misuse or neglect and repair or modification by anyone other than
the Company.  Warranty costs within one year of purchase have  historically been
immaterial to the Company's  results of  operations.  Warranty  costs beyond one
year from the date of initial purchase are charged to the Company's customers.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes"  (Note 7). SFAS No. 109  requires  an asset and  liability  approach  for
financial  reporting for income taxes.  Under SFAS No. 109,  deferred  taxes are
provided for  temporary  differences  between the carrying  values of assets and
liabilities  for  financial  reporting  and tax purposes at the enacted rates at
which these differences are expected to reverse.

Net Income Per Share

Net income per share for  fiscal  1997 and 1996 was  computed  by  dividing  the
Company's  net income by the weighted  average  number of shares of common stock
and common stock equivalents  outstanding  during the year. The impact of common
stock equivalents (Note 6) was not included in the calculation of net income per
share  for  fiscal  1996,  as the  effect  of their  inclusion  would  have been
anti-dilutive.  Fully  diluted  net  income per share for both  fiscal  1997 and
fiscal 1996 has not been presented  because the dilution from primary net income
per share was less than 3 percent in both years.

Stock-Based Compensation

In fiscal 1997, the Company adopted the provisions of SFAS No. 123,  "Accounting
for  Stock-Based  Compensation",  by  continuing  to  apply  the  provisions  of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees", while providing the required pro forma disclosures as if the fair
value method had been applied (Note 6).

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Reclassifications

Certain prior year financial statement amounts have been reclassified to conform
to the current year's presentation.


                                      F-8
<PAGE>

New Accounting Pronouncement

In March 1997,  the Financial  Accounting  Standards  Board issued SFAS No. 128,
"Earnings Per Share".  This  statement  establishes  standards for computing and
presenting  earnings per share ("EPS"),  replacing the presentation of currently
required Primary EPS with a presentation of Basic EPS. For entities with complex
capital  structures,  the statement requires the dual presentation of both Basic
EPS and Diluted EPS on the face of the statement of  operations.  Under this new
standard, Basic EPS is computed based on weighted average shares outstanding and
excludes any potential  dilution;  Diluted EPS reflects  potential dilution from
the  exercise  or  conversion  of  securities  into  common  stock or from other
contracts to issue common stock and is similar to the currently  required  fully
diluted  EPS.  SFAS No. 128 is effective  for  financial  statements  issued for
periods ending after December 15, 1997,  including interim periods,  and earlier
application  is not  permitted.  When  adopted,  the Company will be required to
restate  its EPS data for all prior  periods  presented.  The  Company  does not
expect the impact of the adoption of this statement to be material to previously
reported EPS amounts.

3.   INVENTORY:

The following is a summary of the composition of inventory:

                                                              September 30,
                                                       -------------------------
                                                        1997               1996
                                                       ------             ------
                                                               (in 000s)
      Raw materials                                    $1,894             $2,257
      Work-in-process                                   2,631              1,278
      Finished goods                                      595                259
                                                       ------             ------
                                                       $5,120             $3,794
                                                       ======             ======

4.   PROPERTY AND EQUIPMENT, NET:

Major classifications of property and equipment are as follows:

                                                               September 30,
                                                          ---------------------
                                        Useful Lives        1997         1996
                                        ------------      -------       -------
                                                                (in 000s)
      Leasehold improvements            5 years           $   155       $   129
      Furniture and fixtures            3 - 7 years           310           131
      Machinery and equipment           5 - 10 years          738           453
      Computer software                 5 years               459           370
      Computer hardware                 3 years               443           231
                                                          -------       -------
                                                            2,105         1,314
      Less: Accumulated depreciation
        and amortization                                     (770)         (427)
                                                          -------       -------
                                                          $ 1,335       $   887
                                                          =======       =======



                                      F-9
<PAGE>


5.   NOTES PAYABLE TO BANK:

Line of Credit

In September  1996,  the Company  entered  into an  agreement  with a bank for a
secured line of credit in the aggregate  amount of $5,000,000 with the intent of
borrowings to be made when necessary to meet  short-term  working capital needs.
Outstanding borrowings will bear interest at rates to be determined based on the
amount of the borrowings. The rate will range between the bank's prime rate plus
one-quarter of one percent per annum and, for borrowings  greater than $500,000,
the option of the LIBOR plus 275 basis  points per annum.  The line of credit is
secured by a first  priority  perfected  security  interest in the assets of the
Company.  As of September 30, 1997, no amounts were outstanding  under this line
of credit.  This line of credit will expire on March 31,  1998,  and the Company
has begun discussions with the bank to extend this credit facility.

Bank Loan

In March 1996, the Company  borrowed  $500,000 from a bank under a business loan
agreement.  The  loan  was  to  be  repaid  in  thirty-six  consecutive  monthly
installments of principal and interest  commencing  April 1, 1996 and thereafter
through  March 1, 1999.  The note bore  interest  at an annual rate of eight and
one-half percent.  The proceeds of the note were used to satisfy working capital
requirements for an interim period.  The note was repaid in its entirety in July
1996.

6. SHAREHOLDERS' EQUITY:

Stock Split

In July 1997,  the Company's  Board of Directors  approved a  two-for-one  stock
split, in the form of a stock dividend,  to the Company's common shareholders of
record at August 18, 1997.  The new shares were issued to such  shareholders  of
record  on  September  4,  1997.  Par  value  remained  at $.01 per  share.  All
information contained in the financial statements and related footnotes has been
retroactively restated to give effect to this stock split.

Stock Option Plans

In October  1994,  the  Company  adopted  the 1994 Stock  Option Plan (the "1994
Plan")  covering up to 300,000 of the Company's  common shares pursuant to which
officers,  directors  and key  employees of the Company and  consultants  to the
Company are eligible to receive incentive and/or non-qualified stock options. In
March 1996, the Board of Directors adopted the 1996 Stock Option Plan (the "1996
Plan"),  subject to shareholder approval,  which was subsequently  obtained. The
purpose and  provisions  of the 1996 Plan are  essentially  the same as the 1994
Plan. The 1996 Plan originally  covered 400,000 of the Company's  common shares.
The  total  shares  available  for grant  under the 1996 Plan were  subsequently
increased to 900,000, as resolved by the Board of Directors, in September 1996.

Both the 1994 Plan,  which expires on October 17, 2004, and the 1996 Plan, which
expires on March 18, 2006, will be administered  by the  Compensation  and Stock
Option Committee of the Board of Directors. The selection of participants, grant
of options, determination of price and other conditions relating to the exercise
of options will be determined by the  Compensation and Stock Option Committee of
the Board of Directors.



                                      F-10
<PAGE>

Incentive  stock  options  granted  under  both  the 1994  and  1996  Plans  are
exercisable for a period of up to 10 years from the date of grant at an exercise
price which is not less than the fair market  value of the common  shares on the
date of the grant,  except that the term of an incentive  stock  option  granted
under each of the plans to a shareholder owning more than 10% of the outstanding
common  shares may not exceed five years and its exercise  price may not be less
than  110% of the fair  market  value of the  common  shares  on the date of the
grant.

During fiscal 1996,  100,000  incentive stock options and 100,000  non-qualified
options were granted to the Chairman and Chief Executive  Officer of the Company
under the 1994 Plan.  Pursuant to an employment  agreement  dated  September 30,
1997,  these options  became  immediately  exercisable as of September 30, 1997.
During fiscal 1996, a total of 413,500 options were granted under the 1996 Plan,
including  200,000  non-qualified  options to the Chairman  and Chief  Executive
Officer which also became immediately  exercisable as of September 30, 1997, and
57,500 non-qualified options to various employees,  consultants and non-employee
directors of the Company.  With the  exception  of 22,000  options  which became
exercisable in March 1997, these  non-qualified  options will become exercisable
over  three or five year  periods  in equal  amounts  commencing  with the first
anniversary from the date of grant. The incentive stock options issued under the
1996 Plan all have five year vesting periods.

During fiscal 1997, a total of 60,000 incentive stock options were granted under
the 1996 Plan. These options will become  exercisable over a four year period in
equal  amounts  commencing  with the first  anniversary  from the date of grant,
except  for 24,000  options,  which will vest on the same basis over a five year
period.

The Company  accounts for option awards granted to employees and directors under
APB  Opinion No. 25,  under  which  compensation  cost is  recognized  for stock
options  granted at an exercise  price less than the market value of the options
on the grant date. Had  compensation  cost for all stock option grants in fiscal
years 1997 and 1996 been determined  consistent with SFAS No. 123, the Company's
net income and earnings per share would have been:

                                                    1997               1996
                                                    ----               ----
                                                (in 000s, except per share data)

       Net income:             As Reported         $1,475              $272
                               Pro Forma              958               160

       Earnings per share:     As Reported           $.25              $.05
                               Pro Forma              .17               .03

The  effects  of  applying  SFAS No.  123 in this pro forma  disclosure  are not
indicative  of future  amounts.  SFAS No.  123 does not  apply to option  awards
granted  prior to fiscal year 1996,  and  additional  awards in future years are
anticipated.



                                      F-11
<PAGE>

Transactions involving the Stock Option Plans are summarized as follows:

<TABLE>
<CAPTION>
                                              For the Fiscal Years Ended September 30,
                                           ------------------------------------------------
                                                     1997                      1996
                                           -----------------------   ----------------------
                                                          Weighted                 Weighted
                                                          Average                  Average
                                                          Exercise                 Exercise
                                             Shares        Price       Shares       Price
                                             ------        -----       ------       -----
<S>                                          <C>           <C>          <C>         <C>  
Outstanding at beginning of year             693,500       $3.64        80,000      $5.50
   Granted                                    60,000        8.93       613,500       3.40
   Exercised                                  (6,200)       3.78          --         --
   Forfeited                                 (20,900)       3.78          --         --
                                            --------                  --------

Outstanding at end of year                   726,400        4.08       693,500       3.64
                                            ========                  ========
Exercisable at end of year                   501,400        3.45        32,000       5.50
                                            ========                  ========
Weighted average fair value of options
   granted (a)                              $   5.08         N/A      $   1.92        N/A
                                            ========                  ========
</TABLE>

(a)  The fair value of each stock  option  grant is  estimated as of the date of
     grant  using the  Black-Scholes  option  pricing  model with the  following
     weighted average assumptions:

                                              1997              1996
                                              ----              ----

         Risk-free interest rates             6.19%             6.31%
         Expected lives                      5 years           5 years
         Expected volatility                  58.0%             58.0%
         Expected dividend yields              --                 --

The following table summarizes information about stock options outstanding:

<TABLE>
<CAPTION>
                                                         Options Outstanding                          Options Exercisable
                                        ----------------------------------------------------      ---------------------------
                                           Number             Weighted              Weighted         Number          Weighted
                                         Outstanding          Average               Average        Exercisable       Average
                                        at September          Remaining             Exercise      at September      Exercise
        Range of Exercise Prices          30, 1997         Contractual Life          Price          30, 1997          Price
        ------------------------          --------         ----------------          -----          --------          -----
<S>                                         <C>                   <C>               <C>                <C>             <C>   
         $ 3.00     to    $   4.50          587,400               8.78              $ 3.39             453,400         $ 3.24
         $ 5.00     to    $   5.50          103,000               7.77                5.39              48,000           5.50
                  $ 11.56                    36,000               9.99               11.56                --            11.56
                                           --------                                                    -------
         $ 3.00     to    $  11.56          726,400               8.51                4.08             501,400           3.45
                                           ========                                                    =======
</TABLE>

At September 30, 1997,  there were 20,000  shares  available for grant under the
1994 Plan and 447,400 shares available for grant under the 1996 Plan.

Underwriters' Warrants

In connection  with the  Company's  initial  public  offering of common stock in
February 1995, the Company granted warrants to purchase 150,000 shares of common
stock at $6.60  per  share to the  underwriters  of that  public  offering.  The
exercise  price of $6.60 per share  represented in excess of 110% of the initial
public  offering  price.  As of September 30, 1997,  all of these  warrants were
exercisable and none were exercised.


                                      F-12
<PAGE>

7.     INCOME TAXES:

The provision for income taxes is comprised of the following:

                                                        For the Fiscal Years
                                                         Ended September 30,
                                                    ----------------------------
                                                     1997                1996
                                                    -------             -------
                                                             (in 000s)
     Current:
        Federal                                     $   670             $   558
        State and local                                 223                 197
                                                    -------             -------
                                                        893                 755
                                                    -------             -------
     Deferred:
        Federal                                         153                (400)
        State and local                                  67                (141)
                                                    -------             -------
                                                        220                (541)
                                                    -------             -------
                   Total                            $ 1,113             $   214
                                                    =======             =======

Significant components of deferred tax assets and liabilities are as follows:

                                                            As of September 30,
                                                           --------------------
                                                           1997           1996
                                                           -----          -----
                                                                 (in 000s)
      Non-current deferred tax liability:
         Depreciation                                      $ (96)         $ (29)
                                                           -----          -----

      Current deferred tax assets:
         Accounts receivable                                 101            111
         Inventory                                           320            438
         Accrued liabilities                                --               21
                                                           -----          -----
                                                             421            570
                                                           -----          -----

      Net deferred tax asset                               $ 325          $ 541
                                                           =====          =====

The Company  believes  that,  based upon its  consistent  history of  profitable
operations,  it is probable  that the net  deferred tax assets will be realized,
primarily from the generation of future taxable income.

Reconciliation  of the  statutory  Federal  income  tax  rate  to the  Company's
effective tax rate is as follows:

                                                         For the Fiscal Years
                                                          Ended September 30,
                                                          -----------------
                                                          1997         1996
                                                          ----         ----

      U.S. Federal statutory rate                         34.0%        34.0%
      State income taxes, net of Federal benefit           7.5          7.6
      All other, net                                       1.5          2.4
                                                          ----         ----

      Effective income tax rate                           43.0%        44.0%
                                                          ====         ====



                                      F-13
<PAGE>

8.     COMMITMENTS AND CONTINGENCIES:

Minimum Lease Commitments

The operations of the Company are conducted in leased premises,  one of which is
leased from an affiliate owned partially by the Company's Chairman.  The Company
also leases various  office  equipment.  At September 30, 1997, the  approximate
minimum  annual  rentals under these  leases,  which expire in fiscal year 2002,
were as follows:
                                     Total         
                                (including related           Related  
       For the Fiscal Year       Party Commitments)     Party Commitments) 
       Ended September 30,                      (in 000s)          
       -------------------     ------------------       ------------------ 
              1998                   $473                   $150
              1999                    483                    150
              2000                    319                    150
              2001                    150                    150
              2002                     62                     62 

Total rent expense for all operating  leases was $388,000 and $278,000 in fiscal
1997 and 1996, respectively,  including $65,000 and none, respectively,  paid to
the affiliate.  The Company's  management believes this lease with the affiliate
is on terms which approximate fair market value.

Employment Agreements

The Company has entered into various  employment  agreements  with four officers
and two other employees of the Company  expiring through the end of fiscal 2000,
with minimum compensation requirements as follows:

                  For the Fiscal Year
                  Ended September 30,                               (in 000s)
                  -------------------                               ---------

                         1998                                          $609
                         1999                                           411
                         2000                                            54

Litigation

There are various  claims,  lawsuits and disputes with third parties against the
Company  incident  to the  operation  of its  business.  It is  the  opinion  of
management  and its  counsel  that  their  ultimate  resolution  will not have a
materially  adverse  effect on the  Company's  financial  position or results of
operations.



                                      F-14