UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
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, 2006

                                       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.
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             (Exact name of registrant as specified in its charter)


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

                   425B Oser Avenue, Hauppauge, New York 11788
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               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 631-231-1177
                                                    ------------

Securities registered pursuant to Section 12(b) of the Act:

                                      None

Securities registered pursuant to Section 12(g) of the Act:

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

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<PAGE>

     Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.   Yes [ ]         No [X]

     Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.     Yes [ ]         No [X]

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K.    [ X ]

     Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelereted filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check One):
Large accelerated filer [ ]  Accelerated filer [ ]  Non-Accelerated filer [X]

     Indicate by check mark whether the registrant is shell company (as defined
in rule 12b-2 of the Act).      Yes [ ]         No [X]

     The aggregate market value of the Common Stock of the registrant held
by non-affiliates of the registrant, based on the average bid and asked prices
on March 31, 2006, was approximately $11,650,882.

     As of December 31, 2006, the registrant had a total of 6,218,201 shares
of Common Stock outstanding.

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                                     PART I

Item 1.         Business
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General

Global  Payment  Technologies,  Inc. (the  "Company") is a Delaware  corporation
established  in 1988. We design and  manufacture  currency  validation  systems,
including  paper currency  validators and related paper currency  stackers,  and
sell our  products  in the United  States and  numerous  international  markets.
Validators  receive and authenticate  paper currencies in a variety of automated
machines,  including gaming and gaming related  equipment,  beverage and vending
machines and retail  equipment  that 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 we know
of no commercially available validator that is  counterfeit-currency-proof,  our
validators  and stackers  offer  significant  protection  against  tampering and
counterfeit currencies and provide tamper-evident storage of validated currency.
Our  validators   are  adaptable  to  a  wide  variety  of  original   equipment
manufacturer  ("OEM")  applications  and have been engineered into the design of
most major gaming and numerous beverage and vending machines sold worldwide. Our
products offer a highly  competitive  level of  performance  and are designed to
provide ease of maintenance and repair.

Until the fourth quarter of fiscal 2006 we had a 50% non-controlling interest in
an  Australian  affiliate,  Global  Payment  Technologies  Australia  Pty.  Ltd.
("GPTA").  This entity is  responsible  for sales and  service of the  Company's
products in  Australia  and New Zealand on an exclusive  basis.  On September 2,
2006, we sold our entire interest for a total of  approximately  $1,791,000,  of
which  $1,511,000  was  received in cash at closing and  $280,000  was placed in
escrow which will be released on the one year  anniversary  of the  transaction.
The deferred cash payment is collateralized  by an irrevocable  letter of credit
issued by The  Australian and New Zealand  Banking Group Limited.  The purchaser
was ACN 121 187 068 Pty Limited,  a corporation  organized under the laws of New
South  Wales,  Australia  and is related to Exfair Pty Limited,  the  registered
holder of the  remaining  50% of the issued and  outstanding  shares of GPTA. In
addition we entered into a 5 year exclusive distributor agreement with GPTA. The
distributor  agreement  provides  GPTA  the  exclusive  distribution  rights  in
Australia, Asia, New Zealand, and the Pacific Rim as well as exclusive rights to
distribute Aristocrat  worldwide.  GPTA will be responsible for providing sales,
technical  support,  installation,  service  and  repair  functions  as  well as
maintaining sufficient inventory stock to provide for the territories.

In June 2002, the Company and two other shareholders  formed eCash Holdings Pty.
Ltd. ("eCash"),  an Australian based company.  This entity was formed to market,
distribute,  service and support  Automated Teller Machines across Australia and
New  Zealand.  We owned 1,050 shares  which  represented  a 35% interest in this
entity.  On August 25, 2006,  we sold four hundred and fifty (450) shares to ACN
121 187 068 Pty Limited,  a  corporation  organized  under the laws of New South
Wales  Australia  for a total  purchase  price of $123,138 and six hundred (600)
shares to ACN 121 187 157 Pty Limited, a corporation organized under the laws of

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New South Wales  Australia for a total purchase price of $162,723.  The purchase
price for each sale was based on our equity in the respective  business units as
of April 30, 2006.

We own 100% of Global Payment Technologies (Europe) Limited ("GPT-Europe"). This
entity is based in the United Kingdom and is  responsible  for sales and service
of the Company's products in Europe.

In April 1999, we acquired a 25% equity interest in Abacus Financial  Management
Systems,  Ltd.  ("Abacus-UK"),   a  UK-based  software  company.  Abacus-UK  has
developed a cash management system, of which our validators are a key component,
primarily  intended to serve the retail  market.  In February 2005, we exchanged
our 25% equity interest for a 12.5% ownership interest in Evolve Corporation PLC
("Evolve-UK").  The  exchange  of  ownership  did  not  require  us to  make  an
additional  investment.  Evolve-UK  owns 100% of Abacus-UK and Evolve 100, which
provides  integrated  and  stand-alone  cash  management  systems  to the retail
industry for coin currency handling. In addition, the Company and a principal of
Evolve-UK had formed Abacus Financial Management, Inc. USA ("Abacus-USA"), which
is 80%  owned  by us and has  non-exclusive  rights  to  distribute  Evolve-UK's
product in the USA. To date, Abacus-USA has not had material operations.

On November 1, 1999, Global Payment Technology  Holdings  (Proprietary)  Limited
("GPTHL"), our South African affiliate, formed International Payment Systems Pty
Ltd.  ("IPS")  and  assigned  to IPS its  rights  to all of  GPTHL's  non-gaming
activities,  primarily  the  distribution  of Ingenico,  De La Rue and Scan Coin
products.  We had a 30% interest in IPS.  GPTHL held the exclusive  distribution
rights to our products in the South African region.  On January 18, 2001,  GPTHL
merged its operations with Vukani Gaming Corporation  ("Vukani") (formerly South
African  Video Gaming  Corporation  (Pty) Ltd.),  a wholly owned  subsidiary  of
Hosken Consolidated  Investments Ltd. ("HCI").  By virtue of the agreement,  our
ownership of GPTHL was reduced from 23.5% to approximately 5%. In March 2002, we
exercised  our right to acquire  shares from an existing  shareholder,  HCI, for
$979,000,  which  increased  our  ownership to 24.2%.  In April 2003,  we sold a
significant  portion of our  investments  in our South  African  affiliates.  We
received  approximately $1.9 million in cash for the sale of our entire interest
in IPS and a major  portion  of our  interest  in  GPTHL.  As a  result  of this
transaction,  which did not result in a gain or loss, our ownership  interest in
GPTHL was reduced from 24.2% to 5%. GPTHL's  Vukani  division was one of the two
licensed operators in the South African route market province of Mpumalanga. The
cash received was a return of all of our advances and  investments  resulting in
our recovering the carrying value of such advances and  investments.  On January
15, 2004,  we sold our  remaining  5% ownership  interest in GPTHL for a gain of
$78,000.  GPTHL is currently a non-exclusive  distributor of our products in the
South African region.

In fiscal 2004,  we  registered  a branch in Moscow,  Russia  ("GPT-Russia")  to
provide local service for our products.

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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. During the
1990s,  subsequent  technological  improvements  in the sensory  capabilities of
validators  created the ability to process high  volumes of larger  denomination
notes,  which led to the extensive  use of  validators in many new  applications
including casino gaming machines, lottery ticket dispensing devices and postage,
transportation,  parking and high-value vending machines. This trend accelerated
during  the  1990s as a  result  of the  realization  that  currency  validators
positively  impacted  sales  revenues  and the overall  growth in the  worldwide
gaming and beverage and vending industries.

Our net sales grew from approximately  $35,000 in fiscal 1989 (our first year of
operations)  to our high of $43.9 million in fiscal 1999. In fiscal 2000,  sales
declined  to $22.5  million as a result of a slowdown  in the  worldwide  gaming
market and delays in key projects,  which resulted in increased inventory at our
affiliates.  During  fiscal  2000  we  significantly  reduced  inventory  at our
affiliates,  matching demand in those regions,  which resulted in the resumption
of production and shipments in August 2000.

In fiscal 2001,  sales  increased 43% to $32.2 million  primarily as a result of
increased  demand for our products in both Australia and Russia,  as well as the
addition of several new customers during the year.

In fiscal 2002,  sales  decreased  14% to $27.7 million as a result of customers
lowering their inventory and taking  advantage of our shorter  lead-times on our
Argus gaming  validator,  certain product issues which have since been resolved,
as well as softer worldwide economic conditions.

In fiscal 2003,  sales  decreased  5.9% to $26.1  million as a result of reduced
sales in Eastern  Europe which were hindered by initial  product  issues,  which
have since been  resolved,  offset in part by sales of our new  vending  product
which  commenced  in January  2003.  With the  launching of our new beverage and
vending  product in fiscal  2003,  we achieved an increase in our  beverage  and
vending  sales to $5.7  million as  compared  to $2.2  million  in fiscal  2002.
Beverage and vending products  represented  21.7% of our sales in fiscal 2003 as
compared with 8% in fiscal 2002.

In fiscal 2004, sales decreased 6.5% to $24.4 million primarily due to $4.3
million in lower sales of our gaming products to our Australian affiliate
offset, in part, by a $1.7 million increase in sales of our Aurora product to
both the vending and gaming markets and a $637,000 increase in sales to the
South African gaming market. Gaming sales for fiscal 2004 were $19.304 million,
or 79.2% of sales, as compared with $20.417 million, or 78.3% of sales, in
fiscal 2003. Beverage and vending sales for fiscal 2004 were $5.077 million, or
20.8% of sales, as compared with $5.659 million, or 21.7% of sales in fiscal
2003.

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Net sales for fiscal 2005  increased by 6.2% to $25.886  million.  This increase
was due to increased sales of $3.821 million to the gaming market, primarily the
result of increased demand from our Australian  affiliate and in Russia,  offset
by decreased  sales of $2.316 million to the beverage and vending  market,  as a
result of significant cigarette tax increases in Germany.

Gaming  sales  for  fiscal  2005 were  $23.150  million,  or 89.4% of sales,  as
compared with $19.304 million,  or 79.2% of sales, in fiscal 2004.  Beverage and
vending  sales  for  fiscal  2005 were  $2.736  million,  or 10.6% of sales,  as
compared with $5.077 million, or 20.8% of sales in fiscal 2004.

Net sales for fiscal 2006 decreased 45% to $14.3 million.  The decrease in sales
was  mainly due to the  restrictions  put on gaming in Russia and a slow down in
the market in  Australia.  Gaming sales were $11.3 million in fiscal 2006 or 79%
of total sales as compared to $23.150 million or 89.4% in fiscal 2005.  Beverage
and  Vending  sales  were 3.0  million or 21% of total  sales in fiscal  2006 as
compared to $2.736 million or 10.6% of total sales in fiscal 2005.

Our  international  sales  amounted to 90%,  93% and 86%, of net sales in fiscal
2006, 2005 and 2004, respectively.

Marketing Strategy

We have  continued  to focus our  marketing  efforts  on those  segments  of the
marketplace  which require a relatively  high degree of security and substantial
custom design work that is not  adequately  served by larger  competitors  which
have  tended to focus  primarily  on the  broader,  higher-volume  market  using
standardized  product  configurations.  GPT's  approach in the worldwide  gaming
market was  initially  a "niche"  strategy  that  allowed us to develop a strong
international customer base that originally started with manufacturers too small
to  attract  the  larger  competitors.   With  development   completed  and  the
commencement  of sales of our Argus(TM) and Aurora  products in January 2001 and
January 2003,  respectively,  and the launch of our new "SA-4" product in fiscal
2005,  this strategy has continued  with  particular  attention  paid to markets
which have the largest opportunity for growth. We have both gained new customers
and retained existing  customers based on our strength  internationally  and our
reputation for working closely to adapt to customers' needs. We will continue to
attempt to  strengthen  and grow our  relationships  with the OEMs through joint
marketing  and  advertising  efforts and by creating  country-specific  currency
databases and  customization,  which will allow OEMs an  opportunity to seek new
potential markets worldwide.  Today we have 96 country-specific databases and 15
multi-country  databases,  which  we  believe  is one of  the  largest  database
libraries in the industry. Further, we plan to continue to build a large library
of databases for our newest  products,  as well as adding to existing  Argus and
Aurora databases.

After the  launch of our  Aurora  product  in fiscal  2003,  we  experienced  an
increase in Aurora  revenue from $5.3 million in fiscal 2003, to $7.0 million in
fiscal 2004,  to $8.1  million in fiscal  2005.  In fiscal 2003 we signed a four
year  supply  contract,  valued  in  excess  of  $10,000,000,  with  Tobaccoland
Automaten GmbH & Co, a German based cigarette-vending operator with over 200,000

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machines or  approximately  25% of the German market share.  However,  since the
last  quarter of fiscal 2004 the overall  German  tobacco  vending  industry has
faced  significant  volume  shortfalls due to government  increases in cigarette
taxes. In fiscal 2005, we successfully  penetrated sales into the Russian gaming
market with our Aurora  product,  originally  dubbed the  "beverage and vending"
product.  However,  in fiscal 2006,  as a result of  restrictions  placed on new
casinos in the  Russian  market,  sales of the Aurora  product  declined to $3.4
million.  We  will  continue  to  search  for  new  growth   opportunities  both
domestically and internationally for all our products. Further, we launched SA-4
in fiscal 2005 and believe it will provide an opportunity for penetration in the
domestic gaming market as well as other international markets. The SA-4 model is
targeted to the global casino market and incorporates the features of Argus with
a faster  Digital  Signal  Processing  (DSP)  chip  which  allows  for  currency
validating in less than one second. In fiscal 2006, we had sales of $4.3 million
for our SA-4 validator.

In the gaming venue, we market our products principally to the OEMs as well as
the end-users (i.e., casino operators) who purchase slot machines from the OEMs
to help ensure that our validator products will be specified as the product of
choice in new orders. We have also provided direct operator technical training
and participation in seminars with our OEM customers. By marketing directly to
the end-users in conjunction with the OEMs, we expect our products will gain
acceptance as our customers' gaming machines gain entry into major casinos or
regions previously dominated by currency validators of our competition. Since
1999, we have offered programs and plans designed to elevate the level of our
customers' product knowledge. Such programs and plans included the development
of formally documented maintenance schedules and similar programs, which are
proposed to customers. These maintenance programs are being offered in
coordination with our OEM customers, and are intended to broaden awareness of
the Company and our products within the gaming industry and as a result increase
sales. Additionally, we are focusing our marketing efforts on explaining the
technical features and customer support programs of current and future products
in order to further differentiate ourselves from the competition. This overall
strategy allows our products to continue to demonstrate the high level of
performance and quality achieved in many markets throughout the world.

Our  marketing  strategy for the  significantly  larger  worldwide  beverage and
vending industry is very similar to that of our gaming  strategy.  During fiscal
2002, we initiated sales of the Aurora  product.  During fiscal 2003, with sales
of our new Aurora product  commencing in January 2003, we achieved a significant
$3.5 million increase in beverage and vending sales to $5.7 million.  Throughout
fiscal 2004,  2005, and 2006, we marketed our Aurora product through our already
existing  distribution  channels,  as well as through the creation of additional
alliances and sales channels to further penetrate this market.  The beverage and
vending industry's  requirement for currency  validation  equipment is more than
$375 million per annum,  or three times that of the gaming market.  In addition,
further  penetration into the beverage and vending market, as well as the gaming
market,  will allow us to achieve  further  diversification  and, if successful,
could reduce our reliance on any one market as well as expand our customer base.

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Our overall  sales and marketing  strategy in the worldwide  gaming and beverage
and vending  industries is to deliver a high quality product  supported by local
sales and service in order to make our products the market standard for currency
validation products.  We successfully pursued this strategy in Australia,  South
Africa,  Latin  America and Russia where our products are accepted in the gaming
market.  In order to provide  service  and  support,  we have sales and  service
offices in London  and  Moscow as well as  distributors  in  Australia,  Russia,
Italy, Southeast Asia, Latin America, the Middle East and South Africa.

To date,  our  continuing  sales  have been  dependent  upon the use of paper or
simulated  paper  currency in automated  payment  systems for gaming 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 our future growth
until and unless we develop other products that are not solely  dependent on the
use of paper or simulated paper currency.  We are 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 we will be able to  successfully  develop and market
such new products and systems.

Products

Since  inception,  we have  endeavored,  through  research and  development  and
manufacturing  efforts,  to provide products that meet the specific  performance
requirements of our 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.  We spent  approximately
$333,000,  $55,000 and $75,000 during fiscal 2006, 2005 and 2004,  respectively,
on research and development.  Our research and development consists primarily of
efforts to develop new currency  validators,  expand our product  lines into new
applications, as well as to achieve improvements in technology.

Our product  development  efforts  have been focused on the design of our latest
generation of validator products,  the first of which was Argus(TM),  our gaming
validator.  We began selling  Argus(TM) in January  2001.  Sales of this product
represented  19%, 63%, 54%, 51% and 50% of unit validator  sales in fiscal 2001,
2002,  2003,  2004 and 2005,  respectively.  We launched the SA-4 in late fiscal
2005.  The SA-4,  an improved  Argus  validator  with a faster  processor  chip,
achieved unit sales in fiscal 2006 representing 36% of unit validator sales.

In the summer of 2002, the Company  completed the development of its new product
designed  specifically  to address the  requirements  of the  vending  industry.
Following  successful  field  trials  during  the  summer  and fall of 2002,  we
commenced  a sales  and  marketing  campaign  which led to sales  commencing  in
January  2003  on our  new  product  called  "Aurora".  Sales  of  this  product
represented  29%, 43%, 48% and 47% of unit validator sales in fiscal 2003, 2004,
2005 and 2006,  respectively.  For Argus(TM) and Aurora products, we have, since
achieving   technological   feasibility   through  a  detailed  program  design,
capitalized  the cost of  software  coding  and  development,  and  reflect  the
amortization of these costs in cost of sales.

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Our principal  products in fiscal 2006  included the SA-4,  Argus(TM) and Aurora
and  a  wide  range  of  comprehensive   currency  databases  and  note  stacker
configurations.  In fiscal  1997,  we planned  for a shift in demand  toward our
Generation II product line and such sales amounted to 58% of unit sales.  During
fiscal 2000, 2001 and 2002, this shift continued and Generation II and Argus(TM)
product line sales  accounted for 76%, 89% and 92% of unit sales,  respectively.
The Argus product had been designed to be a drop-in  replacement  for Generation
II products and this focused toward bringing new  technological  features to the
marketplace.  During fiscal 2002 and fiscal 2003,  sales  substantially  shifted
from our  Generation  II  product  line to our  Argus(TM)  product  line,  which
represented 63% and 80% of gaming validator sales.  This shift increased further
in the fourth quarter of fiscal 2003 and  represented  96% of gaming sales which
coupled  with  our  increased  marketing  efforts  on  Argus,  rather  than  our
Generation  II product line  resulted in an increased  inventory  reserve in the
fourth quarter of 2003.  During fiscal 2004, we commenced a phase out program on
this product,  however;  we will maintain field service and support for warranty
repairs  for several  more years.  We believe we have  adequately  reserved  for
inventory  obsolescence  for the shift in demand from our  Generation I products
and Generation II products to our Generation III products.

Argus(TM) is a worldwide gaming note validator,  which can process multi-country
databases,  with a substantially greater number of notes (between 2.44 inches to
3.35 inches in width),  in all 4 directions.  Argus is designed to be a one size
fits all validator  that uses  essentially  the same hardware for every currency
throughout the world.  Argus is equipped with a standard bar code reader,  which
has the added  capability of reading  coupons and currency at the same time. The
Argus  sensor  system has our patented  Red,  Green,  Blue and  Infrared  (RGBI)
optical  array,  which  generates  56 channels of  high-resolution  data.  It is
arranged in a unique  layout that allows for the analysis of a note's  signature
(fingerprint)  without any gaps between optical sensors. The optical information
provided by Argus is reflective (off the note),  transmissive (through the note)
and a combined  RGBI pattern of reflective  data to create a color  signature of
the note  being  evaluated.  The  Argus  validator  also has a  high-sensitivity
magnetic sensor and high-resolution Side-Looking Sensors(TM). The Generation III
product line offers a "soft drop  analyzer"  ("SDA")  option.  This 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   us,   to  a   personal   computer   allowing   instant
feedback/tracking for the machine operator.

Aurora is our first validator  specifically  designed for the worldwide beverage
and vending industries. Aurora is an injection-molded modular design that can be
used in the up-stack or down-stack  orientation and uses state of the art optics
in its internal  sensor system with our patented RGBI optical array.  With field
trials  completed in the fall of 2002 and sales commencing in January 2003, this
product  quickly  replaced  most  sales of our M-125 and  M-150  products.  This
product originally  targeted for the beverage and vending industry has also been

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aggressively  marketed in the  un-regulated  gaming market in 2004 and 2005 with
substantial  penetration.  We continued  marketing efforts in both venues during
fiscal  2006.  As with  Argus,  Aurora  is  designed  to be a one size  fits all
validator  that  essentially  uses the same  hardware for every  currency in the
world.

Our newest product launched in fiscal 2005 is the SA-4. SA-4 is a worldwide note
validator  that can  handle  bills up to 3.35  inches in width  while  holding a
database of up to 128  different  bank notes in four  directions,  which enables
SA-4 to securely  validate multiple  currencies  without the need to re-program.
The DSP chip enables the use of advanced algorithms, which significantly improve
security and  performance.  The SA-4 sensor system has our patented Red,  Green,
Blue and Infrared (RGBI) optical array and an industry  standard bar-code reader
that  is  compatible  with  the  various  Ticket-In  Ticket-Out  (TITO)  systems
currently found on many casino floors worldwide. Many countries use magnetic ink
to increase the security of their currency. The SA-4 currency validator contains
a new  high-sensitivity  magnetic circuit that doubles the sensitivity to detect
these inks. SA-4 contains front and rear sensors,  which guarantee the detection
of   critical   bill   position   information.   SA-4   supports   the   various
industry-standard communication protocols commonly used for vending, gaming, and
video lottery machines.

In October 2006, we announced the rollout of our Falcon currency validator which
uses Digital  Signal  Processor  (DSP)  technology to achieve fast reliable note
recognition.  With our  proven  patented  RGBI  Optical  Technology,  Falcon can
validate currency for most countries.

Product Performance and Warranties

Our  validator  and note stacker  products are  generally  covered by a one-year
warranty  against  defects  in  materials  or  workmanship.  This  warranty  has
essentially doubled with our Generation III validators (Argus, Aurora, Advantage
and SA-4).  The Company or our authorized  service agents will repair or replace
any units that require warranty  service.  We do not warrant that our validators
will reject all counterfeit currencies and believe that there is no commercially
available validator that is  counterfeit-currency-proof or warranted as such. To
support our  increasing  international  market  presence,  we have  expanded our
warranty and non-warranty  support coverage to provide in-country  capability in
key worldwide  markets (e.g.  Australia,  Russia,  Latin America,  South Africa,
Europe and Southeast Asia). In these markets,  the local sales and service joint
venture  partners  and  distributors  provide  warranty  labor while our primary
product support in these markets is in the form of warranty parts. Over the last
three years,  our cost of  warranting  our  products  has varied  primarily as a
direct result of the increase or decrease in the unit sales,  as well as product
performance. Warranty expense for 2006, 2005 and 2004 was $161,000, $176,000 and
$198,000 , respectively,  which represents actual costs incurred and an estimate
of future costs to be incurred.

Marketing and Sales

An "in-house"  sales force  consisting of sales  representatives,  sales/product
technicians and customer service support  personnel,  as well as strategic joint
ventures and  distributors,  conducts our primary sales and marketing efforts in

                                       10
<PAGE>

both the domestic and international  markets.  We have  company-owned  sales and
service  offices in London and Moscow  and  exclusive  distributors  for the key
markets of  Australia,  New Zealand and the Pacific  Rim. In  addition,  we have
distributors in Russia,  Italy,  Southeast Asia, Latin America,  the Middle East
and South  Africa.  The overall  sales and service  network  provides  effective
international   coverage  for  our  products  and  customers  and  reflects  our
commitment to providing superior service worldwide.

Customer Concentration

During fiscal 2006, our largest customer,  GPTA, accounted for approximately 28%
of  net  sales.  A  significant   portion  of  GPTA's  sales  is  to  Aristocrat
Technologies  Australia Pty Ltd. Net sales to the gaming industry  accounted for
approximately  78.9% of our revenues,  with the remaining  21.1%  primarily from
product  applications in the beverage and vending  industry.  We sell to a small
group of OEMs in the gaming and  beverage  and vending  industries.  The Company
must achieve  significantly  less dependence on several  important  customers by
expanding  into new  countries,  expanding our customer base and  developing new
products to increase  the market size we can market to, such as domestic  gaming
and the mass market vending  applications.  Until such initiatives are achieved,
we are at risk that lower  demand for any one product or market,  or a loss of a
significant customer, can substantially impact our revenues and net income.

Manufacturing

Since 1995, our operations have been conducted from a leased facility, currently
44,000 square feet, which houses the manufacturing and administrative  functions
in Hauppauge, New York.

Our 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.
We routinely test all components and have extensive "burn-in" procedures for the
final assembled product. Direct control over fabrication, via our key suppliers,
and testing permits us to shorten our production  cycle and protect patented and
proprietary  technology.  During fiscal 2000, we  transitioned  a portion of our
manufacturing to demand flow technology. In addition, we have evaluated and will
continue  to  evaluate  our  suppliers  in an effort to reduce our total cost of
manufacturing, a process that may include vendor consolidation and outsourcing.

As we began our transition to the Argus product line in fiscal 2001, we incurred
increased  costs  related to lower  volumes on the two  product  lines.  As this
transition was substantially completed during fiscal 2002, Argus was expected to
be produced  in a more  efficient  manner at a lower cost,  and at the same time
allowing increased  flexibility to meet customers' demand. In the fourth quarter
of 2002 these improvements were more than offset by the significant reduction in
sales and  production.  During fiscal 2003, our  introduction  of our new Aurora
product with higher initial purchase costs and increased  initial  manufacturing
costs,  coupled  with overall  lower sales volume than fiscal 2002,  resulted in
lower net margins for the year. We did,  however,  take action to  significantly
reduce our  purchased  component  costs on Aurora and Argus by the end of fiscal

                                       11
<PAGE>

2003 by manufacturing and selling off, on a first-in first-out basis, our higher
priced purchased components. In fiscal 2004, we continued our efforts to further
reduce  costs  and to  improve  the  margin  on our  Aurora  product,  and while
improvements  in  purchasing  costs  and  manufacturing  efficiencies  had  been
achieved by the end of fiscal 2004,  the benefits  were  substantially  realized
during  fiscal  2005.  During  fiscal 2006,  we continued  our efforts to reduce
product costs, including potential outsourcing,  but the most significant factor
affecting  our gross profit  percentage  was the unit sales levels  achieved and
their relationship to manufacturing  costs, as well as any impact from sales and
marketing  efforts to achieve  additional market share and/or reduce its current
inventory levels.

We  depend 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.  We believe  that  concentrating  our
purchases from our existing suppliers provides, in certain cases, better prices,
better  quality  and  consistency  and more  reliable  deliveries.  We  maintain
on-going  communications  with our suppliers to prevent  interruptions in supply
and, to date,  generally have been able to obtain adequate  supplies in a timely
manner. We have entered into volume blanket purchase agreements of approximately
900,000 with selected suppliers to guard against shortages of unique components,
thereby limiting our exposure to business interruptions.  As of January 12, 2007
approximately 450,000 of commitments remain. Furthermore, many of the electronic
components  we use,  including  our  microprocessors,  are  widely  used in many
applications  and are  available  from a number of sources.  However,  the short
wavelength  light  source  that forms a critical  part of our  optical  scanning
device  is  now  commercially  available  from  only a very  limited  number  of
suppliers. We believe that if such supply were to become unavailable,  our 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 that
cannot be quickly remedied could have a materially adverse effect on our results
of operations.

Competition

The market for our products is very  competitive  and the number of  competitors
and  their  product  offerings  has  increased  due  to  the  growing  worldwide
marketplace.  A number of  competitors  have  significantly  greater  financial,
technical, sales and marketing resources than the Company. Additionally, certain
of these companies have acquired  competitors with synergistic  product lines in
an effort to offer a more complete  product line. In 1998, Coin Controls Limited
("Coin Controls") acquired Ardac, Inc. ("Ardac"),  a domestic currency validator
manufacturer.  Coin  Controls had primarily  focused on the  validation of coins
worldwide  for the gaming and  amusement  industries.  With the  acquisition  of
Ardac,  Coin Controls changed its name to Money Controls PLC ("MCP") and the two
companies together had the ability to package its coin mechanism with a currency
validator for both the gaming and beverage and vending  industries.  In November
1999 MCP announced,  and subsequently completed, its agreement to be acquired by
Coin Acceptors, Inc. ("Coinco"), a St. Louis-based supplier of primarily vending
products.  This  resulted in Coinco  being a competitor  that has an  integrated
gaming and beverage and vending product line, as well as  relationships  in both
industries.  Similar  competitors are Japan Cash Machines Co., Ltd.  ("JCM") and
Mars  Electronics  International  ("MEI"),  entities  that have products able to
serve both the gaming and the beverage and vending marketplaces.

                                       12
<PAGE>

In the domestic  market,  certain  competitors  are  divisions or  affiliates of
manufacturers  of vending  machines.  For  example,  Royal  Vendors,  Inc. is an
affiliate of Coinco. Such validator  manufacturers enjoy a competitive advantage
in providing for the significant validator requirements of their affiliates. For
validators sold for use in the beverage,  food, snack and lower-priced  goods or
amusement  markets,  Coinco  dominates the domestic  market.  MEI,  JCM,  Ardac,
International Currency Technologies, Sanyo, Conlux, Coegis and Cashcode Company,
Inc.  ("Cashcode")  compete  with us in the  international  beverage and vending
market.

The  largest  supplier of  validators  used in the  domestic  gaming and lottery
markets is JCM.  Internationally,  we compete for gaming  machine  business with
JCM,  MEI,  Ardac and  Cashcode.  In the  secondary  low-value  gaming  markets,
Innovative  Technology,  Ltd.  maintains a significant  market share due to this
market's price  sensitivity  and its low-cost  approach to this market.  We have
focused our marketing  efforts on the  higher-priced  domestic and international
gaming  validator  business  and  compete  on the  basis  of  service,  quality,
durability and performance while maintaining a high level of protection  against
tampering and counterfeit currencies.

Historically  we have been more  willing to  address  smaller  markets  than our
larger competitors and expect to encounter increased  competition as the markets
addressed by our products  continue to grow. Also, we have been willing to adapt
our products to a variety of OEMs, which has allowed us to be flexible to expand
when new markets  open up to sales.  We believe  that  performance,  quality and
protection against tampering and counterfeit  currency are as important as price
as competitive factors in the worldwide gaming marketplace.

Intellectual Property

We rely on  certain  proprietary  know-how  and trade  secrets  to  protect  our
technology. Important components of this proprietary information are our library
of distinguishing  characteristics of the currencies,  which our validators scan
and   validate,   and  our   proprietary   algorithms.   We  have  entered  into
non-disclosure and secrecy agreements with all of our employees having access to
this technology.

We hold ten U.S.  patents as follows:  design for "Escrow Box for Coin  Operated
Machines,"  U.S.  Patent No.  D283,518  issued April 22, 1986;  "Paper  Currency
Acceptor  and Method of Handling  Paper  Currency  for Vending  Machines and the
Like," U.S. Patent No. 4,884,671 issued December 5, 1989;  "Anti-fraud  Currency
Acceptor," U.S. Patent No. 5,259,490 issued November 9, 1993; "Bill Accumulating
and Stacking  Device," U.S.  Patent No.  5,322,275  issued June 21, 1994;  "Soft
Count Tracking  System," U.S. Patent No. 5,630,755  issued May 20, 1997;  "Paper
Currency  Validator  (Side-Looking  Sensors)," U.S. Patent No.  5,806,649 issued
September 15, 1998;  "Electrical  Switch  Connectors," U.S. Patent No. 5,842,879
issued December 1, 1998; "Stacker Mechanism for Stacking Bank Notes" U.S. Patent
No. 5,899,452 issued May 4, 1999; "Apparatus and Method for Detecting a Security

                                       13
<PAGE>

Feature in a Currency Note," U.S. Patent No.  6,104,036  issued August 15, 2000;
and "Bank Note Validator  (RGBI)" U.S. Patent No.  6,223,876 issued May 1, 2001.
Certain patents cover technology used in our first,  second and third generation
validator  product lines and the  remaining  patents  cover  technology  used in
certain  special models.  In addition,  on September 30, 1999 we filed a reissue
application  with the U.S. Patent and Trademark  Office to amend and broaden the
claims of U.S. Patent No. 5,630,755.

In addition to our U.S.  patents and pending  application,  we have also applied
for  patent  protection  in  a  large  number  of  international   markets.   If
corresponding  foreign patents are obtained, we believe that these patents could
provide important protection for certain technological advantages our validators
possess in  international  markets.  However,  we do not believe that we will be
materially 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.  We have obtained  patents in  Australia,  New Zealand and South Africa
under the Eurasian Patent Convention  corresponding to U.S. Patent No. 6,223,876
covering the use of short  wave-length light in a validator to discern the color
and other characteristics of bills being scanned. In addition we have obtained a
patent in New Zealand  corresponding  to U.S.  Patent No.  5,630,755  covering a
system for monitoring and tracking money collected from a gaming machine and the
like.

In September  2006, we announced that we had filed for patents on  revolutionary
new optical  technology  expected to be unveiled in a new product  launch during
fiscal 2007.

We have licensed certain patented proprietary  technology covered by U.S. Patent
No. 5,630,755 to Ardac, Inc. in 1999. Such license settled a patent infringement
suit initiated by the Company and provides for the payment of license fees based
on unit sales of certain of Ardac's products.

In March 2004,  we entered into a  Cross-License  Agreement  with JCM whereby we
granted JCM a non-exclusive,  royalty-free license for U.S. Patent No. 5,630,755
and JCM granted us a non-exclusive,  royalty-free license to use and install the
ID-003 software in bill  validators  manufactured by or on behalf of the Company
and sold by us.

Although we have not received any bona fide claims asserting infringement of the
proprietary  rights of third  parties,  there can be no  assurances  that  third
parties  will not assert such  claims  against us in the future or that any such
assertion  may not require us 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,   we  are  indirectly  subject  to  such
regulations  that  are  reflected  in  customer   purchase  orders  or  customer
specifications. We believe that we are in full compliance with such regulations.
Any failure to comply with such  regulations,  however,  could have a materially
adverse effect on our results of operations.

                                       14
<PAGE>

Employees

On December 31, 2006, we had 82 employees,  consisting of 3 executives;  5 sales
and customer service representatives;  21 engineers and software developers, and
technical  support  representatives;  8 materials,  quality  control and quality
assurance   personnel;   8  administrative  and  clerical   personnel;   and  37
assembly/manufacturing personnel. We believe our relationship with our 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 a limited base of customers  for a  significant  portion of sales;
the  Company's  dependence  on the  paper  currency  validator  market  and  its
potential  vulnerability to technological  obsolescence;  the possible impact of
competitive products and pricing; the risks that its current and future products
may contain  errors or defects that would be difficult  and costly to detect and
correct;  potential  manufacturing  difficulties;   possible  risks  of  product
inventory  obsolescence;  uncertainties  with respect to the Company's  business
strategy;  general economic conditions in the domestic and international  market
in which the  Company  operates;  potential  shortages  of key parts  and/or raw
materials;   potential  difficulties  in  managing  growth;  dependence  on  key
personnel;  the relative strength of the United States currency; and other risks
described in the Company's Securities and Exchange Commission filings.

Item 1A.        Risk Factors
--------        ------------

We have not been profitable for the past few years.

We have had a large  decline in sales this year and we have not been  profitable
for the past few years.  Our new product  initiatives may not be enough to allow
us to regain profitability.

Our line of credit expires in March 2007.

We are dependent on our line of credit to provide funds for our working  capital
needs and our investment in new product  development.  If we are unable to renew
or replace the line, we may be unable to continue with our new products and this
could have a significant adverse effect on our revenue.

We are dependent on the paper currency validator and gaming market.

In fiscal  2006,  79% of our sales were to the gaming  market.  Any  significant
technological  advances to increased  use of smart cards could cause a reduction
in our revenues.  Any changes in government  regulations,  as we  experienced in
Russia, could have an adverse effect on our revenue.

                                       15
<PAGE>

We are dependent on a small number of customers.

In fiscal 2006,  one customer  accounted for 28% of our sales.  The loss of this
customer could have a significant adverse effect on our revenue.

Some product components have a long lead time.

Some of our  product  components  may take in excess of 12 weeks to obtain and a
shortage of those parts may have a negative effect on our revenue.

We have a risk that some of our inventory may become obsolete.

We hold inventory for warranty and repairs and replacements.  We also anticipate
sales volumes from our customers due to lead times required to build  inventory.
There is a risk that orders may be less than  anticipated  for  certain  product
models  and  that we may  have  excess  inventory  or  inventory  which  becomes
obsolete.

We may have  difficulty  competing  with  larger  companies  that offer  similar
products which may result in decreased revenue

We  believe  that  we  have a very  competitive  product;  however,  many of our
competitors  have greater  resources than we have and can invest more in product
development  and  marketing or develop  pricing  strategies  which may adversely
effect our revenues.

We are  dependent on  management  and our  engineers and a loss of key employees
could disrupt our business and our financial performance could suffer.

Our business is largely  dependent upon our senior executive  officers,  Messrs.
Stephen Nevitt,  our president and chief executive  officer and William McMahon,
our chief financial officer.  Although we have employment  agreements with these
officers,  the  employment  agreements do not guarantee that those officers will
continue as our employees.  Our agreements  with Messrs.  Nevitt and McMahon are
scheduled  to expire on November 7, 2007 and April 16, 2007,  respectively.  Our
business may be adversely affected if any key management  personnel or other key
employees left our employ.

Item 1B.        Unresolved Staff Comments
--------        -------------------------

Not applicable.

Item 2.         Properties
-------         ----------

The  Company   leases   approximately   44,000  square  feet  which  houses  the
manufacturing and  administrative  functions in Hauppauge,  New York, for a term
expiring  June 30, 2007, at an annual base rental of  approximately  $383,000 in
fiscal 2006 and $312,000 in fiscal 2007. The Company believes this facility has

                                       16
<PAGE>

excess  capacity  for  its  office  and  manufacturing  needs  and is  currently
reviewing  its  options  to  downsize  the  current  facility  or  relocate  its
operations.

Item 3.         Legal Proceedings
-------         -----------------

There are no material legal proceedings pending against the Company.

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

Not applicable.

                                     PART II

Item 5.         Market for Registrant's Common Equity, Related Stockholder
-------         ----------------------------------------------------------
                Matters and Issuer Purchases of Equity Securities
                -------------------------------------------------

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 2005 and 2006.

                                                    Common Stock
                                                    ------------

                Quarter Ended                   High            Low
                -------------                   ----            ---

                December 31, 2004               6.00            3.60
                March 31, 2005                  7.63            5.40
                June 30, 2005                   7.00            3.81
                September 30, 2005              4.25            2.85
                December 31, 2005               3.58            2.09
                March 31, 2006                  2.80            2.03
                June 30, 2006                   2.49            1.10
                September 30, 2006              1.99            1.25


b) Holders

The  approximate  number of  beneficial  holders  and  holders  of record of the
Company's Common Stock as of December 14, 2006 were 1,365 and 34, respectively.

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 not declared or
paid any cash dividends and does not expect to declare or pay any cash dividends
in the foreseeable future.

                                       17
<PAGE>

Item 6.         Selected Financial Data
-------         -----------------------

FINANCIAL HIGHLIGHTS
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
<S>                                           <C>          <C>          <C>         <C>          <C>
Year Ended September 30                       2002         2003         2004         2005        2006
------------------------------------------- ----------   ----------   ----------   ---------   ----------
Net sales                                     $27,713      $26,076      $24,381     $25,886      $14,303
Net income (loss)                                (633)(1)   (5,677)(2)   (1,690)(3)    (573)      (4,143)(6)
Diluted earnings (loss) per share(4)            (0.11)       (1.02)       (0.30)      (0.10)       (0.67)
Total assets (5)                               24,030       17,775       16,267      16,714       11,683
Long-term debt obligations                          0            0        1,354          79           40
Stockholders' equity                           17,026       11,677       11,107      13,371        8,837
</TABLE>

(1)  Includes  an  after-tax  gain of  $82,000  from the  sale of the  Company's
     unconsolidated China affiliate.
(2)  Based on the Company's  continued losses, and related uncertainty as to the
     Company's ability to generate sufficient taxable income to realize the full
     value of its  deferred  income  tax  asset,  the  Company  recorded  a full
     valuation allowance and related income tax expense in the fourth quarter of
     fiscal 2003.
(3)  Includes a gain of $78,000  from the sale of the  remaining  portion of the
     Company's unconsolidated South African affiliate.
(4)  The weighted average shares  outstanding used in the calculation of diluted
     loss per share did not include  potential shares  outstanding  because they
     were anti-dilutive.
(5)  The Company, in connection with its fiscal 2002 annual audit,  reclassified
     certain costs previously included in inventory, in the amount of $2,756,000
     and  $1,528,000  as  capitalized  software  costs,  and molds and  tooling,
     respectively,  as of September  30,  2001.  This  reclassification  did not
     affect reported  earnings,  total assets,  or stockholders'  equity for any
     period.
(6)  Includes  gain on sale  of  investments  in  unconsolidated  affiliates  of
     $307,000.

                                       18
<PAGE>

QUARTERLY INFORMATION
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
<S>                                         <C>        <C>        <C>        <C>       <C>
Quarter Ended                             Dec. 31    Mar. 31    June 30    Sept. 30     Year
                                         ---------- ---------- ---------- ---------- ----------
Fiscal 2006
-----------
Net sales                                   $3,905     $4,027     $3,165     $3,206    $14,303
Gross profit                                   685        628        (18)       480      1,775
Net income (loss)                             (790)      (543)    (1,889)      (921)    (4,143)
Basic income (loss) per share                (0.13)     (0.09)     (0.30)     (0.15)     (0.67)
Diluted income (loss) per share (1)          (0.13)     (0.09)     (0.30)     (0.15)     (0.67)

Fiscal 2005
-----------
Net sales                                   $7,752     $7,945     $5,173     $5,016    $25,886
Gross profit                                 2,024      2,336      1,261      1,246      6,867
Net income (loss)                              180       (122)      (340)      (291)      (573)
Basic income (loss) per share                 0.03      (0.02)     (0.05)     (0.05)     (0.10)
Diluted income (loss) per share (1)           0.03      (0.02)     (0.05)     (0.05)     (0.10)
</TABLE>

(1)  The weighted average shares  outstanding used in the calculation of diluted
     loss per share,  for periods in which the  Company had a net loss,  did not
     include potential shares outstanding because they were anti-dilutive.

Item 7.         Management's Discussion and Analysis of Financial Condition and
-------         ---------------------------------------------------------------
                Results of Operations
                ---------------------

Results of Operations
---------------------

Fiscal year ended September 30, 2006 compared with September 30, 2005

Sales

Net sales for fiscal 2006 decreased by 44.7% to $14.303 million as compared with
$25.886  million in fiscal  2005.  This  decrease  was due to lower sales to the
gaming market,  in which sales declined 51% from $23.1 million in fiscal 2005 to
$11.3 million in fiscal 2006. Gaming sales to the Australian market declined 50%
as the Company's  distributor  reduced its short term inventory  requirements to
better manage current market conditions in its territory. Sales into the Russian
market  declined  by  over  30% as a  result  of  government  regulations  which
temporarily  prohibit the placement of new gaming  devices.  These declines were
partially  offset by increased  sales into the Asian and South African  markets,

                                       19
<PAGE>

which  reflected  some  growth  in the  Macau  gaming  area of  China as well as
increased sales efforts by the Company's  distributor in South Africa.  Beverage
and  vending  sales  for  fiscal  2006 were $3.0  million,  or 21% of sales,  as
compared to $2.7 million or 10.6% of sales, an increase of 10%, primarily in the
beverage sector.  Net sales to international  customers  accounted for 90.6% and
92.7% of net sales in fiscal 2006 and 2005, respectively.

Gross Profit

Gross profit  decreased to $1.775  million,  or 12.4% of net sales,  as compared
with $6.867 million or 26.5% of net sales in the prior-year period. The decrease
in gross profit was  primarily  the result of sales  incentives to reduce Aurora
inventory  levels as well as attempting  to increase the Company's  market share
with the Aurora product,  and the effect of a 45% sales decline from fiscal 2005
while  manufacturing  expenses  were  virtually  unchanged.   This  resulted  in
significant under absorption of overhead. In addition, the Company increased the
inventory  reserve by $432,000 in fiscal 2006 to provide for obsolescence in its
Advantage  product  line.  The Company  operates in a facility  which has excess
capacity and the gross profit percentage will continue to be adversely  affected
based  on its  relationship  to unit  sales as well as  impact  from  sales  and
marketing  efforts to achieve  additional  market share and/or reduce  inventory
levels.  The most  significant  factor  affecting  the  Company's  gross  profit
percentage  will be the unit sales  levels  achieved and their  relationship  to
manufacturing  costs, as well as any impact from sales and marketing  efforts to
achieve  additional  market share and/or  reduce its current  inventory  levels.
During fiscal 2006, the Company's  gross profit as a percentage of sales for the
quarters  ended December 31, 2005;  March 31, 2006;  June 30, 2006 and September
30, 2006 was 17.5%; 15.6%; (0.6)% and 15.0%, respectively.

Operating Expenses

Operating  expenses  increased to $7.429 million or 51.9% of net sales in fiscal
2006 from $7.051  million or 27.2% of net sales in fiscal  2005,  an increase of
$378 thousand or 5.4%.  This  increase was due, in part, to a severance  payment
made to a former officer of $150,000,  research and  development  cost increases
related to the new  products  planned  to be  introduced  in fiscal  2007 and an
increase in rent  expense  related to a short term  extension of the lease until
June 2007.

Equity in income of unconsolidated affiliates and Gain on sale of investments in
unconsolidated affiliates

During fiscal 2006, the Company sold its interests in its affiliated  customers.
Prior to such dispositions,  the Company accounted for its results of operations
using the equity method. Included in the Company's results of operations are the
Company's net share of profits  through  August 31, 2006 the  effective  date of
sale, of $648,000 as compared to $236,000 in fiscal 2005.  For fiscal 2006,  the
Company  increased  its  equity  in  income of  unconsolidated  subsidiaries  by
$535,000 as compared to a  reduction  in fiscal 2005 of $33,000,  which  amounts
represent the effect of the Company's  share of the gross profit on sales of the
Company's  products to these affiliates,  which were unsold by the affiliates as
of the Company's fiscal year end.

                                       20
<PAGE>

The  accompanying   consolidated   results  of  operations  include  a  gain  of
approximately  $307,000  relating to the sale of the Company's  interests in its
unconsolidated affiliates in fiscal 2006.

Interest Expense

Included  in interest  expense  for fiscal 2005 was  $568,000 as a result of the
amortization of debt discount. During fiscal 2005 the term loan was fully repaid
and the debt discount was fully amortized.

Income Taxes

With respect to the provision for income taxes,  the effective  rate was 0.0% in
fiscal 2006 as compared to a tax benefit of 3.5% in fiscal 2005.  This change in
the effective tax rate is primarily the result of fiscal 2006  operating  losses
for which no benefit has been recognized.  The Company provided a full valuation
allowance against its deferred income tax assets in the fourth quarter of fiscal
2003 and continues to provide a full valuation  allowance at September 30, 2006.
The  valuation  allowance  is subject  to  adjustment  based upon the  Company's
ongoing  assessment of its future  taxable income and may be wholly or partially
reversed in the future.

Net Loss

The net loss for fiscal 2006 was ($4,143,000), or ($0.67) per share, as compared
with ($573,000 or ($0.10) per share in fiscal 2005.

Fiscal year ended September 30, 2005 compared with September 30, 2004
---------------------------------------------------------------------

Sales

Net sales for fiscal 2005 increased by 6.2% to $25.886  million as compared with
$24.381  million in fiscal 2004.  This  increase  was due to increased  sales of
$3.821  million to the gaming market,  primarily the result of increased  demand
from the Company's Australian affiliate and in Russia, offset by decreased sales
of $2.316 million to the beverage and vending market, as a result of significant
cigarette  tax  increases in Germany.  Gaming sales for fiscal 2005 were $23.150
million, or 89.4% of sales, as compared with $19.304 million, or 79.2% of sales,
in fiscal 2004.  Beverage and vending sales for fiscal 2005 were $2.736 million,
or 10.6% of sales, as compared with $5.077 million,  or 20.8% of sales in fiscal
2004. Net sales to international  customers accounted for 92.7% and 86.3% of net
sales in fiscal 2005 and 2004, respectively.

Gross Profit

Gross profit increased to $6.867 million,  or 26.5% of net sales, in fiscal 2005
as  compared  with  $5.342  million,  or 21.9% of net sales,  in the  prior-year
period.  The increase in gross profit,  as a percentage of sales,  was primarily

                                       21
<PAGE>

the result of achieving a 6.2% sales increase while at the same time  leveraging
off of existing  fixed  manufacturing  costs and by  improvements  in purchasing
costs and  manufacturing  efficiencies on the Company's Aurora product that were
achieved by the end of fiscal 2004 and  realized  early in fiscal  2005.  During
fiscal 2005 the Company's gross profit as a percentage of sales for the quarters
ended December 2004, March 2005, June 2005 and September 2005 was 26.1%,  29.4%,
24.4% and 24.8%, respectively.

Operating Expenses

Operating  expenses in fiscal 2005 increased to $7.051 million,  or 27.2% of net
sales, as compared with $6.857  million,  or 28.1% of net sales, in fiscal 2004.
This  increase of  $194,000  is  primarily  the result of  increased  travel and
stockholder relations expenses of $140,000 and $110,000, respectively, offset in
part by reduced legal and professional fees of $72,000.

Income Taxes

With respect to the provision for income taxes, the effective rate was a benefit
of 3.5% as compared with a benefit of 0.4% in the prior-year period. The Company
provided a full valuation  allowance  against its deferred  income tax assets in
the fourth  quarter of fiscal  2003 and  continues  to provide a full  valuation
allowance  at  September  30,  2005.  The  valuation  allowance  is  subject  to
adjustment  based upon the Company's  ongoing  assessment of its future  taxable
income and may be wholly or partially reversed in the future.

Net Loss

The net loss for fiscal 2005 was  ($573,000),  or ($.10) per share,  as compared
with  ($1,690,000),  or ($.30) per share,  for fiscal  2004.  In addition to its
operations, the Company owns interests in unconsolidated affiliates in Australia
which are accounted for using the equity method.  The Company  accounted for its
United Kingdom  affiliate  using the equity method until February 2005, when the
Company  exchanged  its  25%  interest  in  Abacus-UK  for a 12.5%  interest  in
Evolve-UK,  which is now accounted for on a cost basis. The Company's  affiliate
in South Africa was accounted  for on a cost basis until January 15, 2004,  when
the Company sold its  remaining 5% ownership  interest and  recognized a gain on
the sale of $78,000.  Included in the results of operations  for fiscal 2005 and
2004 are the Company's share of net profits of these  affiliates of $203,000 and
$108,000,   respectively.   In  fiscal  2005  and  2004,  equity  in  income  of
unconsolidated   affiliates   includes  a  decrease  of  $33,000  and  $165,000,
respectively,  which represents the deferral of the Company's share of the gross
profits on intercompany sales to its affiliates that have not been recognized by
these  affiliates.  Excluding  the  intercompany  gross profit  adjustment,  the
Company's  share of net income of these  unconsolidated  affiliates was $236,000
and $273,000 for fiscal 2005 and 2004,  respectively.  This  decrease of $37,000
was primarily the result of lower sales and profits at the Company's  Australian
affiliates,  partially offset, by the reversal of the valuation allowance of the
deferred tax assets at the Company's eCash affiliate.  In addition,  the Company
owns 100% of GPT-Europe and GPT-Russia,  and owns 80% of Abacus-USA, the results
of which are  consolidated in the Company's  financial  statements.  Included in
interest   expense  for  fiscal  2005  and  2004  was  $568,000  and   $242,000,
respectively,  as a result of the  amortization of debt discount.  During fiscal
2005 the term loan was fully repaid and the debt discount was fully amortized.

                                       22
<PAGE>

Liquidity and Capital Resources

The  Company's  capital  requirements  consist  primarily of those  necessary to
continue  to  expand  and  improve   product   development   and   manufacturing
capabilities,   sales  and  marketing   operations,   fund  inventory   purchase
commitments,  and service  principal  and  interest  payments  on the  Company's
indebtedness.  At September 30, 2006,  the Company's  cash and cash  equivalents
were $2,270,000 as compared with $3,108,000 at September 30, 2005. A significant
portion of the Company's cash balance in the amount of $659,000 and $744,000, as
of September 30, 2006 and 2005, respectively,  consists of currency used to test
the  Company's  products  and,  although  it  could  be  available,  it  is  not
anticipated to be utilized for working capital  purposes in the normal course of
business.  The  Company  has  $280,000 of cash held in escrow as a result of its
sale on  September  2, 2006 of the  Company's  50%  interest  in Global  Payment
Technologies  Australia  Pty Ltd.  The escrow  will be  released on the one year
anniversary of the  transaction if,  including  among other things,  the Company
satisfies its  obligations  under a new  distribution  agreement  with GPTA. The
Company's  credit facility with Laurus  discussed below will expire on March 17,
2007.  As of January 11, 2007 the Company had $1.3  million  outstanding  on the
facility. The Company has had discussions with various financial institutions to
extend or replace the current  line of credit.  The Company  believes but has no
assurance that it will replace this line.


On March 16, 2004, the Company  received  aggregate  proceeds of $1,500,000 from
the sale to Laurus Master Fund Ltd. ("Laurus") of a $1,500,000  principal amount
secured  convertible  term note due in March  2007 (the  "CTN"),  pursuant  to a
Securities Purchase Agreement.  The CTN was convertible into common stock of the
Company  at any time at the rate of $4.26 of  principal  for one share of common
stock  and was  collateralized  by  substantially  all  assets  of the  Company.
Interest was payable monthly at the prime rate plus 1.5%, with a minimum rate of
6%. In  addition,  Laurus  received 7 year  warrants to purchase an aggregate of
200,000 shares of the Company's common stock at prices of $4.87, $5.28 and $5.68
for 100,000,  60,000 and 40,000  warrants,  respectively.  The Company  utilized
approximately  $1,200,000 of the proceeds to repay amounts  outstanding  under a
previous  credit  agreement.  At September 30, 2004,  $1,425,000 was outstanding
under the CTN.  During the year ended  September  30, 2005,  the Company  repaid
$50,000 and Laurus  converted the  remaining  $1,375,000 of the CTN into 323,000
shares of common stock, resulting in the full repayment of the CTN.

The value allocated to the warrants resulted in a debt discount of $506,000 that
was being recognized as interest expense over the term of the CTN. Additionally,
by allocating  value to the warrants,  Laurus  received a beneficial  conversion
feature in the amount of $304,000 that resulted in additional debt discount that
was being  recognized  as interest  expense  over the term of the CTN.  Interest
expense  was  computed  utilizing  the  interest  method,  which  resulted in an
effective  yield  over the term of the CTN.  Amortization  for the  years  ended

                                       23
<PAGE>

September  30, 2005 and 2004 was $568,000  and  $242,000,  respectively.  During
fiscal 2005, the entire amount of debt discount had been  recognized as interest
expense and charged to operations.

On March 16,  2004,  the Company also  entered  into a Security  Agreement  with
Laurus  which  provides  for a credit  facility of  $2,500,000  consisting  of a
secured  revolving  note of  $1,750,000  (the  "RN") and a  secured  convertible
minimum  borrowing note of $750,000 (the "MBN"),  both due in March 2007 (the RN
and the MBN  collectively  referred  to as the "LOC").  At closing,  the Company
borrowed $750,000 under the MBN. Funds available under the LOC are determined by
a borrowing base equal to 85% and 70% of eligible  domestic and foreign accounts
receivable,  respectively,  and 50% of eligible  inventory.  Outstanding amounts
under the RN and MBN are  convertible  into  common  stock of the Company at any
time at the rate of $4.26 of  principal  for one share of  common  stock and are
collateralized by substantially  all assets of the Company.  Interest is payable
monthly at the prime rate plus 1.5%,  with a minimum rate of 6%. During the year
ended  September  30, 2005,  Laurus  converted  $750,000 of the MBN into 176,000
shares of common stock. At September 30, 2006, no amounts were outstanding under
the MBN or the RN.

The agreements provide that Laurus will not convert debt or exercise warrants to
the extent that such  conversion  or exercise  would result in Laurus,  together
with its  affiliates,  beneficially  owning  more  than  4.99% of the  number of
outstanding  shares,  including  warrants,  of the Company's common stock at the
time of conversion or exercise.

Net cash used in operating  activities  was  ($2,412,000)  in fiscal 2006.  This
amount was due to a net loss for the period,  adjusted  for non-cash  items,  of
$1,054,000,  decreased accounts receivable of $1,659,000, decreased income taxes
receivable  of $25,000,  increased  accrued  expenses and other  liabilities  of
$115,000  reduced by increased  inventory of $513,000,  and  decreased  accounts
payable of $595,000.

Net cash used in operating activities was ($434,000) in fiscal 2005. This amount
was  due  to a net  loss  for  the  period,  adjusted  for  non-cash  items,  of
$1,767,000,  decreased  prepaid expenses and other assets of $42,000,  decreased
accounts  receivable  of $824,000,  and  decreased  income taxes  receivable  of
$90,000,  reduced by increased inventory of $2,830,000,  primarily the result of
an increase in the Company's  Aurora product due to lower Russian orders and the
slowdown in the German cigarette vending market,  due to significant  German tax
increases,  coupled with the Company's  commitment to receive inventory from its
vendors,  decreased  accounts payable of $181,000 and decreased  accrued expense
and other current liabilities of $146,000.

Net cash provided by operating  activities was  $1,741,000 in fiscal 2004.  This
amount was due to decreased inventory of $746,000 as a result of outsourcing and
the  commonality  of the  Generation  III  components,  decreased  income  taxes
receivable of $96,000 due to collections in 2004,  decreased accounts receivable
of  $1,907,000,  and net loss for the year,  adjusted  for  non-cash  items,  of
$126,000,  offset,  in part,  by increased  prepaid  expenses and other  current
assets  of  $383,000,  decreased  accrued  expenses  and  other  liabilities  of
$600,000, and decreased accounts payable of 151,000.

                                       24
<PAGE>

The Company  sells its  products  primarily  to  international  markets on terms
generally  greater than 30 days. The Company granted 90 day payment terms to its
Australian distributor.  Based upon history, and the Company's current review of
its accounts  receivable,  it believes it is adequately reserved for potentially
uncollectible  accounts.   However,  given  the  Company's  sales  and  accounts
receivable  are  concentrated  to a small  group  of  customers  and in  certain
markets,  any changes in  conditions  could  cause a material  impact to its net
income (loss) and cash flow. Additionally,  the timing and size of the Company's
future Aurora sales orders,  coupled with the continued  commitments  to receive
certain  component  parts, as well as the potential impact of current and future
sales programs, could have an impact on cash from operations and on gross profit
percentages.

Net cash provided by investing  activities amounted to $1,622,000 in fiscal 2006
as compared  with net cash used in  investing  activities  of $340,000 in fiscal
2005 and $38,000 in fiscal 2004. In fiscal 2006 the Company received  $1,798,000
from the sale of its interests in Global Payment Technologies  Australia Pty Ltd
and eCash Pty Ltd.  and in fiscal 2004 the Company  received  $154,000  from the
sale of the remaining  portion of its South African  affiliate  investment.  The
Company provided net funding and investments in its joint ventures of $51,000 in
fiscal 2004.  Further,  the Company  received  $574,000 and $206,000 in dividend
distributions,  primarily from its Australian affiliate,  during fiscal 2006 and
2004,  respectively.  There was no dividend  distribution  in fiscal  2005.  The
remaining  investing  activities of $176,000 in fiscal 2006,  $340,000 in fiscal
2005 and $347,000 in fiscal 2004 were for the purchase of property and equipment
primarily for its manufacturing operations.

Net cash provided by (used in) financing  activities consisted of net repayments
of bank  borrowings of $48,000 in fiscal 2006 as compared with $63,000 in fiscal
2005 and  $1,868,000  in fiscal 2004.  Cash was  provided by the  proceeds  from
issuance of  convertible  debt of $2,250,000 in fiscal 2004.  The remaining cash
provided by  financing  activities  of  $492,000 in fiscal 2005 and  $148,000 in
fiscal 2004 were from the  issuance of stock upon the  exercise of common  stock
options and warrants.

Commitments:
At September 30, 2006, future minimum payments under  non-cancelable  leases and
principal  payments to be made for  long-term  debt  maturing over the next five
years are as follows in ($000):

                                 Operating Lease  Debt Repayments
                                 ---------------  ---------------
Fiscal year ended September 30:
   2007                                    $410              $60
   2008                                      30               40
                                 ---------------  ---------------
                                           $440             $100
                                 ===============  ===============

In addition to the chart above,  and in the normal course of business,  purchase
orders  are  generated   which   obligate  the  Company  for  future   inventory
requirements.  As of September 30, 2006, purchase order commitments approximated
$4.0 million and will be used for production requirements during fiscal 2007 and
beyond.

                                       25
<PAGE>

Critical Accounting Policies

This management  discussion and analysis is based on our consolidated  financial
statements  which are prepared using certain critical  accounting  policies that
require  management to make  judgments and estimates that are subject to varying
degrees of uncertainty.  While we believe that these  accounting  policies,  and
management's judgments and estimates,  are reasonable,  actual future events can
and  often  do  result  in  outcomes  that  can  be  materially  different  from
management's  current  judgments and  estimates.  We believe that the accounting
policies and related  matters  described in the paragraphs  below are those that
depend most heavily on management's judgments and estimates.

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 carrying amount 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 the introduction of
new technology or products by the Company and its  competitors.  These items, as
well as the  introduction of new technology on products,  could result in future
inventory obsolescence.

Capitalized Software Costs:
Based upon achieving technological feasibility through a detailed program design
for  Argus(TM)  and Aurora  products,  the Company has  capitalized  the cost of
software coding and development of these products, and reflects the amortization
of these costs in cost of sales. The annual amortization is calculated using the
greater of (a) the ratio that current  gross  revenues for a product bear to the
total of current and  anticipated  future gross revenues for that product or (b)
the  straight-line  method over the  remaining  estimated  economic  life of the
product  including the period being  reported on. The  estimation of both future
sales of products as well as the life of the product are critical estimates that
are  affected  by both  internal  and  external  factors  that might  affect the
Company's  estimates.  If the useful life is reduced,  or sales projections fall
short of the estimation, amortization expense will increase.

Revenue Recognition:
The Company  recognizes  revenue upon  shipment of products to its customers and
the passage of title, including shipments to its unconsolidated  affiliates,  or
at the time  services  are  completed  with  respect to repairs  not  covered by
warranty  agreements.  Prior to the sale of the Company's interest in Australian
unconsolidated  affiliates,  the  Company  deferred  its pro rata share of gross
profit on sales  for the  inventory  of the  affiliates  until  such time as its
affiliates sold to a third party customer.

                                       26
<PAGE>

Warranty Policy:
The Company  provides  for the  estimated  cost of product  warranty at the time
related sales revenue is recognized.  Furthermore, the Company warrants that its
products are free from defects in material and  workmanship  for a period of one
year, or almost two years in the case of its Argus,  Aurora, SA-4, and Advantage
products,  from the date of initial  purchase.  The warranty  does not cover any
losses or damages  that occur as a result of  improper  installation,  misuse or
neglect  and repair or  modification  by anyone  other than the  Company and its
appointed  service centers.  Repair costs beyond the warranty period are charged
to the Company's customers.

Reserve for Uncollectible Accounts Receivable:
At September 30, 2006,  our accounts  receivable  balance was $2.1 million.  Our
accounting  policy  is to  reserve  for  the  accounts  receivable  of  specific
customers based on our assessment of certain customers' financial condition.  We
make these  assessments using our knowledge of the industry coupled with current
circumstances or known events and our past experiences.  This policy is based on
our past collection experience. To the extent that our experience changes or our
customers experience financial difficulty our reserve may need to increase.

Investments in Unconsolidated Affiliates:
During fiscal 2006,  the Company sold its interest in its  affiliated  entities.
Prior to such  disposition,  the Company applied the equity method of accounting
to its  investments  (including  advances)  in  entities  where the  Company had
non-controlling  ownership  interests of 50% or less and exercised a significant
influence on that entity.  The Company's share of these affiliates'  earnings or
losses is included in the consolidated statements of operations through the date
of sale.  Prior to the sale of its  affiliates,  the Company  eliminated its pro
rata share of gross profit on sales to such  affiliates for inventory on hand at
the affiliates.  Effective  February,  2005, when the Company  exchanged its 25%
interest in Abacus-UK for a 12.5%  interest in Evolve-UK,  it accounted for this
investment on a cost basis.  For  investments  in which no public market exists,
the Company reviews the operating performance,  financing and forecasts for such
entities in assessing  the net  realizable  values of these  investments.  Since
April 2003, when the Company sold a significant portion of its investment in its
South African  affiliates which reduced its ownership in GPTHL from 24.2% to 5%,
the Company  accounted for its remaining  investment on a cost basis.  Effective
January 15, 2004, the Company sold its remaining interest in this affiliate.

Long-Lived Assets:
The Company accounts for long-lived  assets in accordance with the provisions of
Statement  of  Accounting   Standards  ("SFAS")  No.  144,  Accounting  for  the
Impairment  or Disposal of  Long-Lived  Assets.  This  Statement  requires  that
long-lived  assets be  reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future net cash flows expected
to be generated by the asset.  If the  carrying  amount of an asset  exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the  carrying  amount of the asset  exceeds  the fair  value of the asset.
Assets to be disposed of are  reported  at the lower of the  carrying  amount or
fair value less costs to sell, and are no longer depreciated. As a result of its
review,  the  Company  does  not  believe  that  any  impairment  exists  in the
recoverability of its long-lived assets as of September 30, 2006.

                                       27
<PAGE>

Income Taxes:
The Company accounts for income taxes under SFAS No. 109,  Accounting for Income
Taxes.  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.  The effective tax rate for the Company is
affected by the income mix derived from the core  business and from its share of
income from foreign affiliates that may have different tax rates. Realization of
deferred  tax  assets  is  primarily   dependent   upon  the  Company's   future
profitability,  and the Company  has,  consequently,  provided a full  valuation
allowance against its deferred income tax assets due to the impact of the fiscal
2006,  2005 and 2004 losses and uncertainty as to the ability to generate future
taxable income to sufficiently realize those assets. To the extent the Company's
profitability  improves,  the  valuation  allowance  may be wholly or  partially
reversed. At such time that the Company believes that it will realize sufficient
taxable income, the valuation allowance will be reassessed.

Debt Discounts:
Pursuant to the Securities  Purchase  Agreement with Laurus the Company received
proceeds of $1,500,000  from the issuance of the CTN in the principal  amount of
$1,500,000  and 7 year  warrants to  purchase  200,000  shares of the  Company's
common stock. The value allocated to the warrants resulted in a debt discount of
$506,000 that was being recognized as interest expense over the term of the CTN.
Additionally,  by allocating value to the warrants, Laurus received a beneficial
conversion  feature in the amount of $304,000 that  resulted in additional  debt
discount that was being recognized as interest expense over the term of the CTN.
Interest expense was computed utilizing the interest method, which results in an
effective yield over the term of the CTN. At September 30, 2004,  $1,425,000 was
outstanding under the CTN. During the year ended September 30, 2005, the Company
repaid  $50,000 and Laurus  converted the  remaining  $1,375,000 of the CTN into
323,000 shares of common stock, resulting in the full repayment of the CTN. As a
result of the  conversion  of the balance of the CTN, the entire  amount of debt
discount has been recognized as interest expense and charged to operations.

Stock-Based Compensation:
Effective  October 1, 2005,  the Company  adopted SFAS No. 123  (Revised  2004),
Share Based Payment ("SFAS No. 123R"), which requires a public entity to measure
the cost of employee,  officer and director services received in exchange for an
award of equity  instruments  based on the grant  date fair  value of the award.
SFAS No. 123R supersedes the Company's  previous  accounting under SFAS No. 123,
Accounting for Stock-Based  Compensation  ("SFAS No. 123"),  which permitted the
Company to account  for such  compensation  under  Accounting  Principles  Board
Opinion  No.  25,  Accounting  for Stock  Issued to  Employees  ("APB No.  25").
Pursuant to APB No. 25, and related  interpretations,  no compensation  cost had
been recognized in connection with the issuance of stock options, as all options
granted under the Company's stock option plans had an exercise price equal to or
greater than the market value of the underlying  common stock on the date of the
grant.

                                       28
<PAGE>

In advance of implementing  the  requirements of SFAS No. 123R, the Company,  in
September 2005, accelerated the vesting of all unvested stock options previously
awarded to employees,  officers and directors in order to avoid the  recognition
of compensation  expense under SFAS No.123R,  with respect to these options. Any
option grants since then have resulted in compensation expense.

The Company  adopted  SFAS No. 123R using the  modified  prospective  transition
method,  which  requires  that  compensation  cost be recorded as earned for all
unvested stock options  outstanding at the beginning of the first fiscal year of
adoption  of SFAS No.  123R based upon the grant  date fair value  estimated  in
accordance with the original  provisions of SFAS No. 123 and for all share-based
payments granted subsequent to the adoption,  based on the grant date fair value
estimated in  accordance  with the  provisions  of SFAS No. 123R.  The Company's
consolidated  financial  statements  as of  and  for  the  twelve  months  ended
September 30, 2006 reflect the impact of SFAS No. 123R.  In accordance  with the
modified  prospective  transition method, the Company's  consolidated  financial
statements  for prior  periods  have not been  restated to  reflect,  and do not
include, the impact of SFAS No. 123R

Item 7A.        Quantitative and Qualitative Disclosures About Market Risk
--------        ----------------------------------------------------------

Fiscal 2006 saw  continued  moderation  in the level of  inflation.  In order to
offset the resultant rise in the costs of operations,  the Company has assessed,
and will continue to assess,  ways to gain efficiencies and reduce operating and
manufacturing  costs,  thereby  increasing  profit  margins  and  improving  its
operations.

While the Company operates in many international markets, it does so principally
through the sale of its products with invoices  denominated in the United States
currency.  Additionally,  the Company  operates without the use of derivative or
hedging  instruments.  The  Company  is  subject  to the  effects  caused by the
strengthening  or  weakening  of the  United  States  currency,  and as such may
consider the use of currency instruments in the future.

The Company has a $2.5 million credit facility consisting of a secured revolving
note of $1.75  million  and a  secured  convertible  minimum  borrowing  note of
$750,000 with  borrowings  subject to interest at the prime rate as published in
the Wall Street  Journal plus 150 basis  points.  As such,  the interest rate is
variable and the  interest  expense on  potential  borrowings  is based upon the
types of loans and applicable  interest  rates at the time of borrowing.  In the
event the Company had its entire  revolving  credit  facility,  $2.5  million at
September  30,  2006,  outstanding  for the entire  year,  each 100 basis  point
increase would result in an annual increase in interest expense of approximately
$25,000.

During  fiscal  2006,  the Company  sold its  interests  in its  privately  held
unconsolidated  foreign  companies which its used for the purposes of conducting
its business overseas and attaining its strategic objectives.  These investments
had a net carrying value of $2.2 million at September 30, 2005 and were included

                                       29
<PAGE>

in  Investments  in  unconsolidated  affiliates  at  September  30, 2005 and was
accounted for using the equity method. For investments in which no public market
exists,  our policy is to regularly  review the  operating  performance,  recent
financing  transactions  and forecasts  for such  companies in assessing the net
realizable  values of the investments in these companies.  Impairment  losses on
equity investments are recorded when events and circumstances indicate that such
assets are impaired and the decline in value is other than temporary.

Item 8.         Financial Statements and Supplementary Data
-------         -------------------------------------------

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

Item 9.         Changes in and Disagreements With Accountants on Accounting and
-------         ---------------------------------------------------------------
                Financial Disclosure
                --------------------
None.

Item 9A.        Controls and Procedures
--------        -----------------------

The Company  maintains a system of disclosure  controls and  procedures  that is
designed to provide reasonable assurance that information,  which is required to
be disclosed  by the Company in the reports  that it files or submits  under the
Securities  Exchange Act of 1934, as amended, is accumulated and communicated to
management in a timely manner.  The Company's Chief Executive  Officer and Chief
Financial  Officer  have  evaluated  this  system  of  disclosure  controls  and
procedures as of the end of the period covered by this annual report and believe
that the system is operating effectively to ensure appropriate disclosure. There
have been no changes in the Company's internal control over financial  reporting
during  the most  recent  fiscal  year that  have  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

Item 9B.        Other Information
--------        -----------------

None.

                                       30
<PAGE>

                                    PART III

Item 10.        Directors and Executive Officers of the Registrant
--------        --------------------------------------------------

a) Directors and Executive Officers

The following table sets forth certain information with respect to our directors
and executive officers.

Name                   Age     Positions with the Company
----                   ---     --------------------------
Richard E. Gerzof      61      Director, Chairman of the Board(1)(2)(3)
Elliot  H. Goldberg    66      Director, Chairman of the Audit and Compensation
                               Committees(1)(2)
William H. Wood        64      Director, Chairman of the Nominating Committee(3)
Stephen Nevitt         58      President/Chief Executive Officer, Director(2)(3)
Matthew Dollinger      62      Director(1)
William McMahon        54      Vice President, Chief Financial Officer and
                               Secretary

(1)  Member of the Audit Committee
(2)  Member of the Compensation Committee
(3)  Member of the Nominating Committee

     Richard E. Gerzof has been  Chairman of the Board of Directors  since March
2004, Vice Chairman of the Board of Directors from May 2003 to March 2004, and a
director of the  Company  since its  inception  in 1988.  Mr.  Gerzof has been a
partner of Sun Harbor  Manor,  a nursing  home,  since 1974.  He has also been a
licensed  real estate  broker since 1982 and was a partner or principal in Sonom
Realty Co., a property management and construction firm, from 1974 through 1992.
He has also been a partner in the Frank's Steaks Restaurant chain since 1993.

     Elliot H.  Goldberg has been a director of the Company  since January 2006.
Mr.  Goldberg  has been the  senior  partner at the  public  accounting  firm of
Liebman,  Goldberg & Drogin,  LLP since May 1, 1997. From 1967 to May 1, 1997 he
operated the public  accounting  firm of Elliot H. Goldberg CPA PC.,  which then
merged into Liebman  Goldberg & Drogin,  LLP. Mr.  Goldberg has been a member of
the New York  State  Society of CPAs and the  American  Institute  of  Certified
Public  Accountants  since 1967.  Since 1971 Mr.  Goldberg has been President of
Lor-Deb Enterprises Ltd., an insurance  consulting  brokerage firm. Mr. Goldberg
received a  Bachelor  of Arts  Degree in  Economics  in 1963 and a  Bachelor  of
Business Administration Degree in Accounting in 1965 from the City University of
N.Y.

     William H. Wood has been a director  of the Company  since  August 2004 and
Chairman of the Nominating Committee since January 2005. He was President of the
Company from January 1993 to March 1998 and served as Chief Executive Officer of
the Company  from April 1993 to May 1996.  He was a director of the Company from
May 1993 to March  1999.  From April 1999 to July 2004 he was self  employed  in
various consulting and sales assignments in the beverage and vending industries,
and was engaged in community  activities and private  investments.  From January

                                       31
<PAGE>

1990  until  January  1993  he  held  various  executive   positions  at  Maytag
Corp./Dixie Narco Division,  including Director of Product Development  (January
1990 to June 1990),  Vice President,  Engineering and Technical  Resources (July
1990 to April 1992),  and Vice  President,  Gaming and OEM Business (May 1992 to
January 1993). From July 1990 to January 1993 he was also a corporate officer of
Maytag Corp., with responsibilities in its Dixie Narco Division.

     Stephen  Nevitt  has been  President  and Chief  Executive  Officer  of the
Company  since  November  2005 and a director of the Company since January 2005.
Since  September  2003,  he has  been a  partner  in  Solar  Crossings  LLC,  an
international  marketing and sales agency that is  consulting on the  commercial
launch of new sunglass  technologies.  From August 2000 through August 2003, Mr.
Nevitt  was a  consultant  to  Bushnell  Performance  Optics,  a leading  global
distributor of sunglasses,  binoculars and range finders.  From November 1976 to
August 1995 Mr. Nevitt worked in a family sunglass business. In 1995 his company
successfully  completed  an  initial  public  offering  trading  under  the name
Solar-Mates,  Inc. In 1997 his company  acquired the Serengeti  Eyewear division
from  Corning  Inc.  The company,  now known as  Serengeti  Eyewear,  Inc.,  was
purchased by strategic buyers in August 2000. Mr. Nevitt served as President/CEO
of the company from October 1992 to August 2000.

     Matthew  Dollinger has been a director of the Company since April 25, 2006.
Mr.  Dollinger has been a senior  member of the law firm of Dollinger,  Gonski &
Grossman  since  its  formation  in  1977.  The  firm is  primarily  engaged  in
Commercial and Real Property  litigation in the Federal and State Courts located
in the States of New York, New Jersey and Florida.  Mr. Dollinger is licensed to
practice  law in New York and Florida as well as before  various  United  States
District Courts and the United States Supreme Court.  Mr.  Dollinger is a member
of the New York State Bar Association,  Florida Bar  Association,  Nassau County
Bar Association,  Brooklyn Bar  Association,  Suffolk County Bar Association and
the American Bar  Association.  Mr.  Dollinger  participates  as a member of the
Commercial  Litigation  and  Real  Property  Committees  in  various  state  bar
associations.  Mr.  Dollinger  has  lectured  to bar  associations  and  non-bar
association groups in the fields of Commercial  Litigation,  Title Insurance and
Ethical matters involving attorneys and clients.  Mr. Dollinger received a Juris
Doctor Degree in 1969 from the Brooklyn Law School and a Bachelor of Arts Degree
in 1966 from the Long Island University.

     Edward  Seidenberg had been a director of the Company since April 2003, but
did not  stand  for  re-election.  Mr.  Seidenberg  was  Chairman  of the  Audit
Committee from April 2003 to January 2004 and from January 2005 until April 2006
and Chairman of the  Compensation  Committee from January 2004 until April 2006.
Since  November  2000,  Mr.  Seidenberg  has been  Chief  Operating  Officer  of
InfoHighway  Communications  Corporation.  He was  previously  President  of the
Company from March 1998 to November  2000,  was Chief  Operating  Officer of the
Company  from March 1997 to November  2000,  and a director of the Company  from
August 1996 to November  2000.  From August 1996 to March 1998 he served as Vice
President of the Company.  From October 1995 to July 1996 he was Vice  President
and  Chief   Financial   Officer  of  MCI  Wireless,   the   country's   largest
non-facilities  provider of cellular telephone  service,  and from March 1990 to
September 1995 he was Vice President and Chief  Financial  Officer of Nationwide
Cellular Service,  Inc. Mr. Seidenberg  received his BS in Accounting from State
University of New York at Buffalo and his MBA in Finance from Emory University.

                                       32
<PAGE>

     William L. McMahon has been Secretary of the Company and Vice President and
Chief  Financial  Officer of the Company since April 17, 2006. From October 2001
until  April 16,  2006 Mr.  McMahon  was  Senior  Vice  President  of  Buccino &
Associates,  Inc. a national turnaround  consulting firm. From September 2000 to
October 2001,  Mr. McMahon  served as Chief  Financial  Officer of Bobby Allison
Wireless, a publicly traded retailing operation. Mr. McMahon was Chief Financial
Officer of  Serengeti  Eyewear,  Inc.,  from June 1998 to September  2000.  From
December 1992 to June 1998, Mr. McMahon was Director of Development for Uniroyal
Technology Corporation,  a manufacturer of specialty plastics and acrylics. From
June  1984 to  December  1992,  Mr.  McMahon  was Vice  President  of  Buccino &
Associates,  Inc. a national turnaround firm. Mr. McMahon received a Bachelor of
Science in Commerce and Accounting from DePaul  University in Chicago,  Illinois
in 1974.

b) Audit Committee

The Audit Committee has been established in accordance with Section  3(a)(58)(A)
of the  Securities  Exchange Act of 1934,  as amended.  The  Committee  provides
assistance  to the  Company's  directors  in  fulfilling  the Board's  oversight
responsibility as to the Company's accounting, auditing, and financial reporting
practices and as to the quality and  integrity of the  financial  reports of the
Company.  The specific functions and responsibilities of the Audit Committee are
set forth in the written charter of the Audit Committee  adopted by the Board of
Directors.  The Audit Committee is made up of Elliot Goldberg,  Chairman and its
financial  expert,  Richard  Gerzof  and  Matthew  Dollinger.  Mr.  Goldberg  is
independent,  as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the
Exchange Act.

c) Code of Ethics

The Company has adopted a code of ethics that applies to its directors, officers
and  employees.  The Company filed a copy of its code of ethics as Exhibit 14 to
its annual report on Form 10-K for the fiscal year ended September 30, 2004. The
Company  intends to report  amendments to or waivers from the Company's  code of
ethics that are required to be reported  pursuant to the rules of the Securities
and Exchange Commission on Form 8-K.

d) Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires the
Company's  directors and executive  officers,  and persons who own more than ten
percent of the Company's  Common Stock, to file with the Securities and Exchange
Commission  initial  reports of ownership and reports of changes in ownership of
Common  Stock of the  Company.  To the  Company's  knowledge,  based solely on a
review of such reports  furnished to the Company with respect to its most recent
fiscal year, the Company believes that during or with respect to the fiscal year
ended  September  30,  2006 all  reports  under  Section 16 (a) have been timely
filed.

Item 11.        Executive Compensation
--------        ----------------------

a) Summary Compensation Table

                                       33
<PAGE>

The following table summarizes the compensation earned for the last three fiscal
years by the Company's Chief Executive Officer and all other executive  officers
whose  salary and bonus  exceeded  $100,000 for the 2006 fiscal year (the "Named
Executive  Officers"),  for services in all capacities to the Company during its
2006, 2005 and 2004 fiscal years.
<TABLE>
<CAPTION>
<S>             <C>                      <C>                <C>                                   <C>
                                                                                                 Long-Term
                                                                 Annual Compensation            Compensation
                                                                 -------------------            ------------
                                                                                                Securities
     Name and Principal                                                                         Underlying
        Position                         Year              Salary              Bonus            Options
     ------------------                  ----              ------              -----            ------------
                                                           $251,800              ---              500,000
Stephen H. Nevitt (1)                    2006
          President and Chief
          Executive Officer
William McMahon (2)                      2006               $88,000              ---              250,000
          Vice President and
          Chief Financial Officer
Thomas Oliveri (1)                       2006              $264,000              ---                  ---
          Executive Vice President and   2005               231,000           15,000               15,000
          Chief Operating  Officer       2004               200,000              ---              100,000
Thomas McNeill (2)                       2006               100,187              ---                  ---
          Vice President, Chief          2005               171,000            4,000                  ---
          Financial Officer              2004               161,000           10,000               25,000
</TABLE>

(1)  Effective  November 2005, Mr. Nevitt  replaced Mr. Oliveri as President and
     Chief Executive  Officer and Mr. Oliveri assumed the positions of Executive
     Vice President and Chief Operating Officer.

(2)  Effective  April  17,  2006,  Mr.  McMahon  replaced  Mr.  McNeill  as Vice
     President and Chief Financial Officer.

                                       34
<PAGE>

b) Option Grants in Last Fiscal Year (Individual Grants)
<TABLE>
<CAPTION>
<S>                        <C>     <C>            <C>          <C>        <C>  <C>        <C>           <C>
                                                                                      Potential Realizable Value
                                                                                       at Assumed Annual Rates of
                                                                                       Stock Price Appreciation
                                                                                              for Option
                                               % of Total
                      Number of Securities   Options Granted  Exercise                           Term
                        Underlying Options   to Employees in    Price    Expiration       -----------------------
         Name                Granted           Fiscal Year    ($/Share)      Date            At 5%      At 10%
=================================================================================================================
    Stephen Nevitt         250,000 (1)            30.1%        $2.85      11/6/2012       $290,059      $675,961
-----------------------------------------------------------------------------------------------------------------
    Stephen Nevitt         250,000 (2)            30.1%        $2.18      11/6/2012       $185,352      $420,501
-----------------------------------------------------------------------------------------------------------------
     William McMahon       250,000 (3)            30.1%        $1.90      4/16/2013       $193,373      $450,641
-----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  These options were awarded at the fair market value of the Company's Common
     Stock at November 7, 2005, the date of the award, and become exercisable in
     cumulative annual installments of 33.3% per year on each of the first three
     anniversaries  of the grant date.  The options were awarded for services as
     an executive officer.

(2)  These options were awarded at the fair market value of the Company's Common
     Stock at April 25, 2006, the date of the award,  and become  exercisable in
     cumulative annual installments of 33.3% per year on each of the first three
     anniversaries  of the grant date.  The options were awarded for services as
     an executive officer.

(3)  These options were awarded at the fair market value of the Company's Common
     Stock at April 17, 2006, the date of the award,  and become  exercisable in
     cumulative annual installments of 33.3% per year on each of the first three
     anniversaries  of the grant date.  The options were awarded for services as
     an executive officer.

No SARS were granted in the last fiscal year.

c) Aggregated Option Exercises and Fiscal Year End Option Values
<TABLE>
<CAPTION>
<S>                                                       <C>           <C>              <C>
                                                      Number of Securities
                                                      Underlying Unexercised         Value of Unexercised
                                                            Options at               In-the-Money Options
                    Shares Acquired on   Value          September 30, 2006          September 30, 2006(1)
        Name           Exercise (#)   Realized($)   Exercisable/Unexercisable     Exercisable/Unexercisable
==============================================================================================================
Stephen Nevitt                    ---         ---         14,333        507,167          $----           ----
--------------------------------------------------------------------------------------------------------------
William McMahon                   ---         ---                       250,000          $----           ----
--------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The closing price of the  Company's  Common Stock as reported on the NASDAQ
     National  Market  on  September  30,  2006 was $1.29  per  share.  Value is
     calculated by multiplying (a) the difference  between the closing price and
     the  option  exercise  price by (b) the  number of  shares of Common  Stock
     underlying the option.

No SARS were exercised during the last fiscal year or were outstanding at fiscal
year end.

d)   Compensation of Directors

                                       35
<PAGE>


Compensation for non-employee directors is as follows:

Annual Board retainer                          $12,000
Annual Audit Committee Chairman fee             4,000
Annual Compensation Committee Chairman fee      1,000
Board meeting fee                               1,000
Committee meeting fee                             500

Each  non-employee  director may elect to receive  stock options in lieu of cash
compensation. Employee directors do not receive director fees.

The following chart  summarizes the stock options granted and cash  compensation
paid to  directors  for services  rendered as  directors  during the 2006 fiscal
year:

                               Options     Cash
                               Granted     Compensation
                               -------     ------------
Richard E. Gerzof              23,500                $0
William H. Wood                 3,500            21,000
Elliot H. Goldberg              6,500            16,050
Matthew Dollinger              21,500                 0
Edward Seidenberg                   0            15,400
-------------------            ------           -------
        Total                  55,000           $52,450
                               ======           =======

e) Employment Agreements

Effective  November 7, 2005 the Company  entered into an agreement  with Stephen
Nevitt providing for his employment as President and Chief Executive Officer for
a one-year term with automatic  extensions for additional  one-year terms unless
and until  either the Company or Mr.  Nevitt  provides 90 days  advance  written
notice of a desire to terminate  the  agreement.  The  agreement  provided for a
salary  at a rate of  $225,000  per  year  and  bonuses  and  stock  options  as
determined  by the Board of Directors.  On January 11, 2006 the Company  amended
the agreement  and  increased  the annual salary from $225,000 to $300,000.  The
agreement  grants Mr. Nevitt  options to purchase  250,000  shares of the common
stock of the Company at $2.85 per share, the fair market value as of the date of
the  agreement,  which  options vest at the rate of 83,333  options on the first
anniversary of the date of the agreement and a like amount on each of the second
and third  anniversaries,  and options to purchase an additional 250,000 shares,
subject to approval by the  shareholders  of the Company at its next  meeting of
stockholders.  If such additional options are approved, the exercise price would
be the fair market  value at the date of the  approval  and would  otherwise  be
identical to the options previously granted. On April 25, 2006, the options were
approved by the  shareholders  and the  Company  granted  250,000  options at an
exercise  price of $2.18.  The  agreement  also  provides for  participation  in
employee benefit plans and other fringe  benefits.  If terminated under a change
of control in the second six month period, he would be entitled to $50,000.

                                       36
<PAGE>

Effective April 17, 2006 the Company entered into an agreement with William
McMahon to serve as Vice President and Chief Financial Officer of the Company
for a period of one year at an annual salary of $200,000. The agreement grants
Mr. McMahon options to purchase 250,000 shares of the Common Stock of the
Company at $1.90 per share, the fair market value as of the date of the
agreement, which options vest at the rate of 83,333 options on the first
anniversary of the date of this agreement and a like amount on each of the
second and third anniversaries.

Item 12.        Security Ownership of Certain Beneficial Owners and Management
--------        --------------------------------------------------------------
                and Related Stockholder Matters
                -------------------------------

a) Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of December 31, 2006, certain  information as
to the Common Stock  ownership of each of the Company's  directors,  each of the
officers  included  in the  Summary  Compensation  Table  above,  all  executive
officers and directors as a group and all persons known by the Company to be the
beneficial  owners of more than five  percent  of the  Company's  Common  Stock.
Unless otherwise noted, the Company believes that each person named in the table
below has sole voting and investment  power with respect to all shares of Common
Stock beneficially owned by such person.

                                            Amount and Nature    Percentage of
                                              Of Beneficial       Outstanding
                Name and Address                Ownership         Shares Owned
                ----------------            -----------------    -------------
Richard E. Gerzof                               501,100(1)           7.9%
   873 Remsens Lane
   Upper Brookville, NY  11771


William H. Wood                                 303,652(2)           4.9%
   122 Burchwood Bay Cove
   Hot Springs, AK 71913

Stephen Nevitt                                  521,500(3)           7.7%
   c/o Global Payment Technologies, Inc.
   425B Oser Avenue
   Hauppauge, NY 11788

William McMahon                                 250,000(4)           3.9%
   c/o Global Payment Technologies, Inc.
   425B Oser Avenue
   Hauppauge, NY 11788


                                       37
<PAGE>

Elliot Goldberg                                   7,500(5)              *
   c/o Global Payment Technologies, Inc.
   425B Oser Avenue
   Hauppauge, NY 11788

Matthew Dollinger                                21,500(6)              *
   c/o Global Payment Technologies, Inc.
   425B Oser Avenue
   Hauppauge, NY 11788

All directors and executive officers as a
group
(6 persons)                                   1,605,252(7)          22.4%

---------------
*  Less than 1%

(1)  Includes  125,500  shares  issuable upon exercise of currently  exercisable
     options.
(2)  Includes  10,000 shares  issuable  upon  exercise of currently  exercisable
     options.
(3)  Consists of 521,500 shares issuable upon exercise of currently  exercisable
     options.
(4)  Consists of 250,000 shares issuable upon exercise of currently  exercisable
     options.
(5)  Includes  6,500 shares  issuable  upon  exercise of  currently  exercisable
     options.
(6)  Consists of 21,500 shares  issuable upon exercise of currently  exercisable
     options.
(7)  Includes  940,000  shares  issuable upon exercise of currently  exercisable
     options.

b) Equity Compensation Plan Information

         The table below sets forth certain information as of the Company's
fiscal year ended September 30, 2006 regarding the shares of the Company's
common stock available for grant or granted under stock option plans that (i)
were adopted by the Company's stockholders and (ii) were not adopted by the
Company's stockholders.
<TABLE>
<CAPTION>
<S>                                         <C>                          <C>                       <C>
                                                                                      Number of securities remaining
                               Number of securities to be        Weighted-average      available for future issuance
                                 issued upon exercise of        exercise price of        under equity compensation
                              outstanding options, warrants    outstanding options,   plans (excluding securities in
                                       and rights              warrants and rights    the first column of this table)
                             -------------------------------   --------------------   -------------------------------
Equity Compensation plans                   1,290,550                    $3.12                     1,448,485
approved by security
holders

Equity Compensation plans              Not Applicable           Not Applicable                Not Applicable
not approved by security
holders
</TABLE>

                                       38
<PAGE>

Item 13.        Certain Relationships and Related Transactions
--------        ----------------------------------------------

None.

Item 14.        Principal Accountant Fees and Services
--------        --------------------------------------

a) Independent Auditors

Eisner LLP has audited and reported upon the financial statements of the Company
for the fiscal years ended  September  30, 2006,  2005 and 2004.  For the fiscal
years  ended  September  30, 2006 and 2005,  the Company  paid (or will pay) the
following fees for services rendered during the audit in respect of those years:

b) Audit Fees

For the fiscal  years  ended  September  30, 2006 and 2005 Eisner LLP billed the
Company $128,000 and $113,000,  respectively for services rendered for the audit
of the Company's annual financial statements included in its report on Form 10-K
and the reviews of the financial statements included in its reports on Form 10-Q
filed with the SEC.

c) Audit Related Fees

None.

d) Tax Fees

For the fiscal  years ended  September  30, 2006 and 2005 the Company was billed
$31,000  and  $15,000,  respectively,  by  Eisner  LLP in  connection  with  the
preparation of tax returns and the provision of tax advice.

e)       All Other Fees

For the fiscal years ended September 30, 2006 and 2005 Eisner LLP billed the
Company $15,000 and $13,000, respectively, in connection with the audit of its
employee benefit plans.

f) Pre-Approval Policies and Procedures

The Audit Committee  pre-approves all work performed by the Company's  auditors.
The Audit  Committee  of the  Board of  Directors  has  considered  whether  the
provision of non-audit  services by Eisner LLP is  compatible  with  maintaining
auditor independence.

                                       39
<PAGE>

                                     PART IV


Item 15.        Exhibits and Financial Statement Schedules
--------        ------------------------------------------

The following documents are filed as part of this report:

     1.   Global Payment Technologies, Inc. Consolidated Financial Statements:

          Report of Independent Registered Public Accounting Firms (page 47)

          Consolidated  Balance  Sheets as of September  30, 2006 and 2005 (page
          F-2)

          Consolidated  Statements  of  Operations  for each of the years in the
          three-year period ended September 30, 2006 (page F-3)

          Consolidated Statements of Shareholders' Equity and Comprehensive Loss
          for each of the years in the  three-year  period ended  September  30,
          2006 (page F-4)

          Consolidated  Statements  of Cash  Flows  for each of the years in the
          three-year period ended September 30, 2006 (page F-5)

          Notes to Consolidated Financial Statements (pages 48-65)

     2.   Global   Payment   Technologies   Australia   Pty  Limited   Financial
          Statements:

          Report of Independent Registered Public Accounting Firm (page 66)

          Balance Sheets as of August 31, 2006 and June 30, 2006 (page 67)

          Statement of Operations  for the period ended August 31, 2006 and year
          ended June 30, 2006 (page 68)

          Statements  of  Stockholders'  Equity for period ended August 31, 2006
          and year ended June 30, 2006 (page 69)

          Statements  of Cash Flows for period  ended  August 31,  2006 and year
          ended June 30, 2006 (page 70)

          Notes to Financial Statements (pages 71-78)

                                       40
<PAGE>

          Report of Independent Registered Public Accounting Firm (page 79)

          Balance  Sheets as of June 30, 2006 and 2005 (page 80)

          Statements  of Income for each of the years in the  three-year
          period ended June 30, 2006  (page 81)

          Statements  of  Stockholders'  Equity for each of the years  in  the
          three-year  period  ended  June  30,  2006  (page  82)

          Statements  of Cash  Flows  for each of the  years  in the  three-year
          period ended June 30, 2006 (page 83)

          Notes to Financial Statements (pages 84-90)

     3.   Global  Payment  Technologies  eCash  Holdings  Pty Limited  Financial
          Statements:  Report of Independent  Registered  Public Accounting Firm
          (page 91)

          Consolidated Balance Sheets as of June 30, 2006 (page 92)

          Consolidated  Statements  of  Operations  for year ended June 30, 2006
          (page 93)

          Consolidated  Statements  of  Stockholder's  Equity for the year ended
          June 30, 2006 (page 94)

          Consolidated Statements of Cash Flows for the year ended June 30, 2006
          (page 95)

          Notes to Consolidated Financial Statements (pages 96-103)

          Report of Independent Registered Public Accounting Firm (page 104)

          Consolidated  Balance  Sheets as of August 31,  2006 and June 30, 2006
          (page 105)

          Consolidated  Statements of Operations for the period ended August 31,
          2006 and June 30, 2006 (page 106)

          Consolidated  Statements of Stockholder's  Equity for the period ended
          August 31, 2006 and June 30, 2006 (page 107)

          Consolidated  Statements of Cash Flows for the period ended August 31,
          2006 and June 30, 2006 (page 108)

          Notes to Consolidated Financial Statements (pages 109-116)

                                       41
<PAGE>

     4.   Financial  statement  schedules required to be filed by Item 8 of this
          Form: Schedule II - Valuation and Qualifying Accounts (page 117)

     5.   Exhibits:

Exhibit No.
-----------
     3.1  Certificate of Incorporation (2)
     3.2  Certificate of Merger (2)
     3.3  By-Laws (2)
     4.1  Securities  Purchase Agreement dated March 16, 2004 by and between the
          registrant and Laurus (5)
     4.2  Common Stock  Purchase  Warrant  dated March 16, 2004 issued to Laurus
          (5)
     4.3  Registration  Rights Agreement dated March 16, 2004 by and between the
          registrant and Laurus (5)
     4.4  Security  Agreement dated March 16, 2004 by and between the registrant
          and Laurus (5)
     4.5  Security  Agreement dated March 16, 2004 by and between the registrant
          and Laurus (5)
     4.6  Secured Convertible Minimum Borrowing Note dated March 16, 2004 issued
          to Laurus (5)
     4.7  Secured Revolving Note dated March 16, 2004 issued to Laurus (5)
     4.8  Registration  Rights Agreement dated March 16, 2004 by and between the
          registrant and Laurus (5)
     4.9  Amendment  No.  1,  dated  April  29,  2004,  to  Securities  Purchase
          Agreement (6)
     4.10 Amendment  No. 1,  dated  April 29,  2004,  to Common  Stock  Purchase
          Warrant (6)
     4.11 Amendment No. 1, dated April 29, 2004, to Secured  Convertible Minimum
          Borrowing Note (6)
     4.12 Amendment No. 1, dated April 29, 2004, to Secured Revolving Note (6)
     4.13 Amendment No.2,  dated August 9, 2004 to Secured  Convertible  Minimum
          Borrowing Note (7)
     4.14 Amendment No.2, dated August 9, 2004 to Secured Revolving Note (7)
     10.1 Lease  dated  October  1,  2000  between  the  Company  and  Heartland
          Associates (4)
     10.2 1994 Stock Option Plan (1)*
     10.3 1996 Stock Option Plan (1)*
     10.4 2000 Stock Option Plan (3)*
     10.7 Employment  Agreement  dated  November 7, 2005 between the Company and
          Stephen Nevitt (9)*
     10.9 Employment  Agreement  dated  April 17,  2006  between the Company and
          William McMahon (10)*
     14   Code of Ethics (8)
     21   List of Subsidiaries (11)
     23.1 Consent  of  Eisner  LLP,  Independent  Registered  Public  Accounting
          Firm(11)

                                       42
<PAGE>

     23.2 Consent of Pitcher Partners,  Independent Registered Public Accounting
          Firm (11)
     31.1 Rule13a-14a Certification (Chief Executive Officer) (11)
     31.2 Rule13a-14a Certification (Chief Financial Officer) (11)
     32   Section 1350 Certification (11)

(1)  Filed as an exhibit to the  Company's  Registration  Statement  on Form S-8
     (File #333-30829).
(2)  Filed as an exhibit to the  Company's  Annual Report on Form 10-KSB for the
     fiscal year ended September 30, 1997.
(3)  Filed as an exhibit to the  Company's  Proxy  Statement for the fiscal year
     ended September 30, 1999.
(4)  Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 2000.
(5)  Filed as an exhibit to the Company's Current Report on Form 8-K dated March
     16, 2004, filed with the SEC on March 18, 2004.
(6)  Filed as an exhibit to the Company's  Quarterly Report on Form 10-Q for the
     fiscal quarter ended March 31, 2004.
(7)  Filed as an exhibit to the Company's  Quarterly Report on Form 10-Q for the
     fiscal quarter ended June 30, 2004.
(8)  Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 2004.
(9)  Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 2005.
(10) Filed as an exhibit to the Company's  Quarterly Report on Form 10-Q for the
     fiscal quarter ended March 31, 2006.
(11) Filed herewith * Management contract or compensatory plan or arrangement

                                       43
<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 Nevitt
                                Stephen Nevitt
                                President and Chief Executive Officer

Date:  January 12, 2007

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

        Signature       Title                                           Date
        ---------       -----                                           ----

s/Stephen Nevitt        President, Chief Executive Officer      January 12, 2007
----------------        and Director
Stephen Nevitt

s/Richard Gerzof        Director, Chairman of the Board         January 12, 2007
----------------
Richard Gerzof

s/William H. Wood       Director                                January 12, 2007
-----------------
William H. Wood

s/Elliot Goldberg       Director                                January 12, 2007
-----------------
Elliot Goldberg

s/Matthew Dollinger     Director                                January 12, 2007
-------------------
Matthew Dollinger

s/William McMahon       Vice President, Chief Financial         January 12, 2007
-----------------       Officer and Principal Accounting
William McMahon         Officer

                                       44
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                        <C>
                        GLOBAL PAYMENT TECHNOLOGIES, INC.

                   Index to Consolidated Financial Statements
                                                                                         Page

Consolidated Financial Statements of Global Payment Technologies, Inc.:

Report of Independent Registered Public Accounting Firm                                    47

     Consolidated Balance Sheets as of September 30, 2006 and 2005                        F-2

     Consolidated  Statements  of  Operations  for  each  of  the  years  in the
     three-year period ended September 30, 2006                                           F-3

     Consolidated  Statements of Shareholders' Equity and Comprehensive Loss for
     each of the years in the three-year period ended September 30, 2006                  F-4

     Consolidated  Statements  of  Cash  Flows  for  each  of the  years  in the
     three-year period ended September 30, 2006                                           F-5

     Notes to Consolidated Financial Statements                                         48-65

Financial Statements of Global Payment Technologies Australia Pty Limited:(1)

Report of Independent Registered Public Accounting Firm                                    66

     Balance Sheets as of August 31, 2006 and June 30, 2006                                67

     Statement of Operations for the period ended August 31, 2006 and year ended
     June 30, 2006                                                                         68

     Statements  of  Stockholders'  Equity for period  ended August 31, 2006 and
     year ended June 30, 2006                                                              69

     Statements  of Cash Flows for period  ended  August 31, 2006 and year ended
     June 30, 2006                                                                         70

     Notes to Financial Statements                                                      71-78

Report of Independent Registered Public Accounting Firm                                    79

     Balance Sheets as of June 30, 2006 and 2005                                           80

     Statements of  Operations  for each of the years in the  three-year  period
     ended June 30, 2006                                                                   81

     Statements of Stockholders'  Equity for each of the years in the three-year
     period ended June 30, 2006                                                            82

     Statements  of Cash  Flows for each of the years in the  three-year  period
     ended June 30, 2006                                                                   83
</TABLE>

                                       45
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                        <C>
     Notes to Financial Statements                                                      84-90

Financial Statements of Global Payment Technologies eCash Holdings Pty Limited::(1)

Report of Independent Registered Public Accounting Firm                                    91

     Consolidated Balance Sheets as of June 30, 2006                                       92

     Consolidated Statements of Operations for year ended June 30, 2006                    93

     Consolidated Statements of Stockholder's Equity for the year ended June 30,
     2006                                                                                  94

     Consolidated Statements of Cash Flows for the year ended June 30, 2006                95

     Notes to Consolidated Financial Statements                                        96-103

Report of Independent Registered Public Accounting Firm                                   104

     Consolidated Balance Sheets as of August 31, 2006 and June 30, 2006                  105

     Consolidated  Statements of Operations for the period ended August 31, 2006
     and June 30, 2006                                                                    106

     Consolidated Statements of Stockholder's Equity for the period ended August
     31, 2006 and June 30, 2006                                                           107

     Consolidated  Statements of Cash Flows for the period ended August 31, 2006
     and June 30, 2006                                                                    108

     Notes to Consolidated Financial Statements                                       109-116

Additional Financial Information Pursuant to the Requirements of Form 10-K:

     Schedule II - Valuation and Qualifying Accounts and Reserves                         117

Schedules  not  listed  above  have been  omitted  because  they are  either not
applicable  or the  required  information  has been  provided  elsewhere  in the
consolidated financial statements or notes thereto.

(1)  Included pursuant to Reg. S-X, Rule 3-09
</TABLE>

                                       46
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
Global Payment Technologies, Inc.

We have audited the accompanying  consolidated  balance sheets of Global Payment
Technologies,  Inc. and  subsidiaries as of September 30, 2006 and 2005, and the
related  consolidated   statements  of  operations,   shareholders'  equity  and
comprehensive  loss and cash  flows  for each of the three  years in the  period
ended September 30, 2006. Our audits also included financial  statement Schedule
II, listed in the index at Item 15(a). These financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule  based on our  audits.  We did not audit the  financial  statements  of
Global Payment Technologies  Australia Pty Limited (GPTA) and eCash Holdings Pty
Limited (eCash), 50% and 35%,  respectively,  owned investee companies which the
Company sold  effective  August 31, 2006.  The Company's  investment in GPTA and
eCash was  $2,198,000 and $21,000,  respectively,  at September 30, 2005 and its
equity  in  earnings  (loss)  of GPTA  and  eCash  was  $593,000  and  $590,000,
respectively,  for the year ended  September 30, 2006,  $253,000 and  ($50,000),
respectively,  for the year ended September 30, 2005 and $172,000 and ($64,000),
respectively, for the year ended September 30, 2004. The financial statements of
GPTA and eCash were audited by other  auditors whose reports have been furnished
to us, and our opinion,  insofar as it relates to the amounts  included for GPTA
and eCash, is based solely on the reports of the other auditors.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). 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 and the reports of
the other auditors provide a reasonable basis for our opinion.

In our opinion,  based on our audits and the reports of the other auditors,  the
financial statements referred to above present fairly, in all material respects,
the consolidated  financial  position of Global Payment  Technologies,  Inc. and
subsidiaries as of September 30, 2006 and 2005, and the consolidated  results of
their  operations and their cash flows for each of the three years in the period
ended September 30, 2006, in conformity with U.S. generally accepted  accounting
principles. Also, in our opinion, the related financial statement Schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly in all  material  respects  the  information  set forth
therein.

As discussed in Note 2(o) to the consolidated  financial  statements,  effective
October 1, 2005, the Company  changed its method of accounting  for  share-based
compensation.

/s/ Eisner LLP
New York, New York
January 11, 2007

                                       47
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                <C>             <C>
                                GLOBAL PAYMENT TECHNOLOGIES, INC.
                                   Consolidated Balance Sheets
                                   September 30, 2006 and 2005
                         (Dollar amounts in thousands, except share data)

                              Assets                                    2006            2005
                                                                    --------------  --------------
Current assets:
  Cash and cash equivalents                                        $        2,270  $        3,108
  Cash held in escrow                                                         280               -
  Accounts receivable, less allowance for doubtful accounts
    of $159 and $152, respectively                                          2,065           1,386
  Accounts receivable from affiliates                                           -           1,881
  Inventory, net                                                            5,040           5,109
  Prepaid expenses and other current assets                                   218             265
  Income taxes receivable                                                       -              25
                                                                    --------------  --------------
          Total current assets                                              9,873          11,774
Investments in unconsolidated affiliates                                        -           2,219
Property and equipment, net                                                 1,249           1,688
Capitalized software costs, net                                               561           1,033
                                                                    --------------  --------------
          Total assets                                             $       11,683  $       16,714
                                                                    ==============  ==============
               Liabilities and Shareholders' Equity
Current liabilities:
  Current portion of long-term debt                                $           60  $           38
  Accounts payable                                                          1,497           2,092
  Accrued expenses and other current liabilities                            1,249           1,134
                                                                    --------------  --------------
          Total current liabilities                                         2,806           3,264

Long-term debt                                                                 40              79
                                                                    --------------  --------------

          Total Liabilities                                                 2,846           3,343
                                                                    --------------  --------------

Commitments (note 11)

Shareholders' equity:
  Common stock, par value $0.01. Authorized 20,000,000 shares;
    issued 6,497,185 shares                                                    65              65
  Additional paid-in capital                                               13,609          13,446
  Retained earnings/(deficit)                                              (3,433)            710
  Accumulated other comprehensive income                                       95             649
                                                                    --------------  --------------
                                                                           10,336          14,870
Less treasury stock, at cost, 278,984 shares                               (1,499)         (1,499)
                                                                    --------------  --------------
          Total shareholders' equity                                        8,837          13,371
                                                                    --------------  --------------
          Total liabilities and shareholders' equity               $       11,683  $       16,714
                                                                    ==============  ==============
See accompanying notes to consolidated financial statements.
</TABLE>
                                      F-2
<PAGE>
<TABLE>
<CAPTION>
<S>                                           <C>               <C>              <C>
                                GLOBAL PAYMENT TECHNOLOGIES, INC.
                              Consolidated Statements of Operations
                          Years ended September 30, 2006, 2005, and 2004
                  (Dollar amounts in thousands, except share and per share data)

                                                    2006              2005             2004
                                               ----------------  ---------------  ----------------
Net sales:
  Non-affiliates                              $         10,751  $        15,547  $         15,880
  Affiliates                                             3,552           10,339             8,501
                                               ----------------  ---------------  ----------------
                                                        14,303           25,886            24,381
Cost of sales                                           12,528           19,019            19,039
                                               ----------------  ---------------  ----------------
               Gross profit                              1,775            6,867             5,342
Operating expenses                                       7,429            7,051             6,857
                                               ----------------  ---------------  ----------------
               Loss from operations                     (5,654)            (184)           (1,515)
                                               ----------------  ---------------  ----------------
Other income (expense):
  Equity in income of unconsolidated
    affiliates, net                                      1,183              203               108
  Gain on sale of investments in
    unconsolidated affiliates                              307                -                78
  Interest Income (expense), net                            23             (613)             (368)
                                               ----------------  ---------------  ----------------
               Other income(expense)                     1,513             (410)             (182)
                                               ----------------  ---------------  ----------------
               Loss before provision
                  (benefit) for income taxes            (4,141)            (594)           (1,697)
Provision (benefit) for income taxes                         2              (21)               (7)
                                               ----------------  ---------------  ----------------
               Net loss                       $         (4,143) $          (573) $         (1,690)
                                               ================  ===============  ================
Net loss per share:
  Basic                                       $          (0.67) $         (0.10) $          (0.30)
  Diluted                                                (0.67)           (0.10)            (0.30)
Common shares used in computing net
  loss per share amounts:
    Basic                                            6,218,201        5,976,467         5,577,825
    Diluted                                          6,218,201        5,976,467         5,577,825
See accompanying notes to consolidated financial statements.
</TABLE>

                                      F-3
<PAGE>
<TABLE>
<CAPTION>
<S>                                        <C>       <C>    <C>        <C>      <C>            <C>      <C>     <C>
                                           GLOBAL PAYMENT TECHNOLOGIES, INC.
                         Consolidated Statements of Shareholders' Equity and Comprehensive Loss
                                     Years ended September 30, 2006, 2005, and 2004
                                    (Dollar amounts in thousands, except share data)

                                                                                  Accumulated
                                                             Additional              Other
                                           -----------------                                   -----------------
                             Comprehensive   Common stock     paid-in   Retained Comprehensive  Treasury stock
                                           -----------------                                   -----------------
                                 loss        Shares   Amount  capital   earnings    Income      Shares   Amount   Total
                             ------------- ---------- ------ ---------- -------- ------------- --------- ------- -------
Balance at September 30,
 2003                                      5,829,500 $   58 $    9,843 $  2,973 $         302  (278,984)$(1,499)$11,677
 Net loss                   $      (1,690)         -      -          -   (1,690)            -         -       -  (1,690)
 Cumulative translation
  adjustment
  of foreign investments              162          -      -          -        -           162         -       -     162
                             -------------
 Comprehensive loss         $      (1,528)         -      -          -        -             -         -       -       -
                             =============
 Exercise of common stock
  options,
  including income tax
   benefits of $22                            51,250      1        147                                              148
 Common stock warrants
  issued
  with convertible note                            -      -        506        -             -         -       -     506
 Beneficial conversion
  feature related
  to convertible note                              -      -        304        -             -         -       -     304
                                           ---------- ------ ---------- -------- ------------- --------- ------- -------
Balance at September 30,
 2004                                      5,880,750     59     10,800    1,283           464  (278,984) (1,499) 11,107
 Net loss                   $        (573)         -      -          -     (573)            -         -       -    (573)
 Cumulative translation
  adjustment
  of foreign investments              185          -      -          -        -           185         -       -     185
                             -------------
 Comprehensive loss         $        (388)         -      -          -        -             -         -       -       -
                             =============
 Fair value of stock options
  issued                                           -      -         36        -             -         -       -      36
 Conversion of convertible
  notes                                      498,826      5      2,120        -             -         -       -   2,125
 Exercise of common stock
  options,
  including income tax
   benefits of $0                            117,609      1        490        -             -         -       -     491
                                           ---------- ------ ---------- -------- ------------- --------- ------- -------
Balance at September 30,
 2005                                      6,497,185     65     13,446      710           649  (278,984) (1,499) 13,371
 Net loss                   $      (4,143)         -      -          -   (4,143)            -         -       -  (4,143)
 Reclassification to
  operations in
  connection with sales of
  foreign affiliates                 (506)                                               (506)
 Cumulative translation
  adjustment
  of foreign investments              (48)         -      -          -        -           (48)        -       -     (48)
                             -------------
 Comprehensive loss         $      (4,697)         -      -          -        -             -         -       -       -
                             =============
 Fair value of stock options
  issued                                           -      -        163        -             -         -       -     163


                             ------------- ---------- ------ ---------- -------- ------------- --------- ------- -------
Balance at September 30,                                                                                          OFF
 2006                       $              6,497,185 $   65 $   13,609 $ (3,433)$          95  (278,984)$(1,499)$
                             ============= ========== ====== ========== ======== ============= ========= ======= =======

See accompanying notes to consolidated financial statements.
</TABLE>

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                       <C>              <C>              <C>
                                              GLOBAL PAYMENT TECHNOLOGIES, INC.
                                            Consolidated Statements of Cash Flows
                                       Years ended September 30, 2006, 2005, and 2004
                                                (Dollar amounts in thousands)
                                                                                2006             2005             2004
                                                                           ---------------  ---------------  ----------------
Operating activities:
  Net loss                                                                $        (4,143) $          (573) $         (1,690)
  Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:
      Equity in income of unconsolidated affiliates                                (1,183)            (203)             (108)
      Gain on sale of investments in unconsolidated affiliates                       (307)               -               (78)
      Dividend distributions from unconsolidated affiliates                           574                -               206
      Depreciation and amortization                                                 1,118            1,592             1,421
      Provision for losses on accounts receivable                                      61               47               102
      Provision for inventory obsolescence                                            567              300               237
      Share based compensation expense                                                163               36                 -
      Amortization of debt discount                                                    61              568               242
      Changes in operating assets and liabilities:
          Decrease(increase) in accounts receivable                                  (740)          (1,042)            1,744
          (Increase)decrease in accounts receivable from affiliates                 2,416            1,866               163
          (Increase) decrease in inventory                                           (530)          (2,830)              746
          Decrease (increase) in prepaid expenses and
            other current assets                                                      (14)              42              (383)
          Decrease in income tax receivable                                            25               90                96
          (Decrease) increase in accounts payable                                    (595)            (181)             (151)
          Increase (decrease) in accrued expenses
            and other liabilities                                                     115             (146)             (600)
                                                                           ---------------  ---------------  ----------------
              Net cash (used in) provided by operating activities                  (2,412)            (434)            1,947
                                                                           ---------------  ---------------  ----------------
Investing activities:
  Purchases of property and equipment                                                (176)            (340)             (347)
  Proceeds from sale of investments in unconsolidated affiliates                    1,798                -               154
  Investments in unconsolidated affiliates                                              -                -               (51)
                                                                           ---------------  ---------------  ----------------
              Net cash provided by (used in) investing activities                   1,622             (340)             (244)
                                                                           ---------------  ---------------  ----------------
Financing activities:
  Repayments of notes payable to bank                                                 (48)             (63)           (1,868)
  Proceeds from issuance of convertible debt and warrants                               -                -             2,250
  Proceeds from the exercise of stock options                                           -              492               148
                                                                           ---------------  ---------------  ----------------
              Net cash (used in) provided by financing activities                     (48)             429               530
                                                                           ---------------  ---------------  ----------------
              Net (decrease) increase in cash and
                 cash equivalents                                                    (838)            (345)            2,233
Cash and cash equivalents at beginning of year                                      3,108            3,453             1,220
                                                                           ---------------  ---------------  ----------------
Cash and cash equivalents at end of year                                  $         2,270  $         3,108  $          3,453
                                                                           ===============  ===============  ================
Cash paid during the year for:
  Interest                                                                $             8  $            59  $            125
  Income taxes                                                                          -                7                11

Non cash financing activities:
  Discount on convertible note and increase in additional
  paid-in capital resulting from beneficial conversion feature            $             -  $             -  $            304

  Reduction of convertible notes and increase in common stock
  and additional paid-in capital due to conversion of notes               $             -  $         2,125  $              -

Non cash investing activities:
  Machinery acquired through capital lease                                $            31  $           130  $              -
  Proceeds from sale of investments in unconsolidated affiliates held in
   escrow                                                                 $           280  $             -  $              -
See accompanying notes to consolidated financial statements.
</TABLE>

                                      F-5
<PAGE>

(1) Organization and Nature of Business

     (a)  Description of BusinessGlobal Payment Technologies, Inc. (the Company)
          designs, manufactures, and markets paper currency validating equipment
          used in gaming and  vending  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  SA-4,  Argus and Aurora  validator  models.  A few key
          customers  account  for a large  portion  of the  Company's  revenues.
          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.

     (b)  Organization and Development of BusinessThe Company has a wholly owned
          subsidiary, Global Payment Technologies (Europe) Limited (GPT-Europe),
          which is based in the United Kingdom and is responsible  for sales and
          service of the Company's products in Europe.

          Additionally,  the Company has an 80%  controlling  interest in Abacus
          Financial Management,  Inc. USA (Abacus-USA),  which has non-exclusive
          rights  to  distribute   the  products  of  Evolve   Corporation   PLC
          (Evolve-UK),   formerly  Abacus  Financial   Management  Systems  Ltd.
          (Abacus-UK),  in North America. Abacus-UK manufactures cash management
          systems  for  use in  retail  applications.  Abacus  USA  has  not had
          material operations to date.

          See  note  2(d)  and  note  3  for  a  description  of  the  Company's
          investments in unconsolidated affiliates.

     (c)  Significant  CustomersThe  Company's largest customers for 2006, 2005,
          and 2004 represent the following percentages of net sales and accounts
          receivable, respectively:

                                        2006      2005      2004
                                    ------------------------------
          Net sales:
                Customer A                28%       40%        34%
                Customer B               N/A        16%       N/A
                Customer C               N/A       N/A         11%

          Accounts receivable:
                Customer A                80%       58%        87%

          There  were no other  customers  that  represented  10% or more of net
          sales or accounts receivable, respectively, in any of the fiscal years
          presented.  Customer A was the Company's  unconsolidated  affiliate in
          Australia,  which  interest  was sold in the fourth  quarter of fiscal
          2006 (see note 3).

                                       48
<PAGE>

Geographic AreasThe Company generated revenues both domestically and
internationally. The following summarizes the geographic dispersion of the
Company's revenues by destination:
<TABLE>
<CAPTION>
<S>                                             <C>              <C>              <C>
                                                                Year ended September 30
                                                --------------------------------------------------
                                                     2006             2005             2004
                                                ---------------  ---------------  ----------------
                                                                 (In thousands)

          Domestic revenues (United States)     $         1,340  $         1,881  $          3,257
                                                ---------------  ---------------  ----------------
          International revenues:
                Australia                                 3,292            9,509             7,647
                Europe                                    5,225           11,207             9,516
                All others                                4,446            3,289             3,961
                                                ---------------  ---------------  ----------------
                                                         12,963           24,005            21,124
                                                ---------------  ---------------  ----------------
                        Total revenues          $        14,303  $        25,886  $         24,381
                                                ===============  ===============  ================
</TABLE>

     (d)  All of the  Company's  long-lived  assets are  domiciled in the United
          States,  except  for an  immaterial  amount at its  subsidiary  in the
          United Kingdom.

(2) Summary of Significant Accounting and Reporting Policies

     (a)  Principles of Consolidation

          The consolidated  financial  statements include the accounts of Global
          Payment   Technologies,   Inc.,  and  its  wholly  owned  subsidiaries
          GPT-Europe and Abacus-USA.  All intercompany balances and transactions
          have been eliminated in consolidation.

     (b)  Revenue Recognition

          Non-affiliates

          The Company  recognizes  revenue upon shipment of products and passage
          of title to its non-affiliated  customers, or at the time services are
          completed with respect to repairs not covered by warranty agreements.

          Affiliates

          During fiscal 2006,  the Company sold its interests in its  affiliated
          customers. Prior to such dispositions,  the Company recognized revenue
          upon shipment and passage of title, to its affiliated  customers,  but
          deferred  its  proportionate  share of the  related  gross  profit  on
          product  sales until sales were made by the  affiliated  customers  to
          their third-party end users (customers), in accordance with Accounting
          Principles  Board  ("APB")  Opinion  No.  18,  The  Equity  Method  of
          Accounting for Investments in Common Stock ("APB No. 18") (see (d)).

     (c)  Shipping and Handling Costs

          The Company records shipping and handling costs billed to customers in
          net sales and classifies  the shipping and handling  costs  associated
          with outbound freight in cost of sales.

                                       49
<PAGE>

     (d)  Investments in Unconsolidated Affiliates

          The Company applies the equity method of accounting to its investments
          in entities where the Company has  non-controlling,  but  influential,
          ownership interests. The Company's share of these affiliates' earnings
          or losses is included in the  consolidated  statements of  operations.
          The Company  eliminates its pro rata share of gross profit on sales to
          its affiliates for inventory on hand at the affiliates as of September
          30. Entities in which the Company's  respective  ownership interest is
          less than 20%, and in which there is a resulting inability to exercise
          significant  influence,  are  accounted  for using the cost  method of
          accounting. A description of the Company's  unconsolidated  affiliates
          and the related  transactions between the Company and these affiliates
          is discussed in note 3.

     (e)  Foreign Currency Translation

          The financial  position and results of  operations  of GPT-Europe  and
          unconsolidated  affiliates  are measured  using local  currency as the
          functional  currency.  Assets and  liabilities  of such  entities  are
          translated  into US dollars at exchange  rates in effect at  year-end,
          while revenues and expenses are  translated at average  exchange rates
          prevailing during the year. The resulting translation gains and losses
          are  recorded  directly  to  accumulated  other  comprehensive  income
          (loss),  a separate  component of  shareholders'  equity,  and are not
          included  in  net  income  (loss)  until  realized   through  sale  or
          liquidation of the  investment.  Exchange gains and losses incurred on
          foreign currency transactions including foreign currency used for test
          purposes  referred to in (f),  which were not material  during  fiscal
          2006, 2005, and 2004, are included in net loss.

     (f)  Cash and Cash Equivalents

          Cash equivalents are stated at cost, which approximates  market value.
          Highly liquid  investments  with maturities of three months or less at
          the purchase date are considered cash  equivalents for purposes of the
          consolidated balance sheets and consolidated statements of cash flows.
          A significant  portion of the Company's  cash balance in the amount of
          $659,000 and $744,000, as of September 30, 2006 and 2005, respectively
          consists of currency used to test the Company's products, and although
          it  could be  available,  it is not  anticipated  to be  utilized  for
          working capital purposes in the normal course of business.

     (g)  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
          carrying  amount 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  the  introduction  of new
          technology or products by the Company and its competitors. These items
          could result in future inventory obsolescence.

     (h)  Property and Equipment

          Property  and  equipment  are  recorded  at  cost.   Depreciation   is
          calculated  using the  straight-line  method over the estimated useful
          lives  of  the  assets   (note  6)  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 and depreciated.

                                       50
<PAGE>

     (i)  Capitalized Software Costs

          In  accordance  with  Statement  of  Financial   Accounting  Standards
          ("SFAS") No. 86,  Accounting for the Costs of Computer  Software to be
          Sold,    Leased   or    Otherwise    Marketed    ("SFAS   No.    86"),
          internally-generated  software  development  costs associated with new
          products and significant  software  enhancements to existing  products
          are  expensed as incurred  until  technological  feasibility  has been
          established.  Pursuant to SFAS No. 86, the Company deems technological
          feasibility  as having been met upon  completion  of a detail  program
          design.  No  internally-  generated  software  development  costs were
          capitalized  during  fiscal years 2006,  2005,  and 2004.  The Company
          recorded  amortization  in  accordance  with SFAS No. 86 of  $472,000,
          $579,000,  and $547,000 for the fiscal years ended September 30, 2006,
          2005 and 2004, respectively, which is included in cost of sales in the
          accompanying   Consolidated  Statements  of  Operations.   Unamortized
          internally-generated   software  development  costs  included  in  the
          accompanying  consolidated balance sheets as of September 30, 2006 and
          2005 were $561,000 and $1,033,000, respectively.

     (j)  Long-Lived Assets

          The Company  accounts for  long-lived  assets in  accordance  with the
          provisions of SFAS No. 144,  Accounting for the Impairment or Disposal
          of Long-Lived  Assets ("SFAS No. 144").  This Statement  requires that
          long-lived  assets  be  reviewed  for  impairment  whenever  events or
          changes in circumstances indicate that the carrying amount of an asset
          may not be recoverable.  Recoverability  of assets to be held and used
          is  measured by a  comparison  of the  carrying  amount of an asset to
          future  undiscounted  net cash flows  expected to be  generated by the
          asset. If the carrying amount of an asset exceeds its estimated future
          cash flows, an impairment  charge is recognized by the amount by which
          the carrying  amount of the asset exceeds the fair value of the asset.
          Assets to be  disposed of are  reported  at the lower of the  carrying
          amount  or  fair  value  less  costs  to  sell,   and  are  no  longer
          depreciated.

     (k)  Research and Development

          Research and development costs incurred by the Company are included in
          operating  expenses  in the year  incurred.  Such  costs  amounted  to
          $333,000,  $55,000,  and  $75,000  in  fiscal  2006,  2005  and  2004,
          respectively.

     (l)  Warranty Policy

          The  Company  warrants  that its  products  are free from  defects  in
          material and workmanship  for a period of one or two years,  depending
          on the  particular  product,  from the date of initial  purchase.  The
          warranty  does not cover any losses or damages  that occur as a result
          of improper installation, misuse or neglect and repair or modification
          by anyone other than the Company and its  appointed  service  centers.
          Repair costs beyond the warranty  period are charged to the  Company's
          customers (see (b)).

          The Company recognizes, and historically has recognized, the estimated
          cost associated with its standard  warranty on products at the time of
          sale.  The estimate is based on  historical  failure rates and current
          claim  cost  experience.  A summary of the  changes  in the  Company's
          accrued warranty obligation (which is included in accrued expenses) is
          included  in  the  Company's  Schedule  of  Valuation  and  Qualifying
          Accounts.

                                       51
<PAGE>

     (m)  Income Taxes

          The Company  accounts for income taxes under SFAS No. 109,  Accounting
          for  Income  Taxes.  SFAS No.  109  requires  an asset  and  liability
          approach for financial reporting for income taxes. Under SFAS No. 109,
          deferred taxes are provided for net operating loss  carryforwards  and
          for temporary  differences  between the carrying  values of assets and
          liabilities  for financial  reporting  purposes and their tax bases at
          the enacted rates at which these  differences are expected to reverse.
          See note 10.

     (n)  Per Share Data

          Net income (loss) per common share amounts (basic EPS) are computed by
          dividing net earnings (loss) by the weighted  average number of common
          shares  outstanding,  excluding  any  potential  dilution.  Net income
          (loss) per common share amounts  assuming  dilution  (diluted EPS) are
          computed by reflecting  potential  dilution from the exercise of stock
          options  and  warrants,  and  the  conversion  into  common  stock  of
          convertible  loans.  Diluted EPS for fiscal years 2006,  2005 and 2004
          are the same as basic  EPS,  as the  inclusion  of the  impact  of any
          common stock  equivalents  outstanding  during those  periods would be
          anti-dilutive.

          Common stock equivalents not included in EPS are as follows:

                                            Year ended September 30
                            --------------------------------------------------
                                 2006             2005             2004
                            ---------------  ---------------  ----------------
          Stock options           1,290,550          859,999           887,800
          Stock warrants            200,000          200,000           200,000
          Convertible Debt                0          197,740           510,563
                            ---------------  ---------------  ----------------
          Total                   1,490,550        1,257,739         1,598,363
                            ===============  ===============  ================

          A reconciliation  between the numerators and denominators of the basic
          and diluted EPS computations is as follows:
<TABLE>
<CAPTION>
<S>                                           <C>              <C>              <C>
                                                            Year ended September 30
                                               --------------------------------------------------
                                                     2006             2005             2004
                                               ---------------  ---------------  ----------------
                                                 (In thousands, except share and per share data)
          Numerator:
             Net loss attributable to
               common stockholders            $        (4,143) $          (573) $         (1,690)
                                               ---------------  ---------------  ----------------
          Denominator:
             Weighted average common shares
               outstanding - basic                  6,218,201        5,976,467         5,577,825
             Effect of dilutive securities:
               Stock options and warrants                  --               --                --
               Convertible loan                            --               --                --
                                               ---------------  ---------------  ----------------
             Weighted average common shares
               outstanding - diluted                6,218,201        5,976,467         5,577,825
                                               ===============  ===============  ================
          Basic EPS                           $         (0.67) $         (0.10) $          (0.30)
          Diluted EPS                                   (0.67)           (0.10)            (0.30)
</TABLE>

                                       52
<PAGE>

     (o)  Stock-Based Compensation
          Effective  October 1, 2005,  the  Company  has  adopted  Statement  of
          Financial  Accounting  Standards No. 123 (Revised  2004),  Share Based
          Payment ("SFAS No.  123R"),  which requires a public entity to measure
          the cost of  employee,  officer  and  director  services  received  in
          exchange  for an award of equity  instruments  based on the grant date
          fair  value of the  award.  SFAS No.  123R  supersedes  the  Company's
          previous  accounting  under SFAS No. 123,  Accounting for  Stock-Based
          Compensation  ("SFAS No. 123"), which permitted the Company to account
          for such  compensation  under Accounting  Principles Board Opinion No.
          25, Accounting for Stock Issued to Employees ("APB No. 25").  Pursuant
          to APB No. 25, and related  interpretations,  no compensation cost had
          been recognized in connection  with the issuance of stock options,  as
          all options  granted  under the  Company's  stock  option plans had an
          exercise  price  equal  to or  greater  than the  market  value of the
          underlying common stock on the date of the grant.

          In advance of  implementing  the  requirements  of SFAS No. 123R,  the
          Company,  in September  2005,  accelerated the vesting of all unvested
          stock options previously awarded to employees,  officers and directors
          in order to avoid the recognition of  compensation  expense under SFAS
          No.123R,  with  respect to these  options  as the market  price of the
          Company's  common  stock on the date the vesting was  accelerated  was
          less  than  the  exercise  price  of the  modified  stock  option,  no
          compensation expense was recognized under APB No.25 as a result of the
          modification of the vesting terms of the options.

          The  Company  adopted  SFAS No.  123R using the  modified  prospective
          transition  method,  which requires that compensation cost be recorded
          as earned for all unvested stock options  outstanding at the beginning
          of the first  fiscal  year of adoption of SFAS No. 123R based upon the
          grant  date fair  value  estimated  in  accordance  with the  original
          provisions of SFAS No. 123 and for all  share-based  payments  granted
          subsequent  to the  adoption,  based on the grant date fair value.  In
          accordance  with  the  modified  prospective  transition  method,  the
          Company's consolidated financial statements for prior periods have not
          been restated to reflect,  and do not include,  the impact of SFAS No.
          123R.  In the fiscal year ended  September  30,  2006,  as a result of
          adoption   of  SFAS   No.123R,   the  Company   recorded   share-based
          compensation  for options  attributable  to  employees,  officers  and
          directors of $163,000, or $.03 per share.

          The following  table  illustrates  the effect on net loss and loss per
          common share as if the fair value  method  ("FMV") had been applied to
          all outstanding awards in each fiscal year presented.
<TABLE>
<CAPTION>
<S>                                                         <C>                     <C>
                                          2005                   2004
                                    -----------------      -----------------
                                     (In thousands, except per share data)
          Net loss:
                As reported                      $            (573)     $         (1,690)
                Deduct: Compensation expense
                        determined under FMV                (1,156)(a)              (475)
                                                 -----------------      -----------------
                Pro forma                                   (1,729)               (2,165)

          Net loss per common
                share - basic and diluted:
                        As reported              $           (0.10)     $          (0.30)
                        Pro forma                            (0.29)(a)             (0.39)
</TABLE>

     (a)  Includes  $652,000  ($.11 per share) from  acceleration  of vesting of
          outstanding options.

                                       53
<PAGE>

     (p)  Comprehensive Income (Loss)

          SFAS No. 130,  Reporting  Comprehensive  Income requires  companies to
          report all changes in equity during a period,  except those  resulting
          from investments by owners and distributions to owners, for the period
          in which they are recognized. Comprehensive income (loss) is the total
          of net  income  (loss)  and all other  nonowner  changes in equity (or
          other comprehensive income (loss)) such as unrealized  gains/losses on
          securities   classified  as   available-for-sale,   foreign   currency
          translation adjustments and minimum pension liability adjustments.  As
          of  September  30, 2006 and 2005,  due to currency  fluctuations,  the
          cumulative  currency  translation  adjustment related to the Company's
          investments   in  foreign   affiliates   was  $95,000  and   $649,000,
          respectively,  which  is  reflected  in  shareholders'  equity  in the
          accompanying   consolidated   balance  sheets.  In  2006,   cumulative
          translation  gains of $506,000 were transferred from accumulated other
          comprehensive  income to operations in connection with the sale of the
          foreign affiliates.

     (q)  Fair Value of Financial Instruments

          The carrying value of all monetary assets and liabilities reflected in
          the accompanying  consolidated  balance sheets approximated fair value
          as a result of the short-term nature of such assets and liabilities or
          with respect to long-term debt as a result of variable interest rates,
          subject to a minimum rate based on the Company's credit rating.

     (r)  Segment Reporting

          The Company follows the provisions of SFAS No. 131,  Disclosures about
          Segments of an Enterprise  and Related  Information.  Pursuant to this
          pronouncement,  the reportable operating segments are determined based
          on the Company's  management  approach.  The management  approach,  as
          defined by SFAS No. 131, is based on the way that the chief  operating
          decision-maker  organizes the segments within an enterprise for making
          operating decisions and assessing  performance.  The Company's results
          of operations are reviewed by the chief operating  decision-maker on a
          consolidated  basis  and the  Company  operates  in only one  segment.
          Geographical sales segment data is presented in note 1(d).

     (s)  Use of Estimates

          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the 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.
          Among the more  significant  estimates  included  in the  consolidated
          financial   statements  are  the  allowance  for  doubtful   accounts,
          recoverability  of  inventory,   deferred  income  taxes,  capitalized
          software and  provisions for  warranties.  Actual results could differ
          from those estimates.

     (t)  Recently Issued Accounting Pronouncements

          In November 2004, the FASB issued SFAS No. 151,  Inventory  Costs - an
          amendment  of ARB No.  43,  Chapter 4 ("SFAS No.  151").  SFAS No. 151
          clarifies  the  accounting  for  abnormal  amounts  of  idle  facility
          expense,  freight,  handling costs and waste material (spoilage).  The
          statement  requires that those items be  recognized as  current-period
          charges. This statement was effective as of the beginning of the first
          annual  reporting  period  that  begins  after  June 15,  2005 and the
          Company adopted the statement in the first quarter of fiscal 2006. The
          adoption  of SFAS  No.  151  did not  have a  material  impact  on the
          Company's consolidated financial statements.

                                       54
<PAGE>

          In May 2005, the FASB issued SFAS No. 154, Accounting Changes and
          Error Corrections ("SFAS No. 154")/ SFAS No. 154 addresses the
          retrospective application of such changes and corrections. The
          statement is effective as of the beginning of the first annual
          reporting period that begins after December 15, 2006. The Company will
          follow the provisions of this standard in the event of any future
          accounting changes or error corrections.

          In July  2006,  the FASB  issued  Interpretation  No.  48 ("FIN  48"),
          "Accounting  for  Uncertainty  in Income  Taxes," which  clarifies the
          accounting for uncertainty in income taxes recognized in the financial
          statements in accordance with FASB Statement SFAS No. 109,  Accounting
          for Income Taxes. FIN 48 provides guidance on the financial  statement
          recognition  and measurement of a tax position taken or expected to be
          taken in a tax return. FIN 48 also provides guidance on derecognition,
          classification, interest and penalties, accounting in interim periods,
          disclosures  and  transition.  FIN 48 is  effective  for fiscal  years
          beginning after December 15, 2006. The Company is currently evaluating
          the impact of this standard on the Consolidated Financial Statements.

          In  September  2006,  the  FASB  issued  SFAS  No.  157,  "Fair  Value
          Measurements."  SFAS  No.  157  defines  fair  value,   establishes  a
          framework  for  measuring  fair  value  in  U.S.   generally  accepted
          accounting   principles  and  expands  disclosures  about  fair  value
          measurements.  SFAS No. 157 is effective  for fiscal  years  beginning
          after November 15, 2007 and interim periods within those fiscal years.
          The Company is  currently  evaluating  the effect that the adoption of
          SFAS No.  157 will  have on its  financial  position  and  results  of
          operations.

     (u)  Reclassification
          Certain  reclassifications  have been made to prior  period  financial
          information to conform to current period presentation.

(3) Unconsolidated Affiliates

    Net sales to unconsolidated  affiliates for fiscal year 2006, 2005 and 2004
    and accounts receivable from unconsolidated  affiliates as of September 30,
    2006 and 2005 are as follows (in thousands):
<TABLE>
<CAPTION>
<S>                                         <C>        <C>        <C>        <C>              <C>
                                                                          Accounts receivable
                                                                            from affiliates
                                                                           ----------------------------------
                                                Net sales - affiliates        September 30,    September 30,
                                            -------------------------------
                                                2006       2005       2004          2006             2005
                                            ---------- ---------- ---------  ---------------  ---------------
          Australia                         $    3,552 $   10,338 $   8,183  $            --  $         1,881
          Abacus-UK                                 --          1        --               --               --
          South Africa                              --         --       318               --               --
                                            ---------- ---------- ---------  ---------------  ---------------
                       Total                $    3,552 $   10,339 $   8,501  $            --  $         1,881
                                            ========== ========== =========  ===============  ===============
</TABLE>

                                       55
<PAGE>

     (a)  Australia

          In fiscal 1997, the Company acquired a 50% non-controlling interest in
          an Australian affiliate, Global Payment Technologies Australia Pty Ltd
          (GPTA). On September 2, 2006, the Company sold its 50% non controlling
          interest for a total of  approximately  $1,791,000 of which $1,511,000
          was  received  in cash at closing  and  $280,000  was placed in escrow
          which will be released on the one year  anniversary of the transaction
          if,   including  among  other  things,   the  Company   satisfies  its
          obligations under a new distribution agreement with GPTA. The deferred
          cash  payment is  collateralized  by an  irrevocable  letter of credit
          issued by The Australia and New Zealand  Banking  Group  Limited.  The
          purchaser is related to the registered  holder of the remaining 50% of
          the issued and  outstanding  shares of GPTA.  The Company also entered
          into a 5 year  exclusive  distributor  agreement  with  GPTA  which is
          responsible  for  sales  and  service  of the  Company's  products  in
          Australia, New Zealand and the Pacific Rim.

          In June 2002,  the Company  and two other  shareholders  formed  eCash
          Holdings  Pty. Ltd (eCash),  an  Australian  based  company to market,
          distribute,  service  and support  automated  teller  machines  across
          Australia  and New Zealand.  The Company  owned a 35% interest in this
          entity.  On August 25, 2006, the Company sold its total interest for a
          cash consideration of $286,908.

          The accompanying  consolidated results of operations include a gain of
          approximately $307,000 relating to the sale of the Company's interests
          in GPTA and eCash.

          The  accompanying  consolidated  results  of  operations  include  the
          Company's  equity in the results of operations of these  affiliates in
          the amounts of $648,000,  $236,000, and $273,000 in fiscal 2006, 2005,
          and  2004,   respectively.   The  2006   amount   includes   $625,000,
          representing  the Company's share of a gain recognized by eCash on the
          sale of its automatic teller machine rental business. For fiscal 2006,
          2005, and 2004, the Company  increased  (reduced) its equity in income
          of unconsolidated  affiliates by $535,000,  $(33,000), and ($165,000),
          respectively,  which  amounts  represent  the effect of the  Company's
          share of the gross profit on sales of the Company's  products to these
          affiliates,  which were unsold by the  affiliate  as of the  Company's
          fiscal year-end. Deferred gross profit of $535,000 as of September 30,
          2005, is shown as a reduction of accounts  receivable  from affiliates
          in the  accompanying  balance  sheets.  The Company also received cash
          dividends of  $574,000,  $0, and $206,000  from these  affiliates  for
          fiscal 2006, 2005, and 2004,  respectively.  Subsequent to the sale of
          its  interests in GPTA and eCash,  the Company no longer  defers gross
          profit on sales to such affiliates.

     (b)  Evolve - UK

          In fiscal 1999, the Company acquired a non-controlling 25% interest in
          Abacus-UK. Abacus-UK is a software company based in the United Kingdom
          that has developed a cash  management  system,  of which the Company's
          validators  are a key  component,  which  offers the  retail  market a
          mechanism for counting, storing and transporting its cash receipts. In
          fiscal 2006,  2005 and 2004,  the Company did not make any  additional
          investment.

          In fiscal 2002, the Company  recorded a non-cash  charge to operations
          related  to  the  impairment  of  its   equity-method   investment  in
          Abacus-UK, pursuant to APB No. 18, The Equity Method of Accounting for
          Investments  in  Common  Stock.  The  impairment  charge  reduced  the
          investment to zero. This impairment  loss,  which was considered other
          than  temporary,  was  due  to  the  deterioration  of  the  financial
          condition  of this  entity.  The  Company's  consolidated  results  of
          operations for the years ended  September 30, 2006,  2005, and 2004 do
          not include the Company's  equity in the loss of this affiliate as the
          equity investment was previously reduced to zero.

                                       56
<PAGE>

          In February 2005, the Company exchanged its 25% ownership  interest in
          Abacus-UK for a 12.5% ownership interest in Evolve-UK. The exchange of
          ownership   did  not  require  the  Company  to  make  an   additional
          investment.  Evolve-UK  owns 100% of Abacus-UK  and Evolve 100,  which
          provides  integrated and stand-alone  cash  management  systems to the
          retail industry for coin currency handling.

          At the time of the exchange,  Evolve-UK had incurred recurring losses,
          had an accumulated  deficit and required additional funding to further
          its research and development. Therefore, the Company believes that its
          investment in Evolve-UK has nominal  value.  Accordingly,  no gain was
          recorded by the Company on the  exchange  and, as the Company does not
          have the ability to exercise  significant  influence over  Evolve-UK's
          operating and financial policies, its investment in Evolve-UK has been
          accounted for at cost with a carrying value of zero.

     (c)  South Africa

          In  April  2003,  the  Company  sold  a  significant  portion  of  its
          investments  in its South  African  affiliates.  The Company  received
          approximately $1.9 million in cash for the sale of its entire interest
          in the cash handling  division of  International  Payment  Systems Pty
          Ltd.  and  a  major   portion  of  its  interest  in  Global   Payment
          Technologies  Holdings (Pty) Ltd. ("GPTHL"),  its South African gaming
          affiliate. As a result of this transaction,  which did not result in a
          gain or loss,  the Company's  ownership  interest in GPTHL was reduced
          from 24.2% to 5%. GPTHL's  Vukani  division is one of the two licensed
          operators in the South  African route market  province of  Mpumalanga.
          The cash  received was a return of all of the  Company's  advances and
          investments  resulting in the Company's  recovering the carrying value
          of such  advances  and  investments.  The  Company  accounted  for its
          remaining investment on the cost basis.

          In October 2003,  the Company  invested an additional  $51,000 in this
          entity.  Effective January 15, 2004, the Company's  remaining interest
          was sold.  A gain of $78,000 was realized  upon sale of the  remaining
          interest.

(4) Summary Financial Information

    Financial  information with respect to the Company's Australian  affiliates
    is  included  in  the  accompanying   financial  statements  based  on  the
    affiliates'  fiscal year ended June 30, except for fiscal 2006.  Due to the
    sale of the Company's  interests in GPTA and eCash,  operating  results are
    included  through  August 31, 2006,  the effective  date of the sale of the
    entities. The following summary financial information reflects the combined
    assets  and  liabilities  of GPTA and  eCash as of June 30,  2005 and their
    combined  operating  results for their  fiscal  years ended June 30,  2006,
    2005, and 2004 and for the two months ended August 31, 2006.

                                    (in thousands)

                                   June 30,
                                     2005
                                --------------
    Current assets              $       10,686
    Non-current assets                     509
    Current liabilities                  6,814
    Non-current liabilities                  -
    Net assets                           4,381

                                       57
<PAGE>

                                         (in thousands)
<TABLE>
<CAPTION>
<S>                       <C>                     <C>                <C>                <C>
                               Aug 31, 2006         June 30, 2006      June 30, 2005      June 30, 2004
                       ------------------------    -----------------------------------------------------
Net sales                 $              1,963    $        11,635    $        14,245    $        13,892
Operating Income(Loss)                      39               (747)              (340)               621
Net income                                  61              1,746                429                483
</TABLE>

(5) Inventory

    The following is a summary of the composition of inventory:

                                        September 30
                          ----------------------------------------
                                2006                  2005
                          ------------------    ------------------
                                      (In thousands)
    Raw materials         $            4,104    $            3,870
    Work-in-progress                     358                   470
    Finished goods                       578                   769
                          ------------------    ------------------
                          $            5,040    $            5,109
                          ==================    ==================

(6) Property and Equipment, Net

    Major classifications of property and equipment are as follows:


                                       58
<PAGE>
<TABLE>
<CAPTION>
<S>                                <C> <C>                           <C>              <C>
                                                                       September 30
                                                              --------------------------------
                                          Useful lives             2006             2005
                                       ---------------------  ---------------  ---------------
                                                                       (In thousands)
    Leasehold improvements             Shorter of the
                                       life of the lease or
                                       useful life of
                                       asset                  $         266     $        266
    Furniture and fixtures             3 - 7 years                      410              410
    Machinery and equipment            3 - 10 years                   3,409            3,228
    Tooling and Molds                  7 years                        1,839            1,839
    Computer software                  5 years                        1,016            1,004
    Computer hardware                  3 years                        1,071            1,052
                                                              ---------------  ---------------
                                                                      8,011            7,799
    Less accumulated depreciation and
     amortization                                                    (6,762)          (6,111)
                                                              ---------------  ---------------
                                                              $       1,249     $      1,688
                                                              ===============  ===============
</TABLE>

    Depreciation and amortization expense was $646,000,  $916,000, and $830,000
    for the fiscal years ended September 30, 2006, 2005 and 2004, respectively.

(7) Accrued Expenses and Other Current Liabilities

    Accrued expenses and other current liabilities consist of the following:

                                               September 30

                                            2006           2005
                                        -----------     -----------
                                               (In thousands)

    Accrued legal and accounting        $       132     $       112
    Warranty costs                              309             268
    Accrued commissions                           4              22
    Administrative and other                    804             732
                                        -----------     -----------
                                        $     1,249     $     1,134
                                        ===========     ===========

(8) Debt

    On March 16, 2004, the Company  received  aggregate  proceeds of $1,500,000
from the sale to Laurus Master Fund Ltd.  ("Laurus")  of a $1,500,000  principal
amount secured convertible term note due in March 2007 (the "CTN"),  pursuant to
a Securities  Purchase  Agreement.  The CTN was convertible into common stock of
the  Company  at any time at the rate of $4.26  of  principal  for one  share of
common stock and was  collateralized by substantially all assets of the Company.
Interest was payable monthly at the prime rate plus 1.5%, with a minimum rate of
6%. In  addition,  Laurus  received 7 year  warrants to purchase an aggregate of
200,000 shares of the Company's common stock at per share prices of $4.87, $5.28

                                       59
<PAGE>

and $5.68 for  100,000,  60,000 and  40,000  warrants,  respectively.  Under the
agreement,  the  Company is  restricted  from  paying  dividends  or  purchasing
treasury stock. The Company utilized approximately $1,200,000 of the proceeds to
repay amounts  outstanding under a previous credit  agreement.  At September 30,
2004,  $1,425,000 was outstanding under the CTN. During the year ended September
30,  2005,  the  Company  repaid  $50,000  and Laurus  converted  the  remaining
$1,375,000 of the CTN into 323,000 shares of common stock, resulting in the full
repayment  of the CTN.  As a result of the CTN being  fully  repaid,  $29,000 of
unamortized  closing  costs related to the CTN were charged to operations in the
year ended September 30, 2005.

    The value allocated to the warrants resulted in a debt discount of $506,000
that  was  being  recognized  as  interest  expense  over  the  term of the CTN.
Additionally,  by allocating value to the warrants, Laurus received a beneficial
conversion  feature in the amount of $304,000 that  resulted in additional  debt
discount that was being recognized as interest expense over the term of the CTN.
Interest expense was computed utilizing the interest method, which results in an
effective  yield  over  the  term of the  CTN.  As the CTN  was  converted,  the
unamortized discount related to the amount converted was immediately  recognized
as interest expense and charged to operations.  Amortization for the years ended
September 30, 2005 and 2004 was $568,000 and $242,000, respectively.

    On March 16, 2004, the Company also entered into a Security  Agreement with
Laurus  which  provides  for a credit  facility of  $2,500,000  consisting  of a
secured  revolving  note of  $1,750,000  (the  "RN") and a  secured  convertible
minimum  borrowing note of $750,000 (the "MBN"),  both due in March 2007 (the RN
and the MBN notes  collectively  referred  to as the  "LOC").  At  closing,  the
Company  borrowed  $750,000  under the MBN.  Funds  available  under the LOC are
determined  by a borrowing  base equal to 85% and 70% of eligible  domestic  and
foreign  accounts  receivable,  respectively,  and  50% of  eligible  inventory.
Outstanding  amounts under the RN and MBN are  convertible  into common stock of
the  Company  at any time at the rate of $4.26  of  principal  for one  share of
common stock and are  collateralized by substantially all assets of the Company.
Interest is payable  monthly at the prime rate plus 1.5%, with a minimum rate of
6%. During the year ended September 30, 2005,  Laurus converted  $750,000 of the
MBN into  176,000  shares of common  stock.  At  September  30, 2006 and 2005 no
amounts were outstanding under the MBN or the RN.

    The  agreements  provide  that  Laurus  will not  convert  debt or exercise
warrants to the extent that such  conversion or exercise would result in Laurus,
together with its affiliates,  beneficially owning more than 4.99% of the number
of outstanding shares,  including warrants, of the Company's common stock at the
time of conversion or exercise.

    Registration  rights agreements were entered into with Laurus which require
the Company to file  registration  statements for the resale of the common stock
issuable upon  conversion of the notes and upon the exercise of the warrants and
to use  commercially  reasonable  efforts  to have the  registration  statements
declared  effective by the end of a specified  grace  period.  In addition,  the
Company is  required to use  commercially  reasonable  efforts to  maintain  the
effectiveness  of the  registration  statements  until all such common stock has
been sold or may be sold without volume restrictions  pursuant to Rule 144(k) of
the  Securities  Act. If the Company fails to have the  registration  statements
declared   effective  within  the  grace  period  or  if  effectiveness  is  not
maintained,  the agreements  require cash payments of liquidated  damages by the
Company to Laurus at 1.0% per month,  with  respect to the CTN or the  warrants,
and  2.0%  per  month,  with  respect  to the MBN,  of the  respective  original
principal  amounts until the failure is cured.  The  registration  statement was
filed and declared effective within the specified grace period.

    The Company  accounts for the  registration  rights  agreements as separate
free-standing  financial  instruments  and accounts for the  liquidated  damages
provisions  therein as a derivative  liability subject to the provisions of SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133").  Accordingly,  the liability is recorded at estimated fair value based on
an estimate of the  probability  and costs of potential  cash  penalties  and is
revalued  at each  balance  sheet date with  changes in value  recorded in other
income. As of September 30, 2006 no liability was recorded as the Company deemed
the  fair  value  of any  potential  cash  settlement  relating  to  maintaining
effectiveness of the registration statements to be nominal.

                                       60
<PAGE>

    In May,  2005,  the Company  entered  into a capital  lease  agreement  for
machinery  in the  amount  of  $130,000.  The note is to be  repaid  in  monthly
installments of $4,040 over a three year period.  Interest is being charged at a
rate of 7.44% per annum.  The balance at September 30, 2006 and 2005 was $76,000
and $117,000, respectively.

    In March,  2006,  the Company  entered into a capital  lease  agreement for
machinery  in the  amount  of  $31,000.  The  note is to be  repaid  in  monthly
installments  of $1,381 over a two year period.  Interest is being  charged at a
rate of 7.25% per annum. The balance at September 30, 2006 was $24,000.

         Outstanding debt with respect to the capital lease as of September 30,
     2006 is as follows (in thousands):

     Total debt                                $       106
     Less amount representing interest                  (6)
                                               ------------
     Net                                               100
     Less current portion                              (60)
                                               ------------
     Long term debt                            $        40
                                               ============

     Annual  principal  maturities for outstanding debt as of September 30, 2006
     is as follows:

                                                    Amount
                                                --------------
     Fiscal year ended September 30:            (in thousands)
        2007                                    $          60
        2008                                               40
                                                --------------
                                                $         100
                                                ==============

(9)  Stock Option Plans

     The  Company  has  several  stock  option  plans in effect  covering in the
     aggregate  3,500,000  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  nonqualified  stock
     options.  The 1994 and 1996 stock option plans  expired on October 17, 2004
     and March 18, 2006, respectively,  and the 2000 and 2006 stock option plans
     expire on January 25, 2010 and March 7, 2016, respectively,  after which no
     more option  grants may be issued under such plans.  The stock option plans
     are  all  administered  by  the  Compensation  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  are
     determined  by the  Compensation  Committee of the Board of  Directors  and
     administered  in accordance  with the stock option plans as approved by the
     shareholders.

                                       61
<PAGE>

     Incentive  stock options  granted under these various 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.  Options granted under these various plans
     generally  vest over three or four years and expire seven or ten years from
     the date of grant,  while certain  options vest over one and one-half years
     and expire seven years from the date of grant. The Company expects to issue
     new shares upon stock option exercises,  but has treasury shares that could
     be used for this purpose.

     During fiscal 2004, a total of 265,650  incentive stock options and 100,500
     nonqualified  options  were  granted.  All options  granted in 2004 were to
     become exercisable over varying terms up to four years.

     During fiscal 2005, a total of 32,500  incentive  stock options and 127,000
     nonqualified  options  were  granted.  All options  granted in 2005 were to
     become exercisable over varying terms up to four years.

     On  September  8, 2005,  prior to the  adoption  of SFAS 123R,  the Company
     accelerated  the vesting of unvested  stock options  previously  awarded to
     employees, officers and directors of the Company (see note 2(p)).

     During fiscal 2006, a total of 830,000  nonqualified  options were granted.
     All options granted in 2006 were to become  exercisable  over varying terms
     up to four years.

     A summary of the Company's  stock option plans activity as of September 30,
     2006, and changes during the twelve months then ended is as follows:
<TABLE>
<CAPTION>
<S>                    <C> <C>             <C>        <C>                 <C>  <C>
                                                                   Weighted
                                                       Weighted     average      Aggregate
                                                       average     remaining     intrinsic
                                                       exercise   contractual      value
                                            Shares      price    term (years)  (in thousands)
                                          ----------- ---------- ------------- --------------
Outstanding, October 1, 2005                 859,999  $    4.77
    Granted                                  830,000       2.27
    Exercised                                      -          -
    Forfeited                               (377,949)      4.68
    Expired                                  (21,500)      8.69
                                          ----------- ----------

Outstanding, September 30, 2006            1,290,550  $    3.12           5.3  $           -
                                          =========== ========== ============= ==============
Vested or expected to vest, September'
 30, 2006                                  1,290,550  $    3.12           5.3  $           -
                                          =========== ========== ============= ==============
Exercisable, September 30, 2006              445,550  $    4.67           3.4  $           -
                                          =========== ========== ============= ==============
</TABLE>

     In connection  with the adoption of SFAS No. 123R,  the Company  reassessed
     its valuation technique and related assumptions.  The Company estimates the
     fair value of stock  options using a  Black-Scholes  valuation  model.  Key
     input  assumptions used to estimate the fair value of stock options include
     the expected term until exercise of the option,  expected volatility of the
     Company's stock, the risk free interest rate,  option forfeiture rates, and
     dividends, if any. The expected term of the options is calculated using the

                                       62
<PAGE>

     midpoint of the vesting date and the expected life of the grant  consistent
     with the provisions of Securities and Exchange  Commission Staff Accounting
     Bulletin No. 107. The expected  volatility  is derived from the  historical
     volatility  of the  Company's  stock for a period that matches the expected
     life  of the  option.  The  risk-free  interest  rate is the  yield  from a
     treasury  bond or note that is  comparable  in term to the expected life of
     the option.

     Option  forfeiture rates are based on the Company's  historical  forfeiture
     rates.  Expected  dividends  are  based on the  Company's  history  and the
     likelihood of future dividends.

     Compensation  costs for stock  options with graded  vesting are  recognized
     ratably  over the vesting  period.  As of  September  30,  2006,  there was
     $504,000 of total unrecognized compensation costs related to stock options.
     These costs are expected to be recognized over a weighted average period of
     2.2 years.

     The  weighted-average  grant-date  fair  value of options  granted  for the
     twelve  months  ended  September  30,  2006 and 2005 was $0.81  and  $3.16,
     respectively.  The total intrinsic value of stock options  exercised during
     the twelve months ended September 30, 2005 was $238,000.

     The fair  value of each  option  grant was  estimated  on the date of grant
     using the Black-Scholes  option-pricing  model with the following  weighted
     average assumptions:

                                          2006            2005
                                       ----------       ----------
     Expected volatility                39% - 50%        43% - 62%
     Weighted-average volatility            40.3%            49.0%
     Expected dividends                      0.0%             0.0%
     Expected term (in years)                3.6              4.1
     Risk-free interest rates               4.82%            4.18%

(10) Income Taxes

     For  financial  reporting  purposes,   (loss)/income  before  income  taxes
     includes the following components:

                                   Fiscal years ended September 30
                          --------------------------------------------------
                               2006             2005             2004
                          ---------------  ---------------  ----------------
                                            (In thousands)
Pretax (loss)/income:

  United States          $        (4,344) $          (541) $         (1,695)
  Foreign                            203              (53)               (2)
                          ---------------  ---------------  ----------------
                         $        (4,141) $          (594) $         (1,697)
                          ===============  ===============  ================

     The provision for (benefit from) income taxes consists of the following:

                                       63
<PAGE>

                                   Fiscal years ended September 30
                          --------------------------------------------------
                               2006             2005             2004
                          ---------------  ---------------  ----------------
                                            (In thousands)
Current:
      Federal            $            --  $            --  $            (15)
      State and local                  2              (21)                8
                          ---------------  ---------------  ----------------
                                       2              (21)               (7)
                          ---------------  ---------------  ----------------
Deferred:
      Federal                         --               --                --
      State and local                 --               --                --
                          ---------------  ---------------  ----------------
                                      --               --                --
                          ---------------  ---------------  ----------------
           Total         $             2  $           (21) $             (7)
                          ===============  ===============  ================

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

                                                   September 30
                                         --------------------------------
                                              2006             2005
                                         ---------------  ---------------
                                                  (In thousands)
Deferred tax assets:
  Accounts receivable                   $            41  $            38
  Inventory                                         609              499
  Accrued expenses and other, net                   127              114
  Elimination of gross profit on sales
   to affiliates                                     --              218
  Tax NOL carryforwards                           3,425            2,369
                                         ---------------  ---------------
           Deferred tax asset                     4,202            3,238
Less: Valuation allowance (a) (b)                (4,202)          (2,593)
                                         ---------------  ---------------
                                                     --              645
Deferred tax liability:
  Undistributed earnings of
    foreign affiliates                               --             (645)
                                         ---------------  ---------------
           Net deferred taxes           $            --  $            --
                                         ===============  ===============

(a)  The Company has incurred  significant  operating losses in the fiscal years
     2006,  2005,  and 2004.  Due to the  recurring  losses  and  because of the
     uncertainty  as to the  Company's  ability to generate  sufficient  taxable
     income to realize the value of its deferred tax asset the Company  provided
     a full valuation allowance to offset its deferred tax asset. This valuation
     allowance  will be  periodically  assessed  and may be  partially or wholly
     reversed in the future.

     As of September 30, 2006, the Company has a net operating loss carryforward
     of $8,924,000, which expires between 2023 through 2026.

                                       64
<PAGE>

Reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
<S>                                              <C>              <C>               <C>
                                                   Fiscal years ended September 30
                                          -------------------------------------------------
                                              2006             2005             2004
                                          --------------  ---------------  ----------------
U.S. Federal statutory rate                       (34.0)%          (34.0)%           (34.0)%
State income taxes, net of federal effect                           (2.5)             (2.5)
All other, net                                                       5.1               4.5
Change in valuation allowance                      34.0             27.9              31.6
                                          --------------  ---------------  ----------------
               Effective income tax rate            0.0%            (3.5)%            (0.4)%
                                          ==============  ===============  ================
</TABLE>

(11) Commitments

     (a)  Minimum Lease Commitments

          The  operations  of the Company are conducted in leased  premises.  At
          September 30, 2006, the approximate minimum annual rentals under these
          leases, which expire through fiscal year 2008, were as follows:

                                                      (In thousands)
          Fiscal year ending September 30:
                2007                                  $          410
                2008                                              30
                                                      --------------
                                                      $          440
                                                      ==============

          Total rent expense for all operating  leases was  $516,000,  $460,000,
          and $463,000 in fiscal 2006, 2005, and 2004, respectively.

          (b) Employment Agreements

          The  Company  has  entered  into  employment  agreements  with its two
          executive  officers,  both of which  expire  in fiscal  2007.  Minimum
          compensation  requirements  are  $150,000  for the fiscal  year ending
          September 30, 2007.

          (c) Purchase Commitment

          At  September  30, 2006 the Company had entered  into  purchase  order
          commitments  of  approximately  $4.0  million  and  will be  used  for
          production  requirements  during  fiscal 2007 and beyond.  Included in
          this  total was  approximately  $900,000  in volume  blanket  purchase
          agreements with select suppliers.

(12) Subsequent Events

     As of January 11, 2007 the Company has borrowed $1.3 million under the line
     of credit.

                                       65
<PAGE>

             Report of Independent Registered Public Accounting Firm

The Board of Directors
Global Payment Technologies, Inc


We have audited the accompanying balance sheets of Global Payment Technologies
Australia Pty Ltd as of August 31, 2006 and June 30, 2006 and the related
statement of operations, stockholders' equity, and cash flows for the period
ended August 31, 2006 and year ended June 30, 2006. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 the Global Payment Technologies
Australia Pty Ltd as of August 31, 2006 and June 30, 2006, and the results of
its operations and its cash flows for the period ended August 31, 2006 and year
ended June 30, 2006 in conformity with US generally accepted accounting
principles.


/s/ Pitcher Partners,
Sydney, Australia


11th January 2007


                                       66
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                    <C>                            <C>
                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD
                                 Balance Sheets
                        August 31, 2006 and June 30, 2006

                               Assets                                            August 2006       June 2006
                                                                               ----------------- ---------------
Current assets:
   Cash and equivalents                                               A$              3,024,562       2,405,739
   Trade accounts receivable, less allowances for doubtful accounts
     of A$10,000 in August 2006 and A$10,000 in June 2006                             1,347,105       1,006,953
   Inventories                                                                        2,707,513       3,513,694
   Income taxes receivable                                                               20,263               -
   Receivable from affiliate                                                             82,908          67,139
   Other current assets                                                                  74,212          74,466
                                                                               ----------------- ---------------
                        Total current assets                                          7,256,563       7,067,991
                                                                               ----------------- ---------------
Non current assets:
    Deferred income taxes                                                               213,541         213,541

    Property, plant and equipment
          Machinery and equipment                                                       392,312         381,802
          Less accumulated depreciation and amortization                               (256,184)       (249,184)
                                                                               ----------------- ---------------
             Net property, plant and equipment                                          136,128         132,618
                                                                               ----------------- ---------------
                          Total non current assets                                      349,669         346,159
                                                                               ================= ===============
                                      Total assets                    A$              7,606,232       7,414,150
                                                                               ================= ===============

                Liabilities and Stockholders' Equity
Current Liabilities:
    Trade accounts payable                                            A$              1,786,612       1,643,659
    Income taxes payable                                                                      -           4,357
    Accrued liabilities                                                                 788,147         768,472
                                                                               ----------------- ---------------
                          Total current liabilities                                   2,574,759       2,416,488
                                                                               ----------------- ---------------
                          Total liabilities                                           2,574,759       2,416,488
                                                                               ----------------- ---------------

Commitments and contingencies (Note 1)

Stockholders' equity: Common stock
     Issued and outstanding 20,000 shares in 2006 and 20,000 shares                      20,000          20,000
     in 2005
Retained earnings                                                                     5,011,473       4,977,662
                                                                               ----------------- ---------------
                 Total stockholders' equity                                           5,031,473       4,997,662
                                                                               ----------------- ---------------
                 Total liabilities and stockholders' equity           A$              7,606,232       7,414,150
                                                                               ================= ===============
</TABLE>
                See accompanying notes to financial statements.

                                       67
<PAGE>
<TABLE>
<CAPTION>
<S>                                                   <C>                           <C>
                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                            Statements of Operations

            Period ended August 31, 2006 and year ended June 30, 2006

                                                               August 2006       June 2006
                                                              --------------- -----------------
   Servicing income                                                   18,728           191,184
   Net sales                                         A$            1,821,998        10,963,570
                                                              --------------- -----------------
   Total sales                                                     1,840,726        11,154,754
   Cost of goods sold
   - GPT Inc                                                      (1,543,403)       (9,070,800)
   - Other                                                           (11,652)         (193,266)
                                                              --------------- -----------------
                       Gross profit                                  285,671         1,890,688

   Selling, general and administrative expenses                     (263,056)       (1,834,094)
                                                              --------------- -----------------
                      Operating income                                22,615            56,594

   Other income (expense):
       Interest income                                                19,868           114,593
       Other sundry income                                             5,817            12,000
                                                              --------------- -----------------

                      Income before income taxes                      48,300           183,187
   Income taxes                                                      (14,489)          (61,603)
                                                              --------------- -----------------
                      Net income                                      33,811           121,584
                                                              =============== =================
</TABLE>
         See accompanying notes to financial statements

                                       68
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                       Statements of Stockholders' Equity

            Period ended August 31, 2006 and year ended June 30, 2006
<TABLE>
<CAPTION>
<S>                   <C> <C>                             <C>                        <C>             <C>
                                                                    Common         Retained         Total
                                                                    Stock          Earnings     Stockholders'
                                                                                                    Equity
                                                                --------------- --------------- ---------------
     Balances at June 30, 2006                           A$             20,000       4,977,662       4,997,662
        Net income                                                           -          33,811          33,811
                                                                --------------- --------------- ---------------
     Balances at August 31, 2006                                        20,000       5,011,473       5,031,473
                                                                =============== =============== ===============
</TABLE>

                 See accompanying notes to financial statements

                                       69
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                             <C>            <C>
                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                            Statements of Cash Flows

            Period ended August 31, 2006 and year ended June 30, 2006

                                                                        August 2006      June 2006
                                                                       --------------- ---------------
Net income                                                      A$             33,811         121,584
  Adjusted to reconcile net income to net cash
     provided by operating activities:
   Depreciation and amortisation of property, plant and                         7,000          35,226
equipment
   Write off of obsolete stock                                                      -          17,024
   (Increase) / decrease in trade accounts receivable                        (340,152)      1,998,068
   (Increase) / decrease in inventories                                       806,181       2,966,636
   (Increase) / decrease in other assets                                          254         (18,685)
   (Increase) / decrease in intercompany receivables                          (15,769)        942,037
   Increase / (decrease) in trade accounts payable                            142,954      (4,190,257)
   Increase / (decrease) in accrued liabilities                                19,674           7,276
   (Increase) / decrease in deferred income taxes                                   -         (18,732)
  Increase / (decrease) in income tax provision                               (24,620)         (2,955)
   (Increase) / decrease in income tax receivable                                   -               -
                                                                       --------------- ---------------
              Net cash provided by/ (used in) operating                       629,333       1,857,222
                activities
                                                                       --------------- ---------------
Cash flows from investing activities:
   Capital expenditures, including interest capitalized                       (10,510)         (9,910)
                                                                       --------------- ---------------
              Net cash used in investing activities                           (10,510)         (9,910)
                                                                       --------------- ---------------
Cash flows from financing activities:
   Dividends paid                                                                   -        (800,000)
                                                                       --------------- ---------------
              Net cash used in financing activities                                 -        (800,000)
                                                                       --------------- ---------------
              Net decrease in cash and cash equivalents                       618,823       1,047,312

Cash and cash equivalents at beginning of year                              2,405,739       1,358,427
                                                                       --------------- ---------------
Cash and cash equivalents at end of year                        A$          3,024,562       2,405,739
                                                                       =============== ===============
</TABLE>

                 See accompanying notes to financial statements

                                       70
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                        August 31, 2006 and June 30, 2006

1. Summary of Significant Accounting Policies and Practices

     a) Description of Business

     Global  Payment   Technologies   Australia  Pty  Limited  (the   "Company")
     distributes and services paper currency validating equipment used in gaming
     and  vending  machines  in  Australia  and other  countries.  There were no
     significant  changes  in the  nature of the  Company's  principal  activity
     during the fiscal period.

     b) Trade Accounts Receivable

     Trade accounts  receivable  are recorded at the invoiced  amount and do not
     bear  interest.  The allowance for doubtful  accounts is the Company's best
     estimate of the amount of probable credit losses in the Company's  existing
     accounts  receivable.   The  Company  determines  the  allowance  based  on
     historical  write-off  experience by industry and national  economic  data.
     Account  balances are charged off against the allowance  after all means of
     collection have been exhausted and the potential for recovery is considered
     remote.  The Company does not have any  off-balance-sheet  credit  exposure
     related to its customers.

     Concentration of credit risk

     The Company's  largest  customer  represented  35.1% (June 2006:  29.1%) of
     trade  accounts  receivable  as of August 31,  2006 and 63.2%  (June  2006:
     66.8%) of sales for the fiscal  period  ended  August 31,  2006.  Two other
     customers  represented  27%  or  more  of  net  sales  and  trade  accounts
     receivable as of and for the period ended August 31, 2006.

     c) Inventories

     Inventories  are  stated  at the  lower  cost  or  market  value.  Cost  is
     determined using the first-in, first-out method for all inventories.

     d) Property, Plant and Equipment

     Property, plant and equipment are stated at cost.

     Depreciation  on plant and  equipment is  calculated  on the  straight-line
     method over the  estimated  useful  lives of the assets.  The  depreciation
     rates range from 7.5% to 33.33% (June 2006: 7.5% to 33.33%).

     e) Other  Current  Assets and Other Assets  Other  assets are  comprised of
     prepaid expenses and other non-trade receivables.

     f) Income Taxes

                                       71
<PAGE>

     Income  taxes are  accounted  for under  the  asset and  liability  method.
     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax bases and operating  loss and tax credit carry  forwards.  Deferred tax
     assets and  liabilities  are measured  using enacted tax rates  expected to
     apply to taxable income in the years in which those  temporary  differences
     are expected to be recovered or settled.  The effect on deferred tax assets
     and  liabilities  of a change in tax rates is  recognized  in income in the
     period that includes the enactment date.

                                       72
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                        August 31, 2006 and June 30, 2006

     1) Summary of significant Accounting Policies and Practices (cont)

     g) Use of Estimates

     Management  of the Company has made a number of estimates  and  assumptions
     relating to the reporting of assets and  liabilities  and the disclosure of
     contingent assets and liabilities to prepare these financial  statements in
     conformity with generally accepted  accounting  principles.  Actual results
     could differ from those estimates.

     h) Impairment of Long-Lived Assets

     Long-Lived assets are reviewed for impairment whenever events or changes in
     circumstances  indicate  that the  carrying  amount  of an asset may not be
     recoverable.  Recoverability of assets to be held and used is measured by a
     comparison  of the carrying  amount of an asset to  estimated  undiscounted
     future cash flows  expected to be generated  by the asset.  If the carrying
     amount of an asset exceeds its estimated  future cash flows,  an impairment
     charge is  recognized  by the  amount by which the  carrying  amount of the
     asset  exceeds  the fair value of the asset.  Assets to be  disposed of are
     reported  at the lower of the  carrying  amount or fair value less costs to
     sell, and depreciation ceases.

     The Company did not recognize  any  impairment  adjustments  in August 2006
     (June 2006: nil).

     i) Revenue Recognition

     The Company  recognizes  revenue  upon  shipment of products and passage of
     title to its customers,  or at the time services are completed with respect
     to repairs not covered by warranty agreements.

     j) Commitments and Contingencies

     Liabilities  for  loss  contingencies  arising  from  claims,  assessments,
     litigation,  fines and  penalties and other sources are recorded when it is
     probable  that  a  liability  has  been  incurred  and  the  amount  of the
     assessment and or remediation can be reasonably estimated.  No such amounts
     were recorded in August 2006 and June 2006.

     k) Advertising expenses

     Advertising  expenses are  recognized  in the  statement of  operations  as
     incurred.

     l) Cash and cash equivalents

     Cash  and cash  equivalents  comprise  cash on hand,  cash at bank and term
     deposits with banking  institutions.  The Term Deposits are for a period of
     30 days. These have been rolled over since year-end.  Cash at bank includes
     cash denominated in Australian and US dollars.  US dollar  denominated bank
     accounts are  restated at year-end to spot rates at year-end  with the gain
     recognized in the Statement of Operations.

                                       73
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                        August 31, 2006 and June 30, 2006

     2) Income Taxes

     All pre tax income is derived from domestic operations.

     Total income taxes for the period ended August 31, 2006 and year ended June
     30, 2006 consist of:
<TABLE>
<CAPTION>
<S>                           <C> <C>                     <C>                                             <C>
                                                                   Current          Deferred          Total
                                                                --------------- ----------------- ---------------
          Period ended August 31, 2006:                  A$             14,489                 -          14,489
                                                                =============== ================= ===============
          Year ended June 30, 2006:                      A$             80,335           (18,732)         61,603
                                                                =============== ================= ===============
</TABLE>

     Income tax expense was $14,489 and $61,603 for the period  ended August 31,
     2006 and year ended  June 30,  2006  respectively,  and  differed  from the
     amounts computed by applying the Australian  federal income tax rate of 30%
     (June 2006: 30%) to pre tax income as a result of the following:

                                              August 2006       June 2006
                                            ---------------- -----------------
     Computed "expected" tax expense A$              14,489            54,956
     Other, net                                           -             6,647
                                            ---------------- -----------------
                                     A$              14,489            61,603
                                            ================ =================

                                       74
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                        August 31, 2006 and June 30, 2006

     2) Income Taxes (continued)

     The tax  effects of  temporary  differences  that give rise to  significant
     portions of the deferred tax assets and deferred tax  liabilities at August
     31, 2006 and June 30, 2006 are presented below.

                               August 2006          June 2006

                            At 30 % tax rate     At 30% tax rate
                           -------------------- -------------------
<TABLE>
<CAPTION>
<S>                                                                <C>                                     <C>
          Deferred tax assets:
               Accounts receivable principally due to
                   allowance for doubtful accounts                A$                   3,000               3,000
              Inventory                                                               10,731              10,731
              Employee leave entitlements                                             50,185              50,185
              Bonus provision                                                        116,145             116,145
              Unrealised foreign exchange movements                                    8,223               8,223
               Other                                                                  25,257              25,257
                                                                         -------------------- -------------------
                              Total gross deferred tax assets                        213,541             213,541
                                                                         -------------------- -------------------
                              Net deferred tax assets                                213,541             213,541
                                                                         ==================== ===================
</TABLE>

     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realised.  The ultimate  realisation of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.  Management
     considers the  scheduled  reversal of deferred tax  liabilities,  projected
     future  taxable  income,  and  tax  planning   strategies  in  making  this
     assessment.   Based  upon  the  level  of  historical  taxable  income  and
     projections for future taxable income over the periods,  which the deferred
     tax assets are deductible,  management  believes it is more likely than not
     the Company will realize the benefits of these  deductible  differences  at
     August 31, 2006.

                                       75
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                        August 31, 2006 and June 30, 2006

     3) Pension and Other Post Retirement Benefits

     The Company  contributed to a defined  contribution  superannuation fund on
     behalf of its employees.  Contributions are based upon Australian statutory
     minimum percentage of salary plus any additional  contributions included in
     employee's  employment  agreement.  The company  contributed  A$23,986  and
     A$93,188 during August 2006 and June 2006  respectively to the fund.  There
     were no contributions outstanding at year-end.

     The Company  does not sponsor any other post  employment  benefits  for its
     employees.

     4) Accrued Liabilities

                                           August 2006       June 2006

     Goods and services tax payable    A$           78,018           58,207
     Accrued expenses                              467,845          467,982
     Provision for employee leave                  167,283          167,283
     Warranty provision                             75,000           75,000
                                           ---------------- ----------------
                                       A$          788,146          768,472
                                           ================ ================

     5) Commitments

     Non cancellable operating lease commitments
<TABLE>
<CAPTION>
<S>                                                          <C>                                   <C>
     Future operating lease commitments not provided for              August 2006           June 2006
     in the financial statements and payable:
     Within one year                                        A$                166,000              181,000
     One to two years                                                         188,000              188,000
     Two to three years                                                        15,000               15,000
                                                                  -------------------- --------------------
                                                            A$                369,000              384,000
                                                                  -------------------- --------------------
</TABLE>

     The Company leases property under a  non-cancellable 4 year operating lease
     expiring in July 2006.

     The company  exercised  the option in July 2004 to extend the lease for two
     years.

     The Company has not entered into any capital leases.

     6) Cost of Goods Sold

                                       76
<PAGE>


                                                August 2006       June 2006
Opening Inventory (excluding stock in        A$
transit)                                             2,968,716       5,300,666
Add
Purchases - GPT Inc                                    751,346       6,521,841
Purchases - Other                                        3,300         248,594
Freight and other charges                               11,652         161,681
                                                --------------- ---------------
                                                     3,735,014      12,232,782
Less
Ending Inventory (excluding stock in
transit)                                            (2,179,959)     (2,968,716)
                                                --------------- ---------------
Cost of Goods Sold                           A$      1,555,055       9,264,066
                                                =============== ===============

                                       77
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                        August 31, 2006 and June 30, 2006

     7) Related parties

     The company was 50% owned by Global  Payment  Technologies,  Inc, a company
     incorporated in the United States of America.  Global Payment Technologies,
     Inc  disposed of its  interest  on 4 September  2006 to ACN 121 187 068 Pty
     Limited,  a company  domiciled  in  Australia.  The other 50% is owned by a
     private  trust  of  which  the  Managing  Director  of  the  company  is  a
     beneficiary.

     During the period,  the Company  purchased  inventories from Global Payment
     Technologies,  Inc., which totalled  $739,870 (June 2006:  $6,521,841).  An
     amount of  A$1,702,173  payable  to  Global  Payment  Technologies,  Inc is
     included in Trade accounts payable at balance date (June 2006: $1,612,556).

     As of August 31, 2006 the Company had  receivables  from eCash Holdings Pty
     Limited of $82,908,  (June 2006: $67,139) which were primarily attributable
     to payments made by the Company on behalf of eCash  Holdings Pty Limited to
     employees and vendors of eCash Holdings Pty Limited. Interest is charged on
     the  balance  at the rate of 7% p.a.  This  amount  has been  repaid  since
     balance date.

     During the  period,  the Company  had sales to eCash  Holdings  Pty Limited
     totalling $Nil (June 2006:  $1,836). An amount of $Nil is included in Trade
     accounts receivable at balance date (June 2006: $Nil).

     For the period ended  August 31, 2006 and the year ended 30 June 2006,  the
     Company   charged  eCash   Holdings  Pty  Limited  a  management   fee  for
     administrative  tasks  conducted by the Company on behalf of eCash Holdings
     Pty Limited,  which is included in other sundry income in the  accompanying
     statement of operations.

     eCash  Holdings Pty Limited was owned 35% by Global  Payment  Technologies,
     Inc., 35% by the private trust of the Managing Director of the Company, and
     30% by an unrelated third party. Global Payment Technologies,  Inc disposed
     of its interest on 25 August 2006 to ACN 121 187 068 Pty Limited, a company
     domiciled in Australia.

     There were no other transactions with related parties.

                                       78
<PAGE>

             Report of Independent Registered Public Accounting Firm

The Board of Directors
Global Payment Technologies, Inc


We have audited the accompanying  balance sheets of Global Payment  Technologies
Australia  Pty Ltd as of June 30, 2006 and 2005,  and the related  statement  of
operations,  stockholders'  equity,  and cash flows for the years ended June 30,
2006, 2005 and 2004. 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 the standards of the Public  Company
Accounting Oversight Board (United States). 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 the Global Payment Technologies
Australia  Pty Ltd as of  June  30,  2006  and  2005,  and  the  results  of its
operations  and its cash flows for the years ended June 30, 2006,  2005 and 2004
in conformity with US generally accepted accounting principles.

/s/ Pitcher Partners,
Sydney, Australia


11th January 2007

                                       79
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD
                                 Balance Sheets
                             June 30, 2006 and 2005
<TABLE>
<CAPTION>
<S>                                                                   <C>                            <C>
                               Assets                                                2006             2005
                                                                               ----------------- ---------------
Current assets:
   Cash and equivalents                                              A$              2,405,739       1,358,427
   Trade accounts receivable, less allowances for doubtful accounts
     of A$10,000 in 2006 and A$10,000 in 2005                                        1,006,953       3,005,021
   Inventories                                                                       3,513,694       6,497,354
   Receivable from affiliate                                                            67,139       1,009,172
   Other current assets                                                                 74,466          55,781
                                                                               ----------------- ---------------
                        Total current assets                                         7,067,991      11,925,755
                                                                               ----------------- ---------------
Non current assets:
    Deferred income taxes                                                              213,541        194,809

    Property, plant and equipment
          Machinery and equipment                                                      381,802         371,892
          Less accumulated depreciation and amortization                              (249,184)       (213,958)
                                                                               ----------------- ---------------
             Net property, plant and equipment                                         132,618         157,934
                                                                               ----------------- ---------------
                         Total non current assets                                      346,159         352,743
                                                                               ----------------- ---------------
                                      Total assets                    A$             7,414,150      12,278,498
                                                                               ================= ===============

                Liabilities and Stockholders' Equity
Current Liabilities:
    Trade accounts payable                                            A$             1,643,659       5,833,912
    Income taxes payable                                                                 4,357           7,312
    Accrued liabilities                                                                768,472         761,196
                                                                               ----------------- ---------------
                          Total current liabilities                                  2,416,488       6,602,420
                                                                               ----------------- ---------------
                          Total liabilities                                          2,416,488       6,602,420
                                                                               ----------------- ---------------

Commitments and contingencies (Note 1)

Stockholders' equity: Common stock
     Issued and outstanding 20,000 shares in 2006 and 20,000 shares                     20,000          20,000
     in 2005
Retained earnings                                                                    4,977,662       5,656,078
                                                                               ----------------- ---------------
                 Total stockholders' equity                                          4,997,662       5,676,078
                                                                               ----------------- ---------------
                 Total liabilities and stockholders' equity           A$             7,414,150      12,278,498
                                                                               ================= ===============
</TABLE>
                See accompanying notes to financial statements.

                                       80
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                            Statements of Operations

                    Years ended June 30, 2006, 2005 and 2004
<TABLE>
<CAPTION>
<S>                                                                  <C>               <C>             <C>
                                                                   2006             2005             2004
                                                              --------------- ----------------- ---------------
   Servicing income                                                  191,184           250,306         207,416
   Net sales                                         A$           10,963,570        17,104,350     17,409, 545
                                                              --------------- ----------------- ---------------
   Total sales                                                    11,154,754        17,354,656      17,616,961
   Cost of goods sold
   - GPT Inc                                                      (9,070,800)      (14,307,241)    (14,363,467)
   - Other                                                          (193,266)         (185,508)       (326,806)
                                                              --------------- ----------------- ---------------
                       Gross profit                                1,890,688         2,861,907       2,926,688
   Selling, general and administrative expenses                   (1,834,094)       (1,947,755)     (1,777,565)
                                                              --------------- ----------------- ---------------
                      Operating income                                56,594           914,152       1,149,123
   Other income (expense):
       Interest income                                               114,593           162,179         140,252
       Other sundry income                                            12,000            12,000          63,240
                                                              --------------- ----------------- ---------------
                      Income before income taxes                     183,187         1,088,331       1,352,615
   Income taxes                                                      (61,603)         (328,385)       (407,189)
                                                              --------------- ----------------- ---------------
                      Net income                                     121,584           759,946         945,426
                                                              =============== ================= ===============
</TABLE>

         See accompanying notes to financial statements

                                       81
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                       Statements of Stockholders' Equity

                    Years ended June 30, 2006, 2005 and 2004
<TABLE>
<CAPTION>
<S>                   <C> <C>                             <C>                        <C>             <C>
                                                                    Common         Retained         Total
                                                                    Stock          Earnings     Stockholders'
                                                                                                    Equity
                                                                --------------- --------------- ---------------
     Balances at June 30, 2003                           A$             20,000       4,550,706       4,570,706
        Net income (unaudited)                                               -         945,426         945,426
        Dividends declared                                                   -        (600,000)       (600,000)
                                                                --------------- --------------- ---------------
     Balances at June 30, 2004                           A$             20,000       4,896,132       4,916,132
         Net income                                                          -         759,946         759,946
         Dividends declared                                                  -               -               -
                                                                --------------- --------------- ---------------
     Balances at June 30, 2005                           A$             20,000       5,656,078       5,676,078
         Net income                                                          -         121,584         121,584
         Dividends declared                                                  -        (800,000)       (800,000)
                                                                --------------- --------------- ---------------
     Balances at June 30, 2006                                          20,000       4,977,662       4,997,662
                                                                =============== =============== ===============
</TABLE>

                 See accompanying notes to financial statements

                                       82
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                            Statements of Cash Flows

                    Years ended June 30, 2006, 2005 and 2004
<TABLE>
<CAPTION>
<S>                                                              <C>                          <C>             <C>
                                                                            2006            2005            2004
                                                                       --------------- --------------- ---------------
Net income                                                      A$            121,584         759,946         945,426
  Adjusted to reconcile net income to net cash
     provided by operating activities:
   Depreciation and amortisation of property, plant and                        35,226          40,757          42,209
     equipment
   Write off of obsolete stock                                                 17,024               -               -
   (Increase) / decrease in trade accounts receivable                       1,998,068        (853,005)        325,074
   (Increase) / decrease in inventories                                     2,966,636      (1,987,545)      2,841,050
   (Increase) / decrease in prepayments                                       (18,685)         85,559         (90,925)
   (Increase) / decrease in intercompany receivables                          942,033          27,516         425,667
   Increase / (decrease) in trade accounts payable                         (4,190,253)        582,360      (3,476,080)
   Increase / (decrease) in accrued liabilities                                 7,276        (284,767)        (17,082)
   (Increase) / decrease in deferred income taxes                             (18,732)         37,134         291,214
   Increase / (decrease) in income tax provision                               (2,955)          7,312               -
   (Increase) / decrease in income tax receivable                                   -         192,545        (184,320)
                                                                       --------------- --------------- ---------------
              Net cash provided by/ (used in) operating                     1,857,222      (1,392,188)      1,102,233
                activities
                                                                       --------------- --------------- ---------------
Cash flows from investing activities:
   Capital expenditures, including interest capitalized                        (9,910)        (11,023)         (7,997)
                                                                       --------------- --------------- ---------------
              Net cash used in investing activities                            (9,910)        (11,023)         (7,997)
                                                                       --------------- --------------- ---------------
Cash flows from financing activities:
   Dividends paid                                                            (800,000)              -        (600,000)
                                                                       --------------- --------------- ---------------
              Net cash used in financing activities                          (800,000)              -        (600,000)
                                                                       --------------- --------------- ---------------
              Net decrease in cash and cash equivalents                     1,047,312      (1,403,211)        494,236
Cash and cash equivalents at beginning of year                              1,358,427       2,761,638       2,267,402
                                                                       --------------- --------------- ---------------

Cash and cash equivalents at end of year                        A$          2,405,739       1,358,427       2,761,638
                                                                       =============== =============== ===============
</TABLE>
                 See accompanying notes to financial statements

                                       83
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                          June 30, 2006, 2005 and 2004

2. Summary of Significant Accounting Policies and Practices

     a) Description of Business

     Global  Payment   Technologies   Australia  Pty  Limited  (the   "Company")
     distributes and services paper currency validating equipment used in gaming
     and  vending  machines  in  Australia  and other  countries.  There were no
     significant  changes  in the  nature of the  Company's  principal  activity
     during the fiscal year.

     b) Trade Accounts Receivable

     Trade accounts  receivable  are recorded at the invoiced  amount and do not
     bear  interest.  The allowance for doubtful  accounts is the Company's best
     estimate of the amount of probable credit losses in the Company's  existing
     accounts  receivable.   The  Company  determines  the  allowance  based  on
     historical  write-off  experience by industry and national  economic  data.
     Account  balances are charged off against the allowance  after all means of
     collection have been exhausted and the potential for recovery is considered
     remote.  The Company does not have any  off-balance-sheet  credit  exposure
     related to its customers.

     Concentration of credit risk

     The Company's largest customer represented 29% (2005: 33% and 2004: 47%) of
     trade accounts  receivable as of June 30, 2006 and 67% (2005: 54% and 2004:
     59%) of sales for the fiscal year ended June 30, 2006. Two other  customers
     represented  29.5%  (2005:  12%) or more of net sales  and  trade  accounts
     receivable as of and for the year ended June 30, 2006.

     c) Inventories

     Inventories  are  stated  at the  lower  cost  or  market  value.  Cost  is
     determined using the first-in, first-out method for all inventories.

     d) Property, Plant and Equipment

     Property, plant and equipment are stated at cost.

     Depreciation  on plant and  equipment is  calculated  on the  straight-line
     method over the  estimated  useful  lives of the assets.  The  depreciation
     rates range from 7.5% to 33.33% (2005: 7.5% to 27%; 2004: 7.5% to 27%).

     e) Other Current Assets and Other Assets

     Other  assets  are  comprised  of  prepaid  expenses  and  other  non-trade
     receivables.

     g) Income Taxes

     Income  taxes are  accounted  for under  the  asset and  liability  method.
     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax bases and operating  loss and tax credit carry  forwards.  Deferred tax
     assets and  liabilities  are measured  using enacted tax rates  expected to
     apply to taxable income in the years in which those  temporary  differences
     are expected to be recovered or settled.  The effect on deferred tax assets
     and  liabilities  of a change in tax rates is  recognized  in income in the
     period that includes the enactment date.

                                       84
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                          June 30, 2006, 2005 and 2004

     1) Summary of significant Accounting Policies and Practices (cont)

     l) Use of Estimates

     Management  of the Company has made a number of estimates  and  assumptions
     relating to the reporting of assets and  liabilities  and the disclosure of
     contingent assets and liabilities to prepare these financial  statements in
     conformity with generally accepted  accounting  principles.  Actual results
     could differ from those estimates.

     m) Impairment of Long-Lived Assets

     Long-Lived assets are reviewed for impairment whenever events or changes in
     circumstances  indicate  that the  carrying  amount  of an asset may not be
     recoverable.  Recoverability of assets to be held and used is measured by a
     comparison  of the carrying  amount of an asset to  estimated  undiscounted
     future cash flows  expected to be generated  by the asset.  If the carrying
     amount of an asset exceeds its estimated  future cash flows,  an impairment
     charge is  recognized  by the  amount by which the  carrying  amount of the
     asset  exceeds  the fair value of the asset.  Assets to be  disposed of are
     reported  at the lower of the  carrying  amount or fair value less costs to
     sell, and depreciation ceases.

     The Company did not recognize  any  impairment  adjustments  in fiscal 2006
     (2005: nil; 2004: nil).

     n) Revenue Recognition

     The Company  recognizes  revenue  upon  shipment of products and passage of
     title to its customers,  or at the time services are completed with respect
     to repairs not covered by warranty agreements.

     o) Commitments and Contingencies

     Liabilities  for  loss  contingencies  arising  from  claims,  assessments,
     litigation,  fines and  penalties and other sources are recorded when it is
     probable  that  a  liability  has  been  incurred  and  the  amount  of the
     assessment and or remediation can be reasonably estimated.  No such amounts
     were recorded in fiscal 2006, 2005 or 2004.

     p) Advertising expenses

     Advertising  expenses are  recognized  in the  statement of  operations  as
     incurred.

     l) Cash and cash equivalents

     Cash  and cash  equivalents  comprise  cash on hand,  cash at bank and term
     deposits with banking  institutions.  The Term Deposits are for a period of
     30 days. These have been rolled over since year-end.  Cash at bank includes
     cash denominated in Australian and US dollars.  US dollar  denominated bank
     accounts are  restated at year-end to spot rates at year-end  with the gain
     recognized in the Statement of Operations.

                                       85
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                          June 30, 2006, 2005 and 2004

     2) Income Taxes

     All pre tax income is derived from domestic operations.

     Total income taxes for the years ended June 30, 2006, 2005 and 2004 consist
     of:

                                       Current        Deferred       Total
                                      ------------- --------------- ------------
     Year ended June 30, 2006:     A$       80,335         (18,732)      61,603
                                      ============= =============== ============
     Year ended June 30, 2005:     A$      291,251          37,134      328,385
                                      ============= =============== ============
     Year ended June 30, 2004:     A$      115,975         291,214      407,189
                                      ============= =============== ============

     Income tax expense was  $61,603,  $328,385 and $407,189 for the years ended
     June 30, 2006, June 30, 2005 and June 30, 2004, respectively,  and differed
     from the amounts  computed by applying the  Australian  federal  income tax
     rate of 30%  (2005:  30%;  2004:  30%) to pre tax income as a result of the
     following:

                                            2006        2005        2004
                                           ----------- ------------ -----------
     Computed "expected" tax expense    A$     54,956      326,499     405,785
     Other, net                                 6,647        1,886       1,404
                                           ----------- ------------ -----------
                                        A$     61,603      328,385     407,189
                                           =========== ============ ===========

                                       86
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                          June 30, 2006, 2005 and 2004

6)   Income Taxes (continued)

     The tax  effects of  temporary  differences  that give rise to  significant
     portions of the deferred tax assets and  deferred tax  liabilities  at June
     30, 2006 and 2005 are presented below.
<TABLE>
<CAPTION>
<S>                                                          <C>                                     <C>
                                                                          2006                 2005
                                                                    At 30 % tax rate     At 30% tax rate
                                                                   -------------------- -------------------
     Deferred tax assets:
         Accounts receivable principally due to
             allowance for doubtful accounts                A$                   3,000               3,000
        Inventory                                                               10,731               5,624
        Employee leave entitlements                                             50,185              44,644
        Bonus provision                                                        116,145              94,897
        Unrealised foreign exchange movements                                    8,223              21,357
         Other                                                                  25,257              25,287
                                                                   -------------------- -------------------
                        Total gross deferred tax assets                        213,541             194,809
                                                                   -------------------- -------------------
                        Net deferred tax assets                                213,541             194,809
                                                                   ==================== ===================
</TABLE>

     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realised.  The ultimate  realisation of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.  Management
     considers the  scheduled  reversal of deferred tax  liabilities,  projected
     future  taxable  income,  and  tax  planning   strategies  in  making  this
     assessment.   Based  upon  the  level  of  historical  taxable  income  and
     projections for future taxable income over the periods,  which the deferred
     tax assets are deductible,  management  believes it is more likely than not
     the Company will realize the benefits of these  deductible  differences  at
     June 30, 2006.

                                       87
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                          June 30, 2006, 2005 and 2004

7)   Pension and Other Post Retirement Benefits

     The Company  contributed to a defined  contribution  superannuation fund on
     behalf of its employees.  Contributions are based upon Australian statutory
     minimum percentage of salary plus any additional  contributions included in
     employee's employment agreement. The company contributed A$93,188, A$83,304
     and A$81,692  during fiscal years 2006,  2005 and 2004  respectively to the
     fund. There were no contributions outstanding at year-end.

     The Company  does not sponsor any other post  employment  benefits  for its
     employees.

8) Accrued Liabilities

                                              2006            2005

     Goods and services tax payable     A$          58,207         141,837
     Accrued expenses                              467,982         395,545
     Provision for employee leave                  167,283         148,814
     Warranty provision                             75,000          75,000
                                           ---------------- ---------------
                                        A$         768,472         761,196
                                           ================ ===============

9) Commitments

     Non cancellable operating lease commitments

     Future operating lease commitments not provided
     for in the financial statements and payable:

                                                2006             2005
     Within one year                  A$             181,000          210,000
     One to two years                                188,000           70,000
     Two to three years                               15,000                -
                                            ----------------- ----------------
                                      A$             384,000          280,000
                                            ================= ================

     The Company leases property under a  non-cancellable 4 year operating lease
     expiring in July 2006.

     The company  exercised  the option in July 2004 to extend the lease for two
     years.

     The Company has not entered into any capital leases.

                                       88
<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>             <C>             <C>
     6) Cost of Goods Sold
                                                          2006             2005            2004
Opening Inventory (excluding stock in        A$
transit)                                                   5,300,666       2,580,220       3,228,659
Add
Purchases - GPT Inc                                        6,521,841      16,736,086      13,484,683
Purchases - Other                                            248,594         219,651         266,904
Freight and other charges                                    161,681         257,458         290,247
                                                    ----------------- --------------- ---------------
                                                          12,232,782      19,793,415      17,270,493
Less
Ending Inventory (excluding stock in
transit)                                                  (2,968,716)     (5,300,666)     (2,580,220)
                                                    ----------------- --------------- ---------------
Cost of Goods Sold                           A$            9,264,066      14,492,749      14,690,273
                                                    ================= =============== ===============
</TABLE>


                                       89
<PAGE>

                  GLOBAL PAYMENT TECHNOLOGIES AUSTRALIA PTY LTD

                          Notes to Financial Statements

                          June 30, 2006, 2005 and 2004

8)   Related parties

     The company was 50% owned by Global  Payment  Technologies,  Inc, a company
     incorporated in the United States of America.  Global Payment Technologies,
     Inc  disposed of its  interest  on 4 September  2006 to ACN 121 187 068 Pty
     Limited,  a company  domiciled  in  Australia.  The other 50% is owned by a
     private  trust  of  which  the  Managing  Director  of  the  company  is  a
     beneficiary.

     During the year,  the Company  purchased  inventories  from Global  Payment
     Technologies,  Inc.,  which totalled  $6,521,841  (2005:  $16,736,086).  An
     amount of  A$1,612,556  payable  to  Global  Payment  Technologies,  Inc is
     included in Trade accounts payable at balance date (2005: $5,652,566).

     As of June 30, 2006 the Company had  receivables  from eCash  Holdings  Pty
     Limited of $67,139, (2005: $1,009,172) which were primarily attributable to
     payments  made by the  Company on behalf of eCash  Holdings  Pty Limited to
     employees and vendors of eCash Holdings Pty Limited. Interest is charged on
     the  balance  at the rate of 7% p.a.  This  amount  has been  repaid  since
     balance date.

     During  the year,  the  Company  had sales to eCash  Holdings  Pty  Limited
     totalling $1,836 (2005:  $469,391). An amount of A$Nil is included in Trade
     accounts receivable at balance date (2005: $200,178).

     For the year ended June 30, 2006,  the Company  charged eCash  Holdings Pty
     Limited a management fee for administrative  tasks conducted by the Company
     on behalf of eCash Holdings Pty Limited,  which is included in other sundry
     income in the accompanying statement of operations.

     eCash  Holdings Pty Limited was owned 35% by Global  Payment  Technologies,
     Inc., 35% by the private trust of the Managing Director of the Company, and
     30% by an unrelated third party. Global Payment Technologies,  Inc disposed
     of its interest on 25 August 2006 to ACN 121 187 068 Pty Limited, a company
     domiciled in Australia.

     There were no other transactions with related parties.

                                       90
<PAGE>

             Report of Independent Registered Public Accounting Firm


The Board of Directors
eCash Holdings Pty Limited


We have audited the accompanying  consolidated  balance sheets of eCash Holdings
Pty  Limited  and  subsidiaries  as of June 30,  2006  and 2005 and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years ended June 30, 2006, 2005 and 2004. 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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of eCash
Holdings  Pty Limited  and  subsidiaries  as of June 30, 2006 and 2005,  and the
consolidated results of their operations and cash flows for the years ended June
30, 2006,  2005 and 2004, in conformity  with US generally  accepted  accounting
principles.


/s Pitcher Partners,
Sydney, Australia


11th January 2007

                                       91
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                           Consolidated Balance Sheets

                                  June 30, 2006
<TABLE>
<CAPTION>
<S>                                                                               <C>                                 <C>
                    Assets
                                                                                              2006                2005
                                                                                       ------------------- -------------------
Current assets:
       Cash and cash equivalents                                                 A$             1,102,169             274,282
       Trade accounts receivable, less allowance for doubtful accounts of
       A$NIL (2005-A$NIL)                                                                         362,617             166,296
       Inventories                                                                                774,940             886,462
       Deferred Income taxes                                                                       58,854             415,028
       Other current assets                                                                       137,975               8,962
                                                                                       ------------------- -------------------
                    Total current assets                                                        2,436,555           1,751,030
                                                                                       ------------------- -------------------
Property, plant and equipment
       Machinery and equipment                                                                     16,378              20,905
       Less accumulated depreciation and amortization                                                (741)             (3,907)
                                                                                       ------------------- -------------------
                    Net property, plant and equipment                                              15,637              16,998
                                                                                       ------------------- -------------------
     Assets of discontinued operations                                                                  -             652,831
                                                                                       ------------------- -------------------
                    Total assets                                                 A$             2,452,192           2,420,859
                                                                                       =================== ===================

                    Liabilities and Stockholders' Equity
Current liabilities:
                                                                                 A$
       Trade accounts payable                                                                     339,582             830,405
       Income taxes payable                                                                       507,712            (59,951)
       Payable to affiliate                                                                        67,139           1,009,172
       Accrued liabilities                                                                        350,219             366,096

       Liabilities of discontinued operations                                                           -             198,979
                                                                                       ------------------- -------------------
                    Total current liabilities                                                   1,264,652           2,344,701
                                                                                       ------------------- -------------------
                    Total liabilities                                                           1,264,652           2,344,701
                                                                                       ------------------- -------------------
Stockholders' equity:
       Common Stock
            Issued and outstanding 3,000 shares in 2006 and 3,000 shares in
            2005                                                                                    3,000               3,000
       Retained earnings                                                                        1,184,540              73,158
                                                                                       ------------------- -------------------
                    Total stockholders' equity                                                  1,187,540              76,158
                                                                                       ------------------- -------------------
                    Total liabilities and stockholders' equity                   A$             2,452,192           2,420,859
                                                                                       =================== ===================
</TABLE>

Commitments and contingencies (Note 1)

See accompanying notes to the consolidated financial statements.

                                       92
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                      Consolidated Statements of Operations

                            Year ended June 30, 2006
<TABLE>
<CAPTION>
<S>                                                             <C>                             <C>                 <C>
                                                                          2006                2005                2004
Continuing operations

Sales                                                          A$           4,635,873           1,525,034           1,427,159
Cost of goods sold (including rebate and other
direct costs)                                                              (3,283,678)         (1,489,513)           (710,341)
                                                                   ------------------- ------------------- -------------------
                        Gross profit                                        1,352,195              35,521             716,818
Selling, general and administrative expenses                               (1,103,886)           (658,897)           (530,495)
                                                                   ------------------- ------------------- -------------------
                        Operating income/(loss)                               248,309            (623,376)            186,323
Other income / (expense):
        Interest revenue                                                       58,152               9,383               1,426
        Rental income                                                             795                 (75)              2,865
        Other income                                                           75,144              95,295               3,332
        Interest expense                                                     (15,216)             (73,423)            (84,524)
        Servicing income                                                       12,792              14,214              30,758
        Maintenance costs                                                           -                   -             (25,140)
        Rebate income                                                          17,118              29,375              46,919
                                                                   ------------------- ------------------- -------------------
Income/(loss) from continuing operations                                      397,094            (548,607)            161,959
  before income taxes
Income taxes credit / (expense)                                              (119,072)            330,563            (204,804)
                                                                   ------------------- ------------------- -------------------
Income/(loss) from continuing operations                                      278,022            (218,044)            (42,845)
                                                                   ------------------- ------------------- -------------------
Discontinued operations (Note 8)
Profit / (loss) from discontinued operations                                2,761,943             (56,988)           (224,562)
Income taxes credit / (expense)                                              (828,583)             84,465                   -
                                                                   ------------------- ------------------- -------------------
Income/(loss) from discontinued operations                                  1,933,360              27,477            (224,562)
                                                                   ------------------- ------------------- -------------------
                   Net income                                               2,211,382            (190,567)           (267,407)
                                                                   =================== =================== ===================
</TABLE>
See accompanying notes to the consolidated financial statements.

                                       93
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                 Consolidated Statements of Stockholders' Equity

                            Year ended June 30, 2006
<TABLE>
<CAPTION>
<S>              <C> <C>                                        <C>                               <C>                 <C>
                                                                          Common            Retained             Total
                                                                           Stock            Earnings         Stockholders'
                                                                                                                 Equity
                                                                      ---------------- ------------------- -------------------
Balances at June 30, 2003 (Unaudited)                          A$               2,984             531,132             534,116
        Net income/(loss)                                                           -            (267,407)           (267,407)
        Share adjustment                                                           16                   -                  16
                                                                      ---------------- ------------------- -------------------
Balances at June 30, 2004                                      A$               3,000             263,725             266,725
         Net income/(loss)                                                          -            (190,567)           (190,567)
                                                                      ---------------- ------------------- -------------------
Balances at June 30, 2005                                      A$               3,000              73,158              76,158
         Net income/(loss)                                                          -           2,211,382           2,211,382
         Dividends declared                                                         -          (1,100,000)         (1,100,000)
                                                                      ---------------- ------------------- -------------------
Balances at June 30, 2006                                      A$               3,000           1,184,540           1,187,540
                                                                      ================ =================== ===================
</TABLE>
See accompanying notes to the consolidated financial statements.

                                       94
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                      Consolidated Statements of Cash Flows

                            Year ended June 30, 2006
<TABLE>
<CAPTION>
<S>                                                             <C>                              <C>                  <C>
                                                                            2006                2005                2004
                                                                      ------------------ ------------------- -------------------
Net income/(loss)                                              A$             2,211,382           (190,567)            (267,407)
        Adjustments to reconcile net income to net cash
        providing by operating activities:
        Net profit on disposal of business                                   (3,335,839)                 -                   -
        Depreciation and amortisation of property, plant and
        equipment                                                                79,339            110,457               60,496
        Increase/(decrease) in doubtful debts                                         -            (27,000)                   -
        (Increase)/decrease in trade accounts receivable                        (52,644)          (136,192)             (42,351)
        (Increase)/decrease in prepayments                                       (3,821)                 -                    -
        (Increase)/decrease in inventories                                      111,522            (15,535)             974,204
        (Increase)/decrease in other assets                                    (124,254)           120,320             (116,420)
        Increase/(decrease) in related party balances                          (942,033)           (21,240)            (431,834)
        Increase/(decrease) in trade accounts payable                          (625,081)           713,731              125,374
        Increase/(decrease) in provisions and other accruals
                                                                                (80,598)           209,014              (67,830)
        (Increase)/decrease in income tax balance                              567,663              38,330                    -
        (Increase)/decrease in deferred tax balance                            356,174            (415,028)             208,850
                                                                      ------------------ ------------------- -------------------
               Net cash provided by/(used in) operating
               activities                                                    (1,838,190)           386,290              443,082
                                                                      ------------------ ------------------- -------------------
Cash flows from investing activities:
         Net cash inflow upon disposal of business                            3,872,791                  -                    -
         Capital expenditure, including interest capitalised                   (122,490)          (227,205)            (447,269)
                                                                      ------------------ ------------------- -------------------
               Net cash provided by/(used in) investing
               activities                                                     3,750,301           (227,205)            (447,269)
                                                                      ------------------ ------------------- -------------------
Cash flow from financing activities:
        Issue of shares                                                               -                  -                   16
        Dividends paid                                                       (1,100,000)                 -                    -
                                                                      ------------------ ------------------- -------------------
               Net cash provided by/(used in) financing
               activities                                                    (1,100,000)                 -                   16
                                                                      ------------------ ------------------- -------------------
               Net increase/(decrease) in cash and cash
               equivalents                                                      812,111            159,085               (4,171)
Cash and cash equivalents at beginning of year                                  290,058            130,973              135,144
                                                                      ------------------ ------------------- -------------------
Cash and cash equivalents at end of year                       A$             1,102,169            290,058              130,973
                                                                      ================== =================== ===================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       95
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements

(1)  Summary of Significant Accounting Policies and Practices

     (a) Description of Business

     eCash Holdings Pty Ltd (the "Company") was  incorporated on 13 October 1999
     and remained dormant until the 2002 financial year. The company operates in
     the distribution  and servicing of automatic teller machines.  In 2002, the
     Company  did not trade,  rather it allowed a related  party to trade on its
     behalf under an agreed contractual  arrangement and in return an agency fee
     was received.  In 2003, the Company  commenced trading in its own right. On
     17 July 2003 the  company  changed its name from eCash Pty Limited to eCash
     Holdings Pty Limited.

     (b) Trade Accounts Receivable

     Trade accounts  receivable  are recorded at the invoiced  amount and do not
     bear  interest.  The allowance for doubtful  accounts is the Company's best
     estimate of the amount of probable credit losses in the Company's  existing
     accounts  receivable.   The  Company  determines  the  allowance  based  on
     historical  write-off  experience by industry and national  economic  data.
     Account  balances are charged off against the allowance  after all means of
     collection have been exhausted and the potential for recovery is considered
     remote.  The Company does not have any  off-balance-sheet  credit  exposure
     related to its customers.

                          Concentration of credit risk

     The Group's largest ATM sales customer, represented 57.9% (2005: 43.6%) and
     (2004:  0%) of trade  accounts  receivable  as of June 30,  2006 and  76.5%
     (2005:  31%) and  (2004:  0%) of sales for the  fiscal  year ended June 30,
     2006. The Group's largest ATM rebate customer, represented 0% (2005: 44.6%)
     of trade accounts  receivable as of June 30, 2006 and 100% (2005:  100% and
     2004: 100%) of rebate income for the fiscal year ended June 30, 2006.

     (c) Inventories

     Inventories  are  stated  at the  lower of cost or  market  value.  Cost is
     determined using the first-in, first-out method for all inventories.

     (d) Property, Plant and Equipment

     Property, plant and equipment are stated at cost.

     Depreciation  on plant and  equipment is  calculated  on the  straight-line
     method over the  estimated  useful  lives of the assets.  The  depreciation
     rates range from 7.5% to 21% (2005: 7.5% to 21%) and (2004: 7.5% to 21%).

     (e) Other Current Assets and Other Assets

     Other assets are comprised of rental bonds, prepaid expenditure,  and other
     non-trade receivables.

                                       96
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements

(1) Summary of Significant Accounting Policies and Practices (cont)

     (f) Income Taxes

     Income  taxes are  accounted  for under  the  asset and  liability  method.
     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax bases and operating  loss and tax credit carry  forwards.  Deferred tax
     assets and  liabilities  are measured  using enacted tax rates  expected to
     apply to taxable income in the years in which those  temporary  differences
     are expected to be recovered or settled.  The effect on deferred tax assets
     and  liabilities  of a change in tax rates is  recognized  in income in the
     period that includes the enactment date.

     Capital gains tax, if applicable,  is provided for in  establishing  period
     income tax expense when an asset is sold.

     (g) Use of estimates

     Management  of the Company has made a number of estimates  and  assumptions
     relating to the reporting of assets and  liabilities  and the disclosure of
     contingent assets and liabilities to prepare these financial  statements in
     conformity with generally accepted  accounting  principles.  Actual results
     could differ from those estimates.

     (h) Impairment of Long-Lived Assets

     Long-lived  assets,  such as property,  plant and equipment,  and purchased
     intangibles  subject to amortization,  are reviewed for impairment whenever
     events or changes in circumstances  indicate that the carrying amount of an
     asset may not be recoverable.  Recoverability of assets to be held and used
     is measured by a comparison of the carrying amount of an asset to estimated
     undiscounted  future cash flows  expected to be generated by the asset.  If
     the carrying amount of an asset exceeds its estimated future cash flows, an
     impairment  charge is recognized by the amount by which the carrying amount
     of the asset exceeds the fair value of the asset.  Assets to be disposed of
     are reported at the lower of the  carrying  amount or fair value less costs
     to sell, and depreciation ceases.

     An impairment  loss is  recognised  to the extent that the carrying  amount
     exceeds  the  asset's  fair  value.  The  Company  did  not  recognise  any
     impairment adjustments in fiscal 2006, 2005 and 2004.

     (i) Revenue Recognition

     The Company  recognises  revenue when products are shipped and the customer
     takes ownership and assumes risk of loss.  Interest income is recognised as
     it accrues.  Service  revenue is  recognised  as the services are provided.
     Rebate income is brought to account at the time the rebate is earned.

                                       97
<PAGE>

     (j) Commitments and Contingencies

     Liabilities for loss  contingencies,  including  environmental  remediation
     costs, arising from claims,  assessments,  litigation,  fines and penalties
     and other  sources are recorded  when it is probable  that a liability  has
     been incurred and the amount of the assessment  and/or  remediation  can be
     reasonably estimated.

     (k) Advertising expenses

     Advertising  expenses are  recognised  in the  statement of  operations  as
     incurred.

                                       98
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements


(1) Summary of Significant Accounting Policies and Practices (cont)

     (l) Cash and cash equivalents

     Cash  and cash  equivalents  comprise  cash on hand,  cash at bank and term
     deposits with banking institutions.  Cash at bank includes cash denominated
     in  Australian  and US dollars.  US dollar  denominated  bank  accounts are
     restated  at  year-end  to  spot  rates  at  year-end  with  the  gain/loss
     recognised in the Statement of Operations.

     (m) Consolidation

     The consolidated  financial  statements of the consolidated  entity include
     the financial  statements of the Company,  being the chief entity,  and its
     controlled entities ("the consolidated entity").

     Where an entity  either began or ceased to be  controlled  during the year,
     the results are included only from the date control  commenced or up to the
     date control ceased.

     The  balances  and effects of  transactions,  between  controlled  entities
     included in the consolidated financial statements have been eliminated.

     (n) Investments in controlled entities

     Capital ATM Pty Limited  was  incorporated  on 17 March 2003 with the eCash
     Holdings  Pty  Limited   investing   A$1  share  capital  at  the  date  of
     incorporation acquiring a 100% interest.

     Custom Cash Pty Limited  was  incorporated  on 18 March 2003 with the eCash
     Holdings  Pty  Limited   investing   A$1  share  capital  at  the  date  of
     incorporation acquiring a 100% interest.

     eCash Pty Limited was  incorporated on 24 July 2003 with eCash Holdings Pty
     Ltd investing $1 share capital at the date of incorporation  acquiring 100%
     interest.

     eCash  Management  Pty Limited was  incorporated  on 12 September 2002 with
     eCash  Holdings  Pty  Limited  investing  A$1 share  capital at the date of
     incorporation acquiring 100% interest.

(2) Income Taxes

     Total income tax (expense)  credit for the years ended June 30, 2006,  2005
     and 2004 consist of:
<TABLE>
<CAPTION>
<S>                       <C> <C>                         <C>                               <C>                <C>
                                                                Current                Deferred             Total
          Year ended June 30, 2006:                      A$              (591,480)          (356,175)          (947,655)
                                                                ================== ================== ==================
          Year ended June 30, 2005:                      A$                     -            415,028            415,028
                                                                ================== ================== ==================
          Year ended June 30, 2004:                      A$                 4,046           (208,850)          (204,804)
                                                                ================== ================== ==================
</TABLE>

                                       99
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements

(2) Income Taxes (cont)

     Income tax  expense  was  A$947,655  for the year ended June 30, 2006 and a
     credit of  A$415,028  for the year  ended  June 30,  2005 and an expense of
     $204,804  for the year ended June 30,  2004 and  differed  from the amounts
     computed by applying the  Australian  federal income tax rate of 30% (2005:
     30%) and (2004: 30%) to pre tax income as a result of the following:
<TABLE>
<CAPTION>
<S>                                                          <C>                                <C>                 <C>
                                                                         2006                2005               2004
                                                                  ------------------- ------------------- ------------------
          Computed "expected" tax expense/(credit)          A$               947,741            (181,679)           (18,781)
          Computed "expected" tax expense/(credit) of not
          deductible                                                           2,155               2,017                  -
                                                                  ------------------- ------------------- ------------------
          Computed "expected" tax expense/(credit) of
          consolidated tax group                                             949,896            (179,662)           (18,781)
          Timing differences reversal                                         (2,241)                  -            163,757
          Tax losses and timing differences (previously
            not recognised / brought to account)                                   -            (235,366)            59,828
          Increase (reduction) in income taxes resulting
            from other net misc items                                              -                   -                  -
                                                                  ------------------- ------------------- ------------------
                                                            A$               947,655            (415,028)           204,804
                                                                  =================== =================== ==================
</TABLE>

     The tax  effect of  temporary  differences  that  give rise to  significant
     portions of the deferred tax assets and deferred tax liabilities at 30 June
     2006 are presented below.
<TABLE>
<CAPTION>
<S>                                                                           <C>                                    <C>
                                                                                             2006               2005
                                                                                          At 30% Tax         At 30% Tax
                                                                                             Rate               Rate
          Deferred tax assets:
                  Employee leave entitlements                                A$                   28,816             21,283
                  Bonus provision                                                                 33,000             37,506
                  Unrealised Foreign exchange (gains) / losses                                    (2,962)            13,117
                  Tax losses previously not brought to account                                         -            343,122
                                                                                      ------------------- ------------------
                       Deferred tax assets- gross                                                 58,854            415,028
                                                                                      ------------------- ------------------
                       Less valuation allowance                                                        -                  -
                                                                                      ------------------- ------------------
                       Net deferred tax asset                                                     58,854            415,028
                                                                                      =================== ==================
</TABLE>

     In assessing the realisability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realised.  The ultimate  realisation of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.  Management
     considers the  scheduled  reversal of deferred tax  liabilities,  projected
     future  taxable  income,  and  tax  planning   strategies  in  making  this
     assessment.

                                      100
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                   Notes to Consolidated Financial Statements

(3) Pension and Other Post retirement Benefits

     The Company  contributed to a defined  contribution  superannuation fund on
     behalf of its employees.  Contributions are based upon Australian statutory
     minimum percentages of salary plus any additional contributions included in
     employee's  employment  agreement.   The  consolidated  entity  contributed
     A$35,680  during fiscal year 2006 (2005:  A$32,022)  and (2004:  A$30,973).
     There were no contributions outstanding at year-end.

     The Company  does not sponsor any other post  employment  benefits  for its
     employees.

(4) Accrued Liabilities
<TABLE>
<CAPTION>
<S>                                                                                              <C>                <C>
                                                                                             2006               2005
          Goods and services tax payable                                     A$                        -             34,061
          Accrued expenses                                                                       123,167            174,421
          Deferred income                                                                        131,000             92,727
          Provision for employee leave                                                            96,052             64,887
                                                                                      ------------------- ------------------
                                                                             A$                  350,219            366,096
                                                                                      =================== ==================
(5) Cost of Goods Sold

                                                                          2006               2005               2004
          Opening Inventory                                 A$               886,462             870,927          1,824,131
          Add
          Purchases                                                        3,474,894           1,755,954            125,511
          Freight and other charges                                          454,638             978,702            488,565
                                                                    ----------------- ------------------- ------------------
                                                                           4,815,994           3,605,583          2,438,207
          Less
          Ending Inventory                                                  (774,940)           (886,462)          (870,927)
                                                                    ----------------- ------------------- ------------------
          Cost of Goods Sold                                A$             4,041,054           2,719,121          1,567,280
                                                                    ================= =================== ==================

          Continuing                                                       3,283,678           1,489,513            710,341
          Discontinued                                                       757,376           1,229,608            856,939
                                                                    ----------------- ------------------- ------------------
          Cost of Goods Sold                                A$             4,041,054           2,719,121          1,567,280
                                                                    ================= =================== ==================
</TABLE>

(6) Commitments

                   Non cancellable operating lease commitments

     The consolidated entity has no operating lease commitments.

(7) Related parties

     The company was 35% owned by Global Payments Technology, Inc., is 35% owned
     by the  private  trust  of the  Managing  Director  of the  Global  Payment
     Technology  Australia  Pty  Limited,  and is  30%  owned  by the  Marketing
     Director  of  Global  Payment  Technology  Australia  Pty  Limited.  Global
     Payments Technology, Inc. disposed of its interest on 25 August 2006 to ACN
     121 187 068 Pty Limited, a company domiciled in Australia.

                                      101
<PAGE>

     During the year the Group had purchases  from Global  Payment  Technologies
     Australia  Pty  Limited  totalling  A$1,836  (2005:  A$469,391)  and (2004:
     A$415,787).  An amount of A$0 (2005:  A$200,178)  and (2004:  A$208,872) is
     included in Trade  accounts  payable at balance date. In addition the Group
     owed  Global  Payment  Technologies  Australia  Pty  Ltd  A$67,139.  (2005:
     A$1,009,172).

     Global Payment  Technologies  Australia Pty Limited,  a related party, paid
     salary, rental and other administrative costs on behalf of the consolidated
     entity. These costs were recharged through the affiliate loan accounts. The
     company paid salary, rental and other administrative costs on behalf of its
     controlled  entities.  These amounts were  recharged  through the affiliate
     accounts.

     There were no other transactions with related parties.

                                      102
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                   Notes to Consolidated Financial Statements

(8) Discontinued Operations

     During the 30 June 2006 financial year the group disposed of its ATM rental
     business.

     The  business had the  following  income and  expenditure  during the years
     ended 30 June 2006, 2005 and 2004:
<TABLE>
<CAPTION>
<S>                                                           <C>                               <C>                   <C>
                                                                          2006                2005                2004

Sales (including rebate income)                              A$               657,665           1,429,556             822,477
Cost of goods sold (including rebates and other direct
costs)                                                                       (757,376)         (1,229,608)           (856,939)
                                                                   ------------------- ------------------- -------------------
                        Gross profit / (loss)                                 (99,711)            199,948             (34,462)

Selling, general and administrative expenses                                 (486,405)           (259,371)           (192,610)
                                                                   ------------------- ------------------- -------------------
                        Operating income/(loss)                              (586,116)            (59,423)           (227,072)

Other income / (expense):
        Profit on sale of business                                          3,335,839                   -                   -
        Other income                                                                -                   -               1,636
        Interest revenue                                                       12,220               2,435                 874
                                                                   ------------------- ------------------- -------------------
                    Income/(loss) before income taxes                       2,761,943             (56,988)           (224,562)
                                                                   =================== =================== ===================

The business had the following assets and liabilities at 30 June 2006 and 2005.

                    Assets                                                                    2006                2005
                                                                                       ------------------- -------------------
       Cash and cash equivalents                                                                        -              15,776
       Trade accounts receivable                                                                        -             143,875
       Other current assets                                                                             -                 740
       Property, plant and equipment                                                                    -             492,440
                                                                                       ------------------- -------------------

          Total assets                                                                                  -             652,831
                                                                                       =================== ===================
                    Liabilities
       Trade accounts payable                                                                           -             134,258
       Accrued liabilities                                                                              -              64,721
                                                                                       ------------------- -------------------

          Total liabilities                                                                             -             198,979
                                                                                       =================== ===================

(9)  Cash and Cash Equivalents

Cash and cash equivalents are reconciled to the consolidated statement of cash
flows as follows:

                                                                                              2006                2005

Continuing operations                                                              A$           1,102,169             274,282
Discontinued operations (Note 8)                                                                        -              15,776
                                                                                       ------------------- -------------------
                                                                                                1,102,169             290,058
                                                                                       =================== ===================
</TABLE>

                                      103
<PAGE>

Report of Independent Registered Public Accounting Firm


The Board of Directors
eCash Holdings Pty Limited


We have audited the accompanying  consolidated  balance sheets of eCash Holdings
Pty  Limited  and  subsidiaries  as of August 31, 2006 and June 30, 2006 and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for the period ended  August 31, 2006 and year ended June 30, 2006.  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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of eCash
Holdings Pty Limited and  subsidiaries  as of August 31, 2006 and June 30, 2006,
and the  consolidated  results of their operations and cash flows for the period
ended  August  31,  2006 and year  ended  June 30,  2006 in  conformity  with US
generally accepted accounting principles.


/s/ Pitcher Partners,
Sydney, Australia


11th January 2007


                                      104
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                           Consolidated Balance Sheets

                        August 31, 2006 and June 30, 2006
<TABLE>
<CAPTION>
<S>                                                                               <C>                               <C>
                    Assets
                                                                                          August 2006          June 2006
                                                                                       ------------------- -------------------
Current assets:
       Cash and cash equivalents                                                 A$             1,249,575           1,102,169
       Trade accounts receivable, less allowance for doubtful accounts of
       A$NIL (2005-A$NIL)                                                                         472,700             362,617
       Inventories                                                                                858,138             774,940
       Deferred Income taxes                                                                       58,854              58,854
       Other current assets                                                                       142,666             137,975
                                                                                       ------------------- -------------------
                    Total current assets                                                        2,781,933           2,436,555
                                                                                       ------------------- -------------------
Property, plant and equipment
       Machinery and equipment                                                                     16,378              16,378
       Less accumulated depreciation and amortization                                                (841)               (741)
                                                                                       ------------------- -------------------
                    Net property, plant and equipment                                              15,537              15,637
                                                                                       ------------------- -------------------
                    Total assets                                                 A$             2,797,470           2,452,192
                                                                                       =================== ===================

                    Liabilities and Stockholders' Equity
Current liabilities:
                                                                                 A$
       Trade accounts payable                                                                     583,383             339,582
       Income taxes payable                                                                       611,281             507,712
       Intercompany payable                                                                        82,908              67,139
       Accrued liabilities                                                                        286,265             350,219
                                                                                       ------------------- -------------------
                    Total current liabilities                                                   1,563,837           1,264,652
                                                                                       ------------------- -------------------
                    Total liabilities                                                           1,563,837           1,264,652
                                                                                       ------------------- -------------------

Commitments and contingencies (Note 1)

Stockholders' equity:
       Common Stock
            Issued and outstanding 3,000 shares in 2006 and 3,000 shares in
            2005                                                                                    3,000               3,000
       Retained earnings/(accumulated losses)                                                   1,230,633           1,184,540
                                                                                       ------------------- -------------------
                    Total stockholders' equity                                                  1,233,633           1,187,540
                                                                                       ------------------- -------------------
                    Total liabilities and stockholders' equity                   A$             2,797,470           2,452,192
                                                                                       =================== ===================
</TABLE>

See accompanying notes to the consolidated financial statements.

                                      105
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                      Consolidated Statements of Operations

                 Period ended August 31, 2006 and June 30, 2006
<TABLE>
<CAPTION>
<S>                                                                               <C>                                <C>
                                                                                            August 2006         June 2006

Sales                                                                            A$                 751,618          4,635,873
Cost of goods sold                                                                                 (534,777)        (3,283,678)
                                                                                         ------------------- -----------------
                                            Gross profit                                            216,841          1,352,195

Selling, general and administrative expenses                                                       (187,736)        (1,103,886)
                                                                                         ------------------- -----------------

                                            Operating income/(loss)                                  29,105            248,309

Other income (expense):
                  Interest revenue                                                                   10,359             58,152
                  Rental income                                                                           -                795
                  Other income                                                                       20,919             75,144
                  Interest expense                                                                        -            (15,216)
                  Servicing income                                                                    5,510             12,792
                  Rebate income                                                                           -             17,118
                                                                                         ------------------- -----------------
                     Income/(loss) from continuing operations before income
                     taxes                                                                           65,893            397,094
Income taxes credit (expense)                                                                       (19,800)          (119,072)
                                                                                         ------------------- -----------------
                     Income/(loss) from discontinued operations
                                                                                                     46,093            278,022
                                                                                         ------------------- -----------------
Discontinued operations (Note 8)
Profit / (loss) from discontinued operations                                                              -          2,761,943
Income taxes credit / (expense)                                                                           -           (828,583)
                                                                                          ------------------- -----------------
Income/(loss) from discontinued operations                                                                -          1,933,360
                                                                                          ------------------- -----------------
                              Net income                                                             46,093          2,211,382
                                                                                          =================== =================
</TABLE>
See accompanying notes to the consolidated financial statements.

                                      106
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                 Consolidated Statements of Stockholders' Equity

                 Period ended August 31, 2006 and June 30, 2006
<TABLE>
<CAPTION>
<S>              <C> <C>                                        <C>                             <C>                 <C>
                                                                          Common            Retained             Total
                                                                           Stock            Earnings         Stockholders'
                                                                                                                 Equity
                                                                      ---------------- ------------------- -------------------
Balances at June 30, 2006                                      A$               3,000           1,184,540           1,187,540
         Net income/(loss)                                                          -              46,093              46,093
                                                                      ---------------- ------------------- -------------------
Balances at August 31, 2006                                    A$               3,000           1,230,633           1,233,633
                                                                      ================ =================== ===================

</TABLE>

See accompanying notes to the consolidated financial statements.

                                      107
<PAGE>

                   eCash Holdings Pty Limited and subsidiaries

                      Consolidated Statements of Cash Flows

                 Period ended August 31, 2006 and June 30, 2006
<TABLE>
<CAPTION>
<S>                                                             <C>                              <C>
                                                                         August 2006         June 2006
                                                                      ------------------ -------------------
Net income/(loss)                                              A$                46,093          2,211,382
        Adjustments to reconcile net income to net cash
        providing by operating activities:
        Net profit on disposal of business                                            -         (3,335,839)
        Depreciation and amortisation of property, plant and
        equipment                                                                   100             79,339
        Increase/(decrease) in doubtful debts                                                            -
        (Increase)/decrease in trade accounts receivable                       (110,083)           (52,644)
        (Increase)/decrease in prepayments                                      (15,202)            (3,821)
        (Increase)/decrease in inventories                                      (83,198)           111,522
        (Increase)/decrease in other assets                                      10,511           (124,254)
        Increase/(decrease) in related party balances                            15,769           (942,033)
        Increase/(decrease) in trade accounts payable                           243,801           (625,081)
        Increase/(decrease) in provisions and other accruals                    (63,954)           (80,598)
        (Increase)/decrease in income tax balance                               103,569            567,663
        (Increase)/decrease in deferred tax balance                                                356,174
                                                                      ------------------ -------------------
               Net cash provided by/(used in) operating
               activities                                                       147,406         (1,838,190)
                                                                      ------------------ -------------------
Cash flows from investing activities:
         Net cash inflow upon disposal of business                                    -          3,872,791
         Capital expenditure, including interest capitalised                          -           (122,490)
                                                                      ------------------ -------------------
               Net cash provided by/(used in) investing
               activities                                                             -          3,750,301
                                                                      ------------------ -------------------
Cash flow from financing activities:
        Issue of shares                                                               -                  -
        Dividends paid                                                                -         (1,100,000)
                                                                      ------------------ -------------------
               Net cash provided by/(used in) financing
               activities                                                             -         (1,100,000)
                                                                      ------------------ -------------------
               Net increase/(decrease) in cash and cash
               equivalents                                                      147,406            812,111
Cash and cash equivalents at beginning of year                                1,102,169            290,058
                                                                      ------------------ -------------------
Cash and cash equivalents at end of year                       A$             1,249,575          1,102,169
                                                                      ================== ===================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      108
<PAGE>

                     Cash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements

(1) Summary of Significant Accounting Policies and Practices

     (a) Description of Business

     eCash Holdings Pty Ltd (the "Company") was  incorporated on 13 October 1999
     and remained dormant until the 2002 financial year. The company operates in
     the distribution  and servicing of automatic teller machines.  In 2002, the
     Company  did not trade,  rather it allowed a related  party to trade on its
     behalf under an agreed contractual  arrangement and in return an agency fee
     was received.  In 2003, the Company  commenced trading in its own right. On
     17 July 2003 the  company  changed its name from eCash Pty Limited to eCash
     Holdings Pty Limited.

     (b) Trade Accounts Receivable

     Trade accounts  receivable  are recorded at the invoiced  amount and do not
     bear  interest.  The allowance for doubtful  accounts is the Company's best
     estimate of the amount of probable credit losses in the Company's  existing
     accounts  receivable.   The  Company  determines  the  allowance  based  on
     historical  write-off  experience by industry and national  economic  data.
     Account  balances are charged off against the allowance  after all means of
     collection have been exhausted and the potential for recovery is considered
     remote.  The Company does not have any  off-balance-sheet  credit  exposure
     related to its customers.

Concentration of credit risk

     The  Group's  largest  ATM sales  customer,  represented  62.4% (June 2006:
     57.9%) of trade  accounts  receivable as of August 31, 2006 and 75.6% (June
     2006:  76.5%) of sales for the fiscal  period ended  August 31,  2006.  The
     Group's  largest ATM rebate  customer,  represented  0% (June 2006:  0%) of
     trade accounts receivable as of August 31, 2006 and 0% (June 2006: 100%) of
     rebate income for the fiscal period ended August 31, 2006.

     (c) Inventories

     Inventories  are  stated  at the  lower of cost or  market  value.  Cost is
     determined using the first-in, first-out method for all inventories.

     (d) Property, Plant and Equipment

     Property, plant and equipment are stated at cost.

     Depreciation  on plant and  equipment is  calculated  on the  straight-line
     method over the  estimated  useful  lives of the assets.  The  depreciation
     rates range from 7.5% to 21% (June 2006: 7.5% to 21%).

     (e) Other Current Assets and Other Assets

     Other assets are comprised of rental bonds, prepaid expenditure,  and other
     non-trade receivables.

                                      109
<PAGE>

                     Cash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements

(2) Summary of Significant Accounting Policies and Practices (cont)

     (f) Income Taxes

     Income  taxes are  accounted  for under  the  asset and  liability  method.
     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax bases and operating  loss and tax credit carry  forwards.  Deferred tax
     assets and  liabilities  are measured  using enacted tax rates  expected to
     apply to taxable income in the years in which those  temporary  differences
     are expected to be recovered or settled.  The effect on deferred tax assets
     and  liabilities  of a change in tax rates is  recognized  in income in the
     period that includes the enactment date.

     Capital gains tax, if applicable,  is provided for in  establishing  period
     income tax expense when an asset is sold.

     (g) Use of estimates

     Management  of the Company has made a number of estimates  and  assumptions
     relating to the reporting of assets and  liabilities  and the disclosure of
     contingent assets and liabilities to prepare these financial  statements in
     conformity with generally accepted  accounting  principles.  Actual results
     could differ from those estimates.

     (h) Impairment of Long-Lived Assets

     Long-lived  assets,  such as property,  plant and equipment,  and purchased
     intangibles  subject to amortization,  are reviewed for impairment whenever
     events or changes in circumstances  indicate that the carrying amount of an
     asset may not be recoverable.  Recoverability of assets to be held and used
     is measured by a comparison of the carrying amount of an asset to estimated
     undiscounted  future cash flows  expected to be generated by the asset.  If
     the carrying amount of an asset exceeds its estimated future cash flows, an
     impairment  charge is recognized by the amount by which the carrying amount
     of the asset exceeds the fair value of the asset.  Assets to be disposed of
     are reported at the lower of the  carrying  amount or fair value less costs
     to sell, and depreciation ceases.

     An impairment  loss is  recognised  to the extent that the carrying  amount
     exceeds  the  asset's  fair  value.  The  Company  did  not  recognise  any
     impairment adjustments in August 2006 (June 2006: nil).

     (i) Revenue Recognition

     The Company  recognises  revenue when products are shipped and the customer
     takes ownership and assumes risk of loss.  Interest income is recognised as
     it accrues.  Service  revenue is  recognised  as the services are provided.
     Rebate income is brought to account at the time the rebate is earned.

                                      110
<PAGE>

     (j) Commitments and Contingencies

     Liabilities for loss  contingencies,  including  environmental  remediation
     costs, arising from claims,  assessments,  litigation,  fines and penalties
     and other  sources are recorded  when it is probable  that a liability  has
     been incurred and the amount of the assessment  and/or  remediation  can be
     reasonably estimated.

     (k) Advertising expenses

     Advertising  expenses are  recognised  in the  statement of  operations  as
     incurred.

                                      111
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements

(1) Summary of Significant Accounting Policies and Practices (cont)

     (l) Cash and cash equivalents

     Cash  and cash  equivalents  comprise  cash on hand,  cash at bank and term
     deposits with banking institutions.  Cash at bank includes cash denominated
     in  Australian  and US dollars.  US dollar  denominated  bank  accounts are
     restated  at  year-end  to  spot  rates  at  year-end  with  the  gain/loss
     recognised in the Statement of Operations.

     (m) Consolidation

     The consolidated  financial  statements of the consolidated  entity include
     the financial  statements of the Company,  being the chief entity,  and its
     controlled entities ("the consolidated entity").

     Where an entity  either began or ceased to be  controlled  during the year,
     the results are included only from the date control  commenced or up to the
     date control ceased.

     The  balances  and effects of  transactions,  between  controlled  entities
     included in the consolidated financial statements have been eliminated.

     (n) Investments in controlled entities

     Capital ATM Pty Limited  was  incorporated  on 17 March 2003 with the eCash
     Holdings  Pty  Limited   investing   A$1  share  capital  at  the  date  of
     incorporation acquiring a 100% interest.

     Custom Cash Pty Limited  was  incorporated  on 18 March 2003 with the eCash
     Holdings  Pty  Limited   investing   A$1  share  capital  at  the  date  of
     incorporation acquiring a 100% interest.

     eCash Pty Limited was  incorporated on 24 July 2003 with eCash Holdings Pty
     Ltd investing $1 share capital at the date of incorporation  acquiring 100%
     interest.

     eCash  Management  Pty Limited was  incorporated  on 12 September 2002 with
     eCash  Holdings  Pty  Limited  investing  A$1 share  capital at the date of
     incorporation acquiring 100% interest.

(2) Income Taxes

     Total income tax  (expense)  credit for the years ended August 31, 2006 and
     June 30, 2006 consist of:
<TABLE>
<CAPTION>
<S>                    <C> <C>    <C>                                                  <C>
                                             Current            Deferred           Total

     Year ended August 31, 2006: A$              (19,800)                 -            (19,800)
                                        ================== ================== ==================
     Year ended June 30, 2006:   A$             (591,480)          (356,175)          (947,655)
                                        ================== ================== ==================
</TABLE>

                                      112
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                 Notes to the Consolidated Financial Statements

(2) Income Taxes (cont)

     Income tax expense was  A$19,800  for the period  ended August 31, 2006 and
     A$947,655  for the year ended June 30, 2006 and  differed  from the amounts
     computed by applying the  Australian  federal  income tax rate of 30% (June
     2006: 30%) to pre tax income as a result of the following:
<TABLE>
<CAPTION>
<S>                                                                                               <C>                <C>
                                                                     August 2006          June 2006
                                                                  ------------------- -------------------
          Computed "expected" tax expense/(credit)          A$
                                                                              19,800            947,741
          Computed "expected" tax expense/(credit) of not
          deductible                                                               -              2,155
                                                                  ------------------- -------------------
          Computed "expected" tax expense/(credit) of
          consolidated tax group
                                                                                   -            949,896
          Timing differences reversal                                              -             (2,241)
          Tax losses and timing differences (previously
          not recognised / brought to account)
                                                                                   -                  -
          Increase (reduction) in income taxes resulting
          from other net misc items                                                -                  -
                                                                  ------------------- -------------------
                                                            A$                19,800            947,655
                                                                  =================== ===================

     The tax  effect of  temporary  differences  that  give rise to  significant
     portions of the deferred tax assets and deferred tax  liabilities at August
     31, 2006 and 30 June 2006 are presented below.

                                                                                         August 2006          June 2006
                                                                                          At 30% Tax         At 30% Tax
                                                                                             Rate               Rate
          Deferred tax assets:
                  Accounts receivable principally due to allowance for
                  doubtful accounts                                          A$                        -                  -
                  Employee leave entitlements                                                     28,816             28,816
                  Bonus provision                                                                 33,000             33,000
                  Unrealised Foreign exchange (gains) / losses                                    (2,962)            (2,962)
                  Tax losses previously not brought to account                                         -                  -
                                                                                      ------------------- ------------------
                       Deferred tax assets- gross                                                 58,854             58,854
                                                                                      ------------------- ------------------
                       Less valuation allowance                                                        -                  -
                                                                                      ------------------- ------------------
                       Net deferred tax asset                                                     58,854             58,854
                                                                                      =================== ==================
</TABLE>

     In assessing the realisability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realised.  The ultimate  realisation of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.  Management
     considers the  scheduled  reversal of deferred tax  liabilities,  projected
     future  taxable  income,  and  tax  planning   strategies  in  making  this
     assessment.

                                      113
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                   Notes to Consolidated Financial Statements

(3) Pension and Other Post retirement Benefits

     The Company  contributed to a defined  contribution  superannuation fund on
     behalf of its employees.  Contributions are based upon Australian statutory
     minimum percentages of salary plus any additional contributions included in
     employee's  employment  agreement.   The  consolidated  entity  contributed
     A$5,845  during period ended August 31, 2006 (June 2006:  A$35,680).  There
     were no contributions outstanding at year-end.

     The Company  does not sponsor any other post  employment  benefits  for its
     employees.

(4) Accrued Liabilities

                                               August 2006        June 2006
          Accrued expenses               A$            165,713          123,167
          Deferred income                               24,500          131,000
          Provision for employee leave                  96,052           96,052
                                             ------------------ ----------------
                                         A$            286,265          350,219
                                             ================== ================

(5) Cost of Goods Sold

                                               August 2006        June 2006
          Opening Inventory              A$            774,940          886,462
          Add
          Purchases                                    606,370        3,474,894
          Freight and other charges                     11,605          454,638
                                             ------------------ ----------------
                                                     1,392,915        4,815,994
          Less
          Ending Inventory                            (858,138)        (774,940)
                                             ------------------ ----------------
          Cost of Goods Sold             A$            534,777        4,041,054
                                             ================== ================

          Continuing                                   534,777        3,283,678
          Discontinued                                       -          757,376
                                             ------------------ ----------------
          Cost of Goods Sold             A$            534,777        4,041,054
                                             ================== ================

(6) Commitments

                   Non cancellable operating lease commitments

     The company and consolidated entity have no operating lease commitments.

(7) Related parties

     The company was 35% owned by Global Payments Technology, Inc., is 35% owned
     by the  private  trust  of the  Managing  Director  of the  Global  Payment
     Technology  Australia  Pty  Limited,  and is  30%  owned  by the  Marketing
     Director  of  Global  Payment  Technology  Australia  Pty  Limited.  Global
     Payments Technology, Inc. disposed of its interest on 25 August 2006.

                                      114
<PAGE>

     During the period the Group had purchases from Global Payment  Technologies
     Australia Pty Limited totalling A$0 (June 2006: A$1,836).  An amount of A$0
     (June 2006: A$0) is included in Trade accounts  payable at balance date. In
     addition  the Group owed  Global  Payment  Technologies  Australia  Pty Ltd
     A$82,908 (June 2006: A$67,139).

     Global Payment  Technologies  Australia Pty Limited,  a related party, paid
     salary, rental and other administrative costs on behalf of the consolidated
     entity. These costs were recharged through the intercompany loan accounts.

     The company paid salary, rental and other administrative costs on behalf of
     its  controlled   entities.   These  amounts  were  recharged  through  the
     intercompany accounts.

     There were no other transactions with related parties.

                                      115
<PAGE>

                     eCash Holdings Pty Ltd and subsidiaries

                   Notes to Consolidated Financial Statements

(8)  Discontinued Operations

     During the 30 June 2006 financial year the group disposed of its ATM rental
     business.

     The company had the following income and expenditure  during the year ended
     30 June 2006:
<TABLE>
<CAPTION>
<S>                                                                                                  <C>
                                                                                            June 2006

Sales (including rebate income)                                                  A$                657,665
Cost of goods sold (including rebates and other direct costs)
                                                                                                  (757,376)
                                                                                        -------------------
                        Gross profit / (loss)                                                      (99,711)

Selling, general and administrative expenses                                                      (486,405)
                                                                                        -------------------
                        Operating income/(loss)                                                   (586,116)

Other income / (expense):
        Profit on sale of business                                                               3,335,839
        Other income                                                                                     -
        Interest revenue                                                                            12,220
                                                                                        -------------------
                    Income/(loss) before income taxes                                            2,761,943
                                                                                        ===================
</TABLE>

     The  discontinued  business did not have any assets and  liabilities  at 30
     June 2006.

                                      116
<PAGE>

                                                                     Schedule II
<TABLE>
<CAPTION>
<S>           <C> <C>                   <C>              <C>          <C>                <C>
               Column A                     Column B       Column C      Column D          Column E
---------------------------------------  --------------   -----------  ------------       ----------
                                           Balance at     Charged to   Deductions -        Balance
                                           beginning       costs and                        at end
              Description                  of period       expenses                       of period
---------------------------------------  --------------   -----------  ------------       ----------
Allowance for doubtful
  Accounts::
    September 30, 2004                  $          234   $       102  $         86  (a)  $      250
    September 30, 2005                             250            47           145  (a)         152
    September 30, 2006                             152            61            54  (a)         159

Warranty Reserve
    September 30, 2004                             346           198           246  (b)         298
    September 30, 2005                             298           176           206  (b)         268
    September 30, 2006                             268           161           120  (b)         309
</TABLE>


(a)  Write-off of accounts.

(b)  Expenses incurred under warranty obligation.

                                      117