GPTX Global Payment Technologies Inc (CE)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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

OR

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

For the transition period from ___________ to _____________

 Delaware 11-2974651
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)

170 Wilbur Place, Bohemia, New York 11716
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(Address of Principal Executive Offices) (Zip Code)

 (631) 563-2500
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 (Registrant's Telephone Number, Including Area Code)

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 [ ] No [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller Reporting Company [ X ]

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

As of May 9, 2008, the registrant had a total of 7,722,185 shares of Common Stock outstanding.

PART I. FINANCIAL INFORMATION
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 Page Number
 -----------
 Item 1. Financial Statements

 Condensed Consolidated Balance Sheets -March 31, 2008 (unaudited)
 and September 30, 2007 3

 Condensed Consolidated Statements of Operations (unaudited) - Three
 and Six Months ended March 31, 2008 and 2007 4

 Condensed Consolidated Statements of Cash Flows (unaudited) - Six
 Months ended March 31, 2008 and 2007 5

 Notes to Condensed Consolidated Financial Statements (unaudited) 6-11

 Item 2. Management's Discussion and Analysis of Financial Condition and
 Results of Operations 12-16

 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17


 Item 4. Controls and Procedures 17


PART II. OTHER INFORMATION
-------- -----------------

 Item 6. Exhibits 19-23


SIGNATURES 18
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 GLOBAL PAYMENT TECHNOLOGIES, INC.
 ---------------------------------
 PART I. FINANCIAL INFORMATION
 ------- ---------------------
 Item 1. Financial Statements
 CONDENSED CONSOLIDATED BALANCE SHEETS
 -------------------------------------
 (Dollar amounts in thousands, except share and per share data)
 --------------------------------------------------------------

 March 31, September 30,
 ------------------- ------------------
 2008 2007
 ------------------- ------------------
 (Unaudited)
ASSETS
------
 Current assets:
 Cash and cash equivalents $ 859 $ 879
 Accounts receivable, less allowance for doubtful 1,035 1,030
 accounts of $ 65 and $ 86, respectively
 Inventory, net 3,278 3,768
 Prepaid expenses and other current assets 39 178
 ------------------- ------------------

 Total current assets 5,211 5,855

 Property and equipment, net 642 822
 Capitalized software costs, net 67 89
 Other assets 81 36
 ------------------- ------------------
 Total assets $ 6,001 $ 6,802
 =================== ==================

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
 Current liabilities:
 Borrowing under debt facility $ - $ 353
 Current portion of long-term debt 8 40
 Note payable, related party 440 -
 Accounts payable 2,102 2,003
 Accrued expenses and other current liabilities 1,240 936
 ------------------- ------------------
 Total current liabilities 3,790 3,332

 Convertible note, related party, net 44 -
 ------------------- ------------------
 Total liabilitites 3,834 3,332
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 Commitments and Contingencies (Note M)
 Shareholders' equity:
 Common stock, par value $0.01; authorized 20,000,000 shares;
 issued 7,772,185 shares and 6,772,185 shares respectively 78 68
 Additional paid-in capital 14,570 13,912
 Accumulated deficit (11,028) (9,024)
 Accumulated other comprehensive income 46 13
 ------------------ ------------------

 3,666 4,969
 Less treasury stock, at cost, 278,984 shares (1,499) (1,499)
 ------------------- ------------------
 Total shareholders' equity 2,167 3,470
 ------------------- ------------------

 Total liabilities and shareholders' equity $ 6,001 $ 6,802
 =================== ==================


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 The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

 GLOBAL PAYMENT TECHNOLOGIES, INC.
 ---------------------------------
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 -----------------------------------------------
 (Dollar amounts in thousands, except share and per share data)
 --------------------------------------------------------------
 (Unaudited)
 -----------


 Three Months ended Six Months ended
 -------------------------- --------------------------
 March 31, March 31,
 2008 2007 2008 2007
 ----------- ----------- ----------- -----------

Net sales $ 2,921 $ 2,802 $ 5,432 $ 6,766

Cost of sales 2,337 2,175 4,331 5,427
 ----------- ----------- ----------- -----------

Gross profit 584 627 1,101 1,339

Operating expenses 1,582 1,939 3,035 3,889
 ----------- ----------- ----------- -----------

Loss from operations (998) (1,312) (1,934) (2,550)
 ----------- ----------- ----------- -----------

Other expense:
 Interest expense, net (60) (16) (62) (25)
 ----------- ----------- ----------- -----------
Total other expense, net (60) (16) (62) (25)
 ----------- ----------- ----------- -----------

Loss before provision for income taxes (1,058) (1,328) (1,996) (2,575)

Provision for income taxes 2 2 8 4
 ----------- ----------- ----------- -----------

Net loss $ (1,060) $ (1,330) $ (2,004) $ (2,579)
 =========== =========== =========== ===========

Net loss per share:
 Basic $ (0.15) $ (0.21) $ (0.29) $ (0.41)
 =========== =========== =========== ===========
 Diluted $ (0.15) $ (0.21) $ (0.29) $ (0.41)
 =========== =========== =========== ===========

Common shares used in computing net loss
per share amounts:
 Basic 6,981,526 6,218,201 6,876,283 6,218,201
 =========== =========== =========== ===========
 Diluted 6,981,526 6,218,201 6,876,283 6,218,201
 =========== =========== =========== ===========


 The accompanying notes are an integral part of these condensed consolidated financial
 statements (unaudited).

 GLOBAL PAYMENT TECHNOLOGIES, INC.
 ---------------------------------
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 -----------------------------------------------
 (Dollar amounts in thousands)
 -----------------------------
 (Unaudited)
 -----------

 Six Months ended March 31,
 ------------------------------
 2008 2007
 ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:

 Net loss $ (2,004) $ (2,579)
 Adjustments to reconcile net loss to net cash
 used in operating activities:
 Depreciation and amortization 201 612
 Amortization of loan discount 44 --
 Debt cost amortization 63 --
 Provision for losses on accounts receivable 10 13
 Provision (Recovery) for inventory obsolescence 80 (5)
 Share based compensation expense 77 115
 Changes in operating assets and liabilities: ~ --
 Decrease in accounts receivable 3 733
 Decrease in inventory 427 170
 Decrease (increase) in prepaid expenses and other assets 31 (22)
 Increase in accounts payable 102 131
 Increase (decrease) in accrued expenses and other current liabilities 302 (101)
 ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (664) (933)
 ------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment (1) (46)
 ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (1) (46)
 ------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Repayments of capital lease (32) --
 Proceeds from issuance of convertible note 400 --
 Proceeds from issuance of secured note 440 --
 Proceeds from issuance of stock 190 --
 Net (paid) borrowed from debt facility (353) 433
 ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 645 433
 ------------- -------------

NET DECREASE IN CASH AND CASH EQUIVALENTS (20) (546)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 879 2,270
 ------------- -------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 859 $ 1,724
 ============= =============

CASH PAID DURING THE PERIOD FOR:
 Interest $ -- $ 32
 ============= =============
 Income Taxes $ -- $ --
 ============= =============


 The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

Global Payment Technologies, Inc.

Notes to Condensed Consolidated Financial Statements March 31, 2008

(Unaudited)

The accompanying unaudited interim condensed consolidated financial statements of Global Payment Technologies, Inc. (the "Company"), including the September 30, 2007 consolidated balance sheet which has been derived from audited financial statements, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the three and six month periods ended March 31, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2008. We recommend that you refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2007.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses from operations. Accordingly, the Company will be required to identify additional revenue resources, raise additional capital and/or significantly reduce its expenses in order to pay its obligations as they become due. The Company entered into a debt financing agreement and is undertaking a corporate restructuring to attempt to improve operating results and develop new products. There can be no assurance, however, that such plans, including the shareholder approval of the Preferred Stock, will be successful. These uncertainties raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of the carrying amount and classification of assets or the amount and classification of liabilities that might result from the outcome of these uncertainties.

In the six months ended March 31, 2008 and 2007, the Company recorded share-based compensation for options attributable to employees, officers and directors of $77,000 and $115,000, respectively, which are included in the Company's net loss for the periods.

A summary of the Company's stock option plan activity as of March 31, 2008 and changes during the six months then ended is as follows: [OBJECT OMITTED]
[GRAPHIC OMITTED] Compensation costs for stock options with graded vesting are recognized ratably over the vesting period. As of March 31, 2008, there was $153,000 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over a weighted average period of 2.76 years.

 Weighted
 Weighted Average Aggregate
 Average Remaining Intrinsic
 Exercise Contractual Value
 Shares Price Term (years) (in thousands)
 -------------- -------------- -------------- --------------

Outstanding, October 1, 2007 711,360 $ 3.18
 Granted 1,125,500 0.20
 Exercised -- --
 Forfeited (17,950) 3.99
 Expired (75,500) 3.83
 -------------- --------------
Outstanding, March 31, 2008 1,743,410 $ 1.22 5.8 $ --
 ============== ============== ============== ==============
Vested or expected to vest,
 March 31, 2008 795,826 $ 2.01 4.9 $ --
 ============== ============== ============== ==============
Exercisable, March 31, 2008 795,826 $ 2.01 4.9 $ --
 ============== ============== ============== ==============

Compensation costs for stock options with graded vesting are recognized ratably over the vesting period. As of March 31, 2008, there was $153,000 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over a weighted average period of 2.76 years.

A significant portion of the Company's cash balance in the amount of $521,000 and $498,000, as of March 31, 2008 and September 30, 2007, respectively, consists of currency used to test the Company's products. Translation gains or losses on foreign currency amounts used for test purposes are included in loss from operations.

The following is a summary of the composition of inventory:

 (in thousands)
 March September
 31, 2008 30, 2007
 --------- ---------


Raw Materials $ 2,561 $ 2,457
Work-in-process 187 544
Finished Goods 530 767
 --------- ---------
 $ 3,278 $ 3,768
 ========= =========

The Company recorded a provision for inventory obsolescence of $80,000 and $60,000 for the six months ended March 31, 2008 and September 30, 2007, respectively.

The Company's credit facility with Laurus Master Fund Ltd. was paid in full on the maturity date of November 15, 2007. The facility was terminated.

On January 15, 2008, the Company entered into a Securities Purchase Agreement
(the "Purchase Agreement") with Exfair Pty Ltd, an Australian company ("Exfair")
and Global Payment Technologies Australia Pty Ltd. ("GPTA"); companies controlled by Mr. Andre Soussa. GPTA is the Company's largest customer. The transactions contemplated thereunder were consummated at two closings (as discussed below).

First Closing

At the first closing on January 15, 2008 (the "First Closing"), the Company issued to GPTA a one-year secured term note in the principal amount of $440,000 (the "Secured Note") that bears interest at a rate equal to the prime rate plus 3.0% (provided, that the interest rate shall not be less than 9.0%) and is secured by all the assets of the Company pursuant to a Security Agreement (the "Security Agreement").

Second Closing

At the second closing, on February 5, 2008 (the "Second Closing"), the Company issued (i) a convertible note (the "Convertible Note") in the principal amount of $400,000 to Exfair, which note may be converted into 2,000,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share, of the Company (the "Preferred Stock") and (ii) a four-year Common Stock Purchase Warrant (the "Warrant") to purchase 5,784,849 shares of Common Stock of the Company at an exercise price of $0.28 per share. The Convertible Note matures in June 2009.

The entire amount of the proceeds from the Convertible Note has been allocated to the fair value of the common stock purchase warrants, which is accounted for as a discount on the debt. The discount is accreting to the debt and being reported as interest expense over the life of the note. The unamortized portion of the discount at March 31, 2008 was $356,000.

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.

Comprehensive loss is the total of net loss and all other non-owner changes in equity (or other comprehensive income) such as unrealized gains/losses on securities classified as available-for-sale, currency translation adjustments and minimum pension liability adjustments. The Company's comprehensive loss is as follows:

 Three months ended March 31 Six months ended March 31
 2008 2007 2008 2007
 ------------ ------------ ------------ ------------

Net loss $ (1,060) $ (1,330) $ (2,004) $ (2,579)
Other comprehensive
 income (loss) (a) (5) (15) 34 (40)
 ------------ ------------ ------------ ------------
Comprehensive loss $ (1,065) $ (1,345) $ (1,970) $ (2,619)
 ============ ============ ============ ============

(a) Consists of translation adjustments which relate to the Company's subsidiary located in the United Kingdom.

Net loss per common share amounts (basic and diluted EPS) are computed by dividing net loss by the weighted average number of outstanding common shares. For the three and six months ended March 31, 2008 and March 31, 2007, potentially dilutive shares were not included in diluted EPS because including them would be anti-dilutive. Potentially dilutive shares are as follows:

 (in thousands) (in thousands)
 Three months ended March 31, Six months ended March 31,
 2008 2007 2008 2007
 ------------- ------------- ------------- -------------

Stock options 1,743 1,238 1,743 1,238
Stock warrants 7,010 200 7,010 200
Convertible debt 2,000 109 2,000 109
 ------------- ------------- ------------- -------------
Total 10,753 1,547 10,753 1,547
 ============= ============= ============= =============

In June 2006, the Financial Accounting Standards Board (the"FASB") issued Interpretation ("FIN") No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for 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 and requires increased disclosures.

Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of December 31, 2007, the Company has not recorded any unrecognized tax benefits. The Company's policy, if it had unrecognized benefits, is to recognize accrued interest in interest expense and penalties in operating expenses.

Effective October 1, 2007, the Company adopted the provisions of FIN 48. The Company's tax years ranging from 2003 through 2006 remain open to examination by various taxing jurisdictions as the statute of limitations has not expired. As a result of the transactions subsequent to December 31, 2007, the Company will evaluate the effect on its deferred tax asset for accounting purposes in accordance with Section 382 limitations.

In September 2006, the FASB issued Statement of Financial Accounting Standards ("FAS") No. 157, "Fair Value Measurements." FAS 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. FAS No. 157 is partially 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 FAS No. 157 will have on its consolidated financial position and results of operations.

In February 2007, the FASB issued Financial Accounting Standard ("FAS") No. 159, "The Fair Value for Financial Assets and Financial Liabilities". FAS No. 159 permits entities to choose to measure financial assets and liabilities, with certain exceptions, at fair value at specified election dates. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. FAS No. 159 is effective for the Company in its fiscal year beginning October 1, 2008. The Company is currently evaluating the impact of FAS No. 159 on its consolidated financial position and results of operations.

In December 2007, the FASB issued FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51". FAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. FAS No. 160 is effective for the Company in its fiscal year beginning October 1, 2009. The Company is currently evaluating the impact of FAS No. 160 on its consolidated financial position and results of operations.

In December 2007, the FASB issued FAS No. 141 R "Business Combinations". FAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. FAS No. 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FAS No. 141R is effective for the Company in its fiscal year beginning October 1, 2009. While the Company has not yet evaluated this statement for the impact, if any, that FAS No. 141R will have on its consolidated financial position and results of operations, the Company will be required to expense costs related to any acquisitions after September 30, 2009.

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. The following is a summary of the changes in the Company's accrued warranty obligation (which is included in accrued expenses) for the period October 1, 2007 through March 31, 2008:

 (in thousands)
 Amount
 --------------
Beginning Balance as of October 1, 2007 $ 108
Deduct: Payments (17)
Add: Provision 15
 --------------
Ending Balance as of March 31, 2008 $ 106
 --------------

During the quarter ended March 31, 2008, the Company received $190,000 through the sale of 950,000 shares of common stock through a private transaction. In addition, the investors received 950,000 stock purchase warrants which are exercisable at $.28 per share and expire in March 2012. The investors included two of the Company's Directors as well as an individual related to the CEO of the Company.

The Company charged $77,000 and $115,000 to operations during the six months ended March 31, 2008 and 2007, respectively, representing the fair value of stock options granted to officers during the period with a corresponding increase to additional paid-in capital in accordance with the provisions of SFAS No. 123R.

The following are the changes in shareholders' equity during the six months ended March 31, 2008 (in thousands):

Balance, October 1, 2007 $ 3,470
Share-based compensation 77
Issuance of warrants 400
Proceeds from issuance of stock 190
Other comprehensive income 34

Net loss (2,004)
 -------
Balance, March 31, 2008 $ 2,167
 =======

The Company's largest customers for the three and six months ended March 31, 2008 and 2007 represent the following percentages of net sales and accounts receivable:

 Three months ended March 31, Six months ended March 31,
 2008 2007 2008 2007
 ------------ ------------ ------------ -------------
Net sales:
 Customer A 42% 30% 35% 36%
 Customer B 15% * * *

 March 31, September 30,
 2008 2007
 -------------- --------------
Accounts Receivable:
 Customer A 44% 71%
 Customer B * *

* Represents less than 10% for the period

Employment Contracts

On February 5, 2008 the Company entered into an Employment Agreement with Mr. Andre Soussa, pursuant to which he is employed as the Company's Chief Executive Officer. William McMahon resigned as a director of the Company and as its Chief Executive Officer, but remains at the Company as its President and Chief Financial Officer and has also entered into an employment agreement with the Company. The agreements provide for an aggregate annual salary of $500,000 and expire in February 2010, in addition the executives were granted stock options to purchase an aggregate of 750,000 shares of common stock.

Litigation

The Company is a defendant in a matter which arose in the ordinary course of business. In the opinion of management, the ultimate resolution of this matter would not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. The Company believes that an adequate provision therefore has been made in the consolidated financial statements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Recent Developments

On February 5, 2008, the Company issued to Exfair Pty Ltd (i) a Convertible Note in the principal amount of $400,000, which note may be converted into two million shares of Series A Convertible Preferred Stock, par value $0.01 per share, of the Company and (ii) a four-year Common Stock Purchase Warrant to purchase 5,784,849 shares of Common Stock of the Company at an exercise price of $0.28 per share. The Convertible Note matures in June 2009.

On February 5, 2008 the Company entered into an Employment Agreement with Mr. Andre Soussa, pursuant to which he is employed as the Company's Chief Executive Officer. William McMahon resigned as a director of the Company and as its Chief Executive Officer, but will remain at the Company as its President and Chief Financial Officer and has also entered into an employment agreement with the Company.

The Board of Directors on January 22, 2008 awarded Richard Gerzof, Chairman of the Board of the Company, immediately exercisable options to purchase 250,000 shares of Common Stock of the Company at an exercise price of $0.20 per share, the fair market value as of the date of grant. The Board of Directors also awarded Elliott Goldberg, Matthew Dollinger and William Wood, directors, immediately exercisable options to purchase 103,500, 18,500 and 3,500 shares of Common Stock, respectively, at the exercise price of $0.20 per share, the fair market value as of the date of grant. The options expire on January 21, 2015.

The Board of Directors also amended the previously granted stock options to Messrs Gerzof, Goldberg, Dollinger and Woods to eliminate the requirement that options must be exercised, to the extent they were exercisable, within a three month period following the date of termination of employment or directorship, even if by disability or death.

Sales
Net sales increased by 4.2%, or $119,000, to $2,921,000 in the three months ended March 31, 2008 as compared with $2,802,000 in the comparative prior-year period. This sales increase was due to increased sales in the gaming market.

Gross Profit
Gross profit decreased to $584,000, or 20% of net sales, in the three months ended March 31, 2008 as compared with $627,000, or 22.4% of net sales, in the comparative prior-year period. The most significant factor affecting the Company's gross profit percentage is the unit sales levels achieved and their relationship to manufacturing costs.

Operating Expenses
Operating expenses decreased to $1,582,000, or 54.2% of sales, in the three months ended March 31, 2008 as compared with $1,939,000, or 69.2% of sales, in the comparative prior-year period. This decrease of $357,000 is primarily the result of lower payroll, travel, and consulting expenses. The Company also reduced its operating expenses by moving to a smaller facility, which is more appropriate to the size of the business in July 2007. The Company charged $58,000 to operations during the three months ended March 31, 2008 and March 31, 2007 representing the fair value of stock options granted to employees, officers and directors.

Interest Expense
Interest expense increased to $60,000 as compared to interest expense of $16,000 in the comparable prior-year period. The increase was primarily associated with the issuance to GPTA of a one-year secured term note in the principal amount of $440,000 that bears interest at a rate equal to the prime rate plus 3.0% and the amortization of the warrants issued in connection with the convertible note of $400,000. The convertible note matures in June 2009.

Income Taxes
With respect to the provision for income taxes, the effective rate was 0.9% as compared with 0.1% 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 March 31, 2008. 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
Net loss for the quarter ended March 31, 2008 was $1,060,000, or $0.15 per share, as compared with $1,330,000, or $0.21 per share, in the comparative prior-year period.

Sales
Net sales decreased by 19.7%, or $1,334,000, to $5,432,000 in the six months ended March 31, 2008 as compared with $6,766,000 in the comparative prior-year period. This sales decrease was due to $843,000 decreased sales to the gaming market and $491,000 decreased sales to the beverage and vending market.

Gross Profit
Gross profit decreased to $1,101,000, or 20.3% of net sales, in the six months ended March 31, 2008 as compared with $1,339,000, or 19.8% of net sales, in the comparative prior-year period. The most significant factor affecting the Company's gross profit percentage is the unit sales levels achieved and their relationship to manufacturing costs.

Operating Expenses
Operating expenses decreased to $3,035,000, or 55.9% of sales, in the six months ended March 31, 2008 as compared with $3,889,000, or 57.5% of sales, in the comparative prior-year period. This decrease of $854,000 is primarily the result of lower payroll, travel, and consulting expenses. The Company also reduced its operating expenses by moving to a smaller facility, which is more appropriate to the size of the business in July 2007. The Company charged $77,000 to operations during the six months ended March 31, 2008 as compared to $58,000 in the prior year representing the fair value of stock options granted to employees, officers and directors.

Interest Expense
Interest expense increased to $62,000 as compared to interest expense of $25,000 in the comparable prior-year period. The increase was primarily associated with the issuance to GPTA of a one-year secured term note in the principal amount of $440,000 that bears interest at a rate equal to the prime rate plus 3.0% and the amortization of the warrants issued in connection with the convertible note of $400,000. The convertible note matures in June 2009. .

Income Taxes
With respect to the provision for income taxes, the effective rate was 0.9% as compared with 0.1% 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 March 31, 2008. 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
Net loss for the six months ended March 31, 2008 was $2,004,000, or $0.29 per share, as compared with $2,579,000, or $0.41 per share, in the comparative prior-year period.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses from operations. Accordingly, the Company will be required to identify additional revenue resources, raise additional capital and/or significantly reduce its expenses in order to pay its obligations as they become due. The Company entered into a debt financing agreement and is undertaking a corporate restructuring to attempt to improve operating results and develop new products. There can be no assurance, however, that such plans, including the shareholder approval of the Preferred Stock, will be successful. These uncertainties raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of the carrying amount and classification of assets or the amount and classification of liabilities that might result from the outcome of these uncertainties.

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 March 31, 2008, the Company's cash and cash equivalents were $859,000 as compared with $879,000 at September 30, 2007. A significant portion of the Company's cash balance in the amount of $521,000 and $498,000, as of March 31, 2008 and September 30, 2007, respectively, consisted of currency used to test the Company's products.

The borrowings under Company's credit facility with Laurus Master Fund Ltd. were paid in full on the maturity date of November 15, 2007.

On January 15, 2008, the Company entered into a Securities Purchase Agreement
(the "Purchase Agreement") with Exfair Pty Ltd, an Australian company ("Exfair")
and Global Payment Technologies Australia Pty Ltd. ("GPTA"); companies controlled by Mr. Andre Soussa. GPTA is the Company's largest customer. The transactions contemplated thereunder were consummated at two closings (as discussed below).

First Closing

At the first closing on January 15, 2008 the Company issued to GPTA a one-year secured term note in the principal amount of $440,000 that bears interest at a rate equal to the prime rate plus 3.0% (provided, that the interest rate shall not be less than 9.0%) and is secured by all the assets of the Company pursuant to a Security Agreement. Additionally, the Company entered into a Voting Agreement with Exfair and certain director-stockholders of the Company, wherein such stockholders agreed to vote in favor of (i) the election of certain persons to the Board of Directors of the Company and (ii) an amendment to Company's Certificate of Incorporation establishing a class of Preferred Stock (as discussed below). Additionally, the Company entered into a Technology License Agreement with GPTA, pursuant to which the Company has agreed to grant a license to GPTA to utilize certain databases and proprietary operating systems if the Company is unable or unwilling to continue to provide support for such databases and operating systems of the Company, and the parties thereto further agreed that if the Company commences bankruptcy proceedings, then the Company would permit GPTA to duplicate any of the Company's intellectual property as of the commencement of such bankruptcy proceedings. GPTA and the Company also agreed to make certain technical amendments to the Distribution Agreement dated September 1, 2006.

Second Closing

At the second closing, on February 5, 2008, the Company issued (i) a Convertible Note (the "Convertible Note") in the principal amount of $400,000 to Exfair, which note may be converted into two million shares of Series A Convertible Preferred Stock, par value $0.01 per share, of the Company (the "Preferred Stock") and (ii) a four-year Common Stock Purchase Warrant to purchase 5,784,849 shares of Common Stock of the Company at an exercise price of $0.28 per share. The Convertible Note matures in June 2009.

Effective as of the consummation of the Second Closing, all the Company directors except Richard Gerzof resigned and new directors were appointed. In addition, the Company entered into an Employment Agreement with Mr. Andre Soussa, pursuant to which he is employed as the Company's Chief Executive Officer for a two-year term at an annual base salary of $300,000. Mr. Soussa was also awarded options to purchase 500,000 shares of the Company's Common Stock at an exercise price of $0.20 per share in accordance with the Company's stock option plan. Further Mr. William McMahon resigned as a director of the Company and as its Chief Executive Officer. Mr. McMahon remains at the Company as its President and Chief Financial Officer and entered into a new Employment Agreement with the Company for a two-year term with an annual base salary of $200,000. Mr. McMahon was awarded options to purchase 250,000 shares of the Company's Common Stock at an exercise price of $0.20 per share in accordance with the Company's stock option plan.

The Company has agreed to seek the approval of the stockholders of the Company to amend the Certificate of Incorporation to authorize a class of Preferred Stock. Upon the approval of such amendment and the filing thereof with the Secretary of State of the State of Delaware, the Convertible Note will automatically be converted into 2,000,000 shares of Convertible Preferred Stock, par value $0.01 per share, with such rights and preferences, including, but not limited to:

(a) Voting Rights. During the first 18 months after the designation of the Preferred Stock, each holder of shares of the Preferred Stock shall be entitled to five (5) times the number of votes equal to the number of shares of Common Stock into which such holder's shares of Preferred Stock could be converted and after such first 18 month period, each holder of shares of the Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such holder's shares of Preferred Stock could be converted. During the first 18 months after the designation of the Preferred Stock, so long as any shares of Preferred Stock are outstanding, the holders of Preferred Stock shall be entitled to designate three (3) members of the Board of Directors. During the first 18 months after the Preferred Stock has been designated, if the number of members of the Board of Directors is increased to more than five (5), the number of directors designated by the holders of Preferred Stock shall increase such that the Preferred Stock shall designate a majority of the number of authorized Board of Director members.

(b) Dividends. The Preferred Stock will, with respect to payment of dividends and rights upon liquidation, dissolution or winding-up of the affairs of the Company, rank senior and prior to the Common Stock of the Company, and any additional series of preferred stock which may in the future be issued by the Company and are designated in the amendment to the Certificate of Incorporation or the certificate of designation establishing such additional preferred stock as ranking junior to the Preferred Stock. The holders of the Preferred Stock will be entitled to receive dividends if, when and as declared by the Board of Directors from time to time, and in amounts determined by the Board of Directors; provided, however, no dividends shall be paid on any share of Common Stock unless a dividend is paid with respect to all outstanding shares of Preferred Stock in an amount for each such share of Preferred Stock equal to or greater than the aggregate amount of such dividends for all shares of Common Stock into which each such share of Preferred Stock could then be converted.

(c) Liquidation Value. The liquidation value per share of Series A Preferred Stock, in case of the voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Company, will be an amount equal to $0.20, subject to adjustment in the event of a stock split, stock dividend or similar event applicable to the Preferred Stock.

(d) Additional Issuances of Securities. Except for certain issuances by the Company if at any time while the Preferred Stock is outstanding, the Company sells or grants any option to purchase or sells or grants any right to reprice its securities, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock equivalents entitling any person to acquire shares of Common Stock at an effective price per share that is lower than the then applicable conversion price, then the conversion price shall be reduced to such lower price.

(e) Modification of Preferred Stock. So long as any shares of Preferred Stock remain outstanding, the Company, shall not, without the vote or written consent by the holders of more than fifty percent (50.0%) of the outstanding Preferred Stock, voting together as a single class, and unless approved by the Board of Directors: (i) redeem, purchase or otherwise acquire for value (or pay into or set aside for a sinking or other analogous fund for such purpose) any share or shares of its Capital Stock, except for conversion into or exchange for stock junior to the Preferred Stock; (ii) alter, modify or amend the terms of the Preferred Stock in any way; or (iii) create or issue any Capital Stock of the Company ranking pari passu with or senior to the Preferred Stock either as to the payment of dividends or rights in liquidation, dissolution or winding-up of the affairs of the Company; increase the authorized number of shares of the Preferred Stock; or re-issue any shares of Preferred Stock which have been converted or otherwise acquired by the Company.

Net cash used in operating activities was $664,000 in the six months ended March 31, 2008. This amount was due to a net loss for the period, adjusted for non-cash items, of $475,000, decreased accounts receivable of $3,000, decreased prepaid expenses and other current assets of $31,000, increased accrued expenses and other liabilities of $302,000, decreased inventory of $427,000, and increased accounts payable of $101,000.

Net cash provided by financing activities amounted to $645,000 in the six months ended March 31, 2008 as compared with net cash provided by financing activities of $433,000 in the prior comparable period. Net cash provided by financing activities consisted primarily of proceeds from issuance of convertible debt of $400,000, proceeds from issuance of secured note of $440,000 and proceeds from issuance of stock of $190,000offset by net repayments of bank borrowings of $353,000 for the six months ended March 31, 2008 as compared with net borrowings of $433,000 in the six months ended March 31, 2007.

Future minimum payments under non-cancelable operating leases including the Company's new Bohemia facility, and principal payments to be made for long-term debt maturing over the next five years are as follows:

 (in thousands)
 Fiscal Year Operating Lease Debt Repayments
--------------- --------------- ---------------
 2008 $ 131 $ 8
 2009 242 840
 2010 249
 2011 255
 2012 263
 Thereafter 591
 --------------- ---------------
 $ 1,731 $ 848
 =============== ===============

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 March 31, 2008, purchase order commitments approximated $3.8 million and will be used for production requirements during fiscal 2008 and beyond.

There were no changes in critical accounting policies since the filing of the Company's Annual Report on Form 10-K for the year ended September 30, 2007.

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 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company's quantitative and qualitative disclosures about market risk since the filing of the Company's Annual Report on Form 10-K for the year ended September 30, 2007.

Item 4. 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 the Company's Chief Financial Officer have evaluated this system of disclosure controls and procedures as of the end of the period covered by this quarterly 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 quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 6. EXHIBITS

Exhibit Number Description
-------------- -----------
 31.1 Rule 13a-14(a) Certification of Chief Executive Officer
 31.2 Rule 13a-14(a) Certification of Chief Financial Officer
 32.1 Section 1350 Certification of Chief Executive Officer
 32.2 Section 1350 Certification of Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

Date: May 15, 2008

GLOBAL PAYMENT TECHNOLOGIES, INC.

 /s/ Andre Soussa
-------------------------------
 Andre Soussa
 Chief Executive Officer



 /s/ William McMahon
-------------------------------
 William McMahon
 Chief Financial Officer

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