<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                  FORM 10-KSB

(Mark One)
x    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

     For the fiscal year ended May 31, 2001

                                      OR

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

     For the transition period from _______________  to  ______________

                       Commission File Number 000-24569

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

              Delaware                                   95-4558331
    (State or other jurisdiction                      (I.R.S. Employer
  Of incorporation or organization)                  Identification No.)


                   1434 W. 11th Street Los Angeles, CA 90015
              (Address of principal executive offices) (Zip code)

                                (213) 745-2000
               (Issuer's telephone number, including area code)


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

                                                    Name of Each Exchange
                Title of Each Class                 ---------------------
                -------------------                  on Which Registered
                       None                          -------------------
                                                             None

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

                                                    Name of Each Exchange
                Title of Each Class                 ---------------------
                -------------------                  on Which Registered
           Common Stock, $ .01 Par Value             -------------------
                                                   American Stock Exchange

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

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ___

     The Company's gross revenues, for its fiscal year ended May 31, 2001, were
$22,735,599 and its net revenues were $491,180. Gross revenue does not represent
revenue under generally accepted accounting principles. See "Management
Discussion and Analysis".

     On May 31, 2001, the aggregate market value of the Common Stock of
Registrant held by non-affiliates of Registrant computed by reference to the
closing bid price $1.30 at which the stock was sold on such date was,
approximately $4,613,584.

                   APPLICABLE ONLY TO CORPORATE REGISTRANTS

     On August 31, 2001, there were 3,668,034 shares of Common Stock, $ .01 par
value, issued and outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

None
<PAGE>

     In addition to historical information, the information included in this
Form 10-KSB contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), such as those pertaining to the Company's capital resources, performance
and results of operations. Forward-looking statements involve numerous risks and
uncertainties and should not be relied upon as predictions of future events.
Certain forward-looking statements can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately, "intends," "plans," "pro forma," "estimates," or
"anticipates" or the negative thereof or other variations thereof or comparable
terminology, or by discussions of strategy, plans or intentions. Such forward-
looking statements are necessarily dependent on assumptions, data or methods
that may be incorrect or imprecise and may be incapable of being realized. The
following factors, among others, could cause actual results and future events to
differ materially from those set forth or contemplated in the forward-looking
statements: significant and immediate need for capital, market acceptance of the
Company's products, technological restrictions upon development, limited
marketing experience, uncertainty of product development, including our EMMA
technology, dependence upon new technology, need for qualified management
personnel and competition. The success of the Company also depends upon economic
trends generally, governmental regulation, legislation, and population changes.
Readers are cautioned not to place undue reliance on forward-looking statements,
which reflect management's analysis only. The Company assumes no obligation to
update forward-looking statements. See also the Company's reports filed from
time to time with the Securities and Exchange Commission pursuant to the
Securities Act or the Exchange Act.
<PAGE>

                                    PART I

Item 1. Description of Business
-------------------------------

Introduction
------------

     Cash Technologies, Inc., is a Delaware Corporation, incorporated in August
1995. Unless the context otherwise requires, references herein to the Company
refer to Cash Technologies, Inc., and its wholly-owned subsidiaries, National
Cash Processors, Inc., a Delaware corporation, incorporated in May 1994, which
became a subsidiary of the Company in January 1996; CoinBank Automated Systems,
Inc., a Delaware corporation, incorporated in November 1995; and CoinBank
Automation Handels GmbH, Salzburg, Austria incorporated in February 1998.

Electronic Message Management Architecture (EMMA)(TM) Transaction Processing
System

     In 1996, the Company began its development of an enhanced version of an
automated teller machine which was designated the ATM-X(TM). The ATM-X was
designed to provide a range of services not typically offered by ATM machines,
such as electronic bill payment, instant activated phone cards, event ticketing
and others. As development efforts proceeded, the Company discovered a
significant market demand for such a product and the need to create a robust
transaction processing system that could link the new ATMs with the worldwide
financial networks in order to provide these new services to ATMs, kiosks and
PCs.

     In December 1997, the Company filed a patent application describing its
transaction processing and networking technologies, which was allowed by the
U.S. Patent and Trademark Office in spring, 2001. The technology, which was
later named EMMA (E-commerce Message Management Architecture), allows for the
seamless integration of conventional ATM and credit card (point-of-sale)
networks with non-bank networks and the

                                       1
<PAGE>

Internet. The need for convenient access to financial services has created a
demand for EMMA's unique capabilities to provide such services at ATMs,
Point-Of-Sale (POS) terminals and wireless devices.

     EMMA's capabilities, with interfaces to the Company's various financial
services partners, allows it to seamlessly interface financial networks,
particularly the four main channels through which trillions of dollars are
transacted each year:  (1) the ATM network; (2) the credit card network; (3) the
Automated Clearing House (ACH) network; and (4) cash, thus allowing individuals
with no ATM card or credit card to access the services offered.

     In December 1999, the Company entered into an agreement with Rent Way, Inc.
and installed three ATM-X machines in the Rent Way stores as a pilot program in
early 2000. As of August 15, 2001, the machines are in operation and fully
functional providing check cashing and standard ATM functions. In April 2000,
the Company entered into an agreement with Popular Cash Express, Inc. to pilot a
check cashing point-of-sale system in Popular Cash Express stores. As of August
15, 2001, the system is installed in one location and providing check cashing
functions.

Commercial Cash Processing

     While the Company has, in recent years, expanded its operations into other
technologies, it began and continues to do business as a cash processor through
its National Cash Processors, Inc. subsidiary. Typically, currency is purchased
in bulk at a discount of between 1% and 2% from face value. After counting,
sorting and/or wrapping, the Company either promptly resells the processed
currency at face value plus a small fee (approximately $10.00 per $1,000 worth
of bills sorted) to a variety of customers, including armored car companies, or
deposits it at face value at the Federal Reserve Bank for credit to the
Company's account. The Company continues to process currency.

Coin Counting Equipment

     In 1995, the Company began its development of CoinBank(R) self-service coin
counting machines, distributed through its CoinBank Automated Systems, Inc.
subsidiary.  The machines accept and count loose coin, then generate a receipt
redeemable for the amount counted less a service fee of typically 7-9%. This
receipt can then be exchanged for currency or goods.  The machines provide
individuals and small businesses with a convenient method for disposing of their
accumulated loose coin without the need for pre-sorting or wrapping. The Company
has performed extensive field tests with these machines in Southern California,
New England and Europe. The machines can be readily configured to count coin
denominations from most countries in the world.  An important feature of the
machines, for which the Company filed for patent protection in 1997, is their
ability to reject extraneous materials such as foreign objects and slugs,
minimizing down time and repairs. The U.S. Patent and Trademark Office allowed
the patent in August 2001.

     The Company is marketing the machines to companies with existing equipment
distribution and service channels and directly to retailers and financial
institutions.

     During the current fiscal year, the Company's market analysis for self-
service coin counting machines indicated that retailers were demanding higher
profit margins from the operation of these devices than that was being offered
through the "free-placement" business model.  The Company concluded that its
free-placement program should be supplanted by direct sales of these machines to
retail store chains and removed substantially all of its free-placement machines
from operation, including the termination of its agreement with Shaw's
Supermarkets. See "Legal Proceedings". Though the Company intends to market its
CoinBank(R) machines for direct sales, it intends to focus substantially all of
its efforts and operations on the continued development and deployment of the
EMMA technology.

                                       2
<PAGE>

Product Development
-------------------

Electronic Message Management Architecture (EMMA) Transaction Processing System

Technical Description

     The EMMA Platform implements a flexible message format that allows for
constructing multiple transactions and transaction types at a financial
terminal, such as an ATM, Point-Of-Sale (POS) terminal, or wireless device
(cellular phone, PDA, etc.) and transmitting those as a single message or
transaction request, to the EMMA Host. These messages can then be easily
converted into message structures that are widely used in the financial
industry.

     The EMMA Host parses the EMMA Message from the client and prioritizes the
enclosed transactions.  The EMMA specification allows sophisticated
relationships to be created between transactions that require inter-dependencies
between the various legs of each transaction. The EMMA Host then manages each
leg, or sub-transaction, individually. It also manages each sub-transaction as a
separate communication process. For example, an electronic bill payment
transaction might first require access to a customer's bank account to verify
available funds, then notification of the payment to the biller (through a
remittance processor such as Checkfree) and finally the transfer of funds to the
biller. In this example, each leg required management, routing and a distinct
communication protocol.

     A unique capability of EMMA is its ability to manage and communicate the
various transaction messages in parallel, or asynchronously, expediting
transaction processing and permitting the aggregation of transactions for
payment purposes.  For example, a customer may select four different services at
an ATM, such as the payment of a bill, the purchase of a money order, the
transfer of funds and getting cash, and, once selected, these transactions can
be completed simultaneously and with a single payment.

     Designed from the ground up to work in the institutional transaction
processing environment, EMMA is robust, scaleable and reliable, expandable as
needed to meet larger transaction flows as market demand for "advanced-function
services" increases.


ATM-X(TM), POS-X(TM)

     The Company has developed the client software for an enhanced version of an
automated teller machine, designated the ATM-X and a POS terminal, designated
POS-X. The software permits these devices to offer a full range of financial
services not typically offered by ATMs and POS terminals, such as check cashing,
electronic bill payment, instant activated phone cards, event ticketing and
Internet products and services. As reported in previous SEC filings in
partnership with ATM manufacturer Diebold, Inc., in March 2000, the Company
completed installation of the first ATM-X pilot at three stores owned by Rent
Way.  As of August 31, 2001, the machines are in operation and provide automated
check cashing and ATM functions. As of August 31, 2001, the first POS-X
terminals have been deployed at Popular Cash Express. There can be no assurance
that third-party manufacturers, such as Diebold, continue to provide the
hardware needed for the ATM-X and POS-X machines or that they or we, will be
able to successfully market the software of these devices.

                                       3
<PAGE>

Industry (Market) Overview
--------------------------

Electronic Message Management Architecture (EMMA) Transaction Processing System

     Data networking has been an enabling technology for the financial industry.
Using financial networks, financial institutions can present and collect
financial information at the locations where transactions are initiated and
provide services that are an improvement over paper-based transactions. As a
result of networking, financial institutions have changed the normal course of
doing business and have encouraged the growth of global enterprises.

     In recent years, however, the limitations of the aging infrastructure of
the financial networks are being highlighted by the rise of public networking.
The most notable example of public networking, the Internet, depends for its
high availability and security upon advances in network hardware, new protocols,
and high-speed digital communications lines. In contrast, the standard in
financial networking infrastructure is a generation behind the majority of
business and consumer networks.

     This disparity in infrastructure introduces limitations such as the need
for more bandwidth and easier access. But bandwidth is only one problem. Each
existing aging financial network transacts independently via specific industry
protocols which by design prohibit the free flow of information from one network
to another--e.g., the POS network only communicates within the POS network,
ATM's transact exclusively via the ATM network and neither can interface with
the Internet. This problem becomes the significant stumbling block for the
implementation of advances in security, network control and routing.

     EMMA potentially offers the financial industry a bridge technology that
provides a remedy to the disparity within existing systems. The EMMA Platform is
meant to provide a solution that will work in parallel with the current
financial networks, interacting with each without any requirement for those
networks to change their current operation. It supports the beneficial features
of those networks and overcomes their limitations. It promises to provide an up-
to-date solution that can implement the newest technologies, as well as carry
the weight of the transaction volume from older terminals and, in effect,
converts these legacy systems into unaware participants in a more sophisticated
network.


Commercial Cash Processing Services
-----------------------------------

Cash Processing Facility

     The Company operates a cash processing facility in Los Angeles, California,
where it counts currency, which it purchases in bulk from Los Angeles
Metropolitan Transit Authority at a small discount from face value. The Company
then sorts, wraps and resells the currency to various retail customers at face
value plus a small fee or deposits it at face value at the Federal Reserve Bank
for credit to the Company's account. During the fiscal year ended May 31, 2001,
the Company counted $22,606,358 and derived net revenues of $361,940 from its
cash processing business. The Company currently has 5 employees engaged in this
business.


Cash Processing Security

     The Company's operations are substantially dependent on maintaining the
security of the currency transported to the Company's facility and stored on the
Company's premises. The Company's currency processing facility is located in a
secured building.

                                       4
<PAGE>

     The physical security systems in place at the Company's facility have been
rated "AA" (the same top rating maintained by most bank and armored car cash
vaults) by Underwriters Laboratories, Inc., which rating will remain effective
until at least 2002, so long as the Company maintains its present monitoring
procedures. Although the Company believes that it has in place adequate security
systems and procedures to safeguard its quantities of currency, there can be no
assurance that the Company's systems and procedures will be sufficient to ensure
against robbery, embezzlement or other losses.

     The Company maintains insurance against losses on its premises, including
those due to theft or embezzlement by independent contractors or the Company's
employees, up to an aggregate amount of $3,000,000. Though the Company believes
that it can increase the amount of such coverage if needed with a corresponding
increase in premium payments, there can be no assurance that such insurance will
provide the Company with an adequate level of coverage in the event of any loss,
or that it will be renewed or increased in the future as needed, on commercially
reasonable terms or at all. Moreover, the Company may experience an
unanticipated loss not covered by such insurance. Partially or completely
uninsured losses, if of sufficient magnitude, could have a materially adverse
effect on the Company's business and results of operations. The Company also
maintains insurance for off-site theft of coin from and damages to its CoinBank
machines.


Sale of CoinBank Machines
-------------------------

CoinBank Machine Features

     In December 1995, the Company commenced developing and marketing
CoinBank(R) machines, automated self-service coin counting and processing
machines designed to accept and count loose coins for a fee. The CoinBank(R)
machine is a freestanding machine that incorporates hardware and electronic
components and certain software. The Company has developed three different
CoinBank(R) machine models, with variations in coin storage capacity, customer
interfaces and external appearance.

     The CoinBank(R) machine calculates the gross value of each batch of coins
placed into it by a customer deducts a percentage of the gross batch total
(typically 7 1/2% to 9%) and prints out a receipt for the net amount. The
customer can bring the receipt to a teller window in a financial institution, or
cashier; in the case of a retail location, for deposit to a bank account or in
exchange for currency or goods. The CoinBank(R) machine is also capable of being
linked to the ATM network in order to permit customers to directly deposit funds
to a bank account.

     During the current fiscal year, the Company's market analysis for self-
service coin counting machines indicated that retailers were demanding higher
profit margins from the operation of these devices than that is being offered
through the "free-placement" business model.  The Company concluded that its
free-placement program should be supplanted by direct sales of these machines to
retail store chains and removed substantially all of its free-placement machines
from operation.

CoinBank(R) Machine Assembly and Supply

     The Company is dependent on third-party manufacturers for the production of
the components incorporated into CoinBank(R) machines and currently purchases
substantially all of its requirements of specially designed or modified
components from single source suppliers. The Company purchases certain of these
components pursuant to open purchase orders placed from time to time in the
ordinary course of business. Although the Company currently believes that
alternative sources for these components are readily available, failure or delay
by any manufacturer in providing components to the Company on commercially
reasonable terms, or at all, in the absence of readily available alternative
sources, could result in interruptions in the Company's ability to continue its

                                       5
<PAGE>

assembly and installations of CoinBank(R) machines and have a material adverse
effect on the Company's operations.

     The Company currently contracts with one of its suppliers to fabricate the
housing and integrate the components of CoinBank(R) machines, including software
that is proprietary to the Company.


Marketing
---------

E-Commerce Message Management Architecture (EMMA) Transaction Processing System

     EMMA is envisioned to link global financial systems together for the first
time. Using the existing worldwide ATM , POS, Internet and financial services
infrastructure, the Company expects to provide consumers with direct access to
every major method of commerce, including Internet Commerce, from a single
terminal or "e-appliance".

     Marketing studies are currently underway. The Company envisions producing
revenues through the following methods: (1) transaction processing for third
parties; (2) licensing EMMA to other financial services providers worldwide; and
(3) advertising and the sale of transaction data.

Commercial Cash Processing and Coin Machines

     Since inception, the Company has conducted only limited marketing
activities and currently has limited marketing and technical experience and
limited financial, personnel and other resources to independently undertake
extensive marketing activities. The Company conducts substantially all of its
own marketing activities and may hire additional marketing personnel, including
possibly independent contractors to assist it in marketing CoinBank machines. To
date, the Company has conducted marketing of its cash processing services by
means of press releases and articles in trade journals targeted at cash-
intensive industries. The Company's marketing of CoinBank machines has consisted
of entering into market testing arrangements with a limited number of financial
institutions and retailers and attending certain industry shows. The Company
intends to focus its future coin-machine marketing efforts on the sale of
CoinBank machines rather than the free-placement/shared revenue model.


Competition
-----------

EMMA - Electronic Message Management Architecture Transaction Processing System

     There is intense growth in the development and distribution of off-premise
(non-bank) financial services, particularly on ATMs, Point-Of-Sale (POS)
terminals, specialty kiosks and other devices, including cellular phones and
wireless PDAs. Most of this equipment has a limited user interface, although
recent equipment models have high-powered, graphical user interfaces. Many
support peripherals for dispensing new financial products. While there are a
number of companies who have developed transaction processing solutions for
specific applications, such as check cashing, event or airline ticketing,
prepaid phone cards, etc. The Company is not aware of any competitor that has
the Company's plan to provide "advanced function" transaction processing
services as its core business.  There are no assurances that the market will
accept the Company's method of processing or operations. There can be no
assurance that another data processing company with greater financial or
technical resources will not develop software competitive with EMMA and make the
Company's products and services less attractive to prospective customers.

                                       6
<PAGE>

Coin Machines

     The Company is aware of only one company, Coinstar, Inc., that offers self-
service coin counting machines for distribution to the U.S. retail industry. To
the Company's knowledge, unlike the Company, which currently focuses its efforts
on selling CoinBank machines, this competitor focuses its marketing efforts on
installing "free placement" machines. This competitor has installed a large
number of its machines throughout the United States, and in some cases; such
installations are near where the Company has installed or may seek to sell
CoinBank machines. There can be no assurance that potential purchasers of
CoinBank machines will not prefer to employ this competitor's "free placement"
machines. Moreover, there can be no assurance that other companies are not
developing or will not seek to develop functionally equivalent products or
services for the disposal of large amounts of coins in the future. Certain of
the potential competitors may have substantially greater financial, personnel,
marketing and other resources than the Company. In addition, there are many
companies in the coin processing industry that have the expertise and resources
that may encourage them to develop and market products or services that compete
with CoinBank machines or that would render CoinBank machines obsolete or less
marketable. Moreover, potential customers may elect to establish their own
facilities for counting and processing coins or utilize other methods, which
they believe to be less costly or possess other advantages over CoinBank
machines. There can be no assurance that the Company will be able to compete
successfully.


Intellectual Property
---------------------

     Although the Company has received U.S. Patents with respect to its CoinBank
machines and its EMMA Platform, there can be no assurance that these patents
will afford the Company any meaningful protection. The Company does not
currently hold any patents with respect to any software or hardware used by it
in its operations and there can be no assurance that any patents will be granted
to it. The Company relies on a combination of trade secrets, technical measures,
copyright protection and nondisclosure agreements with its employees to
establish and protect the ideas, concepts and documentation of certain software
developed by it and used primarily in its cash processing operations ("Developed
Software"). Such methods may not afford complete protection, and there can be no
assurance that third parties will not independently develop such technology or
obtain access to the Developed Software. Although the Company believes that the
Developed Software and other software used in its operations does not infringe
upon the rights of others, there can be no assurance that the Developed Software
or such other software does not and will not infringe upon the patents or
intellectual property rights of others. See "Legal Proceedings" and "Risk
Factors"-Litigation

     In the event of infringement, the Company could, under certain
circumstances, be required to obtain a license or modify aspects of the
Developed Software or such other software or refrain from using such software.
There can be no assurance that the Company will have the necessary financial
resources to defend any infringement claim made against it or to successfully
terminate any infringement in a timely manner, upon acceptable terms and
conditions or at all. Failure to do any of the foregoing could have a material
adverse effect on the Company. Moreover, if the Developed Software or other
software used in the Company's business is deemed to infringe upon the rights of
others, the Company could, under certain circumstances, become liable for
damages, which could have a material adverse effect on the Company.

     The Company believes that product recognition is an important competitive
factor and promotes the CoinBank name in connection with its marketing
activities. The Company received United States trademark registration for the
"CoinBank" name in September 1997. Although the Company is not aware of any
claims of infringement or other challenges to the Company's rights to use this
trademark, there can be no assurance that the Company's marks do not or will not
infringe upon the proprietary rights of others or that the Company's marks would
be upheld if challenged. The Company has not applied for the trademark with
respect to the EMMA trade name.

                                       7
<PAGE>

Employees
---------

     As of September 1, 2001, the Company employed 18 employees and 4
contractors on a full-time basis, of which 5 were engaged in cash processing, 2
were engaged in facilities and security, 1 was engaged in customer service and
sales, 5 were engaged in accounting and administration and 9 were engaged in
system support and development. None of the Company's employees are subject to
collective bargaining agreements. The Company believes that its relations with
its employees are good. In addition, the Company utilizes the services of two
offshore technical development groups, totaling approximately 26 engineers, for
some of its software development activities.

Risk Factors
------------

     Limited Operating History; Significant and Continuing Losses.  The Company
opened its cash processing facility in May 1994, and commenced installations of
CoinBank machines at a limited number of bank branches in December 1995. As of
August 1, 2000, the Company had removed substantially all of its free-placement
CoinBank machines from field operation. Additionally, the Company is continuing
to develop its EMMA Platform and has not had any commercial activity from the
system, except for the pilot at three Rent Way stores. Accordingly, the Company
has a limited operating history upon which an evaluation of the Company's
performance and prospects can be made. The Company is subject to numerous risks,
expenses, delays, problems and difficulties frequently encountered in the
establishment of any new business. In the last two years, the Company has
incurred significant losses, including net losses of $4,255,570 and $6,639,901
respectively, for its fiscal years ended May 31, 2001 and 2000. At May 31, 2001,
the Company had stockholders deficiency of $5,435,390 and an accumulated deficit
of $23,943,901. The Company will continue to have a high level of operating
expenses and will be required to make significant up-front expenditures in
connection with the development of its EMMA Platform (including, without
limitation, salaries of executive, technical, marketing and other personnel).
The Company anticipates that it will continue to incur significant and
increasing losses for the foreseeable future until such time, if ever, as the
Company is able to generate sufficient revenues to finance its operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Financial Statements."

     Going Concern. The Company's independent certified public accountants
included an explanatory paragraph in their report for the year ended May 31,
2001, which indicated a substantial doubt as to the ability of the Company to
continue as a going concern.  This concern is due primarily to substantial debt
service requirements and working capital needs.  See independent certified
public accountant's letter and Item 6. "Liquidity".

     Working Capital Deficit; Significant Capital Requirements. At May 31, 2001,
the Company had a working capital deficit of $9,419,126. On September 4, 2001,
the Company had available cash of $455,636. The Company's capital requirements
have been and will continue to be significant, and its cash requirements have
exceeded cash flow from operations since inception. As a result, the Company has
been substantially dependent on the proceeds of its initial public offering in
July 1998, and private placements since then of its debt and equity securities
to satisfy its working capital requirements. The Company will be dependent upon
the proceeds of future private placement offerings or other public offerings to
fund development of the EMMA technology, its short-term working capital
requirements, fund certain marketing activities and to continue implementing its
business strategy. There can be no assurance the Company will be able to raise
necessary capital.

     The Need for Substantial Additional Financing; If we are unable to obtain
needed additional financing, our business may fail. In the event that the
Company's plans or assumptions relating to its operations change or prove to be
inaccurate or if the net proceeds of future private placements or other public
offerings together with revenues generated from operations prove to be
insufficient (due to, among other things, unanticipated expenses, increased
competition, unfavorable general economic conditions, decreased demand for cash
processing services, inability to successfully market its products, or other
unforeseen circumstances), the Company could be required to seek other
alternatives available to it. The Company currently requires and expects over
the next fiscal year to

                                       8
<PAGE>

continue to need substantial additional capital in order to continue operations.
There can be no assurance that additional financing from any source will be
available to the Company when needed, on commercially reasonable terms, or at
all. To the extent that the Company obtains additional financing through the
issuance of additional equity securities, any such issuance may involve
substantial dilution to the Company's then-existing stockholders. Additionally,
to the extent that the Company incurs indebtedness or issues debt securities,
the Company will be subject to all of the risks associated with incurring
substantial indebtedness, including the risks that interest rates may fluctuate
and cash flow may be insufficient to pay principal and interest on any such
indebtedness. Any inability to obtain additional financing when needed, will
have a material adverse effect on the Company that could require the Company to
significantly curtail or possibly cease its operations. We have notes
outstanding of approximately $3,362,000 principal amount, which were due and
payable on July 31, 2001. At the current time, we are unable to repay the notes,
which are secured by substantially all of our assets subject to certain liens in
favor of G. E. Capital. In addition, we owe approximately $3,275,070 to G. E.
Capital, which we are unable to repay at this time. As of August 1, 2001 the
notes are in default.

     We have made an offer to the note holders to settle our outstanding debt
concerning the notes.  As settlement, the Company has proposed that the maturity
date be extended and additional warrants be issued. There can be no assurance
given that the note holders will accept our offer. As of September 4, 2001, note
holders representing approximately $3 million of the total $3.36 million in
secured notes have informally indicated their acceptance of the proposed terms
through signed letters of indication, however these indications will not become
binding until or unless formal loan modification documents are executed. While
the Company is optimistic about the successful resolution of this matter, if the
note holders do not accept our offer in whole or in part, they may demand
payment or declare a default.  If we are unable to obtain any additional
financing, we may be required to curtail our marketing and productions plans,
further development of EMMA and possibly cease operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

     Any additional financing we seek may substantially dilute the interests of
our shareholders. To the extent that we obtain additional financing through the
issuance of additional equity securities, any such issuance may involve
substantial dilution to our then-existing stockholders. Additionally, to the
extent that we incur indebtedness or issue debt securities, we will be subject
to all of the risks associated with incurring substantial indebtedness,
including the risks that interest rates may fluctuate and cash flow may be
insufficient to pay principal and interest on any such indebtedness. Any
inability to obtain additional financing when needed will have a material
adverse effect on us that could require us to significantly curtail or possibly
cease our operations.

     If our products and services do not achieve market acceptance, our business
will be harmed. In marketing our products and services, we are attempting to
change the traditional methods by which people obtain financial services and
access the Internet. Accordingly, the demand for these services is subject to a
high level of uncertainty.  If we do not realize market acceptance of these
products, our business will be seriously harmed. The results of the use of EMMA
when deployed may not be well received and prior results of use may not be
indicative of future market acceptance of our products or services.  Commercial
establishments and individuals may elect to utilize other methods, which they
believe to be less costly or possess other advantages over EMMA.  Achieving
market acceptance for EMMA will require substantial marketing efforts and the
expenditure of a significant amount of funds to inform various targeted customer
groups of the perceived benefits and cost advantages of EMMA. To date we have
installed only a limited number of EMMA driven terminals.

     Similarly, the demand for and market acceptance of our currency processing
services are also subject to a high level of uncertainty.  If we do not realize
market acceptance of these products, our business will be seriously harmed.
Commercial establishments and individuals may elect to utilize other methods
which they believe to be less costly or possess other advantages over our cash
processing services, including establishing their own cash counting and
processing operations, or otherwise refraining from seeking to dispose of excess
cash.

                                       9
<PAGE>

     Limited Marketing Capabilities. Since inception, the Company has conducted
only limited marketing activities and currently has limited marketing and
technical experience and limited financial, personnel and other resources to
independently undertake extensive marketing activities. The Company's marketing
plans may be subject to change as a result of a number of factors, including
changes in market conditions, the nature of the marketing requested or provided
by customers for EMMA transaction processing and other factors. There can be no
assurance that the Company's efforts will result in significant initial or
continued market acceptance, that emerging markets for the EMMA system and the
Company's coin and currency processing services will not be limited, or that the
Company will succeed in positioning ATM-X, POS-X and the EMMA system as a
preferred method of financial transaction processing. See "Business--Marketing."

     Our limited marketing capabilities may hinder our growth. Since inception,
we have conducted only limited marketing activities and currently have limited
marketing and technical experience and limited financial, personnel and other
resources to independently undertake extensive marketing activities.
Accordingly, our marketing efforts may not result in significant initial or
continued market acceptance, may not develop a market for our EMMA system,
CoinBank(R) machines and currency processing services and may not succeed in
positioning EMMA as a preferred method of processing "advanced function"
transactions. Further, our current marketing plans are subject to change as a
result of a number of factors, including changes in market conditions, the
nature of the marketing requested or provided by prospective users of EMMA.

     We face substantial security risks in our business for which we may not be
fully insured. Our cash processing operations are substantially dependent upon
maintaining the security of the inventories of coin and currency transported to
our cash processing facility and held on our premises. We have obtained
insurance for on-site and off-site theft of cash from our facilities and
machines, and we maintain insurance against losses, including those due to theft
or embezzlement by independent contractors or our employees. This insurance,
however, may not provide us with an adequate level of coverage in the event of
any loss and it may not be renewed or increased in the future as needed, on
commercially reasonable terms or at all. Moreover, we may experience an
unanticipated loss not covered by such insurance. Partially or completely
uninsured losses, if of sufficient magnitude, could have a material adverse
effect on our business and results of operations. Although we believe that we
have in place adequate security systems and procedures to safeguard the coin and
currency processed at our cash processing facility, our systems and procedures
may not be sufficient to ensure against theft, embezzlement or other losses.

     Our products may not perform reliably in extensive applications. As of
August 31, 2001, we had installed only 4 EMMA-driven ATM-X/POS-X machines and
have derived substantially no revenue from this EMMA based business. To date we
have not installed a base of EMMA-driven ATM-X/POS-X machines upon which we can
base predictions about the reliability or functionality of the EMMA technology.
The Company is no longer intending to be involved in the placement of
CoinBank(R) machines. Although such systems and machines have performed reliably
to date at their current installations, upon widespread commercial use they may
not satisfactorily perform all of their intended functions or may not prove
reliable in extensive utilization. Software and other technologies that are
incorporated into our products are complex and may contain errors, which will
only become apparent subsequent to widespread commercial use. Remedying such
errors could require the expenditure of a substantial amount of money and could
also result in significant delays in installing or selling our products, which
could have a material adverse effect on us. We anticipate that we will continue
to seek to upgrade and enhance both the hardware and software components of our
products. Such upgrading and enhancement efforts remain subject to the risks
inherent in new product development, including unanticipated technical or other
problems, which could result in material delays in product commercialization or
significantly increased costs. Further, our EMMA systems may not satisfactorily
perform all of its intended functions or will prove not to be reliable in
extensive utilization.

     We are dependent on independent contractors, whose nonperformance could
harm our business. We are substantially dependent on the ability of the
independent contractors we hire to dedicate sufficient personnel to service us.
Any contractor that we utilize or may utilize may not have sufficient capacity
to satisfy our needs

                                       10
<PAGE>

during any period of sustained demand. The loss of services of independent
contractors could disrupt our business. Furthermore, the EMMA system accesses
networks, which are owned and operated by third parties. The failure or
unavailability of these networks could have a material adverse effect on us.

     We are dependent on third-party manufacturers. The EMMA system is designed
to be distributed through equipment, such as ATMs manufactured and distributed
by third parties. Although we believe that a number of sources for this
equipment is available, failure or delay by any manufacturer in providing such
equipment to location operators could result in interruptions in our ability to
deploy EMMA-based transactions and could have a material adverse effect on our
operations.

     We are in litigation with a former supplier of technology and a former
Coinbank Customer.  We have commenced a lawsuit against Geld Bearbeitungs
Systeme GES.M.B.H., an Austrian entity which had previously been manufacturing
certain of our CoinBank(R) machines.  Pursuant to licensing and manufacturing
services and distribution agreements with Geld, we have the exclusive worldwide
right, except for sales to certain Austrian financial institutions, to use the
technology, which is incorporated in the equipment, manufactured by this
supplier.  We had previously entered into a letter of intent to acquire Geld to
secure our access to the exclusive technology and certain disputes have arisen
regarding the acquisition and licensing agreements between the parties. We
instituted the suit to enforce certain licensing rights under our agreements and
to enforce the acquisition letter of intent.

     We have been engaged in discussions with one of our CoinBank customers,
Shaw's Supermarkets regarding termination of the placement of our CoinBank
machines in their locations in New England.  We have ceased operating the
machines.  Shaw's filed suit claiming it is owed in excess of $200,000 and other
damages under our agreements with them.  The Company believes that it has
substantially delivered all sums owed to Shaw's except for approximately
$40,000, but has meritorious defenses to other claims of Shaw's.  There can be
no assurance that the suit will be settled favorably or that we would prevail in
any litigation.

     In December 1997, Vindex USA, Inc. filed a complaint against CAS, a
subsidiary of the Company, in the Superior Court of California, Los Angeles
County, seeking to recover $40,000, an unspecified amount of commissions and
interest accrued thereon allegedly due it under the terms of a consulting
agreement it alleged was breached by the Company. The court has entered judgment
against CAS in favor of Vindex in the sum of $97,864. The Company has reflected
this as a liability on its books.

     We have a limited customer base and the loss of any present customers would
have an adverse effect on our operations. We continue to sell most of the
currency that we process to a limited number of entities. We generally do not
enter into long-term written agreements with any customers with respect to the
processing, acquisition or sale of coin and currency and do not anticipate
entering into written contracts for coin purchases or sales with future
customers. The loss of present or any future significant customers, for any
reason, in the absence of significant additional customers or contracts, could
have a material adverse effect on our financial condition and results of
operations. We may not be able to lessen our dependence on a limited number of
customers for a substantial portion of our revenue.

     The expansion of our business is uncertain. To date, we have generally been
dependent on processing currency purchased directly from third parties (other
than through CoinBank(R) machines) to generate substantially all of our
revenues.  We intend to increase our current level of operations, with an
emphasis on marketing EMMA services.  We have achieved limited growth to date
and we may not be able to successfully expand our operations. Expansion of our
operations will be largely dependent upon our ability to successfully market and
distribute EMMA-driven transaction processing services; hire and retain skilled
technical, marketing and other personnel; establish and maintain satisfactory
relationships with banks and retail businesses; and achieve significant market
acceptance for the use of advanced function services.  We may not be able to
successfully implement our business plan and unanticipated expenses, problems or
technical difficulties may occur which would result in material delays

                                       11
<PAGE>

in its implementation. Our prospects could be adversely affected by a decline in
the economic prospects of particular individual or commercial customers or
segments of cash-intensive markets, which could result in reduction or deferral
of requirements for coin processing services or the use of EMMA services by
prospective customers. We may not be able to achieve significant market
acceptance of advanced function transactions, achieve significant penetration in
new geographic markets or successfully expand our operations.

     We may not successfully compete with our competitors. The coin processing
industry is characterized by intense competition and we compete primarily with
banks, most of which possess substantially greater financial, personnel,
marketing and other resources than us. With respect to CoinBank(R) machines, we
are aware of one other company that offers self-service coin counting and
processing services through the use of coin counting machines. To our knowledge,
this competitor focuses its marketing efforts on installing its machines in
supermarkets on a free placement basis. This competitor has installed a number
of its machines in the Los Angeles area as well as in other areas of the United
States, and, in some cases, such installations are near where we have installed
or may seek to install and/or sell CoinBank(R) machines. There can be no
assurance that potential customers of CoinBank(R) machines will not prefer to
utilize this competitor's machines.

     Competition could render our technologies obsolete.  Our competitors may be
developing or may seek to develop functionally equivalent products or services
for the disposal of large amounts of coins in the future. In addition, our EMMA
platform will compete with existing automated teller machines and services
offered by financial institutions and other companies that may provide services
similar to those offered by EMMA.  Competitive technologies may render our
products and services obsolete or less marketable.

     Changing industry trends may adversely effect our operations. Alternatives
to the use of cash and checks, such as credit cards and wire transfer, debit
cards and other forms of electronic currency are increasing. Increasing use of
these alternative forms of payment could reduce the frequency of circulation of
cash and checks resulting in decreased need for some EMMA applications. The
market for alternative forms of money transfer is characterized by frequent
introduction of new products and services and is subject to changing consumer
preferences and economic trends, which may make certain EMMA applications
unattractive, compared to other alternatives.

     The geographic concentration of our business exposes us to risks due to
changes in the regional economy. To date, our operations have been concentrated
primarily in the Southern California area. Our growth prospects will be largely
dependent on its ability to achieve greater penetration in this market as well
as significant penetration in new geographic markets. Although we intend to
focus our efforts on expanding its operations for the foreseeable future, a
substantial portion of our revenues will be derived from its Southern California
operations. Such geographic concentration increases the potential impact on our
results of operations of any regional economic downturn or catastrophic events.
Our prospects could be adversely affected by unfavorable general economic
conditions, including any downturns in the California or national economies,
which could result in an unwillingness by consumers to pay cash processing fees
or an increased interest in developing alternative methods of counting and
sorting cash, including creating in-house processing facilities.

     We are subject to risks relating to our international installations and
sales. We are seeking to deploy the EMMA system outside of the United States. To
the extent that we are able to expand our operations and sales outside of the
United States, we will be subject to the risks associated with international
operations and sales, including economic and political instability, currency
fluctuations, credit risks, shipping delays, customs duties, export quotas,
foreign government regulations and other trade restrictions, any of which could
have a significant impact on our ability to operate effectively outside of the
United States or to deliver EMMA services overseas to customers on a competitive
and timely basis.

     Uncertainty of patent and trademark protection. Although the Company has
received U.S. Patents with respect to its CoinBank machines and its EMMA
Platform, there can be no assurance that these patents will afford the Company
any meaningful protection. We do not currently hold any patents with respect to
any software or

                                       12
<PAGE>

hardware used in its operations. We intend to rely primarily on a combination of
trade secrets, technical measures, copyright protection and nondisclosure
agreements with its employees to establish and protect the ideas, concepts and
documentation of software developed by it and used primarily in its coin
processing operations. Such methods may not afford complete protection, and
there can be no assurance that third parties will not independently develop such
technology or obtain access to the software we have developed. Although we
believe that our use of the software we developed and other software used in its
operations does not infringe upon the rights of others, our use of the software
we developed or such other software may infringe upon the patents or
intellectual property rights of others. In the event of infringement, we could,
under certain circumstances, be required to obtain a license or modify aspects
of the software we developed or such other software or refrain from using such
software. We may not have the necessary financial resources to defend any
infringement claim made against us or be able to successfully terminate any
infringement in a timely manner, upon acceptable terms and conditions or at all.
Failure to do any of the foregoing could have a material adverse effect on us.
Moreover, if the software we developed or any other software or hardware used in
our business is deemed to infringe upon the rights of others, we could, under
certain circumstances, become liable for damages, which could have a material
adverse effect on us. We received United States trademark registration for the
"CoinBank(R)" name in September 1997. Although we are not aware of any claims of
infringement or other challenges to our rights to use this trademark, there can
be no assurance that our marks do not or will not infringe upon the proprietary
rights of others or that our marks would be upheld if challenged.

     We are dependent on key personnel. Our success is dependent on the efforts
of our key personnel, including Mr. Korman, our President and Chief Executive
Officer. We entered into a three-year employment agreement with Mr. Korman,
which expired in July 2001. There is currently no employment agreement in place
between Mr. Korman and us. The loss of the services of Mr. Korman could have a
material adverse effect on our business and prospects. Mr. Korman also
participates in other business endeavors, which require a portion of his
business time. Although Mr. Korman has advised us that his participation in
outside business matters should not interfere with his performance of his duties
as our President and Chief Executive Officer, there can be no assurance that a
conflict of interest will not arise with respect to the allocation of Mr.
Korman's time or that such conflict would be resolved in our favor.

     The success of our business also requires that we retain other qualified
management personnel.  Our success is also dependent upon our ability to hire
and retain additional qualified management, marketing, technical, financial and
other personnel. Competition for qualified personnel is intense, and there can
be no assurance that we will be able to hire or retain additional qualified
personnel. Any inability to attract and retain qualified management and other
personnel would have a material adverse effect on us.

     We are controlled by our management. Mr. Korman and Mr. Miller, and their
respective affiliates, beneficially own, in the aggregate, approximately 20.19%
of our outstanding common stock. As a result, they are and will be in a position
to act together to effectively control us, elect our directors, cause an
increase in the authorized capital or the dissolution, merger or sale of our
assets, and generally direct our affairs.

     Our directors and officers have limited personal liability. Our Certificate
of Incorporation includes provisions to limit, to the full extent permitted by
Delaware law, the personal liability of our directors for monetary damages
arising from a breach of their fiduciary duties as directors. In addition, our
By-Laws require us to indemnify any of our directors, officers, employees or
agents to the full extent permitted by Delaware law. As a result of such
provisions in our Certificate of Incorporation and the By-Laws, stockholders may
be unable to recover damages against our directors and officers for actions
taken by them which constitute negligence, gross negligence or a violation of
their fiduciary duties, which may reduce the likelihood of stockholders
instituting derivative litigation against directors and officers and may
discourage or deter stockholders from suing our directors, officers, employees
and agents for breaches of their duty of care, even though such an action, if
successful, might otherwise benefit us and our stockholders.

                                       13
<PAGE>

     The future sale of our currently outstanding restricted stock may depress
our stock price. As of August 31, 2001, we had 3,668,034 shares of common stock
outstanding, of which approximately 2,518,471 shares of common stock are freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended. All of the remaining 1,149,563 shares of common stock
outstanding are restricted securities as that term is defined under Rule 144
promulgated under the Securities Act. In July 2000 we filed a registration
statement with the SEC to register, on behalf of holders of options and warrants
and other convertible securities, an additional 1,830,592 shares. The sale of
these shares of common stock may have a depressive effect on the market prices
of our Common Stock prevailing from time to time. In addition, we have issued
numerous convertible securities, which could result in an increase in the number
of common shares outstanding. This could impair our ability to raise capital
through the sale of its equity securities.

     Possible delisting of securities from American Stock Exchange and risks
relating to Penny Stocks. Our common stock is currently listed on American Stock
Exchange. The American Stock Exchange granted to us an exemption from its
original listing requirements in order for our Common Stock to be listed for
trading.  AMEX reserves the right to delist an entity in its discretion at any
time.  Among other criteria, AMEX will consider the financial condition and
operating results, the public distribution of securities and other non-
quantitative criteria. The Company is aware that it is not in accordance with
AMEX rules regarding the holding of annual shareholder meetings. This rule
violation, and possible others, may result in delisting. Our failure to meet
these maintenance criteria in the future may result in the delisting of our
common stock from AMEX, and trading, if any, in our securities would thereafter
be conducted in the non-Nasdaq over-the-counter market. As a result of such
delisting, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, our securities.

     Although we anticipate that our common stock will continue to be listed for
trading on Amex, if the common stock were to become delisted from trading on
Amex and the trading price of the common stock were to fall below $5.00 per
share on the date the common stock was delisted, trading in such securities
would also be subject to the requirements of certain rules promulgated under the
Exchange Act, which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny stock,
generally, any non-exchange listed equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors, generally
institutions. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage broker-
dealers from effecting transactions in our securities, which could severely
limit the market price and liquidity of such securities and the ability of
purchasers to sell our securities in the secondary market.

     We have the discretion to issue additional shares of preferred stock. Our
Certificate of Incorporation authorizes our Board of Directors to issue up to
1,000,000 shares of preferred stock, from time to time, in one or more series.
Our Board of Directors is authorized, without further approval of the
stockholders, and except as prohibited in existing Preferred Stock designations,
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each new series of
preferred stock. The issuance of preferred stock could adversely affect the
voting power of the holders of common stock and, under certain circumstances,
make it more difficult for a third party to gain control of us, discourage bids
for our common stock at a premium, or otherwise adversely affect the market
price of our common stock. To date we have authorized the issuance of 118,125
shares of Series A Preferred Stock, 400,000 shares of Series B Preferred Stock,
480,769 shares of Series C Preferred Stock, 5 shares of Series E Preferred Stock
and 5 shares of Series F Preferred Stock.

                                       14
<PAGE>

ITEM 2.   DESCRIPTION OF PROPERTY
---------------------------------

     The Company owns no real estate. The Company leases approximately 13,000
square feet of space at 1434 West 11th Street, Los Angeles, CA, which it uses
for its executive offices and coin processing facility from Prime Financial
Partners, Ltd., an affiliate of Mr. Korman and Miller. The lease agreement
expires in September 2002 and provides for a base monthly rent of approximately
$5,618. As of August 31, 2001 we are $28,397 in arrears in rent. The Company
believes that its facilities are sufficient to accommodate the Company's
anticipated future requirements at the present time.


ITEM 3.   LEGAL PROCEEDINGS
---------------------------

     On September 22, 2000, Shaw's Supermarkets filed a lawsuit (Shaw's
Supermarkets, Inc. v. Cash Technologies, Inc., CoinBank Automated Systems Inc.
United States District Court, District of Massachusetts) against the Company
claiming breach of contract and damages. The Company had been placing Coinbank
machines in Shaw's locations in New England and had been negotiating a
settlement and termination agreement with Shaw's to terminate the CoinBank
machine placements in light of the Company's decision to exit the free placement
business. Shaw's is claiming that it is owed $85,000 in reimbursements in
addition to damages for termination totaling approximately $200,000. The Company
believes that the amount owed for reimbursement is approximately $55,000 and has
accrued for the liability and that it has no liability whatsoever under the
contract for termination fees. Furthermore, the Company has potential claims
against Shaw's for damages to the machines. The Company intends to defend itself
in the suit. There can be no assurance that the Company will be successful in
the defense. Settlement negotiations are presently underway with Shaw's.

     In December 1997, Vindex USA, Inc. filed a complaint against CAS, a
subsidiary of the Company, in the Superior Court of California, Los Angeles
County, seeking to recover $40,000, an unspecified amount of commissions and
interest accrued thereon allegedly due it under the terms of a consulting
agreement it alleged was breached by the Company. The court has entered a
judgment against CAS in favor of Vindex in the sum of $97,864. The Company has
reflected this as a liability on its books.

     In March 2001 the Company entered into certain agreements with Hachador
Holdings Limited, an entity with offices located at 6005 Delmar Blvd, St. Louis,
Missouri pursuant to which Hachador agreed to make a loan to the Company in the
principal amount of $225,000. The loan was to be secured by 700,000 shares of
Common Stock of the Company.   After delivery of the shares to Hachador, by the
Company, Hachador refused to make the loan proceeds available to the Company.
The Company intends to commence suit to obtain the shares from Hachador Limited,
and for damages.

     Kane Corte, et al v. Cash Technologies, Inc. et al., Case # 128256, 32/nd/
Judicial District Parish of Terrebonne, State of Louisiana. In August 2001, the
Company first became aware that an entity to whom it had sold 23 CoinBank
machines in October 1999 had filed suit against the Company in Louisiana court
and obtained a default judgment against the Company. The Louisiana judgment was
issued on August 15, 2000 and rewarded the purchaser $230,000 in damages and
ordered that the machines be returned to the company. In March 2001, the
purchaser obtained a sister-state judgment against the Company in California
based on the judgment of the Louisiana court and a writ of execution was issued.

     The Company contends that the Louisiana court had no jurisdiction over it
and that it was never properly served with either the original Louisiana
lawsuit, the judgment issued by the Louisiana court or the California sister-
state judgment. The Company has initiated legal action in both Louisiana and
California seeking to set aside both judgments and to cause the matter,
including the issue of jurisdiction, to be heard on its merits by the Louisiana
court. The Company believes that it will be successful in these actions to set
aside the judgments. The Company further believes that it has meritorious
defenses to each of the allegations in the action and that it will

                                       15
<PAGE>

ultimately prevail on merits. The Company will incur the cost of defense,
including legal fees, in an undetermined amount in connection with these
matters, which may not be recoverable. There can be no assurance that the
Company will be successful in the defense.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------

     The Company did not submit any matters to the shareholders during the
fiscal year ended May 31, 2001. Also the Company did not have any meetings of
shareholders in the fiscal year ended May 31, 2001 or the last two calendar
years.

                                    PART II

ITEM 5. MARKET OF COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------

     The Company's Common Stock commenced trading on the Nasdaq-SmallCap Market
on July 9, 1998. The Company's Common Stock was not traded in any public
securities market prior to July 9, 1998. On April 3, 2000, the Company's common
stock commenced trading on the American Stock Exchange under the symbol, "TQ".

     The following is the range of closing bid prices for the Common Stock for
the periods indicated below:


     Year Ending May 31, 2001                 High      Low
                                              ----      ---

     Q1    June 1 - August 31               $  8.125  $  5.000
     Q2    September 1 - November 30           7.250     2.875
     Q3    December 1 - February 28            2.500     0.5625
     Q4    March 1 - May 31                    1.850     0.900

     Year Ending May 31, 2000                  High      Low
                                               ----      ---

     Q1    June 1 - August 31               $ 11.875  $ 10.375
     Q2    September 1 - November 30          13.375    11.3125
     Q3    December 1 - February 29           20.750    13.3125
     Q4    March 1 - May 31                   23.500     6.125

     On August 31, 2001, the Company had a 52-week high and low price of $7.75
and $0.50, respectively.


Dividend Policy
---------------

     The Company has never paid any dividends on the Common Stock and the Board
of Directors does not intend to declare or pay any dividends on the Common Stock
in the foreseeable future. The Board of Directors currently intends to retain
all available earnings (if any) generated by the Company's operations for the
development and growth of its business. The declaration in the future of any
cash or stock dividends on the Common Stock will be at the discretion of the
Board and will depend upon a variety of factors, including the earnings, capital
requirements and financial position of the Company and general economic
conditions at the time in question. Moreover, the payment of cash dividends on
the Common Stock in the future could be further limited or prohibited by the
terms of financing agreements that may be entered into by the Company (e.g., a
bank line of

                                       16
<PAGE>

credit or an agreement relating to the issuance of other debt securities of the
Company) or by the terms of any preferred stock that are or may be issued and
then outstanding.


Recent Sales of Unregistered Securities
---------------------------------------

     In October 2000, the Company completed a private placement of $2,000,000 of
units comprised of Series B 8% Preferred Stock ("Series B Stock") and Series C
Warrants. Each unit had a purchase price of $100,000 and is comprised of 20,000
shares of Series B Stock and 4,000 Series C Warrants. The Series B Stock has
annual dividends payable at 8% per year, payable in cash or Common Stock at the
option of the Company. The Series B Stock is convertible into shares of Common
Stock, at anytime at the option of the holder, at the liquidation price divided
by the lesser of: (i) $5.50 per share; or (ii) the average closing price for the
Company's Common Stock for the five (5) trading days ending on the trading day
prior to the date of the conversion notice; provided, however, in no event will
the conversion rate be less than $2.50 per share.  The liquidation price is
$5.00 per share. By way of example, for each $100,000 unit, an investor would be
entitled to approximately 18,181 shares of Common Stock upon conversion of
Series B Stock.  The Series C Warrants have an exercise price of $2.00 per
share. The Company recorded deemed dividends of $436,840 in conjunction with
this offering. This amount was based on the difference between the closing
market price and the Series B Preferred Stock plus the value of the Series C
Warrants, using the Black-Scholes model, associated with the Series B Preferred
Stock. The Company has used the proceeds for working capital and debt repayment.
The Company received gross proceeds of $2,000,000 in conjunction with this
placement and paid commissions of $150,000.

     On January 10, 2001, the Company completed a financing of $500,000, with
one of its shareholders, comprised of Series C 8% Convertible Preferred Stock
and Series D Warrants. The Series C Stock has annual dividends payable at 8% per
year, payable in cash or Common Stock at the option of the Company. There is a
conversion feature of one share of common stock for each share of preferred
stock surrendered. The Series D Warrants have an exercise price of $0.50 per
share. The Company issued 480,769 shares of Series C Preferred Stock which was
determined by dividing the sum of $500,000 by the average closing price of the
Common Stock of the Company on the American Stock Exchange for the 5 trading
days ending January 3, 2000. In addition the investor received 302,231 Series D
Warrants. The Series D Warrants are exercisable by the holder at any time
commencing on the date of issue for a period of five years. Also, the investor
has the right to have one nominee elected to the Board of Directors of the
Company for a period of one year. No person has been nominated by the investor.
As part of the purchase price the investor surrendered 83,000 Series B and C
warrants in his possession. The Company has recorded deemed dividends of
$538,086 in conjunction with this offering. This amount was based on the
difference between the closing market price and the Series C Preferred Stock
plus the value of the Series D Warrants, using the Black-Scholes model,
associated with the Series C Preferred Stock. The Company has used the proceeds
for general working capital purposes.

     In June 2001, the Company completed a financing of $250,000, comprised of
25 shares of Series D 8% Convertible Preferred Stock and 25, 000 Series E
Warrants. The Series D Stock has annual dividends payable at 8% per year,
payable in cash or Common Stock at the option of the Company. The Series E
Warrants have an exercise price of $0.50 per share.

     Subsequent to the end of the fiscal year, in June 2001 the Company, in a
private transaction under Section 4(2) of the Securities Act of 1933, as
amended, and/or Regulation D thereunder, sold an aggregate of $100,000 of its
securities to 2 foreign investors   Each investor purchased a $50,000 unit, each
unit comprised of (i) 41, 667 shares of Common Stock and (ii) 5,000 common stock
purchase warrants.  The warrants have an exercise price of $1.20 per share and
are exercisable for five years. The proceeds of the transactions were used to
pay certain debts, including payroll obligations, of the Company's Austrian
subsidiary.

                                       17
<PAGE>

     In July 2001, the Company completed an offering of $500,000, comprised of 5
shares of Series E 8% Convertible Preferred Stock and 100,000 Series F Warrants.
The Series E Stock has annual dividends payable at 8% per year, payable in cash
or Common Stock at the option of the Company. The Series F Warrants have an
exercise price of $0.50 per share. Each unit consists of 1 share of Series E 8%
Convertible Preferred Stock and 20,000 Series F Warrants and is being offered at
$100,000. The Company has sold 1.8 units for gross proceeds of $180,000.

     On September 4, 2001, the Company completed a financing of $500,000, with
one of its shareholders, comprised of shares of Series F 8% Convertible
Preferred Stock and Series G Warrants. The Series F Stock has annual dividends
payable at 8% per year, payable in cash or Common Stock at the option of the
Company. The Series G Warrants have an exercise price of $0.50 per share. The
Company issued 5 shares of Series F Preferred Stock and 100,000 shares of Series
G warrants. A total of $57,000 in commissions were paid in relation to this
offering as well as an issuance of 50,000 shares of common stock.

                                       18
<PAGE>

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

Overview
--------

     The Company was organized in August 1995, but its cash processing
operations were commenced by its now wholly owned subsidiary, National Cash
Processors, Inc. ("NCP") in May 1994. The Company acquired NCP in January 1996,
from certain affiliates of the Company. The CoinBank portion of the business is
conducted through the Company's wholly owned subsidiary CoinBank Automated
Systems, Inc., which was incorporated in November 1995.

     The Company currently generates revenues through the purchase of loose
currency which is acquired in bulk at a small discount from face value and then
counted, sorted, wrapped and re-sold primarily to a variety of retail businesses
at face value plus a small fee or deposited to the Federal Reserve Bank for
credit to the Company's account. The Company's expenses have exceeded net
revenues since inception.  For the fiscal years ended May 31, 1997, 1998, 1999,
2000 and 2001, the Company sustained net losses of $1.5 million, $2.7 million,
$5.7 million, $6.6 million and $4.3 million, respectively.

     Systems development expenses, marketing expenses, executive salaries and
general and other administrative costs are expected to increase as the Company
continues to develop its EMMA Platform. Inasmuch as the Company will continue to
have a high level of operating expenses, the Company will continue to be
required to make certain up-front expenditures in connection with its proposed
CoinBank machine sales effort and development of EMMA transaction processing
system.  The Company anticipates that losses will continue for the foreseeable
future.

     The Company records as revenue the service fee charged for coin and
currency processed on behalf of a customer but not purchased by the Company.
Gross revenues include the value of coin and currency processed and does not
represent revenue under generally accepted accounting principles.

     To the limited extent that the Company will market its CoinBank machines,
it intends to focus its future efforts on marketing CoinBank machines for sale
rather than "free placement". Revenues generated from CoinBank machines
accounted for approximately 24% of net revenues for the fiscal year ended May
31, 2001, compared to approximately 76% of net revenues generated from currency
processing and other services. The Company anticipates that the revenue
associated with processing fees derived from EMMA transaction processing system
will become the primary source of the Company's future revenues.

     The Company was awarded a contract to count, process and purchase currency
for the Los Angeles County Metropolitan Transit Authority for the period from
April 1, 1997 to March 31, 1999, for a fee of approximately 1% of all currency
processed. The contract was renewed April 1, 2001 to March 31, 2005. The Company
expects to purchase and process between $35 and $40 million worth of currency on
this contract during fiscal year 2002.  The Company records as revenue the
service fee charged for the processing of currency pursuant to such contracts.
From time to time, the Company may submit bids for additional similar contracts.

                                       19
<PAGE>

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


Fiscal Year Ended May 31, 2001, Compared to Fiscal Year Ended May 31, 2000

     Gross revenues include the value of the coins and currency processed for
the fiscal year ended 2001 and amounted to $22,735,599 compared to $42,301,355
for fiscal year 2000. The decrease in coin and currency processed was primarily
attributable to a decrease in the number of coin processing customers and the
decrease in MTA currency processed during fiscal 2001.  This decrease was also a
direct result of the Company's reduction of certain low margin coin processing
activities.  As a result of the reduction in currency processed offset by the
elimination of low margin coin processing customers, net revenues, (as a
percentage of gross revenues) for the fiscal year 2001, decreased to $491,180 or
2.2% of gross revenues compared to $1,161,764 or 2.7% of gross revenues for
fiscal year 2000.

     Cost of revenues for the year ended May 31, 2001, was $325,081 or 1.4% of
gross revenue compared to $1,221,247 or 2.9% of gross revenue in fiscal year
2000.  The decrease in direct costs was primarily the result of the decreased
costs associated with servicing remote CoinBank installations and reduction in
staff associated with these as well as the currency counting activities.

     Gross profit for the year ended May 31, 2001, was $166,099 or 33.8% of net
revenues, as compared to a gross loss of $59,483 or 5.1% of net revenues for the
year ended May 31, 2000. The significant increase in gross profit was primarily
attributable to the decreased direct costs associated with the operation of
CoinBank Automated Systems and other unprofitable activities as well as a
reduction in staff.

     Selling, general and administrative expenses for the year ended May 31,
2001, decreased to $3,179,488 compared to expenses of $4,973,344 for the fiscal
year 2000. These expenses consisted primarily of wages (and wage related costs),
outside contractor expenses, travel/promotional expenses, professional services
and facilities/office related expenses. The decrease in selling, general and
administrative expenses is due to decrease in non-cash compensation and other
costs due to cut backs in spending. Included in selling, general and
administrative expenses is non-cash compensation expense of $117,782 and
$839,001 for the years ended May 31, 2001 and 2000, respectively. This was due
to the Company issuing 31,159 shares of common stock in fiscal year 2000, in
conjunction with the cashless exercise of stock options by the employees as well
as issuing various warrants.

     The Company has taken an impairment charge in the fiscal year ended May 31,
2000 for the carrying value of its CoinBank machines. Impairment on coin
machines was $1,033,759. The impairment was taken due to low inventory turnover
for the coin machines. In future periods, additional impairment may be taken
based of future sales of coin machines. As of May 31, 2001 the coin machines
were valued at $1,196,783.

     Depreciation and amortization expenses increased to $287,904 during fiscal
2001 from $156,749 in fiscal 2000. The increase was primarily attributable to
increased purchases of capital assets as well as an increase in amortization
expense related to the January 2000 debt offering.

     On October 1, 1999, the Company and Coinstar, Inc. agreed to settle all
outstanding litigation between them.  Under the terms of the settlement, the
Company received payment from Coinstar of $600,000 in cash and 30,000 shares of
common stock of Coinstar, for a total value of $923,438.  In October 1999, the
shares were recorded at a market price of $323,428 and in January 2000, they
were sold for $353,170, recognizing a gain of $29,742.

     Interest expense for the fiscal years 2001 and 2000 was $953,323 and
$1,332,335 respectively. The decrease was primarily attributable to the deemed
interest expense of $852,632 recognized in conjunction with the beneficial
conversion of debt, associated with the second private placement in January
2000. The decrease was offset by an increase in the interest expense associated
with the January 2000 debt offering. During the fiscal year ended 2001, the
Company incurred interest expense of $342,071 with respect to its outstanding
notes.

     As a result of the foregoing, net losses for the years ended May 31, 2001
and 2000 were $4,255,570 and $6,639,901, respectively. The decrease in net loss
for the fiscal year 2001 was a direct result of the impairment loss on the coin
machines held for sale in fiscal year 2000.

                                       20
<PAGE>

Fiscal Year Ended May 31, 2000, Compared to Fiscal Year Ended May 31, 1999

     Gross revenues include the value of coins and currency processed for the
fiscal year ended 2000 and amounted to $42,301,355 compared to $46,381,668 for
fiscal year 1999. The decrease in coin and currency processed was primarily
attributable to a decrease in the number of coin processing customers during
fiscal year 2000. This decrease was a direct result of the Company's planned
reduction of certain low margin coin processing activities. As a result of the
elimination of these low margin coin-processing customers, net revenues, (as a
percentage of gross revenues) for the fiscal year 2000, increased to $1,161,764
or 2.7% of gross revenues compared to $899,836 or 1.9% of gross revenues for
fiscal year 1999.

     Cost of revenues for the fiscal year ended May 31, 2000, was $1,221,247 or
2.9% of gross revenue compared to $765,220 or 1.8% of gross revenue in fiscal
year 1999.  The increase in direct costs was primarily the result of the
increased costs associated with servicing remote CoinBank installations and
reclassification of certain direct labor, telephone and depreciation costs into
the cost of sales from selling, general and administrative expenses.

     Gross loss for the fiscal year ended May 31, 2000, was $59,483 or 5.1% of
net revenues, as compared to a gross profit of $134,616 or 15% of net revenues
for the fiscal year ended May 31, 1999. The decrease in gross profit was
primarily attributable to the increased direct costs associated with the
operation of CoinBank Automated Systems and reclassification of certain direct
labor, telephone and depreciation costs into the cost of sales from selling,
general and administrative expenses.

     Selling, general and administrative expenses for the fiscal year ended May
31, 2000, increased to $4,973,344 compared to expenses of $4,872,676 for the
fiscal year 1999. These expenses consisted primarily of wages (and wage related
costs), outside contractor expenses, travel/promotional expenses, professional
services and facilities/office related expenses. The increase in selling,
general and administrative expenses is due to increase in non-cash compensation
cost offset by a decrease in other costs due to cut backs in spending. Included
in selling, general and administrative expenses is non-cash compensation expense
of $839,001 for the fiscal year ended May 31, 2000. This was due to the Company
issuing 31,159 shares of common stock in fiscal year 2000, in conjunction with
the cashless exercise of stock options by the employees as well as issuing
various warrants.

     Impairment on coin machines for fiscal year ended May 31, 2000 was
$1,033,759. The impairment was taken due to low inventory turnover for the coin
machines. In future periods, additional impairment may be taken based of future
sales of coin machines.

     Depreciation and amortization expenses decreased to $156,749 during fiscal
2000 from $299,255 in fiscal 1999. The decrease was primarily attributable to
reclassification into cost of sales and transfer of coin machines from property
and equipment to CoinBank machines held for sale.

     On October 1, 1999, the Company and Coinstar, Inc. agreed to settle all
outstanding litigation between them.  Under the terms of the settlement, the
Company received payment from Coinstar of $600,000 in cash and 30,000 shares of
common stock of Coinstar, for a total value of $923,438.  In October 1999, the
shares were recorded at a market price of $323,428 and in January 2000, they
were sold for $353,170, recognizing a gain of $29,742.

     Interest expense for the fiscal years 2000 and 1999 was $1,332,335 and
$516,948 respectively. The decrease in interest expense was due to lower
indebtedness. Moreover a deemed interest expense of $852,632 was also recognized
in conjunction with the beneficial conversion of debt, associated with the
second private placement.

                                       21
<PAGE>

     As a result of the foregoing, net losses for the years ended May 31, 2000
and 1999 were $6,639,901 and $5,711,964, respectively. The increase in net loss
was a direct result of the impairment loss on the coin machines held for sale.

Liquidity and Capital Resources
-------------------------------

     The Company's capital requirements have been and will continue to be
significant and its cash requirements have been exceeding its cash flow from
operations. At May 31, 2001, the Company had a working capital deficit of
$9,419,126 compared to a working capital deficit of $1,657,722 at May 31, 2000.
At September 4, 2001, the Company had a cash balance of $455,636. The Company's
current monthly operating costs without any interest or principal payments on
debt, amortization of warrants and depreciation expense; is approximately
$150,000 per month. Since inception, the Company has satisfied its working
capital requirements through limited revenues generated from operations, the
issuance of equity and debt securities, borrowing under a line of credit and
loans from stockholders of the Company.

     The Company's independent certified public accountants included an
explanatory paragraph in their report for the year ended May 31, 2001, which
indicated a substantial doubt as to the ability of the Company to continue as a
going concern.  This concern is due primarily to substantial debt service
requirements and working capital needs.  See independent certified public
accountant's letter.

     Net cash used in operating activities was $1,887,142 for the year ended May
31, 2001, as compared to net cash used in operating activities of $2,769,086 for
the year ended May 31, 2000. The decrease in net cash used in operating
activities during fiscal 2001 was primarily the result of the Company's shift
from free placement model to a sales model of the CoinBank coin processing
machines. The total decrease of $881,944 was comprised of reduction in net loss
and increases in accrued interest and accounts payable. This was offset
partially by decreases in deemed interest and non-cash compensation expense
along with reductions/writedowns in inventory that were taken in fiscal year
2000.

     Net cash used in investing activities was $1,173,695 for the fiscal year
ended May 31, 2001, as compared to $1,181,436 for the fiscal year ended May 31,
2000. The slight decrease in net cash used in investing activities was primarily
attributable to proceeds from sale of asset of $40,000.

     Net cash provided by financing activities for the year ended May 31, 2001
was $2,705,473, as compared to net cash used of $3,277,300 for the year ended
May 31, 2000. The amount of $2,705,473 primarily consists of proceeds from the
sale of preferred stock of $2,350,000 and loans from directors and officers of
$155,000.

     The Company entered into a credit agreement with GE Capital Corporation
("GE") pursuant to which the Company has borrowed $5,500,000 for the purchase of
CoinBank component equipment, working capital and general corporate purposes. As
of May 31, 2001, there was approximately $3,275,070 of principal and accrued
interest outstanding. This was the result of the negotiation for the deferral of
principal payments for twelve (12) months and the deferral of interest payments
for six (6) months.  The new loan agreement was entered into on September 29,
2000 with interest rate of 9.5% payable over 20 months starting on the 12th
month after the date of the new loan. Coin machines secure some of the amounts
drawn under the line of credit. As consideration for the extension, the Company
and GE agreed to increase the principal portion of the loan by $100,000 and,
after twelve (12) months (September 2001), restart the amortization of the loans
for eighteen (18) months. If the Company did not repay the loans in full within
twelve (12) months, then an additional $400,000 will be added to the principal
portion of the loan. The Company will be unable to meet the twelve (12) month
deadline. This addition will be financed by GE and amortized over eighteen (18)
months as described above. The Company has agreed to give GE a lien on all of
the assets of the Company subject to any pre- existing liens. The Company is
unable at this time to make any repayments to GE Capital and the methods of
repayment of this loan are currently under negotiation.

                                       22
<PAGE>

There can be no assurance the negotiations will result in any restructuring or
forgiveness of the loan. The loan is currently in default.

     On July 27, 1999, the Company commenced a private offering pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation D. The Company offered
up to 52,500 units, each unit comprised of (I) 10 shares of Series A 8%
Cumulative Convertible Redeemable Preferred Stock and (II) 5 Series A Common
Stock Purchase Warrants. Each share of the Series A Preferred Stock is
convertible into one share of Common Stock.  The Series A Warrants are
exercisable at $12.00 per share. As of November 30, 1999, the Company completed
this offering and received gross proceeds of  $1,122,188. The Company also paid
sales commission of $69,825 in January 2000. The Company has issued (I) 118,125
shares of Series A 8% Cumulative Convertible Redeemable Preferred Stock and (II)
53,809 Series A Common Stock Purchase Warrants (exercisable at $12.00 each).

     On December 31, 1999, the Company sold through Gunn Allen Financial, Inc.
as placement agent 67.5 Units. Each Unit consisted of (i) a Secured Convertible
Promissory Note in the principal amount of $50,000 convertible into Common Stock
at a conversion price of $9.50 per share and (ii) Series B Redeemable Warrants
to purchase an aggregate of 5,000 warrant shares at an exercise price of $13.00
per share. The Company completed the offering on January 5, 2000 and raised
approximately $3,362,000 in gross proceeds. Repayment was due July 2001. The
Company is currently in default. The Company incurred approximately $400,000 in
offering expenses, consisting of legal costs, sales commissions and other
related costs. The offering was comprised of both debt and equity components.
The debt offering had a beneficial conversion feature of $852,632, which was
recorded as deemed interest. The warrants issued in conjunction with the debt
created $316,500 of deferred interest expense of which $211,000 and $87,917 were
amortized for the fiscal years ended May 31, 2001 and 2000, respectively. As of
August 1, 2001 the notes are in default.

     In October 2000, the Company completed a private placement of $2,000,000 of
units comprised of Series B 8% Preferred Stock ("Series B Stock") and Series C
Warrants. Each unit had a purchase price of $100,000 and is comprised of 20,000
shares of Series B Stock and 4,000 Series C Warrants. The Series B Stock has
annual dividends payable at 8% per year, payable in cash or Common Stock at the
option of the Company. The Series B Stock is convertible into shares of Common
Stock, at anytime at the option of the holder, at the liquidation price divided
by the lesser of: (i) $5.50 per share; or (ii) the average closing price for the
Company's Common Stock for the five (5) trading days ending on the trading day
prior to the date of the conversion notice; provided, however, in no event will
the conversion rate be less than $2.50 per share.  The liquidation price is
$5.00 per share. By way of example, for each $100,000 unit, an investor would be
entitled to approximately 18,181 shares of Common Stock upon conversion of
Series B Stock.  The Series C Warrants have an exercise price of $2.00 per
share. The Company recorded deemed dividends of $436,840 in conjunction with
this offering.

     On January 10, 2001, the Company completed a financing of $500,000, with
one of its shareholders, comprised of Series C 8% Convertible Preferred Stock
and Series D Warrants. The Series C Stock has annual dividends payable at 8% per
year, payable in cash or Common Stock at the option of the Company. There is a
conversion feature of one share of common stock for each share of preferred
stock surrendered. The Series D Warrants have an exercise price of $0.50 per
share. The Company issued 480,769 shares of Series C Preferred Stock which was
determined by dividing the sum of $500,000 by the average closing price of the
Common Stock of the Company on the American Stock Exchange for the 5 trading
days ending January 3, 2000. As part of the purchase price the investor
surrendered 83,000 Series B and C warrants in his possession. The Company has
recorded deemed dividends of $538,086 in conjunction with this offering.

     In March 2001, the European division of CoinBank obtained a short-term line
of credit of $100,000 to be used for working capital and development of the
European version of the Coinbank machines. Furthermore, the bank as collateral
is holding 50,000 shares of the Company's common stock.

                                       23
<PAGE>

     In March 2001, the Company obtained a loan of $70,000 and another $10,000
in May 2001, from First Bancorp, L.P. Mr. Bruce Korman, our Chief Executive
Officer, is the president and general partner of First Bancorp. This loan was a
short-term interest free loan payable in increments over 180 days. As of
September 15, 2001 the loan had been repaid in full.

     On April 4, 2001, the Company obtained loan of $75,000 from Transtech GBM,
Inc. Robert Fagenson who is on the Company's Board of Directors is the Chief
Executive Officer of Transtech GBM, Inc. The loan is a 120 days interest free
loan and the Company has issued warrants to purchase 10,000 shares of the
Company's common stock at an exercise price of $2.00 per share and an exercise
period of three years. A compensation expense of $7,284 has been recorded in
conjunction with the warrants. The company is currently in negotiations with
Transtech GBM to extend the loan.

     In June 2001, the Company completed a financing of $250,000, comprised of
25 shares of Series D 8% Convertible Preferred Stock and 25, 000 Series E
Warrants. The Series D Stock has annual dividends payable at 8% per year,
payable in cash or Common Stock at the option of the Company. The Series E
Warrants have an exercise price of $0.50 per share.

     Subsequent to the end of the fiscal year, in June 2001 the Company, in a
private transaction under Section 4(2) of the Securities Act of 1933, as
amended, and/or Regulation D thereunder, sold an aggregate of $100,000 of its
securities to 2 foreign investors   Each investor purchased a $50,000 unit, each
unit comprised of (i) 41, 667 shares of Common Stock and (ii) 5,000 common stock
purchase warrants.  The warrants have an exercise price of $1.20 per share and
are exercisable for five years. The proceeds of the transactions were used to
pay certain debts, including payroll obligations, of the Company's Austrian
subsidiary.

     In July 2001, the Company completed an offering of $500,000, comprised of 5
shares of Series E 8% Convertible Preferred Stock and 100,000 Series F Warrants.
The Series E Stock has annual dividends payable at 8% per year, payable in cash
or Common Stock at the option of the Company. The Series F Warrants have an
exercise price of $0.50 per share. Each unit consists of 1 share of Series E 8%
Convertible Preferred Stock and 20,000 Series F Warrants and is being offered at
$100,000. The Company sold 1.8 units for gross proceeds of $180,000.

     On September 4, 2001, the Company completed a financing of $500,000, with
one of its shareholders, comprised of shares of Series F 8% Convertible
Preferred Stock and Series G Warrants. The Series F Stock has annual dividends
payable at 8% per year, payable in cash or Common Stock at the option of the
Company. The Series G Warrants have an exercise price of $0.50 per share. The
Company issued 5 shares of Series F Preferred Stock and 100,000 shares of Series
G warrants. A total of $57,000 in commissions were paid in relation to this
offering as well as an issuance of 50,000 shares of common stock.

                                       24
<PAGE>

NEW ACCOUNTING PRONOUNCEMENT
----------------------------

     The Financial Accounting Standards Board issued in September 2000,
Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
SFAS 140 replaces SFAS 125 and carries over most of SFAS 125's provisions
without reconsideration.  SFAS 140 revises the standards for accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures.  SFAS 140 did not affect the Company's financial
statements and notes to financial statements.

     The Financial Accounting Standards Board issued in July 2001, SFAS No. 141,
Business Combinations.  SFAS 141 requires the purchase method of accounting to
be used for all business combinations initiated after June 30, 2001.  SFAS 141
prohibits the use of the pooling-of-interests method.  SFAS 141 did not affect
the Company's financial statements and notes to financial statements.

     The Financial Accounting Standards Board issued in July 2001, SFAS No. 142,
Goodwill and Other Intangible Assets.  SFAS No. 142 changes the accounting for
goodwill from amortization method to an impairment-only approach.  SFAS 142
requires companies to stop the amortization of goodwill.  SFAS No. 142 did not
affect the Company's financial statements and notes to financial statements.

                                       25
<PAGE>

ITEM 7. FINANCIAL STATEMENTS
----------------------------

On September 7, 2001, the Company, as recommended by the Board, engaged Vasquez
& Company LLP as its principal accountant and independent auditors for the
fiscal year ending May 31, 2001, and simultaneously dismissed BDO seidman, LLP
as its principal accountant and auditors.

Audit Fees: The aggregate fees billed by Vasquez and Company LLP, as well as any
fees billed by BDO Seidman, LLP, for professional services rendered for the
audit of the Company's financial statements for the fiscal year ended May 31,
2001, was approximately $30,000.

Financial Information Systems Designs and Implementation Fees: Vasquez and
Company LLP and BDO Seidman, LLP did not bill for any professional services for
financial information systems design or implementation as described in Paragraph
(c) (4) (ii) or Rule 2-01 of Regulation S-X for the fiscal year ended May 31,
2001.

All Other Fees: No fees were billed for other services rendered by Vasquez and
Company LLP, other than the services covered in the two previous paragraphs, for
the fiscal year ended May 31, 2001.

During the fiscal year ended May 31, 2001, the Company paid to BDO Seidman LLP
fees for the following work undertaken by BDO for the Company:

     Review of Form 10QSB                         $    24,006
                                                   ----------
     System Design and Implementation             $       0
                                                   ----------
     All other Fees                               $   197,494
                                                   ----------

                                       26
<PAGE>

               INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT

To the Board of Directors and Stockholders of
Cash Technologies, Inc.
Los Angeles, California


     We have audited the accompanying consolidated balance sheets of Cash
Technologies, Inc. and subsidiaries (the "Company") as of May 31, 2001, and the
related consolidated statements of operations, stockholders' deficiency and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. The consolidated
financial statements of Cash Technologies, Inc. and subsidiaries as of May 31,
2000 and for the year ended May 31, 2000, were audited by other auditors whose
report dated August 31, 2000 included an explanatory paragraph that described
the significant recurring losses from operations which raised substantial doubt
of the Company's ability to continue as a going concern discussed in Note 1(a)
to the consolidated financial statements.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
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 audit provides a reasonable basis for our opinion.

     In our opinion, the 2001 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Cash
Technologies, Inc. and subsidiaries as of May 31, 2001 and the results of their
operations and cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.

     The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1(a) to the consolidated financial statements, the Company has suffered
significant recurring losses from operations and at May 31, 2001, had a net
capital deficiency that raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1(a). The consolidated financial statements do not include any
adjustments that might result from the outcome of the uncertainty.


                                                /s/ VASQUEZ & Company, LLP


Los Angeles, California
September 17, 2001

                                      27

<PAGE>

               INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT

To the Board of Directors and Stockholders of
Cash Technologies, Inc.
Los Angeles, California:

     We have audited the accompanying consolidated balance sheet of Cash
Technologies, Inc. and subsidiaries (The "Company") as of May 31, 2000, and the
related consolidated statements of operations, stockholders' deficiency, and
cash flows for the year then ended.  These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at May 31, 2000,
and the results of their operations and their cash flows for the year then ended
in conformity with accounting principles generally accepted in the United States
of America.

     The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1(a) to the financial statements, the Company has suffered significant recurring
losses from operations and at May 31, 2000, had a net capital deficiency that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

                                             /s/ BDO Seidman LLP

Los Angeles, California
August 31, 2000, except for Note 9
which is as of September 12, 2000

                                       28
<PAGE>

                   CASH TECHNOLOGIES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                MAY 31                MAY 31
                                                                                                 2001                  2000
                                                                                             ------------          ------------
<S>                                                                                          <C>                   <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents                                                                    $         --          $    355,364
Cash inventory                                                                                         --               176,163
Accounts receivable                                                                                23,714               156,341
Prepaid expenses and other current assets                                                          52,500                   800
Other receivable (net of allowance $21,000)                                                       100,666                    --
                                                                                             ------------          ------------
Total Current Assets                                                                              176,880               688,668

COINBANK MACHINES HELD FOR SALE  (Note 1(j))                                                    1,196,783             1,282,636

PROPERTY AND EQUIPMENT (net) (Note 2)                                                             141,797               260,581

CAPITALIZED SOFTWARE COSTS (Note 1(r))                                                          2,362,749             1,161,214

DEFERRED FINANCE FEES (Note 3)                                                                    277,778                    --

OTHER ASSETS                                                                                        4,629                39,500
                                                                                             ------------          ------------

TOTAL ASSETS                                                                                 $  4,160,616          $  3,432,599
                                                                                             ============          ============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Current maturities of notes payable (Note 3)                                                 $  3,352,922          $  1,359,229
Due to Officers and Directors (Note 3)                                                            155,000                    --
Convertible debt (Note 4)                                                                       3,655,915                    --
Current maturities of capital lease obligations                                                        --                   487
Accounts payable                                                                                  969,129               370,298
Accrued liabilities                                                                               943,871               557,820
Book Overdraft                                                                                    200,860                    --
Dividend payable                                                                                  318,309                58,556
                                                                                             ------------          ------------

Total Current Liabilities                                                                       9,596,006             2,346,390

Long-Term Notes Payable (Note 3)                                                                       --             1,293,266
Long-Term Convertible Debt (Note 4)                                                                    --             3,202,667
                                                                                             ------------          ------------

TOTAL LIABILITIES                                                                               9,596,006             6,842,323
                                                                                             ------------          ------------

COMMITMENTS & CONTINGINCIES (Note 9)                                                                   --                    --

STOCKHOLDERS' DEFICIENCY: (Note 6)
Common Stock, $0.01 par value, 20,000,000 shares authorized, 3,551,111                             35,488                35,198
and 3,522,200 issued and outstanding at May 31, 2001 and 2000

8% Cumulative Redeemable Preferred Stock, $0.01 par value; 1,000,000                            3,009,063             1,122,188
shares authorized;  950,144 and 118,125  shares issued and outstanding at
May 31, 2001 and 2000

Additional Paid In Capital                                                                     15,463,960            13,905,391
Accumulated Deficit                                                                           (23,943,901)          (18,472,501)
                                                                                             ------------          ------------

Total stockholders' deficiency                                                                 (5,435,390)           (3,409,724)
                                                                                             ------------          ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                               $  4,160,616          $  3,432,599
                                                                                             ============          ============
</TABLE>

                See notes to consolidated financial statements

                                      29


<PAGE>

                   CASH TECHNOLOGIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                YEAR ENDED
                                                                               ENDED MAY 31
                                                                        2001                     2000
                                                                 ---------------------------------------------
<S>                                                              <C>                         <C>
GROSS REVENUES (Note 1 (e))                                         $ 22,735,599             $ 42,301,355
                                                                 =========================================

NET REVENUES                                                        $    491,180             $  1,161,764
COST OF REVENUES                                                         325,081                1,221,247
                                                                 -----------------------------------------

GROSS PROFIT (LOSS)                                                      166,099                  (59,483)

SELLING, GENERAL, & ADMINISTRATIVE EXPENSE                             3,179,488                4,973,344
IMPAIRMENT ON COIN MACHINES                                                    -                1,033,759
DEPRECIATION & AMORTIZATION EXPENSE                                      287,904                  156,749
                                                                 -----------------------------------------

OPERATING LOSS                                                        (3,301,293)              (6,223,335)

OTHER INCOME (Note 7)                                                      1,446                  923,438
INTEREST EXPENSE                                                        (953,323)              (1,332,335)
                                                                 -----------------------------------------

LOSS BEFORE INCOME TAXES                                              (4,253,170)              (6,632,232)
INCOME TAXES (Note 5)                                                      2,400                    7,669
                                                                 -----------------------------------------

NET LOSS                                                            $ (4,255,570)            $ (6,639,901)
                                                                 =========================================

Dividends and deemed dividends to preferred stockholders               1,234,679                  544,427

Net loss allocable to common
shareholders                                                          (5,490,249)              (7,184,328)

Basic and diluted net loss per share                                $      (1.55)            $      (2.05)

Basic and diluted weighted average
shares of common stock outstanding                                     3,544,691                3,500,917
                                                                 =========================================
</TABLE>

                See notes to consolidated financial statements

                                      30



<PAGE>

                           Cash Technologies, Inc.

          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

                       Years ended May 31, 2000 and 2001

<TABLE>
<CAPTION>
                                                                                                                      Additional
                                                              Common Stock                  Preferred Stock             Paid-in
                                                              ------------                  ---------------
                                                         Shares         Amount          Shares          Amount          Capital
                                                        --------------------------------------------------------------------------
<S>                                                     <C>             <C>             <C>          <C>             <C>
Balance, May 31, 1999                                        3,488,665     $ 34,887            -     $         -     $ 11,323,780

Issuance of redeemable preferred stock                                                   118,125       1,122,188          485,871
Issuance of warrants for services                                                                                         609,760
Issuance of common stock in conjunction
with the exercise of employee stock options                     33,535          311                                       316,848
Issuance of warrants in conjunction
with sale of convertible debt (Note 3)                                                                                    316,500
Beneficial conversion recognized in
conjunction with the sale of convertible debt (Note 3)                                                                    852,632
Net Loss
                                                        --------------------------------------------------------------------------

Balance May 31, 2000                                         3,522,200       35,198      118,125       1,122,188       13,905,391


Preferred Stock - Offerings                                                              880,769       2,350,000
Beneficial Conversions                                                                                                    974,926
Conversion from Preferred to Common Stock                       48,750          488      (48,750)       (463,125)         462,637
Compensation Expense                                                                                                      117,782
Rescinding of Employee Options                                 (29,839)        (298)                                          298
Distribution of Common Stock                                    10,000          100                                        21,775
Dividends on Preferred Stock
Rescinding of Noteholder Warrants                                                                                         (18,849)
Net Loss

Balance May 31, 2001                                         3,551,111     $ 35,488      950,144     $ 3,009,063     $ 15,463,960

<CAPTION>


                                                                                              Total
                                                                  Accumulated             Stockholder's
                                                                    Deficit            Equity (Deficiency)
                                                            ---------------------------------------------
<S>                                                         <C>                        <C>
Balance, May 31, 1999                                          $ (11,288,173)               $     70,494

Issuance of redeemable preferred stock                              (544,427)                  1,063,632
Issuance of warrants for services                                                                609,760
Issuance of common stock in conjunction
with the exercise of employee stock options                                                      317,159
Issuance of warrants in conjunction
with sale of convertible debt (Note 3)                                                           316,500
Beneficial conversion recognized in
conjunction with the sale of convertible debt (Note 3)                                           852,632
Net Loss                                                          (6,639,901)                 (6,639,901)
                                                            ---------------------------------------------

Balance May 31, 2000                                             (18,472,501)                 (3,409,724)


Preferred Stock - Offerings                                                                    2,350,000
Beneficial Conversions                                              (974,926)                          -
Conversion from Preferred to Common Stock                                                              -
Compensation Expense                                                                             117,782
Rescinding of Employee Options                                                                         -
Distribution of Common Stock                                                                      21,875
Dividends on Preferred Stock                                        (259,753)                   (259,753)
Rescinding of Noteholder Warrants                                     18,849                           -
Net Loss                                                          (4,255,570)                 (4,255,570)

Balance May 31, 2001                                           $ (23,943,901)               $ (5,435,390)
</TABLE>

                                      31
<PAGE>

                   CASH TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASHFLOWS

<TABLE>
<CAPTION>
                                                                                                 FOR TWELVE MONTHS ENDED MAY 31
                                                                                                     2001              2000
                                                                                                 -----------       -----------
<S>                                                                                              <C>               <C>
OPERATING ACTIVITIES:
Net loss                                                                                         $(4,255,570)      $(6,639,901)
Adjustments to reconcile net loss to net cash used by
operating activities:

Amortization of discount on convertible debt                                                         211,000            87,917
Noncash deemed Interest Expense                                                                      222,222           852,632
Common stock issued in exchange for legal services                                                    21,775                --
Noncash compensation Expense                                                                         117,782           839,001
Depreciation expense                                                                                  90,944           156,749
Impairment of CoinBank Machines held for Sale                                                             --         1,033,759

Changes in operating assets and liabilities:

Account receivable                                                                                    31,961           (20,064)
Coinbank machinery held for sale                                                                      85,853           424,074
Prepaid expenses and other current assets                                                            (51,700)            8,456
Cash inventory                                                                                       176,163            25,392
Other assets                                                                                          34,871            17,182
Accounts payable                                                                                     598,831           161,678
Accrued interest                                                                                     442,675            56,250
Accrued expenses and other current liabilities                                                       386,051           227,789
                                                                                                 -----------       -----------

Net cash used in operating activities                                                             (1,887,142)       (2,769,086)
                                                                                                 -----------       -----------

INVESTING ACTIVITIES:

Purchase of property and equipment                                                                   (12,160)          (64,832)
Proceeds From sale of asset                                                                           40,000                --
Capitalized software                                                                              (1,201,535)       (1,161,214)
Restricted cash                                                                                           --            44,610
                                                                                                 -----------       -----------

Net cash used in investing activities                                                             (1,173,695)       (1,181,436)
                                                                                                 -----------       -----------

FINANCING ACTIVITIES:

Book overdraft                                                                                       200,860                --
Payments on capital lease obligation                                                                    (487)          (42,076)
Repayments on long-term debt                                                                              --        (1,162,812)
Proceeds from issuance of convertible debt                                                                --         3,360,000
Net proceeds from issuance of preferred stock                                                      2,350,000         1,122,188
Proceeds from short-term debt                                                                        155,000                --
Proceeds from common stock                                                                               100                --
                                                                                                 -----------       -----------

Net cash provided by financing activities                                                          2,705,473         3,277,300
                                                                                                 -----------       -----------

CHANGE IN CASH AND CASH EQUIVALENTS                                                                 (355,364)         (673,222)

Cash and Cash Equivalents, Beginning of Year                                                         355,364         1,028,586
                                                                                                 -----------       -----------

Cash and Cash Equivalents, End of Year                                                           $        (0)      $   355,364
                                                                                                 ===========       ===========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

              Income taxes                                                                       $     2,400       $     7,669
              Cash paid for interest                                                             $    29,450       $   274,469

SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION

              The company transfered certain assets from property and equipment to
              coinbank machines held for sale                                                    $        --       $   943,705
              Purchase of property and equipment in exchange for vendor note                     $        --       $    77,852
              Reclassification of depreciation from fixed assets to CoinBank machines            $        --       $   357,470
              Finance Fees added to notes payable                                                $   500,000       $        --
              Conversion of Preferred Stock into Common Stock                                    $   462,637       $        --
              Deemed Dividend on Preferred Stock                                                 $   974,926       $        --
              Issuance of Common Stock for legal services performed                              $    21,775       $        --
              Rescinding of noteholder warrants                                                  $    18,849       $        --
              Dividend preferred stock                                                           $   259,753       $    58,556
</TABLE>

                See notes to consolidated financial statements

                                      32
<PAGE>

                   CASH TECHNOLOGIES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
    PRESENTATION

    (a)   "Going Concern"--The accompanying consolidated financial statements
          have been prepared assuming that the Company will continue as a going
          concern. The Company has significant losses from operations and has
          used significant amounts of cash for operations during the last four
          years. As of May 31, 2001, the Company has both working capital and
          net capital deficiencies. Operating losses and cash flow deficiencies
          have continued throughout 2001.

          In view of the financial deficiencies, there is substantial doubt
          about the Company's ability to continue as a going concern. The
          recoverability of recorded assets and satisfaction of the liabilities
          is dependent on the continued operations of the Company, which is in
          turn dependent upon the Company's ability to meet its financing
          requirements on a continuing basis as well as to succeed in its future
          operations. The financial statements do not include any adjustments
          relating to the recoverability and classification of recorded assets
          or liabilities.

          Due to the unfavorable results of operations and cash flows, the
          Company is in the process of negotiating payment terms with vendors
          representing a significant portion of its accounts payable and is
          managing the payments of the remaining accounts payable on a case-by-
          case basis. Management is also taking certain steps to obtain
          additional equity financing to improve its operating results and
          financial position.

          Management estimates that the proceeds contemplated by a $500,000
          private placement, which was completed on September 4, 2001, will be
          sufficient to fund the Company's operations through November 30, 2001,
          the Second Quarter of fiscal year 2002. The Company also plans to
          increase revenues and reduce costs in order to generate sufficient
          positive cash flow beginning in second quarter of fiscal year 2003.
          While the Company believes that its financing and revenue generation
          plans will be successful, no assurances can be given that the Company
          will be successful and that the Company will continue as a going
          concern.

    (b)   Basis of Consolidation--The accompanying consolidated financial
          statements include the accounts of Cash Technologies, Inc. ("CTI"),
          a Delaware corporation, and its wholly owned subsidiaries, National
          Cash Processors, Inc. ("NCP"), and CoinBank Automated Systems
          ("CAS") together the "Company." CoinBank Automation Handels GmbH,
          Salzburg, Austria ("CoinBank Europe" or "CBE") was treated as a
          division of CoinBank Automated Systems during this period and was
          consolidated into CoinBank Automated Systems. All significant inter-
          company transactions and accounts have been eliminated in
          consolidation. CTI was incorporated in August 1995. In January 1996,
          certain affiliates of the Company exchanged their stock in NCP as part
          of a combination of entities under common control. CAS was
          incorporated in November 1995.

    (c)   Business--The principal business activity of each entity is as
          follows: CTI is currently undergoing a development process of
          Electronic Message Management Architecture Transaction Processing
          System (EMMA); NCP is a full-service cash-processing entity providing
          sorting, counting and wrapping functions to cash-intensive businesses;
          CAS offers self-service coin-counting machines. CBE functions as a
          European sales office for the Company.

          Approximately 74% and 48% of the Company's net revenues were derived
          from one customer for the years ended May 31, 2001 and 2000,
          respectively. The Company has a firm fixed-price contract with

                                       33
<PAGE>

          Los Angeles County Metropolitan Authority. The Contract is renewable
          every year until March 31, 2005.

    (d)   Revenue Recognition--The Company recognizes service fee income when
          coins and currency are processed. In certain instances, customers will
          remit funds to the Company in advance of the coin shipments to them.
          In certain instances, customers deposit coins before the Company makes
          payment.

    (e)   Gross revenues--Include the value of coin and currency processed and
          do not represent revenue under generally accepted accounting
          principles.

    (f)   Use of Estimates--The preparation of financial statements in
          conformity with generally accepted accounting principles requires
          management to make estimates and assumptions that affect the reported
          amounts of assets and liabilities and disclosures of contingent assets
          and liabilities at the date of the financial statements and reported
          amounts of revenue and expense during the reporting period. Actual
          results could differ from those estimates.

    (g)   Cash Equivalents--The Company considers all investments purchased with
          an original maturity of three months or less to be cash equivalents.

    (h)   Cash Restricted--The Company no longer maintains a cash deposit as
          security towards the daily purchase of currency.

    (i)   Cash Inventory--Inventory consists of currency stated at face value.

    (j)   CoinBank Machines Held for Sale--The Company has designated its
          CoinBank machines and parts as being held for sale. CoinBank machines
          held for sale are recorded at the lower of the cost or estimated fair
          value, which includes an estimate of the costs to sell these assets.
          The estimated fair value is based on information including recent
          sales of CoinBank machines and estimated present value techniques.
          During the fiscal year ended May 31, 2000, the Company transferred
          $943,705 from property plant and equipment to coin machines held for
          sale. During the fourth quarter of fiscal year 2000, management
          evaluated the estimated fair market value of these machines and
          subsequently recorded an impairment loss of $1,033,759.

    (k)   Property and Equipment--Property and equipment are stated at cost less
          accumulated depreciation. Depreciation is computed using the straight-
          line method over the estimated useful lives of the related asset,
          ranging from 3 to 7 years. Amortization of leasehold improvements is
          computed using the straight-line method over the shorter of the
          estimated life of the asset or the remaining term of the lease.

    (l)   Impairment of Long-Lived Assets--The Company evaluates long-lived
          assets for impairment whenever events or changes in circumstances
          indicate that the carrying value of an asset may not be recoverable.
          If the estimated future cash flows (un-discounted and without interest
          changes) from the use of an asset are less than the carrying value, a
          write-down would be recorded to reduce the related asset to its
          estimated fair value.

    (m)   Income Taxes--The Company files a consolidated federal income tax
          return and a combined California franchise tax return. Deferred income
          taxes have been recognized for temporary differences between the
          financial reporting and income tax bases of assets and liabilities,
          which are based on the enacted tax rates expected to be in effect when
          such amounts are expected to be realized or settled. A valuation
          allowance is established when necessary, to reduce deferred income tax
          assets to the amount expected

                                       34
<PAGE>

          to be realized. Income tax expense is the tax payable or refundable
          for the year plus or minus the change during the year in deferred
          income taxes.

    (n)   Employee Stock Option--The Company adopted statement of financial
          accounting standard No. 123, "Accounting for Stock-Based
          Compensation"(SFAS No. 123), as of June 1, 1998, which establishes a
          fair value method of accounting for stock-based compensation plans. In
          accordance with SFAS No. 123, the Company has chosen to continue to
          account for stock-based compensation utilizing the intrinsic value
          method prescribed in APB 25. Accordingly, compensation cost for stock
          option is measured as the excess, if any, of the fair market price of
          the Company's stock at the date of grant over the amount an employee
          must pay to acquire the stock.

          Also, in accordance with SFAS No. 123, the Company has provided
          footnote disclosure with respect to stock-based employee compensation.
          The cost of stock-based employee compensation is measured at the grant
          date on the value of the award and is recognized over the service
          period. The value of the stock-based ward is determined using a
          pricing model whereby compensation cost in excess of the fair value of
          the stock as determined by the model at the grant date or other
          measurement date over the amount an employee must pay to acquire the
          stock.

    (o)   Basic and Diluted Net Loss per Common Share--Basic and diluted net
          loss per common share is based on the weighted average number of
          common shares outstanding during the respective periods. Statement of
          Financial Accounting Standards No. 128, "Earnings per Share" issued
          by the FASB is effective for financial statements with fiscal years
          and interim periods ending after December 15, 1997. SFAS 128 provides
          for the calculation of Basic and Diluted earnings per share. Basic
          earnings per share includes no dilution and is computed by dividing
          income available to common stockholders by the weighted average number
          of common shares outstanding during the periods presented. Diluted
          earnings per share reflect the potential dilution of securities that
          could share in the earnings, such as stock options, warrants or
          convertible debentures. Stock options and warrants outstanding during
          the periods presented were not included in diluted earnings per share
          since their effect would be anti-dilutive.

    (p)   Fair Value of Financial Instruments--Financial instruments consist of
          accounts receivable and payable, which have a fair value approximating
          the book value due to their short-term nature; notes payable for which
          fair value approximates book value due to interest rates on long-term
          debt approximate current interest rates, and amounts due to
          stockholders have a fair value that cannot be determined due to the
          related-party nature of the transactions.

    (q)   Concentration of Suppliers--The Company is dependent on third-party
          manufacturers for the production of the components incorporated into
          CoinBank machines and currently purchases substantially all of its
          requirements of specially designed or modified components from single
          source suppliers. The Company purchases certain of these components
          pursuant to open purchase orders placed from time to time in the
          ordinary course of business. Although the Company currently believes
          that alternative sources for these components are readily available,
          failure or delay by any manufacturer in providing components to the
          Company on commercially reasonable terms, or at all, in the absence of
          readily available alternative sources, could result in interruptions
          in the Company's ability to continue its assembly and installations of
          CoinBank machines and have a material adverse effect on the Company's
          operations.

    (r)   Capitalized Software --The research and development of new software
          products and enhancements to existing software products were expensed
          as incurred (and recorded in the consolidated statement of operation)
          until technological feasibility has been established. Technological
          feasibility is established upon completion of a detailed program
          design or working model. Once technological feasibility is

                                       35
<PAGE>

          established all software production cost will be capitalized and
          reported at the lower of unamortized cost or net realizable value
          until the product is available for general release to customers.
          Capitalized software cost will be amortized based on current and
          future expected revenue for each product subject to an annual minimum
          based on straight-line amortization over the remaining estimated life
          of the product, not to exceed 5 years. The Company will evaluate the
          recoverability of all capitalized software cost on a quarterly basis
          by comparing the net realizable value, determined pursuant to
          management's estimates of future product cash flows, with the
          unamortized capitalized software cost balance. As of May 31, 2001,
          capitalized software costs amounted to $2,362,749 of which $1,201,535
          was capitalized in fiscal year ended May 31, 2001. No amortization has
          been expensed, as the product is not yet available for general release
          to customers.

    (s)   Concentration of Credit Risk--Financial instruments that potentially
          subject the Company to a concentration of credit risk consists
          primarily of accounts receivable. The receivables are unsecured, and
          the Company performs ongoing credit evaluations of its customers. At
          May 31, 2001, the receivable from a major customer was $12,500.

    (t)   Reclassification--Certain reclassifications have been made to the May
          31, 2000 financial statements to conform to the May 31, 2001
          presentation.


2.  PROPERTY AND EQUIPMENT

    Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                             2001         2000
                                                                           --------     --------
<S>                                                                        <C>          <C>
Machinery and equipment..............................................      $ 17,842     $ 49,977
Security systems.....................................................        42,788       26,219
Furniture and fixtures...............................................        13,714       13,714
Vehicles.............................................................             -       14,415
Computer equipment...................................................       237,803      225,644
Leasehold improvements...............................................       125,444      125,444
Other equipment .....................................................        82,136      289,716
                                                                           --------     --------
   Total Property and Equipment......................................      $519,727     $745,129
   Less accumulated depreciation.....................................       377,930      484,548
                                                                           --------     --------
                                                                           $141,797     $260,581
                                                                           ========     ========
</TABLE>

                                       36

<PAGE>

3.   NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                               2001         2000
                                                                            ----------   ----------
<S>                                                                         <C>          <C>
Equipment loans were secured by the personal guarantees of the two
Principal Stockholders of the Company. The guarantors were released 90
days after the Company's initial public offering. Interest rates range
from 3.88% to 9.25%, with the loans maturing through 2002. Pursuant to a
loan and security agreement and related note, as revised (collectively
the "Agreement"), with a finance company, the Company borrowed
$5,500,000. In September 2000, the Company signed a deferment agreement
with the lender to defer payment for 6 months. The finance company has
indicated that all funds advanced to the Company are to be secured by
equipment. The Company is in default at this time, but negotiations are
underway with the finance company. The new loan agreement was entered
into on September 29, 2000 with interest rate of 9.5% payable over 20
months starting on the 12th month after the date of the new loan. Coin
machines secure some of the amounts drawn under the line of credit. As
consideration for the extension, the Company and GE agreed to increase
the principal portion of the loan by $100,000 and, after twelve (12)
months (September 2001), restart the amortization of the loans for
eighteen (18) months. If the Company does not repay the loans in full
within twelve (12) months, then an additional $400,000 will be added to
the principal portion of the loan. This addition will be financed by GE
and amortized over eighteen (18) months as described
above...................................................................    $3,275,070   $2,574,643

Enhancement work done on coin machines was converted into a note payable
with the vendor. The loan matured on February 2001. The interest rate
is at 10% and interest payments are made on a monthly basis. The
Company is current under default, but negotiating new payment terms on
this note...............................................................        77,852       77,852
                                                                            ----------   ----------

                                                                             3,352,922    2,652,495
   Less current portion.................................................     3,359,922    1,359,229
                                                                            -----------------------
Long term maturity......................................................    $        -   $1,293,266
                                                                            ==========   ==========
</TABLE>

                                       37
<PAGE>

In March 2001, the Company obtained a loan of $70,000 and another $10,000 in May
2001, from First Bancorp, L.P. Mr. Bruce Korman, our Chief Executive Officer, is
the president and general partner of First Bancorp. This loan was a short-term
interest free loan payable in increments over 180 days. As of September 15, 2001
the loan had been repaid in full.

     On April 4, 2001, the Company obtained loan of $75,000 from Transtech GBM,
Inc. Robert Fagenson who is on the Company's Board of Directors is the Chief
Executive Officer of Transtech GBM, Inc. The loan is a 120 days interest free
loan and the Company has issued warrants to purchase 10,000 shares of the
Company's common stock at an exercise price of $2.00 per share and an exercise
period of three years. A compensation expense of $7,284 has been recorded in
conjunction with the warrants. The Company is currently in negotiations with
Transtech GBM to extend the loan.



4.   CONVERTIBLE DEBT

The Company completed an offering on January 5, 2000 and raised $3,362,000 in
gross proceeds. The Company incurred approximately $400,000 in offering
expenses, consisting of legal costs, sales commissions and other related costs.
The Company engaged Gunn Allen Financial, Inc. as placement agent and paid
commissions of 10% and reimbursement of expenses. Pursuant to this offering 67.5
Units were sold. Each Unit consisted of (i) a Secured Convertible Promissory
Note in the principal amount of $50,000 convertible into Common Stock at a
conversion price of $9.50 per share (maturity date can be converted immediately)
and (ii) Series B Redeemable Warrants to purchase an aggregate of 5,000 Warrant
Shares at an exercise price of $13.00 per share (warrants are vested immediately
and expire five years from the date of issuance). As of August 1, 2001 the notes
are in default.

The offering was comprised of both debt and equity components. The debt offering
had a beneficial conversion feature of $852,632, which was recorded as deemed
interest. The warrants issued in conjunction with the debt created $316,500 of
deferred interest expense of which $211,000 and $87,917 was amortized during the
fiscal year ended May 31, 2001 and 2000, respectively.


5.   INCOME TAXES

As of May 31, 2001, the Company has available federal net operating loss ("NOL")
carry-forwards that approximate $19,400,000 and may be applied against future
taxable income through tax year 2021. State NOL carry-forward is approximately
$11,600,000 and expire through tax year 2005. Since management can not determine
if it is more likely than not that the deferred tax asset will be realized, a
100% valuation reserve has been set up to entirely offset the deferred tax asset
of $7,600,000. The utilization of NOLs may be limited in the future if
significant changes in stock ownership occur. Temporary differences other than
the NOL are not material. The current tax expense is due to payment of minimum
state taxes.

As of May 31, 2000, the Company has available federal net operating loss
("NOL") carry-forwards that approximate $16,400,000 and may be applied against
future taxable income through 2020. State NOL carry-forward is approximately
$10,800,000 and expire through 2004. Since management can not determine if it is
more likely than not that the deferred tax asset will be realized, a 100%
valuation reserve has been set up to entirely offset the deferred tax asset of
$6,500,000. The utilization of NOLs may be limited in the future if significant
changes in stock ownership occur. Temporary differences other than the NOL are
not material. The current tax expense is due to payment of minimum state taxes.

                                      38
<PAGE>

6.    STOCKHOLDERS EQUITY

In February 1997, the Company amended its certificate of incorporation to
increase the number of authorized shares of common stock to 20,000,000.

In July 1998, the Company completed an initial public offering of 1,485,000
shares and in August 1998 completed an over-allotment of 172,790 shares of its
common stock.

On July 9, 1998, the Company completed an initial public offering of 1,485,000
shares of its common stock and received net proceeds of approximately $8,845,000
after deducting commissions and expenses of $1,550,000. At the same time, the
Company issued approximately 130,915 shares of its common stock and certain
officers and stockholders exchanged approximately 161,830 shares of the
Company's common stock owned by them in exchange for approximately $1,412,106 of
indebtedness to shareholders.

The Company granted options under the Employee Option Plan to purchase common
stock. 227,643 options were granted at $7.00 per share and 285,887 options were
granted at $3.50 per share. These options vested in equal increments over a
three-year period.

Prior to the initial public offering, the Company had issued various
subordinated promissory notes. These notes were repaid with a portion of the net
proceeds from the initial public offering of the Company's common stock. In
conjunction with liquidation of the notes, the Company issued warrants to
purchase 653,300 shares of Common Stock at prices ranging from of $3.50 to $8.00
per share. (Note 8)

In August 1998, the Company issued 172,790 shares of common stock in connection
with the partial exercise of the over-allotment option. Net proceeds to the
Company were approximately $1,055,071 after deducting $154,179 for commissions
and expenses.

On July 27, 1999, the Company commenced a private offering pursuant to Section
4(2) of the Securities Act of 1933 and Regulation D. The Company was offering up
to 52,500 units, each unit comprised of (I) 10 shares of Series A 8% Cumulative
Convertible Redeemable Preferred Stock and (II) 5 Series A Common Stock Purchase
Warrants. Each share of the Series A Preferred Stock is convertible into one
share of Common Stock. The Series A Warrants are exercisable at $12.00 per
share. The securities in the private offering were being sold in reliance upon
the availability of an exemption from the registration provisions of the
Securities Act of 1933 by virtue of the Company's intended compliance with the
provisions of sections 4(2), 4(6) thereof and rule 506 adopted by the Securities
and Exchange Commission thereunder. The securities may not be transferred or
resold except pursuant to registration under the Securities Act of 1933 or an
exemption therefrom.

On November 30, 1999, the Company completed this offering and received gross
proceeds of $1,122,188. The Company also paid sales commission of $69,825 in
January of 2000. The Company has issued (i) 118,125 shares of Series A 8%
Cumulative Convertible Redeemable Preferred Stock and (ii) 53,809 Series A
Common Stock Purchase Warrants (exercisable at $12.00 per share). The Company
recorded deemed dividends of $522,640 for the Preferred Stock issued for the
period. This amount was based on (i) the difference between the closing market
price and the offering price of the Preferred Stock plus (ii) the value of the
Warrants associated with the Preferred Stock, valued using the Black Scholes
model.

The Company issued one hundred thousand (100,000) Stock Purchase Warrants to
Starr Securities at $10.375 each for consulting services including advice
related to future merger, acquisition, financing and other capital transactions.
These options have been valued at $190,856 using the Black Scholes model and are
recorded as deferred offering costs.

                                       39
<PAGE>

The Company issued Gunn Allen Securities twenty five thousand (25,000) Stock
Purchase Warrants at $10.375 for services related to assisting the Company with
future capital transactions in late August of 1999. These options were not
recorded in the first quarter of 1999 and were subsequently recorded in the
second quarter of 1999. These options have been valued at $47,714 using the
Black Scholes model and this amount was recorded as an expense.

The Company also issued Gunn Allen Securities one hundred thousand (100,000)
Stock Purchase Warrants at $11.3125 for services related to assisting the
Company with future capital transactions in September of 1999. These options
have been valued at $208,099 using the Black Scholes model and this amount was
recorded as an expense.

The Company also issued WAB Capital twenty five thousand (25,000) Stock Purchase
Warrants at $12.9375 for consulting and research services in November of 1999.
These options have been valued at $51,291 using the Black Scholes model and this
amount was recorded as an expense.

In September 1999, the Company issued Howard Brand, its then current Chief
Financial Officer, thirty thousand (30,000) Stock Purchase Warrants at $11.3125
per share. These warrants have been valued at $62,431 using Black Scholes model
and this amount was expensed over a one-year period. These warrants were
repriced to $5.00 per share in August 2000, which was valued at $22,606 and
expensed in the first quarter. The repricing requires the Company to recognize
additional compensation cost when the common stock price is greater than $5.00
per share. Also in August 2000, Mr. Brand was issued an additional 70,000 Stock
Purchase Warrants at $5.00 per share, which was valued at $61,440 and was also
expensed in the first quarter. Mr. Brand served as the Company's Chief Financial
Officer and Secretary, until December 7, 2000.

During the fiscal year ended May 31, 2000, the Company issued 31,159 shares of
common stock in conjunction with the exercise of stock options by its employees.
In order to effect a cashless transaction, an additional 58,059 incentive stock
options were forfeited. These shares of common stock are restricted for a period
of one year from the date of exercise. This cashless transaction resulted in a
charge to non-cash compensation of $317,159. In January of 2000, certain
employee of the Company and the Company rescinded the exercise of their options
and returned shares of common stock, which they had received in conjunction with
the employee's exercise of stock options and the stock were part of the
Company's 1996 Employee Stock Option Plan. A total of 29,839 shares of common
stock were rescinded. Furthermore, all options related with this transaction
were cancelled.

The Company issued 337,500 Stock Purchase Warrants in connection with the
convertible debt offering. (See Note 4)

In October 2000, the Company completed a private placement of $2,000,000 of
units comprised of Series B 8% Preferred Stock ("Series B Stock") and Series C
Warrants. Each unit had a purchase price of $100,000 and is comprised of 20,000
shares of Series B Stock and 4,000 Series C Warrants. The Series B Stock has
annual dividends payable at 8% per year, payable in cash or Common Stock at the
option of the Company. The Series B Stock is convertible into shares of Common
Stock, at anytime at the option of the holder, at the liquidation price divided
by the lesser of: (i) $5.50 per share; or (ii) the average closing price for the
Company's Common Stock for the five (5) trading days ending on the trading day
prior to the date of the conversion notice; provided, however, in no event will
the conversion rate be less than $2.50 per share. The liquidation price is $5.00
per share. By way of example, for each $100,000 unit, an investor would be
entitled to approximately 18,181 shares of Common Stock upon conversion of
Series B Stock. The Series C Warrants have an exercise price of $2.00 per share.
The Company recorded deemed dividends of $436,840 and paid $150,000 in
commission in conjunction with this offering.

On December 7, 2000, the Company awarded 10,000 shares of common stock to their
legal counsel in Germany for services performed. Legal expenses of $21,775 were
recognized in conjunction with this transaction.

                                      40
<PAGE>

The Company also issued Gunn Allen Securities fifty thousand (50,000) Stock
Purchase Warrants at $0.50 for services related to assisting the Company with
capital transactions in October 2000, in conjunction with the Series B Preferred
Stock offering.

On January 10, 2001, the Company completed a financing of $500,000, with one of
its shareholders, comprised of Series C 8% Convertible Preferred Stock and
Series D Warrants. The Series C Stock has annual dividends payable at 8% per
year, payable in cash or Common Stock at the option of the Company. There is a
conversion feature of one share of common stock for each share of preferred
stock surrendered. The Series D Warrants have an exercise price of $0.50 per
share. The Company issued 480,769 shares of Series C Preferred Stock which was
determined by dividing the sum of $500,000 by the average closing price of the
Common Stock of the Company on the American Stock Exchange for the 5 trading
days ending January 3, 2000. As part of the purchase price the investor
surrendered 83,000 Series B and C warrants in his possession. The Company has
recorded deemed dividends of $511,953 in conjunction with this offering.

In March 2001, the European division of CoinBank obtained a line of credit for
$100,000 to be used for working capital and development of the European version
of the Coinbank machines. Furthermore, the bank as collateral is holding 50,000
shares of the Company's common stock.

In March 2001, the Company obtained a loan of $70,000 and another $10,000 in May
2001, from First Bancorp, L.P. Mr. Bruce Korman, our Chief Executive Officer, is
the president and general partner of First Bancorp. This loan was a short-term
interest free loan payable in increments over 180 days. As of September 15, 2001
the loan had been repaid in full.

On April 4, 2001, the Company obtained loan of $75,000 from Transtech GBM, Inc.
Robert Fagenson who is on the Company's Board of Directors is the Chief
Executive Officer of Transtech GBM, Inc. The loan is a 120 days interest free
loan and the Company has issued warrants to purchase 10,000 shares of the
Company's common stock at an exercise price of $2.00 per share and an exercise
period of three years. A compensation expense of $7,284 has been recorded in
conjunction with the warrants.

In June 2001, the Company completed a financing of $250,000, comprised of 25
shares of Series D 8% Convertible Preferred Stock and 25, 000 Series E Warrants.
The Series D Stock has annual dividends payable at 8% per year, payable in cash
or Common Stock at the option of the Company. The Series E Warrants have an
exercise price of $0.50 per share.

Subsequent to the end of the fiscal year, in June, 2001 the Company, in a
private transaction under Section 4(2) of the Securities Act of 1933, as
amended, and/or Regulation D thereunder, sold an aggregate of $100,000 of its
securities to 2 foreign investors Each investor purchased a $50,000 unit, each
unit comprised of (i) 41, 667 shares of Common Stock and (ii) 5,000 common stock
purchase warrants. The warrants have an exercise price of $1.20 per share and
are exercisable for five years. The proceeds of the transactions were used to
pay certain debts, including payroll obligations, of the Company's Austrian
subsidiary.

In July 2001, the Company completed an offering of $500,000, comprised of 5
shares of Series E 8% Convertible Preferred Stock and 100,000 Series F Warrants.
The Series E Stock has annual dividends payable at 8% per year, payable in cash
or Common Stock at the option of the Company. The Series F Warrants have an
exercise price of $0.50 per share. Each unit consists of 1 share of Series E 8%
Convertible Preferred Stock and 20,000 Series F Warrants and is being offered at
$100,000. The Company sold 1.8 units for gross proceeds of $180,000.

On September 4, 2001, the Company completed a financing of $500,000, with one of
its shareholders, comprised of shares of Series F 8% Convertible Preferred Stock
and Series G Warrants. The Series F Stock has annual dividends payable at 8% per
year, payable in cash or Common Stock at the option of the Company. The Series G
Warrants have an exercise price of $0.50 per share. The Company issued 5 shares
of Series F Preferred Stock and 100,000

                                       41
<PAGE>

shares of Series G warrants. A total of $57,000 in commissions were paid in
relation to this offering as well as an issuance of 50,000 shares of common
stock.


7.  OTHER INCOME

On October 1, 1999, the Company and Coinstar, Inc. agreed to settle all
outstanding litigation between them. Under the terms of the settlement, the
Company received payment from Coinstar of $600,000 in cash and 30,000 shares of
common stock of Coinstar, for a total of $923,438. In October 1999, the shares
were recorded at a market price of $323,428 and in January 2000, they were sold
for $353,170, resulting in a gain of $29,742.


8.  STOCK OPTION PLAN AND WARRANTS

The Company adopted a 1996 stock option plan (the "Option Plan"). As of May 31,
2001, a total of 775,887 shares of the Company's common stock have been reserved
for issuance under the Option Plan. The Board of Directors administers the
Option Plan, or a committee appointed by the Board of Directors, which determine
the recipients and term of the awards granted (Item 10. "Stock Options").

In addition to the above mentioned stock options, in July 1998, in conjunction
with the Company's initial public offering certain debt holders were granted
options/warrants in exchange for note repayments.

    The Company has granted the following options/warrants to purchase common
stock as of May 31, 2001.

<TABLE>
<CAPTION>
                                                Number of        Weighted Average
                                             Options/Warrants       Price $/Sh
                                             ----------------      ------------

<S>                                         <C>                  <C>
Options Outstanding - June 1, 1999              1,322,330             $    6.49
Employee Stock Options
----------------------
Granted                                            64,000             $   10.73
Expired                                            54,971                  8.95
Exercised                                          61,592                  7.85

Shareholder Warrants
--------------------                              746,562                 11.94
Granted                                                 -                     -
Expired                                                 -                     -
Exercised
                                           ------------------------------------
Options/Warrants outstanding -                  2,016,329             $    8.53
May  31, 2000                              ------------------------------------
</TABLE>

                                       42
<PAGE>

<TABLE>
<S>                                      <C>                     <C>
Employee Stock Options
----------------------
Granted                                           58,000         $ 2.41
Expired                                           68,868           8.13
Exercised                                              -              -

Shareholder Warrants
--------------------
Granted                                          534,231           1.57
Expired                                          105,000          12.52
Exercised                                              -              -
                                         ------------------------------
Options/Warrants outstanding - May
31, 2001                                       2,434,692         $ 6.70
                                         ------------------------------
</TABLE>

Stock Based Compensation

All stock options issued to employees have an exercise price not less than the
fair market value of the company's Common Stock on the date of grant, and in
accounting for such options utilizing the intrinsic value method there is no
related compensation expense recorded in the Company's financial statements. If
the compensation had been determined based on the fair market value of the stock
option on their dates of grant in accordance with SFAS 123, the Company's net
loss and loss per share for the years ended May 31, 2001 and 2000, would have
been decreased to the pro forma amounts present below:


<TABLE>
<CAPTION>
                                                                                        2001          2000
                                                                                    ------------   ------------
<S>                                                                                 <C>            <C>
     Net Loss
     --------
              As Reported......................................................     $(4,255,570)   $(6,639,901)
              Pro Forma........................................................     $(4,613,140)   $(7,450,875)

     Basic and Diluted Loss Per Common Share
     ---------------------------------------
              As Reported......................................................           (1.55)         (2.05)
              Pro Forma........................................................           (1.30)         (2.13)
</TABLE>

For the fiscal year ended May 31, 2001, the fair value of option grants is
estimated on the date of grant utilizing the Black-Scholes option-pricing model
with the weighted average assumption for options granted during 1997-2001,
expected life of the option is 5 years, expected volatility of 53%, risk free
interest rate of 6.00% and a 0% dividend yield. The weighted average fair value
at the grant date for such option is $4.94 per option.

For the fiscal year ended May 31, 2000, the fair value of option grants is
estimated on the date of grant utilizing the Black-Scholes option-pricing model
with the weighted average assumption for options granted during 1997-2000,
expected life of the option is 5 years, expected volatility of 29%, risk free
interest rate of 5.75% and a 0% dividend yield. The weighted average fair value
at the grant date for such option is $4.85 per option.

                                       43
<PAGE>

<TABLE>
<CAPTION>
                                            Outstanding                                       Exercisable
                                          Weighted Average                                  Weighted Average
                                ------------------------------------                   --------------------------
                                                   Life    Exercise                                     Exercise
Exercise Price Per share            Shares       (Years)     Price                         Shares         Price
--------------------------------------------------------------------                   --------------------------
<S>                             <C>              <C>       <C>                         <C>              <C>
           $     0.50                  352,231      4.75     $   0.50                         352,231     $   0.50
           $     2.00                  132,000      4.50     $   2.00                          82,000     $   2.00
           $     3.50                  290,000      2.00     $   3.50                         290,000     $   3.50
           $     5.00                  108,000      4.50     $   5.00                         100,000     $   5.00
           $     6.00                   23,502      2.50     $   6.00                          20,332     $   6.00
           $     6.30                   50,000      2.50     $   6.30                          50,000     $   6.30

           $     7.00                  476,830      2.50     $   7.00                         476,830     $   7.00

           $     8.00                  350,000      2.50     $   8.00                         350,000     $   8.00

           $    10.375                 200,500      3.75     $ 10.375                         200,500     $ 10.375
           $    10.75                       67      2.75     $  10.75                              33     $  10.75
           $    11.3125                100,000      3.75     $  11.31                         100,000     $  11.31

           $    12.00                   59,062      3.50     $  12.00                          59,062     $  12.00

           $    12.25                    5,000      3.75     $  12.25                           5,000     $  12.25

           $    12.9375                 25,000      3.75     $  12.94                          25,000     $  12.94

           $    13.00                  262,500      3.75     $  13.00                         262,500     $  13.00
                                 ---------------------------------------------------------------------------------
Total options outstanding            2,434,692               $   6.70                       2,373,488     $   6.80
                                 ---------------------------------------------------------------------------------
</TABLE>

9.   COMMITMENTS AND CONTINGENCIES

On September 12, 1997, the Company entered into a commercial single tenant lease
agreement with a related party. The landlord is an affiliate of Bruce Korman and
Rich Miller, both are officers and/or directors of the Company. The new lease
became effective on September 13, 1997 and will expire on September 13, 2002.
The annual rent is $67,416. Rent expense is recognized using the effective rent
method over the life of the lease. The lease contains rent escalations and
certain rent abatements. There is a provision for a 60-month renewal option. The
lease requires the payment of costs such as insurance and other operating costs
in addition to minimum rentals. As of August 31, 2001 we are $28,397 in arrears
in rent.

The Company is committed under non-cancelable facility lease agreements, which
expires on September 2002 in the amount of $67,416. Rent expense was $76,127 and
$67,416 for the fiscal years ended May 31, 2001 and 2000, respectively.

Effective December 11, 2000, the Company's Chief Financial Officer and
Secretary, Howard Brand, resigned and was replaced by Edmund King. The Company
has negotiated an employment agreement with Mr. King and under the terms of his
employment, Mr. King will serve as Chief Financial Officer and Secretary of the
Company and its subsidiaries. Mr. King will receive a base salary of $120,000
per annum, and will be entitled to participate in employment benefit plans
available to other senior executives, and will receive a car allowance and
reimbursement of expenses.  Mr. King was granted five-year stock options to
purchase 50,000 shares of Common Stock with an exercise price of $2.19 per
shares, the closing price of the Company's stock on December 7, 2000.  The
options vest in one-third increments commencing December 2001.  The grant of
options is subject to stockholder approval of certain amendments to the
Company's employee stockholder plan, which the Company expects to submit to
stockholders in the fiscal year 2002.

                                       44
<PAGE>

10.   SUBSEQUENT EVENT

In June 2001, the Company completed a financing of $250,000, comprised of 25
shares of Series D 8% Convertible Preferred Stock and 25,000 Series E Warrants.
The Series D Stock has annual dividends payable at 8% per year, payable in cash
or Common Stock at the option of the Company. The Series E Warrants have an
exercise price of $0.50 per share.

Subsequent to the end of the fiscal year, in June 2001 the Company, in a private
transaction under Section 4(2) of the Securities Act of 1933, as amended, and/or
Regulation D thereunder, sold an aggregate of $100,000 of its securities to 2
foreign investors. Each investor purchased a $50,000 unit, each unit comprised
of (i) 41,667 shares of Common Stock and (ii) 5,000 common stock purchase
warrants.  The warrants have an exercise price of $1.20 per share and are
exercisable for five years. The proceeds of the transactions were used to pay
certain debts, including payroll obligations, of the Company's Austrian
subsidiary.

In July 2001, the Company completed an offering of $500,000, comprised of 5
shares of Series E 8% Convertible Preferred Stock and 100,000 Series F Warrants.
The Series E Stock has annual dividends payable at 8% per year, payable in cash
or Common Stock at the option of the Company. The Series F Warrants have an
exercise price of $0.50 per share. Each unit consists of 1 share of Series E 8%
Convertible Preferred Stock and 20,000 Series F Warrants and is being offered at
$100,000. The Company sold 1.8 units for gross proceeds of $180,000.

In August 2001, the Company first became aware that an entity to whom it had
sold 23 CoinBank machines in October 1999 had filed suit against the Company in
Louisiana court and obtained a default judgment against the Company. The
Louisiana judgment was issued on August 15, 2000 and rewarded the purchaser
$230,000 in damages and ordered that the machines be returned to the company. In
March 2001, the purchaser obtained a sister-state judgment against the Company
in California based on the judgment of the Louisiana court and a writ of
execution was issued.

The Company contends that the Louisiana court had no jurisdiction over it and
that it was never properly served with either the original Louisiana lawsuit,
the judgment issued by the Louisiana court or the California sister-state
judgment. The Company has initiated legal action in both Louisiana and
California seeking to set aside both judgments and to cause the matter,
including the issue of jurisdiction, to be heard on its merits by the Louisiana
court. The Company believes that it will be successful in these actions to set
aside the judgments. The Company further believes that it has meritorious
defenses to each of the allegations in the action and that it will ultimately
prevail on merits. The Company will incur the cost of defense, including legal
fees, in an undetermined amount in connection with these matters, which may not
be recoverable. There can be no assurance that the Company will be successful in
the defense.

On September 4, 2001, the Company completed a financing of $500,000, with one of
its shareholders, comprised of 5 shares of Series F 8% Convertible Preferred
Stock and Series G Warrants. The Series F Stock has annual dividends payable at
8% per year, payable in cash or Common Stock at the option of the Company. The
Series G Warrants have an exercise price of $0.50 per share. The Company issued
5 shares of Series F Preferred Stock and 100,000 shares of Series G warrants. A
total of $57,000 in commissions were paid in relation to this offering as well
as an issuance of 50,000 shares of common stock.

                                       45
<PAGE>

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

     Effective September 7, 2001, the Board of Directors of Cash Technologies,
Inc. (the "Company") determined that it would be in the best interests of the
Company to terminate the services of its independent accountant BDO Seidman LLP,
which acted as its independent accountant with respect to the Company's
financial statements for the fiscal years ended May 31, 1999 and 2000.

     The Board also determined to retain the firm of Vasquez & Company as its
independent auditors to audit its financial statements for the fiscal year ended
May 31, 2001.

     The termination of BDO Seidman was recommended and approved by the Board of
Directors of the Company and is not the result of any disagreement with BDO
Seidman on any matter of accounting principles or practice, financial statement
disclosure or auditing scope or procedure.

     During the last two fiscal years the reports issued by BDO Seidman
contained an explanatory paragraph as to the Company's ability to continue as a
going concern but did not contain any disclaimer of opinion, or was qualified or
modified as to audit scope or accounting principles. In addition, during the
last two fiscal years and subsequent periods there were no disagreements with
BDO Seidman regarding accounting principles, or practices, financial statement
disclosure, or auditing scope or procedure.

     Prior to the change of accounting firms, neither the Board of Directors nor
management consulted Vasquez & Company regarding the application of accounting
principles to a specific completed or contemplated transaction, or the type of
audit opinion that might be rendered.


                                   PART III

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

<TABLE>
<CAPTION>
Name                               Age               Position
----                               ---               --------
<S>                                <C>               <C>
Bruce R. Korman                    41                President, Chief Executive Officer and
                                                     Chairman of the Board

Edmund King                        37                Chief Financial Officer/Secretary

Richard  Miller                    48                Director/Assistant Secretary

Robert B. Fagenson                 51                Director

Vincent A. Carrino                 44                Director

Kevin Walls                        40                Director
</TABLE>

                                       46
<PAGE>

     Bruce Korman has been President, Chief Executive Officer and Chairman of
the Board of Directors of the Company since its inception, and has served in the
same capacities at National Cash Processors, Inc. ("NCP") and CoinBank Automated
Systems, Inc. ("CAS"), the Company's wholly owned subsidiaries, since their
respective inceptions. Since 1984, Mr. Korman has been a principal and general
partner in a series of real estate limited partnerships engaged in the
development, construction and management of multi-family housing projects in
Southern California.

     Edmund King has served as the Chief Financial Officer and Secretary of the
Company and its subsidiaries since December 11, 2000. Mr. King served as
financial and operations consultant for numerous manufacturing, entertainment
and e-commerce companies from 1998-2000. He also served as Vice-President and
Chief Financial Officer of UStel, Inc. between 1997-1998, controller for ITT
Fluid Technology Corporation between 1989-1992, as well as a financial analyst
for Trouver Capital Resources from 1994-1997.

     Richard Miller was Vice President, Secretary, Chief Financial Officer and a
Director of the Company since its inception and has served in the same
capacities at NCP and as Chief Financial Officer, Secretary and Director at CAS
since their respective inceptions. Effective January 11, 1999, Mr. Miller
resigned as a Vice President and Chief Financial Officer and Secretary of the
Company and it subsidiaries.  Since 1985, Mr. Miller has served as President and
Chief Executive Officer of Union Fidelity, a mortgage banking firm which he
founded.  Mr. Miller is also the President of M.R. International Enterprises,
Ltd., which is the general partner of Lakeview Enterprises Limited Partnership,
a private real estate limited partnership.

     Robert B. Fagenson has been a director of the Company since August 4, 1998.
Mr. Fagenson has, for more than the last five years, been a director and
President of Fagenson & Co., Inc., a New York Stock Exchange ("NYSE") specialist
firm, and a Vice President and director of Starr Securities, Inc. a registered
broker-dealer and member of the NYSE. Mr. Fagenson has been director and Vice
Chairman of the NYSE; a director of Rent-Way, Inc., a company listed on the
NYSE; a director of Intrenet, Inc., a company listed on the Nasdaq SmallCap
Market; and a director of Hudson Hotel Corporation, a company listed on the
Nasdaq National Market. Mr. Fagenson serves as the representative of Starr
Securities, Inc., the co-underwriter in the Company's initial public offering.

     Robin Richards was appointed to the Company's Board of Directors in March
of 1999.  Mr. Richards serves as the President and Chief Operating Officer of
MP3.Com, an Internet music company, positions he has held since January 1999.
Prior to joining MP3.Com, Mr. Richards was a President and Chief Executive
Officer at Lexi International, a direct marketing company from October 1985.
Mr. Richards also serves on the Board of Directors of Tickets.Com, Inc. and is
the President of The Chase Foundation. Mr. Richards resigned from the Board of
Directors effective June 22, 2001.

     Vincent A. Carrino has been a director of the Company since August 4, 1998.
Mr. Carrino founded Brookhaven Capital Management, Inc., an investment
management company headquartered in Menlo Park, California in 1986 and has been
its President since such time.  Mr. Carino serves as a director of Rent Way,
Inc., a company listed on the NYSE.

     Kevin Walls has been a director of the Company since July 2001. Mr. Walls
worked for 5 years as Director of Sales with Guinness Peat Aviation in Ireland,
at that time the world's largest aircraft finance and leasing company. From 1994
to 1997 Mr. Kevin Walls also worked as Vice President - Corporate Planning for a
major airline in Jakarta, Indonesia and headed up the corporate and strategic
planning department. Furthermore, Mr. Kevin Walls acts as a special advisor to
many companies in the Middle East and is an expert on the aerospace industry.

     Pursuant to the terms of the Underwriting Agreement between the Company and
Starr Securities, Inc, and Gunn Allen Financial Corp., the underwriters in its
initial public offering, the underwriters may appoint a designee as either a
member of the Board of Directors or as an advisor to attend all Board Meetings,
until July 2001.  Mr. Fagenson serves as the nominee of the underwriters. In
addition, GunnAllen Financial has acted as private

                                       47
<PAGE>

placement agent for the placements in the last two (2) years has the right to
nominate one person, which it has waived to date.

Compensation of Directors, Committees of the Board and Board Meetings.

     During the fiscal year ended May 31, 2001, the Company did not pay any
consideration to Mr. Korman or Mr. Miller for their services as members of the
Board. Mr. Korman and Mr. Miller were the only members of the Board of Directors
until August 4, 1998 when Messrs. Fagenson, Carrino and Harshfield were
appointed. Mr. Richard was appointed to the Board of Directors on March 16,
1999.  Prior to August 4, 1998 the Board of Directors had no committees.

     Directors do not receive cash compensation for serving on the Board of
Directors. The Corporation reimburses Directors who are not employees of the
Corporation the costs of attending meetings. Directors employed by the
Corporation are not entitled to any additional compensation as such.  All non-
employee directors are eligible to participate in the Non-Executive Director
Stock Option Plan, which was approved by the Board of Directors in August 1998
and by the Shareholders in June 1999.  Under the Non-Executive Director Plan
each non-employee director received 30,000 options upon joining the Board of
Directors. The options vest as follows: 10,000 options vest upon the date of
joining the Board; 10,000 options vest on the first anniversary date; and 10,000
options vest on the director's second anniversary date. As of May 31, 2001,
there were 120,000 options issued under the plan to directors. There are no
annual grants of options to directors under the Non-Executive Director Plan. See
"Non-Executive Director Stock Option Plan".

     The Board of Directors has established two committees. The Audit Committee
is comprised of Robin Richards, Vincent Carrino and Richard Miller. Mr. Richards
serves as the Chairman of the Audit Committee. All of the members of the Audit
Committee are independent directors of the Company. The audit committees' duties
include: (i) reviewing with the Company's independent auditors, the scope and
results of any audits; and (ii) reviewing with the independent auditors and
management, the Company's accounting, financial and operating controls and
staff.

     In addition, the Board of Directors has established a Compensation
Committee in which all of the members of the Compensation Committee are
independent directors of the Company.  The Compensation Committee is comprised
of Robert Fagenson & Richard Miller. The Compensation Committee will
administer the Company's Employee Stock Option Plan and negotiate and approve
employment agreements between the Company and executive officers of the Company.

     During the fiscal year ended May 31, 2001, 2 meetings of the Board of
Directors were held.

Certain Key Employees

   Willi Muhr, 39, has been Vice President of the Company since August 1996,
establishing and managing the Company's European Operations. From June 1993 to
March 1996, Mr. Muhr served as Chief Executive Officer of Adcon Telemetry, an
international wireless data communications company. From August 1986 to February
1993, Mr. Muhr was a principal in a series of real estate limited partnerships
engaged in the development, construction and management of multi-family housing
projects in Southern California.

   Darryl J. Bergman, 34, has been Vice-President of Technical Development for
the Company since January 1997. From January 1991 to December 1996, Mr. Bergman
served first as Software Developer and later as Software Project Leader at
Harte-Hanks, a leading media and marketing firm, where he had senior
responsibility for database applications software development for major accounts
including Sony Corporation, Prudential Insurance, Cigna Health Care and others.

                                       48
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

Summary of Cash and Certain Other Compensation

     The following table sets forth certain compensation paid by the Company
during the fiscal years ended May 31, 2001 May 31, 2000 and May 31, 1999 to its
President and Chief Executive Officer (the "Named Executives").

                          Summary Compensation Table

<TABLE>
<CAPTION>
Name and                                                                                         All Other
Principal Position                  Annual Compensation         Long Term Compensation         Compensation
------------------                  -------------------         ----------------------         ------------

                               Year       Salary       Bonus     Securities     Options (#)
                               ----       ------       -----     ----------     -----------
                                                                Underlying
                                                                ----------
<S>                           <C>        <C>           <C>      <C>            <C>              <C>
Bruce Korman                    2001    $ 180,000 (1)                                            $    0.00
 President and                  2000    $ 150,000                                                $    0.00
  Chief Executive Officer       1999    $ 120,000                 119,265                        $    0.00

Edmund King                     2001    $  60,000                                 50,000         $   6,000 (2)
  Chief Financial Officer
</TABLE>

(1)  As of May 31, 2001 the Company owed Mr. Korman $49,487 in back wages.
(2)  Amount represents Company paid allowance for Automobile Allowance.

     The following table discloses information concerning stock options granted
in the year ended May 31, 2001 to the Named Executive.

Option Grants in Fiscal Year Ended May 31, 2001


                     Individual Grants in Last Fiscal Year
                     -------------------------------------

<TABLE>
<CAPTION>
                                                              Percent of Total
                                                              ----------------
                                  Number of Securities        Options/Warrants     Exercise
                                  --------------------        ----------------     --------
                                       Underlying             to Employees in        Price          Expiration
                                       ----------             ---------------        -----          ----------
Name                                Options/Warrants          Fiscal Year (%)       ($/Sh)             Date
----                                ----------------          ---------------       ------             ----
<S>                                        <C>                      <C>               <C>              <C>
Bruce Korman                                0

Edmund King                            50,000                       39%              2.19            12-7-05
</TABLE>

                                       49
<PAGE>

Aggregated Option Exercises And Fiscal Year-End Option Values

     The following table sets forth information concerning the number of options
owned by the Named officers and the value of any in-the-money unexercised stock
options as of May 31, 2001. No options were exercised by any of the named
officers during the fiscal year ended May 31, 2001:

<TABLE>
<CAPTION>
                                       Number of Securities                 Value of  Unexercised
                                      Underlying Unexercised               In-the-Money Options at
                                     Options at May 31, 2001                   May 31, 2001(1)

       Name                        Exercisable      Un-exercisable      $Exercisable    $Un-exercisable
<S>                                <C>              <C>                 <C>             <C>
Bruce Korman                          80,915                                  0
                                      72,444                                  0
                                      46,821                                  0

Edmund King                                0             50,000                                 0
</TABLE>

(1)  Year-end values for unexercised in-the-money options represent the positive
     spread between the exercise price of such options and the fiscal year-end
     market value of the Common Stock. An Option is "in-the-money" if the fiscal
     year end fair market value of the Common Stock exceeds the option exercise
     price.

Employment Agreements

     We entered into a three-year employment agreement with Mr. Korman, which
expired in July 2001. There is currently no employment agreement in place
between Mr. Korman and us. The loss of the services of Mr. Korman could have a
material adverse effect on our business and prospects. Mr. Korman also
participates in other business endeavors, which require a portion of his
business time. Although Mr. Korman has advised us that his participation in
outside business matters should not interfere with his performance of his duties
as our President and Chief Executive Officer, there can be no assurance that a
conflict of interest will not arise with respect to the allocation of Mr.
Korman's time or that such conflict would be resolved in our favor.

     Effective December 11, 2000, the Company's Chief Financial Officer and
Secretary, Howard Brand, resigned and was replaced by Edmund King. The Company
has negotiated an employment agreement with Mr. King and under the terms of his
employment, Mr. King will serve as Chief Financial Officer and Secretary of the
Company and its subsidiaries. Mr. King will receive a base salary of $120,000
per annum, and will be entitled to participate in employment benefit plans
available to other senior executives, and will receive a car allowance and
reimbursement of expenses. Mr. King was granted five-year stock options to
purchase 50,000 shares of Common Stock with an exercise price of $2.19 per
shares, the closing price of the Company's stock on December 7, 2000. The
options vest in one-third increments commencing December 2001. The grant of
options is subject to stockholder approval of certain amendments to the
Company's employee stockholder plan, which the Company expects to submit to
stockholders in the first quarter of 2001.

Employee Stock Option Plans

     In 1996, Company adopted the 1996 Employee Stock Option Plan (the "Employee
Plan"). The purpose of the Employee Plan is to attract and retain qualified
personnel, to provide additional incentives to employees, officers and
consultants of the Company and to promote the success of the Company's business.
A reserve of

                                       50
<PAGE>

775,887 shares of the Company's Common Stock had been established for issuance
under the Employee Plan. The Board of Directors currently administers the
Employee Plan. Subject to the Employee Plan, the Board has complete discretion
to determine which eligible individuals are to receive option grants, the number
of shares subject to each such grant, the exercise price of the option, the
status of any granted option as either an incentive stock option or a non-
qualified option, the vesting schedule to be in effect for the option grant and
the maximum term for which any granted option is to remain outstanding.

     Each option granted under the Employee Plan will have a maximum term of
five years, subject to earlier termination following the optionee's cessation of
service with the Company. All options granted to date have a term of five years.
The exercise price of incentive stock options and non-qualified stock options
granted under the Employee Plan must be at least 100% of the fair market value
of the stock subject to the option on the date of grant, respectively (or 110%
with respect to incentive options granted to holders of more than 10% of the
voting power of the Company's outstanding stock). Such payment may be made in
cash, or at the discretion of the Board, in outstanding shares of Common Stock
held by the participant, through a full recourse promissory note payable in
installments over a period of years or any combination of the foregoing. The
Board is submitting for Shareholder approval a proposal to increase the number
of shares reserved under the 1996 Plan by 200,000 shares.

     At the Annual Meeting of Shareholders held on June 21, 1999, the Company's
shareholders approved an amendment to the 1996 Employee Stock Option Plan to
increase the number of shares eligible for issuance by 200,000 shares from
557,887 to 775,887 shares. As of May 31, 2001, there were 605,599 options
granted under the 1996 Employee Stock Option Plan.

Non-Executive Director Stock Option Plan

     In August 1998 the Board of Directors approved a stock option plan for Non-
Employee Directors who are not eligible to participate in the 1996 Employee
Plan. The Director Stock Option plan was approved by the Company's shareholders
at the Annual Meeting held in June 1999.

     The Director Plan provides each non-executive director with options to
purchase 30,000 options upon joining the Board of Directors. The options vest as
follows: 10,000 options vest upon joining the Board; 10,000 options vest on the
first anniversary date; and 10,000 options vest on the director's second
anniversary date. There are no annual grants of options to directors under the
Director Plan. Only non-employee directors of the Company are eligible to
participate in the Director Plan.

     The Director Plan is intended to attract and retain key personnel whose
performance is expected to have a positive effect on the Company's profits and
growth potential by encouraging and assisting those persons to acquire equity in
the Company. The Board believes that by compensating Directors with stock
options the Board will have similar interests to the shareholders of the Company
to promote growth and enhanced shareholder value.

     As of May 31, 2001, options to purchase a total of 120,000 shares of the
Company's Common Stock have been issued under the Director Plan. Options may be
granted under the Director Plan until the year 2008 to (I) non-executive
directors as defined and (II) members of any advisory board established by the
Company who are not full time employees of the Company or any of its
subsidiaries.

     The exercise price for options granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date of grant. Until
otherwise provided in the Director Plan the exercise price of options granted
under the Director Plan must be paid at the time of exercise, either in cash, by
delivery of shares of Common Stock of the Company or by a combination of each.
The term of each option commences on the date it is granted and, unless
terminated sooner as provided in the Director Plan, expires five years from the
date of grant. Options granted under the Director Plan are not qualified for
incentive stock option treatment.

                                       51
<PAGE>

Limitations of Liability and Indemnification

     The Company's Restated Certificate of Incorporation and by-laws provide
that the Company shall, to the maximum extent permitted from time to time under
the Delaware General Corporation Law (the "DGCL"), indemnify and advance
expenses to any officer, director, employee or agent of the Company in
connection with any threatened, pending or completed action, suit or proceeding.
The Restated Certificate of Incorporation also permits the Company to secure
insurance on behalf of any person who was or is a director, officer, employee or
agent of the Company against any liability incurred by such person in such
capacity, regardless of whether indemnification would be permitted under the
applicable provisions of the DGCL or the Restated Certificate of Incorporation.

     Section 102(b)(7) of the DGCL permits a provision in the certificate of
incorporation of each corporation organized thereunder eliminating or limiting,
with certain exceptions, the personal liability of a director to the corporation
or its stockholders for monetary damages for certain breaches of fiduciary duty
as a director.

     Section 145 of the DGCL ("Section 145"), in summary, empowers a Delaware
corporation, within certain limitations, to indemnify its officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by them
in connection with any nonderivative suit or proceeding, if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to a criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.

     With respect to derivative actions, Section 145 permits a corporation to
indemnify its officers, directors, employees and agents against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit, provided such person meets the
standard of conduct described in the preceding paragraph, except that no
indemnification is permitted in respect of any claim where such person has been
found liable to the corporation, unless the Court of Chancery or the court in
which such action or suit was brought approves such indemnification and
determines that such person is fairly and reasonably entitled to be indemnified.

Audit Fees: Financial Information Systems Design and Implementation: All Other
Fees


During the fiscal year ended May 31, 2001, the Company paid to BDO Seidman LLP
fees for the following work undertaken by BDO for the Company:

     Review of Form 10QSB                         $    24,006
                                                   ----------
     System Design and Implementation             $       0
                                                   ----------
     All other Fees                               $   197,494
                                                   ----------

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information as of September 20,
2001, with respect to each Executive Officer and Director, all Directors and
Officers as a group and the persons (including any "group" as that term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), known
by the Company to be the beneficial owner of more than five percent of any class
of the Common Stock, the sole class of voting securities.

<TABLE>
<CAPTION>
            Name and Address of                    Amount and Nature            Percentage of Shares
         Beneficial Owners (1) (2)                of Beneficial Owner            Beneficially Owned
     <S>                                          <C>                           <C>
     Bruce Korman (3)                                         716,477                  20.19%

     Richard Miller (4)                                       716,657                  20.20%

     Robert B. Fagenson (5)                                   30,000                       *

     Vincent A. Carrino (5)(6)                                211,239                   5.95%

     Edward G. Harshfield (5)                                  30,000                      *

     Robin Richards (5)                                        30,000                      *

     Howard N. Brand (7)                                      100,000                   2.82%

     Christine Dobbings (8)                                    50,000                   1.41%

     Darryl Bergman (9)                                        75,000                   2.11%

     Willi Muhr (10)                                           50,000                   1.41%

     All directors and executive officers as a group
      (10 persons) (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)          2,009,373                  56.58%
 </TABLE>

* Denotes less than 1%.

Footnotes appear on next page

                                       52
<PAGE>

(1)  Unless otherwise indicated, the address for each named individual or group
     is in care of Cash Technologies, Inc., 1434 West 11th Street, Los Angeles,
     California 90015.

(2)  Unless otherwise indicated, the Company believes that all persons named in
     the table have sole voting and investment power with respect to all shares
     of Common Stock beneficially owned by them. A person is deemed to be the
     beneficial owner of securities that can be acquired by such person within
     60 days from May 12, 1999, upon the exercise of options, warrants or
     convertible securities. Each beneficial owner's percentage ownership is
     determined by assuming that options, warrants or convertible securities
     that are held by such person (but not those held by any other person) and
     which are exercisable within 60 days of the date of proxy statement.

(3)  Includes 516,477 shares owned by First Bancorp L.P. Mr. Korman is a limited
     partner of First Bancorp L.P. and the President of the general partner of
     First Bancorp L.P. Also includes (i) 200,180 shares subject to outstanding
     exercisable and unexercisable options.

(4)  Includes 516,477 shares owned by Lakeview Enterprises, Ltd. Mr. Miller is a
     limited partner of Lakeview Enterprises, Ltd. and the President of the
     general partner of Lakeview Enterprises, Ltd. Also includes 200,180 shares
     subject to outstanding exercisable and unexercisable options.

(5)  Messrs. Fagenson, Harshfield and Carrino were elected to the Board of
     Directors on August 4, 1998.  Mr. Richards was appointed to the Board of
     Directors effective March 16, 1999.  The Board members each own 30,000
     option under the. Non-Executive Director Plan,  options vest in 1/3
     increments commencing on the date of the grant.   The date of the grant is
     the date that such Director is elected to the Board of Directors.

(6)  Does not include any shares of Common Stock or other securities owned by
     Starr Securities, Inc. of which Mr. Fagenson is an officer and director or
     the Fagenson & Co., Inc. Employee Pension Plan and Trust of which Mr.
     Fagenson is an employee.

(7)  Includes 30,000 options under the Non-Executive Direct Plan (See footnote
     48,125 warrants exercisable at $8.00 per share and 70,000 warrants at
     $10.375 per share, 63,114 shares of common stock).

(8)  Includes five-year warrants to purchase an aggregate of 100,000 shares
     exercisable at $5.00 per share.  The options vest July 28, 2000.

(9)  Includes five-year options to purchase an aggregate of 50,000 shares
     exercisable at prices between  $3.50 and $7.00 per share.  The options vest
     in increments of 1/3 commencing July 1998.

(10) Includes five-year options to purchase an aggregate of 75,000 shares
     (22,000 options exercisable at $3.50 per share, 28,000 options exercisable
     at $7.00, 15,000 options exercisable at $6.00, 5,000 options exercisable at
     $10.375 and 5,000 options exercisable at $12.25).

(11)  Includes five-year options to purchase an aggregate of 50,000 shares
     exercisable at prices between  $3.50 and $7.00 per share.  The options vest
     in increments of 1/3 commencing July 1998.

                                       53
<PAGE>

Certain Reports

     Other than the individuals disclosed below, during the fiscal year ended
May 31, 2001, no Director, officer of beneficial owner of more than ten percent
of the Corporation's Common Stock (which is the only class of securities of the
Corporation registered under Section 12 of the Securities Exchange Act of 1934
(the "Act"), (a "Reporting Person") failed to file on a timely basis, reports
required by Section 16 of the Act during the most recent fiscal year. Vincent
Carrino and Robin Richards, directors of the Company, failed to file Form 4
reports for the months of August 1999 and March 1999, respectively. The
Corporation was not subject to the reporting requirements under the Act prior to
its initial public offering in July 1998.

                                       54
<PAGE>

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
---------------------------------------------------------


Certain Transactions

     The Company leases approximately 13,000 square feet of space at 1434 West
11th Street, Los Angeles, CA, which it uses for its executive offices and coin
processing facility from Prime Financial Partners, Ltd., an affiliate of Messrs.
Korman and Miller. The lease agreement expires in September 2002 and provides
for a base monthly rent of $5,600. As of August 31, 2001 we are $28,397 in
arrears in rent.

     In connection with its initial public offering, certain lenders into
approximately 292,745 shares of Common Stock, of which Messrs. Korman and Miller
beneficially own approximately 161,830, converted approximately $1,324,700 of
outstanding Company indebtedness. In connection with this transaction, the
Company issued Messrs. Korman and Miller options to purchase approximately
161,800 shares of Common Stock at an exercise price of $7.00 per share.

     In March 2001, the Company obtained a loan of $70,000 and another $10,000
in May 2001, from First Bancorp, L.P. Mr. Bruce Korman, our Chief Executive
Officer, is the president and general partner of First Bancorp. This loan was a
short-term interest free loan payable in increments over 180 days. As of
September 15, 2001 the loan had been repaid in full.

     On April 4, 2001, the Company obtained loan of $75,000 from Transtech GBM,
Inc. Robert Fagenson who is on the Company's Board of Directors is the Chief
Executive Officer of Transtech GBM, Inc. The loan is a 120 days interest free
loan and the Company has issued warrants to purchase 10,000 shares of the
Company's common stock at an exercise price of $2.00 per share and an exercise
period of three years. A compensation expense of $7,284 has been recorded in
conjunction with the warrants. The company is currently in negotiations with
Transtech GBM to extend the loan.

                                       55
<PAGE>

Delaware Anti-takeover Law

     The Company is subject to certain anti-takeover provisions under Section
203 of the Delaware General Corporation Law. In general, under Section 203, a
Delaware corporation may not engage in any business combination with any
''interested stockholder'' (a person that owns, directly or indirectly, 15% or
more of the outstanding voting stock of a corporation or is an affiliate of a
corporation and was the owner of 15% or more of the outstanding voting stock)
for a period of three years following the date such stockholder became an
interested stockholder, unless (i) prior to such date the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, or (II)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, or (III) on or subsequent to such date, the business combination is
approved by the board of directors and unauthorized at an annual or special
meeting of stockholders by at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder. The restrictions imposed by
Section 203 will not apply to a corporation if the corporation's initial
certificate of incorporation contains a provision expressly electing not to be
governed by this section or the corporation by action of its stockholders
holding a majority of the outstanding stock adopts an amendment to its
certificate of incorporation or by-laws expressly electing not to be governed by
Section 203.

     The Company has not elected out of Section 203, and upon consummation of
the Company's initial public offering and the listing of Common Stock on Nasdaq,
the restrictions imposed by Section 203 apply to the Company. Such provision
could have the effect of discouraging, delaying or preventing a takeover of the
Company, which could otherwise be in the best interest of the Company's
stockholders, and have an adverse effect on the market price for the Company's
Common Stock.

                                      56
<PAGE>

ITEM 13.   EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(a)  Exhibits

          The following Exhibits designated by an asterisk (*) have been
previously filed with the Securities and Exchange Commission and, pursuant to
Rule 17 C.F.R. 230.411, are incorporated by reference to the document referenced
in brackets following the descriptions of such exhibits.  All other exhibits are
filed herewith.

*3.1   Restated Certificate of Incorporation of the Company [Exhibit 3.1 to the
       Company's Registration Statement on Form SB-2 (File No. 333-6436)]
*3.2   Bylaws of the Company [Exhibit 3.2 to the Company's Registration
       Statement on Form SB-2 (File No. 333-6436) ]
*3.3   Certificate of Designation of Series A 8% Cumulative Convertible
       Preferred Stock [filed as Exhibit 3.1 (a) to the Company's Form 10 QSB
       for the quarter ended August 31, 1999.
*3.4   Form of Certificate of Designation of Series B Cumulative Preferred Stock
       (filed as Exhibit 4.3 to Form 10QSB for the quarter ended August 31,
       2000)
*3.5   Form of Certificate of Designation of Series C Cumulative Preferred Stock
       (filed as Exhibit 4.1 to Form 10QSB for the quarter ended August 31,
       2000)
 3.6   Form of Certificate of Designation of Series D Cumulative Preferred Stock
 3.7   Form of Certificate of Designation of Series E Cumulative Preferred Stock
 3.8   Form of Certificate of Designation of Series F Cumulative Preferred Stock
*4.1   Form of the Company's Common Stock Certificate [Exhibit 4.1 to the
       Company's Registration Statement on Form SB-2 (File No. 333-6436)]
*4.2   Form of the Underwriter's Warrant Agreement, including Form of Warrant
       Certificate dated as of July 9, 1998 between the Company, Starr
       Securities, Inc. and GunnAllen Financial Inc. (the
       "Underwriters")[Exhibit 4.1 to the Company's Registration Statement on
       Form SB-2 (File No. 333-6436)]
*10.1  Lease for the Company's Facilities at 1422 -34 West 11th Street, Los
       Angeles Ca [Exhibit 10.1 to the Company's Registration Statement on Form
       SB-2 (File No. 333-6436)]
*10.2  Agreement dated November 22, 1996 between National Cash Processors Inc.
       and First Bancorp LP [Exhibit 10.2 to the Company's Registration
       Statement on Form SB-2 (File No. 333-6436)]
*10.3  Manufacturing and License Agreement dated January 17, 1997 between the
       Company and Geld Bearbeitungs Systeme GES.M.B.H.[Exhibit 10.3 to the
       Company's Registration Statement on Form SB-2 (File No. 333-6436)]
*10.4  Form of Employment Agreement between the Company and Bruce Korman
       [Exhibit 10.4 to the Company's Registration Statement on Form SB-2 (File
       No. 333-6436)]
*10.5  Employee Stock Option Plan [Exhibit 10.5 to the Company's Registration
       Statement on Form SB-2 (File No. 333-6436)]
*10.6  Form of Consulting Agreement between the Company and the Underwriters
       dated as of July 9, 1998 [Exhibit 10.6 to the Company's Registration
       Statement on Form SB-2 (File No. 333-6436)]
*10.7  Stock Purchase Agreement and Plan of Reorganization of the Company
       [Exhibit 10.7 to the Company's Registration Statement on Form SB-2 (File
       No. 333-6436)]
*10.8  Contract between the Company and Los Angeles County Metropolitan
       Transportation Authority [Exhibit 10.8 to the Company's Registration
       Statement on Form SB-2 (File No. 333-6436)]
*10.9  Promissory Note issued to G.E. Capital Corp, Security Agreement and
       related Guarantees [Exhibit 10.9 to the Company's Registration Statement
       on Form SB-2 (File No. 333-6436)]
*10.10 Form of Bridge Notes and Bridge Warrant [Exhibit 10.10 to the Company's
       Registration Statement on Form SB-2 (File No. 333-6436)]
*10.11 Non-Executive Director Stock Option Plan [filed as Exhibit A to the
       Company's Proxy Statement for its Annual Meeting held on June 21, 1999].
*10.12 Form of Series B Redeemable Warrant (filed as Exhibit 4.3 to Form 10QSB
       for the quarter ended February 29, 2000).
*10.13 Form of Secured Convertible Note dated as of January 3, 2000 (file as
       Exhibit 10.1 to Form 10QSB for the quarter ended February 29, 2000).
*10.14 Form of Series C Redeemable Warrant (filed as Exhibit 4.1 to Form 10QSB
       for the quarter ended August 31, 2000)
 10.15 Form of Series D Redeemable Warrant
 10.16 Form of Series E Redeemable Warrant
 10.17 Form of Series F Redeemable Warrant
 10.18 Form of Series G Redeemable Warrant
 21.   Subsidiaries of the Company
 23.   Consent of Vasquez & Company LLP, independent auditors
 23.1  Consent of BDO Seidman LLP, independent auditors

                                       57
<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 the 27th day of
September, 2001.

                                      CASH TECHNOLOGIES, INC.


                                                   /s/   Bruce Korman
                                      By:
                                                       Bruce Korman
                                           President and Chief Executive Officer

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

<TABLE>
<CAPTION>
              Signature                           Title                                Date
       ---------------------            -----------------------                    ------------

<S>                                  <C>                                    <C>
       /s/  Bruce Korman               President, Chief Executive               September 27, 2001
                                       Officer
            Bruce Korman               And Director (Principal
                                       Executive Officer)

       /s/  Edmund King                Chief Financial Officer and              September 27, 2001
                                       Secretary  (Principal
            Edmund King                Financial Officer)

       /S/  Richard Miller             Director/Assistant Secretary             September 27, 2001

            Richard Miller

       /s/  Robert Fagenson            Director                                 September 27, 2001

            Robert Fagenson

       /s/  Vincent A. Carrino         Director                                 September 27, 2001

            Vincent A. Carrino

       /s/  Kevin Walls                Director                                 September 27, 2001

            Kevin Walls
</TABLE>

                                       58