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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, 2003
| |  | --------------------------------------



OR



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



| |  | For the transition period fromto
| |  | --------------------------------



Commission File Number 001-15783



CASH TECHNOLOGIES, INC.

(Name of small business issuer in its charter)



|Delaware                                                      |  | 95-4558331                         
|------------------------------------------------------------- |  | -----------------------------------
|(State or other jurisdictionOf incorporation or organization) |  | (I.R.S. EmployerIdentification 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:



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



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



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



XCheck 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, 2003,
were $2,246,221 and its net revenues were $295,200. Gross revenue does not represent revenue under generally accepted accounting principles. See Management Discussion and Analysis.



On September 1, 2003, the aggregate market value of the Common Stock of
Registrant held by non-affiliates of Registrant computed by reference to the closing bid price $0.75 at which the stock was sold on such date was, approximately $4,246,404.



APPLICABLE ONLY TO CORPORATE REGISTRANTS



On September 1, 2003, there were 9,453,819 shares of Common Stock, $ .01 par value, issued and outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



None



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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
we, our or Cash Tech refers to Cash Technologies, Inc., and its wholly-owned subsidiaries, National Cash Processors, Inc., a Delaware corporation, incorporated in May, 1994, which became a subsidiary 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. In December, 2001, we created a new subsidiary, Cintelia Systems
Inc., a Delaware corporation and in June, 2002 we created another subsidiary CT Holdings, LLC., also a Delaware corporation of which we currently own 86.65%. Unless the context otherwise requires, references herein to we or
us refers to Cash Technologies, Inc., and its wholly-owned and majority owned subsidiaries, National Cash Processors, Inc., CoinBank Automated Systems, Inc., Cintelia Systems, Inc. and CoinBank Automation Handels GmbH, Salzburg, Austria.
Our address is 1434 West 11th Street, Los Angeles, California 90015. Our telephone number is (213) 745-2000.



Since April 3, 2000, our common stock has been listed on the American Stock Exchange under the symbol TQ. On August 19, 2003 the closing price
of the common stock was $1.35. From the date of our initial public offering on July 8, 1998 through March 31, 2000, our common stock was listed for trading on the Nasdaq SmallCap Market under the symbol CHNG.



Our business model has evolved over the last three years from a business
based upon currency processing in our Los Angeles facilities and retail coin processing through our CoinBank machines, to a business based upon our proprietary transaction processing technology called E-commerce Message Management Architecture, or
EMMA. Although we intend to continue operations in our original two lines of business, much of our operations in the last three years have been refocused upon development of EMMA and marketing of this new transaction processing technology. We
anticipate most of our future growth will be based upon EMMA, although there can be no assurance that we will be able to generate revenue from this business line and we have not generated any EMMA related revenue to date.



EMMA is designed to interface with our various e-commerce partners and to
seamlessly connect with financial networks, particularly the four main channels through which trillions of dollars in commerce are transacted each year:



| | (1) |  | the ATM network;
| | --- |  | ----------------

| | (2) |  | the credit card network;
| | --- |  | ------------------------

| | (3) |  | the Automated Clearing House (ACH) network; and
| | --- |  | -----------------------------------------------

| | (4) |  | cash.
| | --- |  | -----



The EMMA transaction processing system allows individuals with no ATM card or credit card to access these four channels and obtain a variety of financial services. For consumers, EMMA will result in access to these
services and products through ATM machines and Point of Sale terminals located at retail outlets, including supermarkets, general merchandisers and convenience stores and others. Utilization of EMMA will allow retail establishments such as grocery
supermarkets, banks, brokerage firm offices, check cashing establishments and other commercial outlets to provide consumers with greater financial services which may result in increased revenues to such establishments. For every transaction
processed through EMMA, we intend to receive a transaction fee.



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To date, we have not generated any material revenue from our EMMA technology. There can be no assurance
that we will be successful in generating material revenue.



Over the past three fiscal years and since, numerous business milestones were achieved by the Company, including the following:



| |  |  | We were issued a U.S. patent for essential elements of our EMMA technology
| | - |  | --------------------------------------------------------------------------

| |  |  | We were issued a U.S. patent for critical components of our CoinBank coin counting machine
| | - |  | ------------------------------------------------------------------------------------------

| |  |  | The EMMA software was deemed ready for market.
| | - |  | ----------------------------------------------

| |  |  | The BONUS bank check cashing application was created
| | - |  | -----------------------------------------------------

| |  |  | Our CT Holdings subsidiary was formed to market BONUS
| | - |  | -----------------------------------------------------

| |  |  | A supply agreement was signed with Diebold, Inc. to permit Diebold to distribute our CoinBank machines to its customers. Approximately 40 CoinBank machines have been shipped under
the Diebold agreement.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Companys first transaction revenue-generating contract was signed with Popular Cash Express, a Banco Popular division, for our MFS mobile check cashing product.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Company began the Popular Cash Express (PCE) pilot in December, 2002. The pilot was successfully concluded and an agreement was signed in June, 2003 to roll out the system to
their mobile locations. The rollout began in August, 2003 and is underway.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Company signed an agreement for the distribution of CoinBank machines in Europe through NCR Corporation via their equipment supplier. The product launch, including the creation
of sales literature, customer presentations, technician training, etc. is underway.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | In August, 2003, the Company proposed the conversion to equity of its $3.3 million in secured convertible debt to the noteholders, to be consummated in September, 2003. Under the
terms of the agreement the conversion price of the notes will be reduced to $2.50 plus the exercise price of the warrants will also be reduced to $0.65 per share. As of August 25, noteholders representing approximately 27% of the total value of
notes have converted to equity. Noteholders representing an additional 48% of the total value of notes have given non-binding written indications of their intent to convert on the terms proposed upon receipt of formal documentation (see Risk
Factors).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Evolution of Our Business



We commenced operations in two lines of business, namely, currency processing
through our main office in Los Angeles and coin counting through machines placed in retail establishments, banks and other businesses. Typically, currency was purchased in bulk at a discount of between 1% and 2% from face value. After counting,
sorting and/or wrapping, we either promptly resold 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 deposited it at face
value at the Federal Reserve Bank for credit to our account. We have ceased our coin and currency processing operations and do not intend to actively engage in the coin and currency processing business in the future. The Companys contract with
the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which resulted and will continue to result in a significant reduction in the Companys gross revenue in the future. As of September 1,
2003 the Company still does not have any cash processing customers and, due to our focus on our other businesses, we may choose not to pursue other cash processing customers. At this time the Company has elected to reflect this business as
discontinued operations.



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In 1995, we began our development of CoinBank® self-service coin counting machines, distributed through our 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. An outgrowth of our CoinBank counting machine business was our development, commenced in 1996, of
an enhanced version of an automated teller machine that was designated the ATM-X. 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
with the ATM-X machines, we 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.



As a result of our view of
the need for a transaction processing system, in December of 1997, the Company filed a patent application describing its transaction processing and networking technologies, which resulted in the issuance of patent; number 6,308,887, by the U.S.
Patent and Trademark Office on October 30, 2001. The technology, which was later named EMMA (E-commerce Message Management Architecture), allows for the seamless integration of conventional ATM and credit card networks with non-bank networks and the
Internet. The explosion of Internet e-commerce and the need to automate manual financial services transactions has created, in managements opinion, a demand for EMMAs unique capabilities to provide advanced financial services on ATMs,
POS (point of sale) terminals and wireless devices.



The
networks of banks, securities firms and retail establishments do not easily, if at all, communicate directly with each other because of a host of technological barriers. ATM machines are linked to systems developed over 30 years ago, and these
systems do not allow for services other than the traditional functions of account access, funds disbursement, accepting deposits and limited bill payment. Additionally, the systems of service providers such as utility providers, or securities
brokerage firms cannot interact with the ATM network. Thus, an ATM user (whether the machine is located in a traditional bank branch or other retail establishment) cannot typically obtain other services such as cashing checks, conducting stock
trades or paying utility bills.



EMMA is our proprietary
financial transaction software and technology, which is based in our server systems, presently located in our Los Angeles facility. The EMMA platform implements a flexible message class format that allows for constructing multiple transactions and
transaction types at a financial terminal, such as an ATM or Point-Of-Sale (POS) terminal, or other client device, such as wireless devices, including cellular phones and personal digital assistants (PDAs), 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 and finally the transfer of funds to the biller. In this example, each leg required management, routing and a distinct communication protocol.



A unique, patented 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.



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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.



In June 2002 we formed a subsidiary named CT Holdings, LLC to develop, market and implement EMMA-based banking applications. CT Holdings, LLC is
continually developing and bringing BONUS(TM), a suite of self-service electronic banking services, including automated check cashing, to the marketplace. The BONUS software allows automated check cashing at bank branches using advanced ATMs.
Powered by our EMMA software, BONUS uses third party owned proprietary optical character recognition (OCR), biometric identification and a sophisticated risk analysis engine to establish a users identity and authorize checks. CT Holdings is
being financed separately from Cash Technologies and initially received its first net proceeds of $368,000 from an existing Cash Technologies investor. Since that time the Company has received an additional $75,000. These shareholders own 13.35%
while the Company owns 86.65% of CT Holdings, LLC.



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



We have 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, phone cards issuance, event ticketing and Internet products and services. In partnership with ATM manufacturer Diebold, Inc., in March 2000, we completed installation of the first ATM-X pilot at three stores owned by Rent
Way. The machines were removed when the stores were sold in 2002. In August 31, 2001, the first pilot POS-X terminal was 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 system.



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.



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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.



MAC Systems certified EMMA in February 2001 for ATM transaction processing. MAC, a division of Concord EFS, is a leading financial services firm, offering
payment processing, transaction settlement, authorization, and funds transfer, and is one of the first transaction facilitators to build a network based on the TCP/IP protocol, the modern standard for data transmission over networks. Utilized by the
Internet and built into most UNIX-based systems, TCP/IP is also recognized by a number of network operating systems that have their own protocols. EMMA was the first host-to-host financial transaction platform to utilize Concords new TCP/IP
networks, theoretically giving Cash Tech access to every major ATM and POS card issuer in the world.



Our ATM-X and
POS-X Terminals



We have developed the client software for an enhanced version of an automated
teller machine, designated the ATM-X and a Point-of-Sale 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. In partnership with ATM manufacturer Diebold, Inc., in March 2000, we completed installation of the first ATM-X pilot at three stores owned by Rent Way.
The machines were removed when the stores were sold in 2002. In August 31, 2001, the first pilot POS-X terminal was deployed at Popular Cash Express.



Because they are linked to banks, ATMs are a natural partner in the marriage of traditional bank accounts, Internet accessibility, direct debit (bill
payment), and other forms of e-commerce. Yet, while ATMs represent one of the most ubiquitous remote devices for the delivery of real-time integrated financial and consumer products and services over the Internet, the medium has yet to be included
in the e-commerce revolution.



Although cost and network
deficiencies have impeded the three main ATM groupsmanufacturers, owners and network operatorsfrom rolling out enhanced equipment on a commercial scale, experimental ATM hardware that parallels other technological achievements has been
developed. For instance, biometrics (speech, facial, and fingerprint recognition) and natural language recognition push the technology envelope, and can be found on todays prototypical ATMs. High quality printers, sound cards, full motion
video monitors, motion sensors, forgery detection, and the ability to remember each individual consumers preferences are other evolved characteristics of enhanced ATM architecture. The evolution of the ATM hardware will allow for
greater availability of services, which EMMA is intended to support.



The ATM-X machines are designed to take advantage of EMMAs capabilities to expand access throughout the financial network. For example, the ATM-X machines will allow the user to cash her paycheck by inserting the paycheck into the
machine, then instruct the system how to distribute the funds. The consumer will be able to purchase money orders, transfer money, scan her utility bill into the ATM-X machine and direct payment to third parties such as a utility provider. The ATM-X
machines, combined with EMMA, will expand the extremely limited traditional ATM functions of accessing an account, dispersing funds and moving funds between bank accounts. These advanced functions will be available to customers who do not have bank
accounts.



We do not intend to manufacture or distribute any
ATM machines, including the ATM-X machines. The



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manufacturing, distribution and support of these specialized ATMs is performed by existing large ATM manufacturers such as Diebold and NCR.



Cash Technologies, Inc. operated a cash processing facility in Los Angeles,
California, where it counted currency, which it purchased in bulk from Los Angeles Metropolitan Transit Authority at a small discount from face value. We then sorted, wrapped and resold the currency to various retail customers at face value plus a
small fee or deposited it at face value at the Federal Reserve Bank for credit to our account. During the fiscal year ended May 31, 2003, Cash Technologies counted $1,978,465 and derived net revenues of $27,624 compared to $16,908,289 and $242,041,
respectively for the fiscal year ended May 31, 2002. The Companys contract with the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which has resulted and will continue to result in a
significant reduction in the Companys gross revenue. As of September 1, 2003 the Company does not have any cash processing customers and, due to our focus on our other businesses, we may choose not to pursue other cash processing customers. At
this time the Company has elected to reflect this business as discontinued operations.



Cash Processing Security



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



The physical security systems in place at our facility were rated
AA (the same top rating maintained by most bank and armored car cash vaults) by Underwriters Laboratories, Inc., which rating was in effect until 2002, when we curtailed LACMTA cash processing. Although we believe that we have in place
adequate security systems and procedures to safeguard our personal property, there can be no assurance that our systems and procedures will be sufficient to ensure against robbery, embezzlement or other losses.



We maintain insurance against losses on its premises, including those due to
theft or embezzlement by independent contractors or our employees, up to an aggregate amount of $3,000,000. Though we believe that we 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 us 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, we 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 our business and results of operations. We also maintain insurance for off-site theft
of coin from and damages to our CoinBank machines.



CoinBank Machines
Business



CoinBank Machine Features



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



The CoinBank 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 machine is also capable of being linked to bank networks in order to permit customers to directly deposit funds to a bank account.



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During the current fiscal year, our 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. We concluded that our free-placement program should be supplanted by direct
sales of these machines to retail store chains and removed substantially all of our free-placement machines from operation.



CoinBank Machine Assembly and Supply



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



We currently contract with one of our suppliers to fabricate the housing and integrate the components of CoinBank machines,
including software that is proprietary to us.



Sales and 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, we expect to provide consumers with direct access to every major method of commerce, including Internet commerce, from a single
terminal or e-appliance. We envision 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. To date, no material revenue has been generated through the EMMA technology.



In June 2002 we formed a subsidiary named CT Holdings, LLC to develop, market and implement EMMA-based banking applications. CT Holdings, LLC will bring BONUS(TM), a suite of self-service electronic banking services,
including automated check cashing, to the marketplace. The BONUS software allows automated check cashing at bank branches using advanced ATMs. Powered by our EMMA software, BONUS uses third party owned proprietary optical character recognition
(OCR), biometric identification and a sophisticated risk analysis engine to establish a users identity and authorize checks. CT Holdings is being financed separately from Cash Technologies and initially received its first net proceeds of
$368,000 from an existing Cash Technologies investor. Since that time the Company has received an additional $75,000. These shareholders own 13.35% while the Company owns 86.65% of CT Holdings, LLC.



In August 2002, we signed an agreement with Popular Cash Express, Inc.
(PCE), a unit of Banco Popular parent Popular, Inc., to install our EMMA MFS
(Mobile Financial Services) system on PCEs mobile check cashing trucks. Under the agreement, PCE is responsible for installation and hardware costs and a per-transaction fee to Cash Tech for each check processed. The agreement provides for the
parties to share the cost of a 120-day pilot, the successful conclusion of which would be followed by a rollout to PCEs fleet of sixty (60) check cashing trucks in the Los Angeles area.



Following the successful completion of the PCE pilot, on June 25, 2003 Cash
Technologies, Inc. signed an agreement with PCE to install the MFS system on PCEs mobile check-cashing trucks. Under the agreement, PCE is responsible for installation and hardware costs and a per-transaction fee to Cash Tech for each check



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processed. The agreement provides for the installation of the system in two phases. In the first phase, the 10 trucks generating the highest transaction
volume will be installed. In the second phase, the remainder of PCEs fleet of more than 50 check-cashing trucks in the Los Angeles area will be deployed. Deployment of the second phase is subject to PCEs approval of phase one. As of
August 31, 2003, the deployment was underway.



On August 19,
2003, the Company and A2iA Corp., a worldwide leading developer of natural handwriting and print technology (OCR, ICR, OMR) announced the integration of A2iAs technology into the Companys check-cashing products for the financial services
industry. These products are able to rapidly capture and analyze transaction data from checks, reducing losses due to fraud and automating manual processes. Checks can be evaluated while the customer is still present or during back-office
processing. A2iA CheckReader technology is
incorporated into the EMMA risk analysis engine, which is found in our check-cashing products including MFS (Mobile Financial Services) and BONUS for banks. BONUS reduces fraud and improves customer service by offloading costly manual check transactions to a smart self-service ATM. The products have been installed into
various financial services locations, including the PCE mobile check-cashing trucks in the greater Los Angeles area. Our system can recognize and analyze check data, identify a customer and provide a check approval in about 5 seconds, reducing
losses and improving efficiency and record keeping. A2iAs advanced text recognition technology is a key component of the EMMA risk analysis process, which quickly analyzes and credit-scores electronic check images to determine the probability
of loss. The speed and accuracy of the EMMA system can permit cashiers to identify fraudulent and counterfeit checks while the customer is still present. This is significant for the industry since the majority of banks and financial services
providers have little or no ability to detect check fraud, which costs the industry billions of dollars per year, at the point of presentment.



Commercial Cash Processing and Coin Machines



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. We conduct substantially all of our own marketing activities and may hire additional marketing personnel, including possibly independent contractors to assist
it in marketing CoinBank machines. To date, we have conducted marketing of our cash processing services by means of press releases and articles in trade journals targeted at cash-intensive industries. Our 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. We intend to focus our future coin-machine marketing efforts on the sale of CoinBank machines rather
than the free-placement/shared revenue model.



The Company has
entered into an OEM arrangement to supply Diebold, Inc. with CoinBank machines for Diebold, Inc. to sell through its sales force. The first 33 machines under this relationship have been shipped. The Company believes that this relationship could
result in significant revenues over the next 12-month period. The gross proceeds of these sales are approximately $236,104, although there can be no assurance of future sales. The Company also sold 9 other machines during this period to other
customers for additional gross proceeds of $57,392.



On June
30, 2003, CoinBank Automations Handels Ges.m.b.H. (CoinBank Europe), an Austrian corporation and wholly owned subsidiary of Cash Technologies, Inc., signed an agreement with Cash Solutions Geldverarbeitungssysteme GmbH i.G. (Cash
Solutions), an Austrian corporation, for Cash Solutions to exclusively distribute our CoinBank® self-service coin counting machines in Europe. Cash Solutions will supply the machines to NCR Corporation and others. NCR is one of the worlds largest banking equipment providers
and will in turn market the machines to its bank customers in Europe directly and indirectly through its distributors.



The agreement requires that Cash Solutions purchase certain minimum quantities each year to maintain its exclusivity and allows for the parties to share
in manufacturing cost reductions realized as production quantities increase from sales. The machines, engineered in the U.S. and Austria by Cash Tech and CoinBank Europe, are



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manufactured under contract to CoinBank Europe by a prestigious European equipment maker that operates more than 500,000 square feet of ISO 2002
manufacturing facilities in Austria.



The European coin machine
market has expanded dramatically since the introduction of euro coins in January 2001. All coins previously issued by the European Union countries have been replaced with euro coins, creating an enormous demand for new coin counting equipment that
can efficiently sort and count the new denominations.



The
CoinBank machine provides superior performance due to its proprietary technology. The machine determines a coins denomination by electronically measuring its metal content rather than by weight and size. The proprietary technology, key aspects
of which were issued a U.S. patent in 2001 (worldwide patents are pending), outperforms competitive machines by separating out and returning all foreign debris and coins, improving reliability and accuracy. Through a sophisticated communications
device, the machines also permit remote management, maintenance and software upgrades via telephone, the Internet or local area network (LAN). This allows a large network of machines to be efficiently managed by financial institutions or retailers.
Importantly, the latest version of the CoinBank machine, to be marketed under the new Cash Solutions agreement, does an exceptional job processing euros, which are particularly difficult to count accurately due to slight variations in the metal
alloys introduced by the many countries minting the new coins.



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, we are not aware of any competitor that has our plan to provide advanced function transaction processing services as its core business. One
company, 7-Eleven, Inc., has begun to deploy a check-cashing terminal into its convenience stores. These terminals are also capable of issuing money orders and transferring money. This product has similar functionality to our ATM-X, however the
product is geared toward the retail market and not toward bank and mobile applications, as are our BONUS and MFS products. In addition, the 7-Eleven system does not offer features contained in our EMMA platform and, to our knowledge, 7-Eleven is not
offering transaction processing services to outside companies or institutions, though there is no assurance that they will not do so in the future. Nevertheless, the 7-Eleven offering is an important factor competing for a similar consumer base and,
in our opinion, validates the market demand for self-service financial products.



Coin Machines



While we are aware of nine self-service
coin machine manufacturers in the world, we know of only one company, Coinstar, Inc., that has distributed an appreciable number of self-service coin counting machines to the U.S. retail industry. To our knowledge, unlike our approach, in which
CoinBank machines are sold, Coinstar focuses its marketing efforts on installing free placement machines. They have installed a large number of machines throughout the United States, and in some cases; such installations are near where
we have 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. To our knowledge, all but two manufacturers are located in and serve
primarily foreign markets, however some of these companies are attempting to enter the U.S. market. Other coin machine manufacturers may have substantially greater financial, personnel, marketing and other resources than



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us. While we believe that our CoinBank machines contain patented and proprietary methods that make them the best choice for self-service retail use in the
U.S., 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 we will be able to compete successfully.



Intellectual Property



Although we have
received U.S. Patents with respect to our CoinBank machine and EMMA Platform, there can be no assurance that these patents will afford the Company any meaningful protection. Any or all claims of a patent can be invalidated even after its issuance
through litigation and other administrative procedures. If the Company failed to adequately defend such attacks, one or more of our claims or our entire patent(s) could be invalidated and of no further value to the Company. We rely 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 we
believe 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 Risk FactorsLitigation.



In the event of infringement, we 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 we will have the necessary financial resources to defend any infringement claim made against us 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 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
believe that product recognition is an important competitive factor and promotes the CoinBank name in connection with its marketing activities. We received United States trademark registration for the CoinBank 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 have not applied for the trademark with respect to the EMMA trade name or any other trade name.



EMPLOYEES



As of May 31, 2003, we employed 15 employees and 3 contractors on a full-time basis, of which 2 were engaged in facilities and security, 1 was engaged in
customer service and sales, 4 were engaged in accounting and administration and 11 were engaged in system support and development. None of the Companys employees are subject to collective bargaining agreements. We believe that our relations
with our employees are good. In addition, we utilize the services of two offshore technical development groups, totaling approximately 3 engineers, for some of its software development activities.



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RISK FACTORS



The following factors, in addition to those discussed elsewhere, should be considered carefully in evaluating our business
and us. An investment in our securities is suitable only for those investors who can bear the risk of loss of their entire investment. Certain information included in this Form 10-K contains statements that are forward-looking, such as statements
relating to plans for future activities. Such forward-information involves important known and unknown risks, uncertainties and other factors that could significantly affect our actual results, performance or achievement in the future and,
accordingly, such actual results, performance or achievements may materially differ from those expressed or implied in any forward looking statements made by us. The risks, uncertainties and other factors include, but are not limited to, those
discussed in the Risk Factors section. The words believe, expect, anticipate, intend and plan and similar expressions identify forward-looking statements which speak only as of
the date the statement was made. See Risk Factors.



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:



| |  |  | our significant and immediate need for working capital;
| | - |  | -------------------------------------------------------

| |  |  | market acceptance of our products;
| | - |  | ----------------------------------

| |  |  | technological restrictions upon development;
| | - |  | --------------------------------------------

| |  |  | our limited marketing experience;
| | - |  | ---------------------------------

| |  |  | the uncertainty of product development, including our EMMA technology,
| | - |  | ----------------------------------------------------------------------

| |  |  | our dependence upon new technology,
| | - |  | -----------------------------------

| |  |  | our need for qualified management personnel; and
| | - |  | ------------------------------------------------

| |  |  | the effect of competition.
| | - |  | --------------------------



Our success also depends upon economic trends generally, governmental regulation, legislation, and population changes. Investors are cautioned not to
place undue reliance on forward-looking statements, which reflect managements predictions only. We assume no obligation to update forward-looking statements.



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 and estimates 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.



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Risks Related to Our Financial Condition



We have a history of incurring losses, which have resulted in our independent accountants issuing opinions
containing doubts about our ability to continue as a going concern.



We have incurred losses since our inception. For the last two fiscal years ended May 31, 2003 and 2002, we sustained net losses of $4,048,345 and $3,852,351, respectively. At May 31, 2003 we had a working capital deficit of $12,653,698
compared to $8,509,738 for the fiscal year ended May 31, 2002. At August 18, 2003, we had a cash balance of approximately $175,000. Our capital requirements have been and will continue to be significant, and our cash requirements have exceeded cash
flow from operations since inception. We are in dire need for capital to continue to operate. We have been dependent on the proceeds of our initial public offering in July 1998, and private placements of our securities since then of our debt and
equity securities to satisfy our working capital requirements. We will be dependent upon the proceeds of future private placement offerings or other public offerings to fund development of the EMMA technology, our short-term working capital
requirements, to fund certain marketing activities and to continue implementing our business strategy. There can be no assurance we will be able to raise necessary capital. In its reports accompanying our audited financial statements for the fiscal
years ended May 31, 2003 and 2002, our independent auditors included an explanatory paragraph wherein they expressed substantial doubt about our ability to continue as a going concern. During the current fiscal year, we have continued to generate
losses and will continue to incur losses for the foreseeable future.



We have generated limited revenues since our inception, and do not expect to generate significant revenues within the next fiscal year. For the fiscal year ended May 31, 2003 and the fiscal year ended May 31, 2002, we had net revenue of
only $295,200 and $385,977, respectfully.



We have an immediate need for
capital and if we are unable to obtain the financing we need, our business may fail.



For the fiscal years ended May 31, 2003 and 2002, we had outstanding liabilities of approximately $12,690,148 and $11,639,924 respectfully, which debts we are unable to repay. In the event that our plans or
assumptions relating to our 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 our products and services, inability to successfully market its products, or other unforeseen circumstances), we could be required
to seek other alternatives. We currently require and expect over the next fiscal year to 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 us when needed, on commercially reasonable terms, or at all. 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. As of May 31, 2003 we have notes outstanding of approximately $4,362,731 in principal and interest of which all are in default. In August, 2003, the Company proposed the conversion to equity of its $3.3 million in secured convertible
debt to the noteholders, to be consummated in September, 2003. Under the terms of the agreement the conversion price of the notes will be reduced to $2.50 plus the exercise price of the warrants will also be reduced to $0.65 per share. As of August
25, noteholders representing approximately 27% of the total value of notes have converted to equity. Noteholders representing an additional 48% of the total value of notes have given non-binding written indications of their intent to convert on the
terms proposed upon receipt of formal documentation. There can be no assurance that the remaining noteholders will not declare an event of default and demand immediate payment or seek to attach our assets, including our patented technology,



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We also owe $3,858,741 to G.E. Capital, which includes principal, financing fees and unpaid interest. In
2000, unable to pay G.E. Capital on the original terms, the Company entered into the first of several loan modifications with G.E., which have been paid as agreed. The current modification shall expire in March, 2004. There can be no assurance that
G.E. Capital will not declare an event of default and demand immediate payment if we are unable to satisfy or renegotiate future requirements of their loan. The Company is currently negotiating with G.E. Capital to extend the principal only payments
for another 6 months there can be no assurance though.



Any
additional financing that we may obtain may substantially dilute the interests of our shareholders.



To the extent that we obtain additional financing through the issuance of additional equity securities in the future, 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.



We
may not fully recover the carrying value of our CoinBank machines held for sale.



We currently are holding for sale approximately 260 CoinBank machines, which have a carrying value of approximately $862,090 at May 31, 2003. After reviewing the carrying value of these machines it was determined that
an accounting impairment exists. For the fiscal year ended May 31, 2002 we had taken an impairment charge of $79,245 for the carrying value of our CoinBank machines. The impairment was taken due to low inventory turnover for the coin machines. In
future periods, additional impairment may be taken based on future sales of coin machines. If we conclude that such impairment exists, this could give rise to a substantial expense, which would increase our reported losses. During the fiscal year
ended May 31, 2003 we sold 35 of these machines for $246,229 and during the fiscal year ended May 31, 2002 we sold 19 of these machines for $130,355. We continue attempting to identify parties interested in acquiring the remaining units.



Our assets serve as collateral for various loan obligations and
therefore may not be available for distribution to shareholders in the event of liquidation.



We have previously granted security interests in all of our assets to various lenders, including the holders of the notes in the principal and interest
amount of $4,362,731 issued in our placement, which was completed in January 2000, and liens in favor of General Electric Capital Corporation pursuant to a Master Security Agreement originally entered into in May 1997. The General Electric loan is
secured by certain of our CoinBank machines. As of May 31, 2003, we were indebted to General Electric Capital Corporation in the amount of approximately $3,858,741 including interest. A technical default by us on our secured obligations could cause
a secured creditor to declare our indebtedness due and foreclose on the assets securing the defaulted indebtedness. As a result of the existing liens, we are unable to further obtain credit by securing our assets. Further, as a result of the
security interests, creditors would be entitled to collect upon the assets prior to any distribution being available to holders of our Common Stock.



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We are dependent upon revenue generated through our Los Angeles County Metropolitan Transportation
Authority and our current contract expired in June 2002.



A
majority of our revenue for the last three fiscal years was derived from our agreement with the Los Angeles County Metropolitan Transportation Authority. During the fiscal year ended May 31, 2003, Cash Technologies counted $1,978,645 and derived net
revenues of $27,624 compared to $16,908,289 and $242,041, respectively for the fiscal year ended May 31, 2002. The Companys contract with the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30,
2002, which has resulted and will continue to result in a significant reduction in the Companys gross revenue. As of May 31, 2003 the Company does not have any cash processing customers and, due to our focus on our other businesses, we may
choose not to pursue other cash processing customers. At this time the Company has elected to reflect this business as discontinued operations.



Risks Related to Our Coin Processing and CoinBank Businesses



If our products and services do not achieve market acceptance, our business will be harmed.



The demand for and market acceptance of our coin and 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.



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.



We are dependent on third-party manufacturers.



We are substantially dependent on the ability of the independent contractors we hire to build our CoinBank machines. We do not manufacture our CoinBank
machines. As a result, we are dependent upon third parties for the manufacture of our machines, we cannot control the price or timing of availability of machines for resale and this reliance upon third parties may affect our ability to market and
sell the machines to our customers at a competitive price or to satisfy delivery requirements demanded by our customers.



We have a limited customer base and the loss of any present customers would have an adverse effect on our operations.



The Companys contract with the Los Angeles County Metropolitan Transit
Authority (LACMTA) to count currency expired on June 30, 2002, which has resulted and will continue to result in a significant reduction in the Companys gross revenue. As of May 31, 2003 the Company does not have any cash processing customers
and, due



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to our focus on our other businesses, we may choose not to pursue other cash processing customers. At this time the Company has elected to reflect this
business as discontinued operations. We may not be able to lessen our dependence on a limited number of customers for a substantial portion of our revenue.



We may not successfully compete with our competitors.



The financial transaction processing industry is crowded with well-established companies, large and small. While companies such as Deluxe, Concord EFS,
Total Systems and others have focused on conventional ATM and POS and related transactions, if these firms were to make a concerted effort to develop an advanced function system comparable to EMMA they might prevent or reduce our ability to
effectively market EMMA successfully. We believe that its development advantage and proprietary technologies will permit it to penetrate the market effectively, but there is no assurance that larger or better established transaction processing firms
will not offer competing products in the future that preempt our efforts.



Risks Related to Our EMMA Based Technology Businesses



Our products may not perform reliably in extensive applications.



As of May 31, 2003, we had test-marketed only 4 EMMA-driven ATM-X/POS-X machines and have derived substantially no revenue from our EMMA based business. To date we have not installed a base of EMMA-driven ATM-X/POS-X
machines or PrISM systems upon which we can base reliable predictions about the reliability or functionality of those technologies. Although such systems and machines have performed reliably to date at their current installations and in our
laboratory, 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.



Competing products and services could render our technologies obsolete.



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.



If our EMMA Technology does 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 not generated any revenue from our EMMA based technology.



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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 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 and the nature of the marketing requested or provided by prospective users of EMMA.



The expansion of our EMMA based business is uncertain.



To date, we have generally been dependent on processing coins and currency purchased directly from third parties (other than
through CoinBank machines) to generate substantially all of our revenues. We intend to increase our current level of CoinBank marketing, but with an emphasis on marketing our EMMA based services. 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 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.



Our
new business line, Prism is an outgrowth of the events of September 11, 2001, and the newly recognized need for enhanced security and identification capabilities. These relatively new industries may be considered an emerging market. As such, no one
has substantial sales in this market. There can be no assurance that we will be able to capitalize on the opportunities in this market, or that the perceived level of demand for these types of products will be as high as anticipated.



We may not successfully compete with our competitors.



We have only recently introduced our Prism line of business, which is based
in part upon our EMMA Technology and is intended to consist of a suite of security products and provide professional services and custom development for specific security requirements. PrISM products use biometric and risk analysis technologies for
critical security applications including physical security and high-risk financial transactions. There are other companies involved in this field of business, including Eyeticket Corporation, Viisage Technologies, Visionics Corporation and Identix,
all of whom may be more established in the industry and may be better financed. There can be no assurance that we will be able to compete with these companies, or other entrants in the field



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.



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We are dependent on third -party manufacturers and on independent contractors, whose nonperformance
could harm our business.



We are substantially dependent on
the ability of the independent contractors we hire to provide software engineering for our EMMA technology. Any contractor that we utilize or may utilize may not have sufficient capacity to satisfy our needs during any period of sustained demand.
The loss of services of independent contractors could disrupt our business. Furthermore, the EMMA system will access networks, which are owned and operated by third parties. The failure or unavailability of these networks could have a material
adverse effect on us. 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 are 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 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.



Risks Related to Government Regulation and Patent and Licensing matters



Uncertainty of patent and trademark protection.



Although we have received U.S. Patents with respect to our EMMA Platform, there can be no assurance that these patents will afford us any meaningful
protection. 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 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.



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Risks Related to Our Management



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 15.13% 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. This 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.



The American Stock Exchange may delist our securities.



Our common stock is listed on American Stock Exchange. The American Stock
Exchange granted us an exemption from its original listing requirements in order for our common stock to be listed for trading. AMEX also reserves the right to delist an entity at anytime in its discretion. Among other criteria when determining
whether or not to delist a security, AMEX will consider the entitys financial condition and operating results, the public distribution of securities and other non-quantitative criteria. 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. In addition, we are aware that we are not in accordance with AMEX rules
regarding the holding of annual shareholder meetings. Further we have issued, in various private placements, securities, which AMEX may determine AMEX violated rules, which require shareholder approval for the issuance of securities, which may
result in a number of shares, equal to 20% or more our outstanding securities. These potential rule violations, and possible others, may result in delisting of our Common Stock from AMEX. 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.



If our common stock is delisted from the American Stock Exchange, we may be subject to the risks relating to penny stocks.



If our common stock were to be delisted from trading on the 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. Our Common
Stock has not been traded above $5.00 in over a year. These rules require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a penny stock and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally institutions. 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



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and liquidity of such securities and the ability of purchasers to sell our securities in the secondary market. A penny stock is defined generally as any
non-exchange listed equity security that has a market price of less than $5.00 per share, subject to certain exceptions.



The price of our common stock has been, and may continue to be, volatile.



The market price of our common stock, like that of the securities of many other development stage biotechnology companies,
has fluctuated over a wide range and it is likely that the price of our common stock will fluctuate in the future. Since January 1, 2000, the sale price for our common stock, as reported by the American Stock Exchange and the Nasdaq SmallCap Market
has fluctuated from a low of $0.50 to a high of $24.00. The market price of our common stock could be impacted by a variety of factors, including:



| |  |  | announcements of technological innovations or new commercial products by us or our competitors,
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | changes in government regulation and policies which may be undertaken with respect to security issues related to terrorism, privacy and other matters,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | developments in the patents or other proprietary rights owned or licensed by us or our competitors,
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | matters related to our financial condition, including our ability to obtain necessary capital,
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | litigation, and
| | - |  | ---------------



| |  |  | general market conditions in our industry.
| | - |  | ------------------------------------------



In addition, the stock market continues to experience extreme price and volume fluctuations. These fluctuations have especially affected the market price of many
biotechnology companies. Such fluctuations have often been unrelated to the operating performance of these companies. Nonetheless, these broad market fluctuations may negatively affect the market price of our common stock.



We have the discretion to issue additional shares of preferred stock with
rights and preferences superior to those granted to holders of our common 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, 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 such 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. As of May 31, 2003, we have authorized the issuance of 119,000 shares of Series A Preferred Stock, 400,000 shares of Series B Preferred Stock, 480,769 shares of
Series C Preferred Stock, 25 shares of Series D Preferred Stock, 72 shares of Series E Preferred Stock and 5 shares of Series F Preferred Stock.



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ITEM 2. DESCRIPTION OF PROPERTY



We do not own any real estate. We lease approximately 13,000 square feet of space at 1434 West 11th Street, Los Angeles, CA,
which we use for our executive offices and coin processing facility from Prime Financial Partners, Ltd., an affiliate of Messrs. Korman and Miller. The lease agreement expired in September 2002 and we currently rent the facility on a month-to-month
basis at a monthly rate of $5,618. We believe that our facilities are sufficient to accommodate our anticipated future requirements at the present time. See Certain Relationships and Related Transactions. As of May 31, 2003 we were
$11,236 in arrears with our rent payments.



ITEM 3. LEGAL PROCEEDINGS



Shaws Supermarkets has filed a lawsuit, captioned
Shaws Supermarkets, Inc. v. Cash Technologies, Inc., CoinBank Automated Systems Inc. (United States District Court, District of Massachusetts), against us claiming breach of contract and damages. We operated CoinBank machines in
Shaws locations in New England on a free-placement basis since June, 1999 and had been negotiating a settlement and termination agreement with Shaws to terminate the CoinBank machine placements in light of our decision to exit the free
placement business. Shaws is claiming damages in excess of $75,000, for contract termination fees and reimbursements. We believe that the amount owed is approximately $55,000 and have accrued for the liability. Furthermore, we have potential
claims against Shaws for damages to the machines. Although we intend to vigorously defend the suit, we may not be successful in our defense.



We have commenced a lawsuit in Austria against Geld Bearbeitungs Systeme GES.M.B.H., an Austrian entity which had been manufacturing certain of our
CoinBank machines. As previously described in our SEC Reports, we have a five year licensing and manufacturing services agreement with Geld. We had previously entered into a letter of intent to acquire Geld 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. Although we believe, based upon advice of our Austrian
counsel, that we have a meritorious and strong claim, we may not be successful in our suit.



We are involved in a litigation titled 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, we first became
aware that an entity to which we had sold 23 CoinBank machines in October 1999 had filed suit against us in Louisiana court and obtained a default judgment against us. 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 us in California based on the judgment of the Louisiana court and a writ of execution was issued.



Upon learning of this matter, we immediately initiated legal
actions in Louisiana and California. At a hearing in the Louisiana court, we were granted a Temporary Restraining Order staying enforcement of the judgment. We contend that the Louisiana court had no jurisdiction over it and that we were never
properly served with either the original Louisiana lawsuit, the judgment issued by the Louisiana court or the California sister- state judgment. We also contend that Kane Cortes allegations are without merit and that his desire to return the
machines is a result of his failed business practices. The Company 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. In May 2003, the Louisiana Court decided in favor of the Company and vacated its previous judgment against us. The plaintiff, however, immediately refiled its lawsuit. The Company has entered into settlement negotiations and has
reached a tentative settlement agreement involving the resale of the Plaintiffs machines. There can be no assurance that the Company will be successful in completing the settlement arrangement satisfactorily.



On August 1, 2002, Cash Technologies, Inc. filed a lawsuit, captioned Cash
Technologies, Inc. v. McNeely and Willmon (Case No. BC 278823, Superior Court of the State of California), for breach of contract. In September 2002, Cash Technologies, Inc. loaned McNeely and Willmon the amount of $79,999. Pursuant to the
promissory



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notes the funds were due to be returned in December 2002. Despite repeated collection attempts, both McNeely and Willmon have refused to repay the funds. The
Company is seeking an amount in excess of $79,999. On September 25, 2002, McNeely and Willmon filed a cross complaint claiming $500,000 in compensatory damages. The next scheduled court hearing is in November, 2003. The Company believes that the
cross complaint has no merit. The Company is confident that it will prevail in this matter, however there can be no assurance of a successful outcome.



In June, 2002 we were notified that a vendor, Kiosk Information Systems, Inc. (KIS), had obtained a judgment against the Company for
$129,567.34 allegedly owed for services rendered in 1999, plus interest and attorneys fees. Upon learning of the judgment, we notified KIS that we have never been served with a lawsuit related to this matter and were unaware of the existence of the
case. Subsequent settlement negotiations resulted in a tentative settlement agreement with KIS on July 7, 2003. Under the agreement the Company will inspect the CoinBank machine inventory held at the KIS location. If the



Company agrees to pay $20,000 down and $3000 per unit to KIS for shipping 5
machines, KIS will hold the remainder of the judgment for a period of six months. The Company also has a period of 60 days to pay the entire original balance of $77,851 and KIS will release the entire inventory. If the settlement agreement is not
completed, it is likely that the Company will initiate legal action to set aside the judgment and take other appropriate measures. In such event the Company will incur substantial legal fees and there is no assurance that we would succeed in setting
aside the judgment or prevailing in any subsequent litigation.



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, 2003. Also the Company has not had any meetings of shareholders during the last three calendar years. The Company anticipates holding a
shareholders meeting within the next 3 to 6 months.



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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, 2003 |  | High                    |  | Low
|------------------------ |  | ----------------------- |  | ---
|Q1                       |  | June 1August 31        |  | $  
|Q2                       |  | September 1November 30 |  |    
|Q3                       |  | December 1February 28  |  |    
|Q4                       |  | March 1May 31          |  |    
|                         |  |                        
|Year Ending May 31, 2002 |  | High                    |  | Low
|Q1                       |  | June 1August 31        |  | $  
|Q2                       |  | September 1November 30 |  |    
|Q3                       |  | December 1February 28  |  |    
|Q4                       |  | March 1May 31          |  |    



On September 1, 2003,
the Company had a 52-week high and low closing price of $1.42 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 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 outstanding. During the fiscal year ended May 31, 2003, the Company paid dividends on outstanding Series B Preferred Stock of $107,213 with 99,084 shares of the Companys common stock. The Company also accrued dividends of
$341,634 for all Preferred Stock outstanding and incurred deemed dividend expense of $450,914 in conjunction with beneficial conversion recognized on warrants issued in various equity placements.



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Recent Sales of Unregistered Securities



In June 2002, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, we sold 1 unit at an
aggregate of $50,000 of its securities to 1 foreign investor. Each unit comprised of (i) 33,334 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. A deemed dividend benefit of $4,855 was recognized in conjunction with this placement.



In June 2002, the Company issued 60,400 shares of the Companys common stock and 50,400 common stock warrants with an exercise price of $2.00 and a
five (5) year life to a consultant in lieu of cash payment. The Company recorded a compensation expense charge of $90,600 as well as a beneficial conversion feature of $50,291.



In June 2002, the Company issued 55,000 shares of the Companys common stock to one of its developers in lieu of cash
payment for services rendered. The shares of common stock were valued at $1.36 per share.



During September 2002, shareholders converted 20,000 shares of Series B Redeemable Preferred Stock for 20,000 shares of the Companys Common Stock.



During September, 2002, the Company received $100,000 from a Series D warrant holder to exercise 200,000 warrants into
200,000 shares of the Companys common stock.



During October 2002, shareholders converted 10,500 of Series A Redeemable Preferred Stock for 10,500 shares of the Companys Common Stock.



In October 2002, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of
$250,000 of its securities to a shareholder. The unit comprised of (i) 312,500 shares of Common Stock and (ii); 150,000 common stock purchase warrants. The warrants have an exercise price of $0.95 per share and are exercisable for five years. A
deemed dividend expense of $23,055 was recognized in conjunction with this placement.



On February 28, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $200,000 of its securities to a shareholder. The unit comprised
of (i) 344,828 shares of Common Stock and (ii); 195,172 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years. A deemed dividend expense of $106,814 was recognized in conjunction
with this placement.



On February 28, 2003, in a private
transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $300,000 of its securities to a shareholder. The unit comprised of (i) 517,241 shares of Common Stock and (ii); 292,759 common stock
purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years. A deemed dividend expense of $160,219 was recognized in conjunction with this placement.



In the fiscal year ended May 31, 2003, in a private transaction under Section
4(2) of the Securities Act of 1933, as amended, the Company sold 307,428 shares of the Companys Common Stock to five (5) shareholders. The Company received gross proceeds of $168,879 for a purchase price ranging from $0.50 to $0.60 per share.
There were no warrants awarded in relation to this transaction.



During the fiscal year ended May 31, 2003, the Company received an additional $75,000 from 5 of its shareholders for an equity share in the Companys subsidiary of CT Holdings, LLC. As of May 31, 2003 the Company has received $443,000
in net proceeds and the shareholders own 13.65% while the Company owns 86.35% of CT Holdings, LLC. The proceeds from this have been used to further develop the BONUS product for CT holdings, LLC as well as working capital for CT holdings, LLC and
Cash Technologies, Inc.



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In May 2003 we completed a private placement offering with one of our shareholders consisting of
convertible notes and warrants under Section 4(2) of the Securities Act of 1933. The offering consisted of an unsecured convertible promissory note in the principal amount of $50,000, bearing interest at the rate of 5% per annum and redeemable
warrants to purchase 100,000 shares of common stock. The note is convertible into our Common Stock at the conversion rate of $0.50 per share. The Warrants are exercisable at a price of $1.00 per share. The Company also reduced the exercise price of
8,000 Series C warrants owned by the shareholder from $2.50 to $0.25 per share. The note is due and payable on May 2, 2004. A deemed dividend expense of $25,331 was recognized in conjunction with the warrants offered in this placement.



In May 2003 we completed a private placement offering with one of our
shareholders consisting of convertible notes and warrants under Section 4(2) of the Securities Act of 1933. The offering consisted of an unsecured convertible promissory note in the principal amount of $20,750, bearing interest at the rate of 5% per
annum and redeemable warrants to purchase 30,000 shares of common stock. The note is convertible into our Common Stock at the conversion rate of $0.50 per share. The Warrants are exercisable at a price of $0.65 per share. The Company also reduced
the exercise price of 45,000 Series B warrants owned by the shareholder from $4.50 to $0.65 per share which were exercised immediately for gross proceeds to the Company of $29,250. The note is due and payable on May 8, 2008. A deemed dividend
expense of $25,901 was recognized in conjunction with the warrants offered in this placement.



On June 1, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $50,000 of its securities to a shareholder. The unit comprised of
100,000 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On June 2, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $25,000
of its securities to a shareholder. The unit comprised of (i) 38,462 shares of Common Stock and (ii); 15,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



On June 12, 2003, in a private transaction under Section 4(2)
of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $75,000 of its securities to a shareholder. The unit comprised of (i) 150,000 shares of Common Stock and (ii); 75,000 common stock purchase warrants. The warrants
have an exercise price of $1.00 per share and are exercisable for five years.



In July, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 26 units at an aggregate of $10,000 of its securities to 7 shareholders. The unit comprised of (i)
15,385 shares of Common Stock and (ii); 5,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



On July 30, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1
unit at an aggregate of $50,000 of its securities to a shareholder. The unit comprised of 76,924 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On September 2, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 5 units at an aggregate of $25,000 of its securities to 2 European shareholders. The unit comprised of (i) 38,462 shares of Common Stock and (ii); 12,821 common stock purchase warrants. The
warrants have an exercise price of $1.00 per share and are exercisable for five years.



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



Overview



Cash Technologies, Inc., is a Delaware Corporation, incorporated in August 1995. Unless the context otherwise requires,
references herein to us or we 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; CoinBank Automation Handels GmbH, Salzburg, Austria incorporated in February, 1998; Cintelia Systems, Inc., incorporated in December, 2001 and CT
Holdings, LLC incorporated in June 2002 of which the Company owns 86.35%.



The Companys independent certified public accountant included an explanatory paragraph in its report for the year ended May 31, 2003, which indicated a substantial doubt as to the ability of the Company to
continue as a going concern. This concern is primarily due to substantial debt service requirements and working capital needs. See independent certified public accountants letter.



Systems development expenses, marketing expenses, executive salaries and general and other administrative costs are expected
to increase as we continue to develop our EMMA Platform. Inasmuch as we will continue to have a high level of operating expenses, we will continue to be required to make certain up-front expenditures in connection with our proposed CoinBank machine
sales effort and development of EMMA transaction processing system. We anticipate that losses will continue for the foreseeable future. Our expenses have exceeded net revenues since inception. For the fiscal years ended May 31, 2003 and 2002, we
sustained net losses of $4.025 million and $3.85 million, respectively.



Gross profit for the year ended May 31, 2003, was $74,439 or 25.22% of net revenues, as compared to a $125,797 or 32.6% of net revenues for the year ended May 31, 2002. The decrease in gross profit was primarily attributable to a decrease
in currency processed.



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. As of May 31, 2003, capitalized software costs amounted to $2,005,836. Technological feasibility was achieved in September of 1999 and commencing October 1, 1999 all expenses related to EMMA
software development had been capitalized. As of December 31, 2001, the Company had capitalized $2,771,536 in development and related costs. The EMMA product was available for release to the public in January 2002 thus all development costs since
have been expensed including $287,000 for the fiscal year ended May 31, 2003.



Amortization of the capitalized software commenced on January 1, 2002. Amortization had been calculated over a seven (7) year period for the quarter ended February 28, 2002 resulting in an amortization expense of
$65,989. Management changed the amortization period for capitalized software, to five (5) years starting March 1, 2002, primarily to approximate the estimated period over which the business brought about by the technology will expand into its
expected capacity. As of March 1, 2002, net unamortized capitalized software amounted to $2,705,547. The unamortized cost as of March 1, 2002 is being amortized over the remaining revised estimated life. The change resulted in an amortization
expense of $205,931, an increase of $40,959 ($0.01 per share) from the original estimated amortization period, for the year ended May 31, 2002. During the fiscal year ended May 31, 2003, the Company amortized an additional $559,768 of capitalized
software.



The current EMMA asset is currently valued at
$2,005,836, which reflects the costs incurred by the Company in developing the asset, as well as the net realizable value estimated in managements determination.



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Management believes that its estimates reflect its ability, based upon managements internal projections, to obtain a recovery on the asset. These
estimates assume that recovery of the value of the asset will be obtained commencing in the early half of 2004 calendar year, and will be obtained fully by the end of the calendar year 2006. These projections and estimates are subject to numerous
contingencies, including, without limitation, the condition of the economy and the ability of corporate entities to purchase software such as the EMMA software.



In its projections, management has calculated a transaction fee based upon the use of the technology through placement on mobile trucks operated by an
independent third party. The transaction charge for use through ATM machines would be higher, because the services available through an ATM located in a bank office would be greater and the expense to the Company is also greater. The projected
transaction fee is based upon managements discussions with potential customers, including bank and non-bank ATM service providers. Management has had significant negotiations with representatives of various large financial institutions
regarding the installation of EMMA based products. However, to date the Company has not entertained any definitive agreements with any institution. According to a study entitled the Use of Checks and other Non-Cash Payments Instruments in the
United States prepared by the Federal Reserve, there were 42.5 billion checks processed by financial institutions in the United States during the year 2000 about a third of which are of the type that the Companys products are intended to
help process.



Much of our SG&A costs are fixed in nature,
therefore, as volume of transactions and revenues increase, the SG&A does not increase proportionately.



There can be no assurance that managements estimates will prove accurate, and investors should be aware that in the event these estimates are
inaccurate, a write down of all or a portion of this asset may be required.



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



In
1996, we began our 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, we discovered 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 wireless devices. In December of 1997, we filed a patent application describing the transaction processing and networking technologies, which resulted in the issuance of patent, number 6,308,887, by the
U.S. Patent and Trademark Office on October 30, 2001. The technology, which was later named EMMA (E-commerce Message Management Architecture), allows for the seamless integration of conventional ATM and credit card networks with non-bank networks
and the Internet.



In 1995, we began our development of
CoinBank® self-service coin counting machines,
distributed through our 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 the disposing of their accumulated loose coin without the need for pre-sorting or wrapping.



During the fiscal year ended May 31, 2003, our 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. We concluded that its
free-placement program should be supplanted by direct sales of these machines to retail store chains and removed substantially all of our free-placement machines from operation. We are marketing the machines to other equipment manufacturer
OEM customers (manufacturers of cash handling equipment), companies with existing equipment distribution and service



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channels and directly to retailers and financial institutions. Although we will continue our direct sales approach with respect to our CoinBank machines, we
intend to focus substantially all of its efforts and operations on the continued development and deployment of the EMMA technology.



Revenues generated from CoinBank machines accounted for approximately 83% of net revenues for the fiscal year ended May 31, 2003, compared to
approximately 7% of net revenues generated from currency processing and 10% from EMMA related services. Although there can be no assurance, we anticipate that the revenue associated with processing fees derived from EMMA transaction processing
system will become the primary source of our future revenues.



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Fiscal Year Ended May 31, 2003, Compared to Fiscal Year Ended May 31, 2002



For the fiscal year ended May 31, 2003 net revenues fro continuing
operations amounted to $267,576, as compared to $143,936 for the fiscal year ended May 31, 2002. The increase was directly attributable to the increase in the number of CoinBank machines sold.



Cost of revenues for the year ended May 31, 2003, was $193,632 compared to
$112,077 in fiscal year 2002. The increase in direct costs was primarily the result of the increased costs associated with sale of CoinBank machines.



Gross profit for the year ended May 31, 2003, was $73,944, as compared to a $31,859 for the year ended May 31, 2002. The increase in gross profit was
primarily attributable to an increase in the sale of CoinBank machines.



Selling, general and administrative expenses for the year ended May 31, 2003, increased to $2,487,714 compared to expenses of $2,175,559 for the fiscal year 2002. These expenses consisted primarily of wages (and wage related costs), outside
contractor expenses, travel/promotional expenses, professional services and facilities/office related expenses.



Research and development expenses for the fiscal year ended May 31, 2003 amounted to $287,000 compared to $183,756 for the fiscal year ended May 31, 2002.
The increase is largely due the fact that development expenses were capitalized up until December 2001.



Depreciation and amortization expenses increased to $584,731 during fiscal 2003 from $290,490 in fiscal 2002. The increase was primarily attributable to
an increase in amortization expenses recognized during the 2003 fiscal year of $559,768 compared to $205,931 in 2002.



Interest expense for the fiscal years 2003 and 2002 was $767,616 and $1,230,522, respectively. The decrease was primarily attributable to decrease in
interest recognized in relation to the deferment of the GE Capital notes payable.



As a result of the foregoing, net losses for the years ended May 31, 2003 and 2002 were $4,022,425 and $3,746,357, respectively.



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Fiscal Year Ended May 31, 2002, Compared to Fiscal Year Ended May 31, 2001



Gross revenues include the value of the coins and currency processed for the
fiscal year ended 2002 and amounted to $17,052,225 compared to $22,735,599 for fiscal year 2001. The decrease in coin and currency processed was primarily attributable to a decrease in the number of cash processing customers and the decrease in MTA
currency processed during fiscal 2002. As a result of the reduction in currency processed, net revenues, (as a percentage of gross revenues) for the fiscal year 2002, decreased to $385,977 or 2.3% of gross revenues compared to $491,180 or 2.2% of
gross revenues for fiscal year 2001.



Cost of revenues for the
year ended May 31, 2002, was $260,180 or 1.5% of gross revenue compared to $325,081 or 1.4% of gross revenue in fiscal year 2001. 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, 2002, was $125,797 or 32.6% of net revenues, as compared to a $166,099 or 33.8% of net revenues for the year ended
May 31, 2001. The decrease in gross profit was primarily attributable to a decrease in currency processed.



Selling, general and administrative expenses for the year ended May 31, 2002, decreased to $2,360,363 compared to expenses of $3,179,488 for the fiscal
year 2001. 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.



The Company has taken an impairment charge in the fiscal year ended May 31, 2002 for the carrying value of its CoinBank machines. Impairment on coin
machines was $79,245. The impairment was taken due to low inventory turnover for the coin machines. In future periods, additional impairment may be taken based on future sales of coin machines. As of May 31, 2002 the coin machines were valued at
$1,029,292.



Depreciation and amortization expenses increased
to $304,325 during fiscal 2002 from $287,904 in fiscal 2001. The increase was primarily attributable to an increase in amortization expenses recognized during the 2002 fiscal year in relation to capitalized software offset by decrease in
amortization expense related to the January 2000 debt-offering.



Interest expense for the fiscal years 2002 and 2001 was $1,231,814 and $953,323, respectively. The increase was primarily attributable to additional interest recognized in relation to the deferment of the GE Capital notes payable.



As a result of the foregoing, net losses for the years ended
May 31, 2002 and 2001 were $3,852,351 and $4,255,570, respectively.



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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, 2003, the Company had a working capital deficit of $12,653,698 compared to a working capital deficit of $8,509,738 for 2002. At August 18, 2003, the Company had a cash balance of approximately
$175,000. 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. Furthermore, the Companys contract with
the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which will result in a significant reduction in the Companys gross revenue in the future. As of September 1, 2003, the Company does not
have any cash processing customers.



Net cash used in operating
activities was $1,840,468 for the year ended May 31, 2003 as compared to net cash used in operating activities of $1,926,946 for the year ended May 31, 2002.



Net cash provided by investing activities was $2,876 for the fiscal year ended May 31, 2003, as compared to net cash used in investing activities of
$425,751 for the fiscal year ended May 31, 2002. The dramatic decrease in net cash used in investing activities was primarily attributable to a decrease in capitalized software of $408,786.



Net cash provided by financing activities for the year ended May 31, 2003 was
$1,419,762, as compared to net cash used of $2,772,402 for the year ended May 31, 2002. The amount of $1,419,762 primarily consists of proceeds from the sale of common stock of $968,879 and proceeds from short-term debt of $381,019.



In 1997, we entered into a credit agreement with G.E. Capital Corporation
(G.E.) pursuant to which we borrowed $5,500,000 for the purchase of CoinBank component equipment, working capital and general corporate purposes. On September 29, 2000 the Company entered into an agreement with GE to defer principal
payments on the debt for twelve (12) months and to defer interest payments for six (6) months. As consideration for the extension, the Company and GE have agreed to increase the principal portion of the loan by $500,000 and the Company recorded
deferred financing fees, which were amortized over an eighteen (18) month period. The Company and G.E. Capital had negotiated another waiver agreement as of September 13, 2001 pursuant to which G.E. Capital agreed to a six (6) month deferral of
interest payments and a twelve (12) month deferral of principal payments provided (i) we granted G.E. Capital a lien on all of its assets (ii) we paid G.E. Capital 60% of all proceeds from the sale of its CoinBank machines (iii) we obtained
subordination agreements from all of our noteholders prior to December 30, 2001 whereby the noteholders subordinate their lien to that of G.E. Capital (iv) the sum of $250,000 is added to the outstanding principal amount of the loan, which is being
amortized over a twelve (12) month period. On September 27, 2002 the Company entered into an agreement with GE to pay the total debt outstanding in twelve (12) monthly payments beginning October 15, 2002 of which the first eleven (11) consisting of
interest only and the payment twelve (12) consisting of all outstanding principal, interest and fees. The Company agreed to (i) pay 9.5% per annum for the first six (6) payments (ii) pay 11.5% per annum for the last six (6) payments (iii) a minimum
of 18% if the Company was to become in default (iv) 5% late fee if a payment is received ten (10) days after the payment date and (v) 90% of all gross proceeds received from the sale of presently owned CoinBank machines. Since 2000, the Company has
entered into the first of several loan modifications with G.E. which have been paid as agreed and the current modification shall expire in March, 2004. As of May 31, 2003, we owed $3,858,741, which includes the principal, financing fees and unpaid
interest. The Company is currently negotiating with G.E. Capital to extend the principal only payments for another 6 months there can be no assurance though.



In January 2000, we completed a private placement offering of convertible notes and warrants under Section 4(2) of the Securities Act of 1933. The
offering consisted of units, each unit comprised of a secured



31



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convertible promissory note in the principal amount of $50,000, bearing interest at the rate of 10% per annum and Series
B Redeemable Warrants to purchase 5,000 shares of common stock. GunnAllen Financial, Inc., one of our investment bankers and an underwriter in our initial public offering, was engaged as placement agent for this offering. We received gross proceeds
from this offering of $3,362,000 from the sale of 67.2 Units. As a result of this offering, we issued notes in the aggregate principal amount of $3,362,000 and 336,200 Series B Common Stock Purchase Warrants The notes were originally convertible
into our Common Stock at the conversion rate of $9.50 per share. The Series B Warrants were originally exercisable at a price of $13.00 per share. The notes were originally due and payable on July 31, 2001. The notes were secured by a first priority
lien on all of our assets.



Since July 31, 2001, some of the
notes have been in default, and some have been restructured. Under the restructuring, the notes were extended for two (2) years to July 2003, the noteholders agreed to surrender all old warrants priced at $13.50 per share to receive 2 replacement
warrants for every old warrant surrendered. The new warrants were vested immediately, have a life of 5 years and were exercisable at $1.35 thru December 31, 2001, $2.20 through January 15, 2002 and $4.50 thereafter. In August, 2003, the Company
proposed the conversion to equity of the $3.3 million in secured convertible debt to the noteholders, to be consummated in September, 2003. Under the terms of the agreement the conversion price of the notes will be reduced to $2.50 plus the exercise
price of the warrants will also be reduced to $0.65 per share. As of August 25, 2003, noteholders representing approximately 27% of the total value of notes have converted to equity. Noteholders representing an additional 48% of the total value of
notes have given non-binding written indications of their intent to convert on the terms proposed upon receipt of formal documentation (see Risk Factors).



In June 2002, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, sold 1 unit at an aggregate of $50,000 of its
securities to 1 foreign investor. Each unit comprised of (i) 33,334 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. A deemed dividend
benefit of $4,855 was recognized in conjunction with this placement.



In June 2002, the Company issued 60,400 shares of the Companys common stock and 50,400 common stock warrants with an exercise price of $2.00 and a five (5) year life to a consultant in lieu of cash payment. The Company recorded a
compensation expense charge of $90,600 as well as a beneficial conversion feature of $50,291.



In June 2002, the Company issued 55,000 shares of the Companys common stock to one of its developers in lieu of cash payment for services rendered. The shares of common stock were valued at $1.36 per share.



During September 2002, shareholders converted 20,000 shares of
Series B Redeemable Preferred Stock for 20,000 shares of the Companys Common Stock.



During September, 2002, the Company received $100,000 from a Series D warrant holder to exercise 200,000 warrants into 200,000 shares of the Companys common stock.



During October 2002, shareholders converted 10,500 of Series A Redeemable
Preferred Stock for 10,500 shares of the Companys Common Stock.



In October 2002, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $250,000 of its securities to a shareholder. The unit comprised of (i) 312,500 shares of
Common Stock and (ii); 150,000 common stock purchase warrants. The warrants have an exercise price of $0.95 per share and are exercisable for five years. A deemed dividend expense of $23,055 was recognized in conjunction with this placement.



32



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On February 28, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as
amended, the Company sold 1 unit at an aggregate of $200,000 of its securities to a shareholder. The unit comprised of (i) 344,828 shares of Common Stock and (ii); 195,172 common stock purchase warrants. The warrants have an exercise price of $1.00
per share and are exercisable for five years. A deemed dividend expense of $106,814 was recognized in conjunction with this placement.



On February 28, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of
$300,000 of its securities to a shareholder. The unit comprised of (i) 517,241 shares of Common Stock and (ii); 292,759 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years. A
deemed dividend expense of $160,219 was recognized in conjunction with this placement.



In the fiscal year ended May 31, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 307,428 shares of the Companys Common Stock to five (5)
shareholders. The Company received gross proceeds of $168,879 for a purchase price ranging from $0.50 to $0.60 per share. There were no warrants awarded in relation to this transaction.



During the fiscal year ended May 31, 2003, the Company received an additional $75,000 from 5 of its shareholders for an
equity share in the Companys subsidiary of CT Holdings, LLC. As of May 31, 2003 the Company has received $443,000 in net proceeds and the shareholders own 13.65% while the Company owns 86.35% of CT Holdings, LLC. The proceeds from this have
been used to further develop the BONUS product for CT holdings, LLC as well as working capital for CT holdings, LLC and Cash Technologies, Inc.



In May 2003 we completed a private placement offering with one of our shareholders consisting of convertible notes and warrants under Section 4(2) of the
Securities Act of 1933. The offering consisted of an unsecured convertible promissory note in the principal amount of $50,000, bearing interest at the rate of 5% per annum and redeemable warrants to purchase 100,000 shares of common stock. The note
is convertible into our Common Stock at the conversion rate of $0.50 per share. The Warrants are exercisable at a price of $1.00 per share. The Company also reduced the exercise price of 8,000 Series C warrants owned by the shareholder from $2.50 to
$0.25 per share. The note is due and payable on May 2, 2004. A deemed dividend expense of $25,331 was recognized in conjunction with the warrants offered in this placement.



In May 2003 we completed a private placement offering with one of our shareholders consisting of convertible notes and
warrants under Section 4(2) of the Securities Act of 1933. The offering consisted of an unsecured convertible promissory note in the principal amount of $20,750, bearing interest at the rate of 5% per annum and redeemable warrants to purchase 30,000
shares of common stock. The note is convertible into our Common Stock at the conversion rate of $0.50 per share. The Warrants are exercisable at a price of $0.65 per share. The Company also reduced the exercise price of 45,000 Series B warrants
owned by the shareholder from $4.50 to $0.65 per share which were converted immediately for gross proceeds to the Company of $29,250. The note is due and payable on May 8, 2008. A deemed dividend expense of $25,901 was recognized in conjunction with
the warrants offered in this placement.



On June 1, 2003, in a
private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $50,000 of its securities to a shareholder. The unit comprised of 100,000 shares of Common Stock. There were no warrants
awarded in conjunction with this offering.



On June 2,
2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $25,000 of its securities to a shareholder. The unit comprised of (i) 38,462 shares of Common Stock and (ii);
15,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



33



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On June 12, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended,
the Company sold 1 unit at an aggregate of $75,000 of its securities to a shareholder. The unit comprised of (i) 150,000 shares of Common Stock and (ii); 75,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share
and are exercisable for five years.



In July, 2003, in
a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 26 units at an aggregate of $10,000 of its securities to 7 shareholders. The unit comprised of (i) 15,385 shares of Common Stock and (ii); 5,000
common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



On July 30, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of
$50,000 of its securities to a shareholder. The unit comprised of 76,924 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On September 2, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company
sold 5 units at an aggregate of $25,000 of its securities to 2 European shareholders. The unit comprised of (i) 38,462 shares of Common Stock and (ii); 12,821 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and
are exercisable for five years.



34



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CRITICAL ACCOUNTING POLICIES



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.



Gross revenues include the value of currency processed and do not represent revenue under generally accepted accounting principles.



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 fourth quarter of fiscal year 2002, management evaluated the estimated fair market value of these machines and subsequently recorded an impairment loss of $79,245. As of May 31, 2003, the
carrying value of the CoinBank machines is $862,090.



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.



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 is less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.



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. As of May 31, 2002, capitalized software costs amounted to $2,771,536 of which $408,787 and $1,201,535 were capitalized in fiscal years ended May 31, 2002 and 2001, respectively. Technological feasibility
was achieved in September of 1999 and from that point forward all expenses related to the EMMA software development had been capitalized. As of December 31, 2001, the Company had capitalized $2,771,536 in development and related costs. The EMMA
product was available for release to the public in January 2002 thus all development costs since have been expensed.



Amortization commenced on January 1, 2002. The amortization was over a seven (7) year period for the quarter ended February 28, 2002 resulting in an
amortization expense of $65,989. The amortization period for capitalized software was changed to five (5) years starting March 1, 2002, primarily to approximate the estimated period over which the business brought about by the technology will expand
into its expected capacity. As of March 1, 2002, net unamortized capitalized software amounted to $2,705,547. The unamortized cost as of March 1, 2002 is being amortized over the remaining revised estimated life. The change resulted in an
amortization expense of $205,931, an increase of $40,959 ($0.01 per share) from the original estimated amortization period, for the year ended May 31, 2002.



35



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NEW ACCOUNTING PRONOUNCEMENTS



The Financial Accounting Standards Board (FASB) issued in June 2002, Statement of Financial Accounting Standards No. 146
(SFAS 146), Accounting for Costs Associated with Exit or Disposal Activities. The provisions of SFAS 146 are effective for exit or disposal activities initiated after December 31, 2002. SFAS 146 did not affect the Companys financial statements
and notes to financial statements.



In December 2002, the FASB
issued Statement of Financial Accounting Standards No. 148 (SFAS 148), Accounting for Stock-Based Compensation Transition and Disclosure an Amendment of FASB Statement No. 123. SFAS 148 provides alternative methods of transition for companies making
a voluntary change to fair value-based accounting for stock-based employee compensation. The Company continues to account for its stock options under the intrinsic value recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. Under the intrinsic value method, no stock-based employee compensation cost is recognized in net income because the exercise price of all options granted was less than the market price of the
underlying common stock on the grant date. Effective for interim periods beginning after December 15, 2002, SFAS 148 also requires disclosure of pro-forma results on a quarterly basis as if the company had applied the fair value recognition
provisions of SFAS 123.



36



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ITEM 7 CONTROLS AND PROCEDURES



CONTROLS AND PROCEDURES

Evaluation
of Disclosure Controls and Procedures:



Our management, under the
supervision and with the participation of our Chief Executive Officer and Controller, conducted an evaluation of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)) within 90 days of
the filing date of this Annual Report on Form 10-KSB. Based on their evaluation, our chief executive officer and controller have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that all
material information required to be filed in this Annual Report on Form 10-KSB has been made known to them.



Additionally, in response to the passage of the Sarbanes-Oxley Act of 2002, our Board of directors and management have, among other actions, formed a Disclosure Committee comprised of various members of our management
team. The Disclosure Committee will be charged with, among other things, reviewing and developing policies and procedures to enhance our disclosure controls and procedures as well as with reviewing our periodic reports and other public disclosures.



The Board of Directors adopted, effective, August 25, 2003 a Code of Ethics
for its Chief Executive Officer and Chief Financial Officer, as well as a Code of Ethics for its employees. These Codes are intended to ensure compliance with rules and regulations, promote honest and ethical behavior and to prevent wrongdoing.



Other than as described above, there have been no significant changes,
including corrective actions with regard to significant deficiencies or material weaknesses in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date set forth above.



37



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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, 2003 and 2002, and the related consolidated statements of operations, stockholders deficiency and cash flows for the years then ended. These financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Cash Technologies, Inc. and subsidiaries as of May 31, 2003 and 2002 and the results of their operations and cash flows for the years 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, 2003, 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

August 25, 2003.



38



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CASH TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                    |  | MAY 31, 2003 |             |   | MAY 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ------------ | -
|ASSETS                                                                                                                                                              |  |              |             |   |              |  
|CURRENT ASSETS:                                                                                                                                                     |  |              |             |   |              |  
|Cash and cash equivalents                                                                                                                                           |  | $            | 1,874       |   |              | $
|Accounts receivable                                                                                                                                                 |  |              | 2,484       |   |              |  
|Prepaid expenses and other current assets                                                                                                                           |  |              | 4,057       |   |              |  
|Other receivable (net of allowance $21,000)                                                                                                                         |  |              | 28,035      |   |              |  
|                                                                                                                                                                    |  |              |             |   |              |  
|                                                                                                                                                                    |  |             
|Total Current Assets                                                                                                                                                |  |              | 36,450      |   |              |  
|                                                                                                                                                                    |  |             
|CoinBank machines held for sale (Note 1(j))                                                                                                                         |  |              | 862,090     |   |              |  
|PROPERTY AND EQUIPMENT (net) (Note 2 )                                                                                                                              |  |              | 29,051      |   |              |  
|CAPITALIZED SOFTWARE COSTS (Note 1(r))                                                                                                                              |  |              | 2,005,836   |   |              |  
|DEFERRED FINANCE FEES (Note 3)                                                                                                                                      |  |              |            |   |              |  
|OTHER ASSETS                                                                                                                                                        |  |              | 69,187      |   |              |  
|                                                                                                                                                                    |  |              |             |   |              |  
|TOTAL ASSETS                                                                                                                                                        |  | $            | 3,002,614   |   |              | $
|                                                                                                                                                                    |  |              |             |   |              |  
|LIABILITIES AND STOCKHOLDERS DEFICIENCY                                                                                                                            |  |              |             |   |              |  
|CURRENT LIABILITIES:                                                                                                                                                |  |              |             |   |              |  
|Current maturities of Notes Payable (Note 3)                                                                                                                        |  | $            | 4,371,527   |   |              | $
|Due to Officers and Directors (Note 9)                                                                                                                              |  |              | 121,085     |   |              |  
|Convertible debt (Note 4)                                                                                                                                           |  |              | 4,362,731   |   |              |  
|Equity Placement Liability                                                                                                                                          |  |              |            |   |              |  
|Due to Shareholders (Note 4)                                                                                                                                        |  |              | 70,750      |   |              |  
|Accounts payable                                                                                                                                                    |  |              | 1,062,170   |   |              |  
|Accrued liabilities                                                                                                                                                 |  |              | 1,493,209   |   |              |  
|Bank overdraft                                                                                                                                                      |  |              | 197,800     |   |              |  
|Dividend payable                                                                                                                                                    |  |              | 1,010,876   |   |              |  
|                                                                                                                                                                    |  |              |             |   |              |  
|                                                                                                                                                                    |  |             
|Total Current Liabilities                                                                                                                                           |  |              | 12,690,148  |   |              |  
|                                                                                                                                                                    |  |             
|Long-Term Notes Payable (Note 3)                                                                                                                                    |  |              |             |   |              |  
|Long-Term Convertible Debt (Note 4)                                                                                                                                 |  |              |            |   |              |  
|                                                                                                                                                                    |  |             
|TOTAL LIABILITIES                                                                                                                                                   |  |              | 12,690,148  |   |              |  
|                                                                                                                                                                    |  |              |             |   |              |  
|COMMITMENTS & CONTINGENCIES (Note 10)                                                                                                                               |  |              |            |   |              |  
|                                                                                                                                                                    |  |             
|MINORITY INTEREST                                                                                                                                                   |  |              | 22,044      |   |              |  
|                                                                                                                                                                    |  |             
|STOCKHOLDERS DEFICIENCY: (Note 6)                                                                                                                                  |  |              |             |   |              |  
|                                                                                                                                                                    |  |             
|8% Cumulative Redeemable Preferred Stock, $0.01 par value; 1,000,000 shares authorized; 645,966 and 676,466 shares issued and
outstanding at May 31, 2003 and 2002. |  |              | 1,758,688   |   |              |  
|                                                                                                                                                                    |  |             
|Common Stock, $0.01 par value, 20,000,000 shares authorized, 8,511,254 and 6,225,676 issued and outstanding at May 31, 2003 and
2002.                               |  |              | 85,191      |   |              |  
|                                                                                                                                                                    |  |             
|Additional Paid-In-Capital                                                                                                                                          |  |              | 22,753,598  |   |              |  
|Accumulated Deficit                                                                                                                                                 |  |              | (34,307,055 | ) |              |  
|                                                                                                                                                                    |  |              |             |   |              |  
|                                                                                                                                                                    |  |             
|Total stockholders deficiency                                                                                                                                      |  |              | (9,709,578  | ) |              |  
|                                                                                                                                                                    |  |              |             |   |              |  
|                                                                                                                                                                    |  |             
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY                                                                                                                      |  | $            | 3,002,614   |   |              | $
|                                                                                                                                                                    |  |              |             |   |              |  



See notes to
consolidated financial statements



39



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CASH TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                      |  | FISCAL YEAR ENDEDMAY 31, |           
|--------------------------------------------------------------------- |  | ------------------------ | ----------
|                                                                      |  | 2003                     |           
|NET REVENUES                                                          |  | $                        | 267,576   
|COST OF REVENUES                                                      |  |                          | 193,632   
|                                                                      |  |                          |           
|GROSS PROFIT (LOSS)                                                   |  |                          | 73,944    
|SELLING, GENERAL, & ADMINISTRATIVE EXPENSE                            |  |                          | 2,487,714 
|RESEARCH AND DEVELOPMENT                                              |  |                          | 287,000   
|IMPAIRMENT ON COIN MACHINES                                           |  |                          |          
|DEPRECIATION & AMORTIZATION EXPENSE                                   |  |                          | 584,731   
|                                                                      |  |                          |           
|OPERATING LOSS                                                        |  |                          | (3,285,501
|INTEREST EXPENSE                                                      |  |                          | 767,616   
|                                                                      |  |                          |           
|LOSS BEFORE INCOME TAXES                                              |  |                          | (4,053,117
|INCOME TAXES                                                          |  |                          | 2,400     
|MINORITY INTEREST                                                     |  |                          | 33,092    
|NET LOSSCONTINUING OPERATIONS                                        |  |                          | (4,022,425
|NET LOSSDISCONTINUING OPERATIONS                                     |  |                          | (25,920   
|                                                                      |  |                          |           
|TOTAL NET LOSS                                                        |  | $                        | (4,048,345
|                                                                      |  |                          |           
|Dividends & deemed dividends                                          |  | $                        | 792,548   
|Net loss allocable to common shareholders                             |  | $                        | (4,840,893
|Basic and diluted net loss per shareContinuing Operations            |  | $                        | (0.68     
|Basic and diluted net loss per shareDiscontinuing Operations         |  | $                        | (0.00     
|Basic and diluted weighted average shares of common stock outstanding |  |                          | 7,121,257 
|                                                                      |  |                          |           



See notes to
consolidated financial statements



40



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CASH TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS (DEFICIENCY)

Years ended May 31, 2002 and 2003



|                                                                                              |  | Common Stock |  | Preferred Stock |        |        | AdditionalPaid-inCapital |   | AccumulatedDeficit |   |            | TotalStockholdersEquity(Deficiency) | 
|--------------------------------------------------------------------------------------------- |  | ------------ |  | --------------- | ------ | ------ | ------------------------ | - | ------------------ | - | ---------- | ------------------------------------ | 
|                                                                                              |  | Shares       |  | Amount          |        | Shares |                          |   | Amount             |   |            |                                      | 
|Balance May 31, 2001                                                                          |  | 3,551,111    |  | $               | 35,488 |        | 950,144                  |   |                    | $ | 3,009,063  |                                      | 
|Issuance of redeemable Preferred Stock                                                        |  |             |  |                 |       |        | 102                      |   |                    |   | 775,500    |                                      | 
|Beneficial conversions of Series warrants issued in conjunction with Preferred Stock issuance |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Conversion from Preferred to Common Stock                                                     |  | 1,369,610    |  |                 | 13,697 |        | (273,780                 | ) |                    |   | (1,879,875 | )                                    | 
|Sale of Common Stock                                                                          |  | 1,021,639    |  |                 | 10,316 |        |                         |   |                    |   |           |                                      | 
|Beneficial conversions of warrants issued in conjunction with sale of Common Stock            |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Common Stock payments to consultants                                                          |  | 130,000      |  |                 | 1,300  |        |                         |   |                    |   |           |                                      | 
|Beneficial conversions of warrants issued to consultants                                      |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Interest paid with shares of Common Stock                                                     |  | 53,077       |  |                 | 531    |        |                         |   |                    |   |           |                                      | 
|Dividends paid with shares of Common Stock                                                    |  | 95,239       |  |                 | 953    |        |                         |   |                    |   |           |                                      | 
|Warrant conversion                                                                            |  | 5,000        |  |                 | 50     |        |                         |   |                    |   |           |                                      | 
|Warrant repricing                                                                             |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Dividends on Preferred Stock                                                                  |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Net loss                                                                                      |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Balance May 31, 2002                                                                          |  | 6,225,676    |  | $               | 62,335 |        | 676,466                  |   |                    | $ | 1,904,688  |                                      | 
|                                                                                              |  |              |  |                 |        |        |                          |   |                    |   |            |                                      | 
|Common Stock payments to consultants                                                          |  | 275,663      |  |                 | 2,756  |        |                         |   |                    |   |           |                                      | 
|Beneficial conversions of warrants issued to consultants                                      |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Unit purchaseCommon Stock                                                                    |  | 1,515,330    |  |                 | 15,154 |        |                         |   |                    |   |           |                                      | 
|Beneficial conversion of warrantsunit purchase                                               |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Conversion from Preferred Stock to Common Stock                                               |  | 30,500       |  |                 | 305    |        | (30,500                  | ) |                    |   | (146,000   | )                                    | 
|Warrant conversion to Common Stock                                                            |  | 365,000      |  |                 | 3,650  |        |                         |   |                    |   |           |                                      | 
|Beneficial conversionrepricing of noteholders warrants                                       |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Beneficial conversion of warrantsconvertible notes                                           |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Subsidiary APIC                                                                               |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Dividends Paid With Common Stock                                                              |  | 99,084       |  |                 | 991    |        |                         |   |                    |   |           |                                      | 
|Dividends on Preferred Stock                                                                  |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Net Loss                                                                                      |  |             |  |                 |       |        |                         |   |                    |   |           |                                      | 
|Balance May 31, 2003                                                                          |  | 8,511,253    |  |                 | 85,191 |        | 645,966                  |   |                    | $ | 1,758,688  |                                      | 
|                                                                                              |  |              |  |                 |        |        |                          |   |                    |   |            |                                      | 



41



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CASH TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASHFLOWS



|                                                      |  | FISCAL YEAR ENDEDMAY 31 |           
|----------------------------------------------------- |  | ----------------------- | ----------
|                                                      |  | 2003                    |           
|OPERATING ACTIVITIES:                                 |  |                         |           
|Net loss                                              |  | $                       | (4,048,345
|Adjustments to reconcile net loss to net cash used by |  |                         |           
|operating activities:                                 |  |                         |           
|Minority interest                                     |  |                         | 22,044    
|Amortization of discount on convertible debt          |  |                         |          
|Amortization of capitalized software                  |  |                         | 559,768   
|Noncash deemed interest expense                       |  |                         | 83,333    
|Common Stock issued in exchange for legal services    |  |                         |          
|Loss on collection of accounts receivable             |  |                         |          
|Noncash compensation expense                          |  |                         | 281,927   
|Depreciation expense                                  |  |                         | 24,963    
|Impairment of CoinBank machines held for sale         |  |                         |          
|Changes in operating assets and liabilities:          |  |                         |           
|Account receivable                                    |  |                         | 94,849    
|CoinBank machines held for sale                       |  |                         | 167,202   
|Prepaid expenses and other current assets             |  |                         | (4,057    
|Cash inventory                                        |  |                         |          
|Other assets                                          |  |                         | (66,187   
|Accounts payable                                      |  |                         | 101,125   
|Accrued interest                                      |  |                         | 404,446   
|Accrued expenses and other current liabilities        |  |                         | 538,463   
|                                                      |  |                         |           
|Net cash used in operating activities                 |  |                         | (1,840,468
|                                                      |  |                         |           
|INVESTING ACTIVITIES:                                 |  |                         |           
|Purchase of property and equipment                    |  |                         | 2,876     
|Proceeds from sale of asset                           |  |                         |          
|Capitalized software                                  |  |                         |          
|                                                      |  |                         |           
|Net cash provided by (used in) investing activities   |  |                         | 2,876     
|                                                      |  |                         |           
|FINANCING ACTIVITIES:                                 |  |                         |           
|Book overdraft                                        |  |                         |          
|Proceeds from subsidiary                              |  |                         | 19,864    
|Proceeds from conversion of warrants                  |  |                         | 129,250   
|Proceeds from convertible debt                        |  |                         | 70,750    
|Proceeds from other equity placements                 |  |                         |          
|Repayments on long-term debt                          |  |                         |          
|Net proceeds from issuance of preferred stock         |  |                         |          
|Proceeds from short-term debt                         |  |                         | 381,019   
|Repayments on short-term debt                         |  |                         | (150,000  
|Proceeds from sale of common stock                    |  |                         | 968,879   
|                                                      |  |                         |           
|Net cash provided by financing activities             |  |                         | 1,419,762 
|                                                      |  |                         |           
|CHANGE IN CASH AND CASH EQUIVALENTS                   |  |                         | (417,830  
|Cash and Cash Equivalents, Beginning of Year          |  |                         | 419,704   
|                                                      |  |                         |           
|Cash and Cash Equivalents, End of Year                |  | $                       | 1,874     
|                                                      |  |                         |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      |  |                         |           
|Income taxes                                          |  | $                       | 2,400     
|SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS       |  |                         |           
|Finance fees added to notes payable                   |  | $                       |          
|Conversion of preferred stock into common stock       |  | $                       | 146,000   
|Issuance of common stock for services performed       |  | $                       | 281,927   
|Dividends declared on preferred stock                 |  | $                       | 341,634   
|Dividends paid on preferred stock with common stock   |  | $                       | 107,213   
|Deemed dividend on warrants issued                    |  | $                       | 450,914   
|Interest paid on preferred stock with common stock    |  | $                       |          
|Conversion of shareholder warrants                    |  | $                       | 291,250   
|Repricing of noteholder warrants                      |  | $                       |          



See notes to
consolidated financial statements



42



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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, 2003 and 2002, the Company has both working capital and net capital deficiencies. Operating losses and cash flow
deficiencies have continued throughout 2003.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



The Company plans to increase revenues and reduce costs in order to generate sufficient positive cash flow beginning in
fourth quarter of fiscal year 2004. 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), Cintelia, Inc, CT Holdings, LLC 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
Cintelia in December 2001 and CT Holdings, LLC in June 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During the fiscal year ended May 31, 2003, the Company received an additional $75,000 from 5 of its shareholders for an equity share in the Companys subsidiary of CT Holdings, LLC. As of May 31, 2003 the Company
has received $443,000 in net proceeds and the shareholders own 13.65% while the Company owns 86.35% of CT Holdings, LLC. The proceeds from this have been used to further develop the BONUS product for CT holdings, LLC as well as working capital for
CT holdings, LLC and Cash Technologies, Inc.



|(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
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



43



---

European sales office for the Company and Cintelia was formed to develop and market software applications in relation to airport and other security through
the utilization of biometrics.



Approximately 49% and 63% of
the Companys net revenues were derived from one customer for the years ended May 31, 2003 and 2002, respectively. The Company has a firm fixed-price contract with Los Angeles County Metropolitan Transit Authority. The Companys contract
with the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which may result in a significant reduction in the Companys gross and net revenue in the future. As of May 31, 2003 the Company
does not have any cash processing customers.



|(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 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) |  | 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
fourth quarter of fiscal year 2002, management evaluated the estimated fair market value of these machines and subsequently recorded an impairment loss of $79,245. As of May 31, 2003, the carrying value of the CoinBank machines is $862,090.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(i) |  | Property and EquipmentProperty and equipment are stated at cost less accumulated depreciation. The provision for 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.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(j) |  | 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 is less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair
value.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(k) |  | 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 to be realized.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



---

| | Income tax expense is the tax payable or refundable for the year plus or minus the change during the year in deferred income taxes.
| | -----------------------------------------------------------------------------------------------------------------------------------



|(l) |  | 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 award 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.



|(m) |  | 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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(n) |  | 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.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(o) |  | 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.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(p) |  | 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. As of February 28, 2003, capitalized software costs
amounted to $2,145,778. Technological feasibility was achieved in September of 1999 and commencing October 1, 1999 all expenses related to EMMA software development had been capitalized.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



45



---

As of December 31, 2001, the Company had capitalized $2,771,536 in development and related costs. The EMMA product was available for release to the public in
January 2002 thus all development costs since have been expensed including $287,000 for the fiscal year ended May 31, 2003.



Amortization of the capitalized software commenced on January 1, 2002. Amortization had been calculated over a seven (7) year period for the quarter ended
February 28, 2002 resulting in an amortization expense of $65,989. Management changed the amortization period for capitalized software, to five (5) years starting March 1, 2002, primarily to approximate the estimated period over which the business
brought about by the technology will expand into its expected capacity. As of March 1, 2002, net unamortized capitalized software amounted to $2,705,547. The unamortized cost as of March 1, 2002 is being amortized over the remaining revised
estimated life. The change resulted in an amortization expense of $205,931, an increase of $40,959 ($0.01 per share) from the original estimated amortization period, for the year ended May 31, 2002. During the fiscal year ended May 31, 2003, the
Company amortized an additional $559,768 of capitalized software.



The current EMMA asset is currently valued at $2,005,836, which reflects the costs incurred by the Company in developing the asset, as well as the net realizable value estimated in managements determination. Management believes that
its estimates reflect its ability, based upon managements internal projections, to obtain a recovery on the asset. These estimates assume that recovery of the value of the asset will be obtained commencing in the early half of 2004 calendar
year, and will be obtained fully by the end of the calendar year 2006. These projections and estimates are subject to numerous contingencies, including, without limitation, the condition of the economy and the ability of corporate entities to
purchase software such as the EMMA software.



In its
projections, management has calculated a transaction fee based upon the use of the technology through placement on mobile trucks operated by an independent third party. The transaction charge for use through ATM machines would be higher, because the
services available through an ATM located in a bank office would be greater and the expense to the Company is also greater. The projected transaction fee is based upon managements discussions with potential customers, including bank and
non-bank ATM service providers. Management has had significant negotiations with representatives of various large financial institutions regarding the installation of EMMA based products. However, to date the Company has not entertained any
definitive agreements with any institution. According to a study entitled the Use of Checks and other Non-Cash Payments Instruments in the United States prepared by the Federal Reserve, there were 42.5 billion checks processed by
financial institutions in the United States during the year 2000 about a third of which are of the type that the Companys products are intended to help process.



Much of our SG&A costs are fixed in nature, therefore, as volume of transactions and revenues increase, the SG&A
does not increase proportionately.



There can be no assurance
that managements estimates will prove accurate, and investors should be aware that in the event these estimates are inaccurate, a write down of all or a portion of this asset may be required.



|(q) |  | Discontinued OperationsA majority of our revenue for the last three fiscal years was derived from our agreement with the Los Angeles County
Metropolitan Transportation Authority. During the fiscal year ended May 31, 2003, Cash Technologies counted $1,978,645 and derived net revenues of $27,624 compared to $16,908,289 and $242,041, respectively for the fiscal year ended May 31, 2002. The
Companys contract with the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which has resulted and will continue to result in a significant reduction in the Companys gross revenue. As
of May 31, 2003 the Company does not have any cash
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



46



---

| | processing customers and, due to our focus on our other businesses, we may choose not to pursue other cash processing customers. At this time the Company has
elected to reflect this business as discontinued operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(r) |  | 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, 2003, the receivable from a major customer was $2,383.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(s) |  | ReclassificationCertain reclassifications have been made to the May 31, 2002 financial statements to conform to the May 31, 2003 presentation.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------



2. PROPERTY AND EQUIPMENT



Property and equipment consist of the following:



|                              |  | 2003 |         | 2002
|----------------------------- |  | ---- | ------- | ----
|Machinery and equipment       |  | $    |        |     
|Security systems              |  |      |        |     
|Furniture and fixtures        |  |      |        |     
|Computer equipment            |  |      | 159,491 |     
|Leasehold improvements        |  |      |        |     
|Other equipment               |  |      | 32,135  |     
|                              |  |      |         |     
|Total Property and Equipment  |  | $    | 191,626 |     
|Less accumulated depreciation |  |      | 162,575 |     
|                              |  |      |         |     
|                              |  | $    | 29,051  |     
|                              |  |      |         |     



The Companys contract with the
Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which has resulted and will continue to result in a significant reduction in the Companys gross revenue. As of September 1, 2003 the Company
does not have any cash processing customers and, due to our focus on our other businesses, we may choose not to pursue other cash processing customers. At this time the Company has elected to reflect this business as discontinued operations. All of
the fixed assets for this discontinued operations were either sold or salvaged in the fiscal year ended May 31, 2002.



3. NOTES PAYABLE



|Loan                        |  | Bal. @ 6/01/02 |  | Additions6-1-02 to 5/31/03 |  | Payments6-1-02 to 5/31/03 |   |  | Bal. @ 5/31/03
|--------------------------- |  | -------------- |  | -------------------------- |  | ------------------------- | - |  | --------------
|G.E Capital                 |  | 3,288,465      |  |                           |  |                          |   |  | 3,288,465     
|GE CapitalAccrued Interest |  | 521,313        |  | 308,000                    |  | (259,037                  | ) |  | 570,276       
|Notes PayableKiosk         |  | 77,852         |  |                           |  |                           |   |  | 77,852        
|Notes PayableMTA           |  | 150,000        |  |                            |  | (150,000                  | ) |  |              
|Notes PayableEurope        |  | 100,000        |  | 334,934                    |  |                           |   |  | 434,934       
|                            |  |                |  |                            |  |                           |   |  |               
|Total                       |  | 4,137,630      |  | 642,934                    |  | (409,037                  | ) |  | 4,371,527     
|                            |  |                |  |                            |  |                           |   |  |               



47



---

In 1997, we entered into a credit agreement with G.E. Capital Corporation (G.E.) pursuant to which we
borrowed $5,500,000 for the purchase of CoinBank component equipment, working capital and general corporate purposes. On September 29, 2000 the Company entered into an agreement with GE to defer principal payments on the debt for twelve (12) months
and to defer interest payments for six (6) months. As consideration for the extension, the Company and GE have agreed to increase the principal portion of the loan by $500,000 and the Company recorded deferred financing fees, which were amortized
over an eighteen (18) month period. The Company and G.E. Capital had negotiated another waiver agreement as of September 13, 2001 pursuant to which G.E. Capital agreed to a six (6) month deferral of interest payments and a twelve (12) month deferral
of principal payments provided (i) we granted G.E. Capital a lien on all of its assets (ii) we paid G.E. Capital 60% of all proceeds from the sale of its CoinBank machines (iii) we obtained subordination agreements from all of our noteholders prior
to December 30, 2001 whereby the noteholders subordinate their lien to that of G.E. Capital (iv) the sum of $250,000 is added to the outstanding principal amount of the loan, which is being amortized over a twelve (12) month period. On September 27,
2002 the Company entered into an agreement with GE to pay the total debt outstanding in twelve (12) monthly payments beginning October 15, 2002 of which the first eleven (11) consisting of interest only and the payment twelve (12) consisting of all
outstanding principal, interest and fees. The Company agreed to (i) pay 9.5% per annum for the first six (6) payments (ii) pay 11.5% per annum for the last six (6) payments (iii) a minimum of 18% if the Company was to become in default (iv) 5% late
fee if a payment is received ten (10) days after the payment date and (v) 90% of all gross proceeds received from the sale of presently owned CoinBank machines. As of May 31, 2003, we owed $3,858,741, which includes the principal, financing fees and
unpaid interest. The Company is currently negotiating with G.E. Capital to extend the principal only payments for another 6 months there can be no assurance though.



On March 14, 2002, the Company obtained a loan of $150,000 from Continental Business Credit strictly for purposes of the Companys cash
processing operations. The loan was a short-term loan with an interest rate of 22%. In July of 2002 the principal balance on the loan was paid back in full.



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. The line was increased in the fiscal year ended May 31, 2003.



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. In June, 2002 we were notified that a vendor, Kiosk Information Systems, Inc. (KIS), had obtained a judgment against the Company for $129,567.34 allegedly owed for
services rendered in 1999, plus interest and attorneys fees. Subsequent settlement negotiations have resulted in a tentative settlement agreement with KIS on July 7, 2003. If the settlement agreement is not completed, it is likely that the Company
will initiate legal action to set aside the judgment and take other appropriate measures. In such event the Company will incur substantial legal fees and there is no assurance that we would succeed in setting aside the judgment or prevailing in any
subsequent litigation. The Company is currently under default. (See Legal Proceedings).



4. CONVERTIBLE DEBT



|Description                   |                |           |                   | Additions |                   | Adjustments |                |          
|----------------------------- | -------------- | --------- | ----------------- | --------- | ----------------- | ----------- | -------------- | ---------
|                              | Bal. @ 6/01/02 |           | 6-1-02 to 5/31/03 |           | 6-1-02 to 5/31/03 |             | Bal. @ 5/31/03
|Convertible DebtPrincipal LT |                | 2,586,674 |                   |          |                   | 1,075,000   |                | 3,661,674
|Convertible DebtPrincipal ST |                | 1,075,000 |                   |          |                   | (1,075,000) |                |         
|Convertible DebtInterest     |                | 353,574   |                   | 347,483   |                   |            |                | 701,057  
|Convertible DebtShareholders |                |          |                   | 70,750    |                   |            |                | 70,750   
|Total                         |                | 4,015,248 |                   | 418,233   |                   |            |                | 4,433,481



48



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In January 2000, we completed a private placement offering of convertible notes and warrants under Section 4(2) of the
Securities Act of 1933. The offering consisted of units, each unit comprised of a secured convertible promissory note in the principal amount of $50,000, bearing interest at the rate of 10% per annum and Series B Redeemable Warrants to purchase
5,000 shares of common stock. GunnAllen Financial, Inc., one of our investment bankers and an underwriter in our initial public offering, was engaged as placement agent for this offering. We received gross proceeds from this offering of $3,362,000
from the sale of 67.2 Units. As a result of this offering, we issued notes in the aggregate principal amount of $3,362,000 and 336,200 Series B Common Stock Purchase Warrants The notes were originally convertible into our Common Stock at the
conversion rate of $9.50 per share. The Series B Warrants were originally exercisable at a price of $13.00 per share. The notes were originally due and payable on July 31, 2001. The notes were secured by a first priority lien on all of our assets.



Since July 31, 2001, some of the notes have been in default, and some have
been restructured. Under the restructuring, the notes were extended for two (2) years to July 2003, the noteholders agreed to surrender all old warrants priced at $13.50 per share to receive 2 replacement warrants for every old warrant surrendered.
The new warrants were vested immediately, have a life of 5 years and were exercisable at $1.35 thru December 31, 2001, $2.20 through January 15, 2002 and $4.50 thereafter. As of February 28, 2003 the Company had restructured $2,587,000 of the notes,
representing thirty-five (35) of the forty-eight (48) noteholders, or approximately 77% of the total dollar amount of notes outstanding. As part of the restructuring process the Company reclassified $339,722 of interest accrued as part of the
reissued notes. As of May 31, 2003 the Company has accrued an additional $661,009 in interest payable on the notes. The Company has recognized a deemed dividends expense of $273,904 in conjunction with this restructuring. In August, 2003, the
Company proposed the conversion to equity of the $3.3 million in secured convertible debt to the noteholders, to be consummated in September, 2003. Under the terms of the agreement the conversion price of the notes will be reduced to $2.50 plus the
exercise price of the warrants will also be reduced to $0.65 per share. As of August 25, 2003, noteholders representing approximately 27% of the total value of notes have converted to equity. Noteholders representing an additional 48% of the total
value of notes have given non-binding written indications of their intent to convert on the terms proposed upon receipt of formal documentation. There can be no assurance we will be successful in converting or restructuring these remaining notes.
(See Risk Factors).



In May 2003 we completed a private placement offering with
one of our shareholders consisting of convertible notes and warrants under Section 4(2) of the Securities Act of 1933. The offering consisted of an unsecured convertible promissory note in the principal amount of $50,000, bearing interest at the
rate of 5% per annum and redeemable warrants to purchase 100,000 shares of common stock. The note is convertible into our Common Stock at the conversion rate of $0.50 per share. The Warrants are exercisable at a price of $1.00 per share. The Company
also reduced the exercise price of 8,000 Series C warrants owned by the shareholder from $2.50 to $0.25 per share. The note is due and payable on May 2, 2004. A deemed dividend expense of $25,331 was recognized in conjunction with the warrants
offered in this placement.



In May 2003 we completed a private placement
offering with one of our shareholders consisting of convertible notes and warrants under Section 4(2) of the Securities Act of 1933. The offering consisted of an unsecured convertible promissory note in the principal amount of $20,750, bearing
interest at the rate of 5% per annum and redeemable warrants to purchase 30,000 shares of common stock. The note is convertible into our Common Stock at the conversion rate of $0.50 per share. The Warrants are exercisable at a price of $0.65 per
share. The Company also reduced the exercise price of 45,000 Series B warrants owned by the shareholder from $4.50 to $0.65 per share which were converted immediately for gross proceeds to the Company of $29,250. The note is due and payable on May
8, 2008. A deemed dividend expense of $25,901 was recognized in conjunction with the warrants offered in this placement.



49



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5. INCOME TAXES



As of May 31, 2003, the Company has available federal net operating loss (NOL) carry-forwards that approximate $25.9 million and may be applied against future
taxable income through tax year 2023. State NOL carry-forward is approximately $10.9 million and expire through tax year 2009. 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 $9.8 million. 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.



In
September 2002 a California assembly bill temporarily suspended NOL deduction for the 2002 and 2003 taxable years. The carryover period for suspended losses is extended by two years for losses incurred before January 1, 2002 and by one year for
losses incurred after January 1, 2002, and before January 1, 2003. After the suspension period, the Net Operating Loss deduction will be allowed at 100%.



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.



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



50



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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.



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 employees 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.



In January 2000, the Company issued 336,200 Stock Purchase Warrants at an exercise price of
$13.00 in connection with the convertible debt offering. In December 2001, as part of the note restructuring process the Company issued 228,700 replacement warrants at exercise prices ranging from $1.35 to $4.50, as well as an additional 228,700
warrants at the same exercise prices. (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



51



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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.



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 bears an interest rate of 10% annually 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 had been recorded in 2001 in conjunction with the warrants. The company has accrued interest expense of $8,750 in conjunction with
this loan.



In June 2001, we completed a financing of $250,000, comprised of 25
shares of Series D 8% Convertible Preferred Stock and 50,000 Series E Warrants. The financing was intended to comply with Section 4(2) of the Securities Act of 1933 as exempt from registration. The Series D Stock have 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 $1.36 per share. During the quarter ended August 30, 2001, there was a deemed dividend expense of $136,849 recognized in
conjunction with the warrants issued in this offering. The Company received gross proceeds of $220,000, which has been used for operating activities. In February 2002, the 25 shares of Series D Preferred Stock were converted into 325,860 shares of
the Companys Common Stock.



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In June 2001, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, 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. During the quarter ended August 30, 2001 there was a deemed dividend expense of $14,909 recognized in conjunction with the warrants issued in this offering. The proceeds of the transactions were used to pay
certain debts, including payroll obligations, of our Austrian subsidiary.



In
August 2001, we completed an offering of 72 shares of Series E 8% Convertible Preferred Stock and 34,500 Series F Warrants. The financing was intended to comply with Section 4(2) Of the Securities Act of 1933 as exempt from registration. 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 $2.00 per share. The Company sold 72 units for gross proceeds of $180,000. During the
quarter ended August 30, 2001 there was a deemed dividend gain of $19,603 recognized in conjunction with the warrants issued in this offering.



On August 31, 2001, we completed a financing of $500,000 in gross proceeds, with one of our shareholders, comprised of shares of Series F 8% Convertible Preferred Stock
and Series G Warrants. The financing was intended to comply with Section 4(2) of the Securities Act of 1933 as exempt from registration. The Series F Stock has annual dividends payable at 8% per year, payable in cash or Common Stock at our option.
Each Series G Warrants is initially exercisable to purchase one Warrant Share at an initial exercise of $1.46 per share. We issued 5 shares of Series F Preferred Stock and 100,000 shares of Series G warrants. A total of $57,000 in commissions was
paid in relation to this offering as well as an issuance of 50,000 shares of our common stock valued at $67,500 to Gunn Allen and associates. Furthermore, during the quarter ended August 30, 2001, there was a deemed dividend expense of $247,252
recognized in conjunction with the warrants issued in this offering. In February 2002, the 5 shares of Series F Preferred Stock were converted into 500,000 shares of the Companys Common Stock.



During the quarter ended November 30, 2001 we issued 50,000 shares of our common stock valued
at $50,000 to one of our EMMA developers for payment toward services performed. The issuance was intended to comply with Section 4(2) of the Securities Act of 1933, as amended in a transaction exempt from registration.



On December 5, 2001, we issued 10,000 shares of the Companys common stock valued at
$22,000 to one of our shareholders for payment toward consulting services performed. An expense of $22,000 was recognized during the quarter ended February 28, 2002. The shares of common stock were issued at fair market value.



In December 2001, in a private transaction under Section 4(2) of the Securities Act of 1933,
as amended, the Company completed a private placement of its securities. The Company sold nine (9) units for gross proceeds of $225,000. Each unit was comprised of 20,000 shares of common stock and warrants to purchase 20,000 shares of common stock.
Ten thousand (10,000) warrants are initially exercisable to purchase one warrant share each at an initial exercise price of $1.50, five thousand (5,000) warrants at $2.50 and five thousand (5,000) warrants at $4.75. Furthermore, during the quarter
ended February 28, 2002, there was a deemed dividend expense of $178,724 recognized in conjunction with the warrants issued in this offering.



In December 2001, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company completed a private placement of its securities. The
Company sold eight (8) units for gross proceeds of $200,000. The Company issued 106,383 shares of common stock and 50,000 stock purchase warrants. The warrants are initially exercisable to purchase one Common Stock share each at an initial exercise
price of $1.88. Furthermore, during the quarter ended February 28, 2002, there was a deemed dividend expense of $53,012 recognized in conjunction with the warrants issued in this offering.



In February 2002, in a private transaction under Section 4(2) of the Securities Act of 1933,
as amended, the Company sold 3 units at an aggregate of $75,000 of its securities to 2 foreign investors. Each unit comprised of (i)



53



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16,667 shares of Common Stock and; (ii) 2,500 common stock purchase warrants. The warrants have an exercise price of
$1.70 per share and are exercisable for five years. During the quarter ended February 28, 2002, there was a deemed dividend expense of $4,096 recognized in conjunction with the warrants issued in this offering. The proceeds of the transactions were
used to pay certain debts, including payroll obligations, of our Austrian subsidiary.



On February 22, 2002, we completed a private placement of our securities with one of our shareholders. GunnAllen Financial Corp, a registered broker dealer, served as placement agent for the transaction, which was intended to comply with
Section 4(2) of the Securities Act of 1933, as amended. We sold a unit for gross proceeds of $750,000. The unit was comprised of 576,923 shares of common stock and warrants to purchase 150,000 shares of common stock. Each warrant is initially
exercisable to purchase one share at an initial exercise price of $1.50. In addition, we paid a commission of 8% of the gross proceeds to GunnAllen Financial Corp and issued to GunnAllen Financial (or its affiliates) an aggregate of 40,000 shares of
common stock warrants at an exercise price of $1.50 per share. Furthermore, during the quarter ended February 28, 2002, there was a deemed dividend expense of $187,341 recognized in conjunction with the warrants issued in this offering. We received
net proceeds of $687,000 in conjunction with this offering.



In March 2002, in
a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $50,000 of its securities to 1 foreign investor. Each unit comprised of (i) 25,000 shares of Common Stock and; (ii) 5,000
common stock purchase warrants. The warrants have an exercise price of $1.70 per share and are exercisable for five years. A deemed dividend gain of $9,409 was recognized in relation to this offering.



On March 14, 2002, the Company obtained a loan of $150,000 from Continental Business Credit
strictly for purposes of the Companys cash processing operations. The loan was a short-term loan with an interest rate of 22%. In July of 2002 the principal balance on the loan was paid back in full.



In May 2002, the Company received proceeds of $6,750 for Series B warrants which were
converted into 5,000 shares of the Companys common stock.



In June 2002,
in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $50,000 of its securities to 1 foreign investor. Each unit comprised of (i) 33,334 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. A deemed dividend benefit of $4,374 was recognized in conjunction with this placement.



In June 2002, the Company issued 60,400 shares of the Companys common stock and 50,400
common stock warrants with an exercise price of $2.00 and a five (5) year life to a consultant in lieu of cash payment. The Company recorded a compensation expense charge of $90,600 as well as a beneficial conversion feature of $49,230.



In June 2002, the Company issued 55,000 shares of the Companys common stock to one
of its developers in lieu of cash payment for services rendered. The shares of common stock were valued at $1.36 per share.



During September 2002, shareholders converted 20,000 shares of Series B Redeemable Preferred Stock for 20,000 shares of the Companys Common Stock.



During September, 2002, the Company received $100,000 from a Series D warrant holder to
exercise 200,000 warrants into 200,000 shares of the Companys common stock.



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During October 2002, shareholders converted 10,500 of Series A Redeemable Preferred Stock for 10,500 shares of the
Companys Common Stock.



In October 2002, in a private transaction under
Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $250,000 of its securities to a shareholder. The unit comprised of (i) 312,500 shares of Common Stock and (ii); 150,000 common stock purchase
warrants. The warrants have an exercise price of $0.95 per share and are exercisable for five years. A deemed dividend expense of $21,300 was recognized in conjunction with this placement.



On February 28, 2003, in a private transaction under Section 4(2) of the Securities Act of
1933, as amended, the Company sold 1 unit at an aggregate of $200,000 of its securities to a shareholder. The unit comprised of (i) 344,828 shares of Common Stock and (ii); 195,172 common stock purchase warrants. The warrants have an exercise price
of $1.00 per share and are exercisable for five years. Also on February 28, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $300,000 of its securities to a
shareholder. The unit comprised of (i) 517,241 shares of Common Stock and (ii); 292,759 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years. A deemed dividend expense of $260,708
was recognized in conjunction with both of these placements.



In the
fiscal year ended May 31, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 307,428 shares of the Companys Common Stock to five (5) shareholders. The Company received gross proceeds
of $168,879 for a purchase price ranging from $0.50 to $0.60 per share. There were no warrants awarded in relation to this transaction.



During the fiscal year ended may 31, 2003, the Company received an additional $75,000 from 5 of its shareholders for an equity share in the Companys subsidiary of
CT Holdings, LLC. As of May 31, 2003 the Company has received $443,000 in net proceeds and the shareholders own 13.65% while the Company owns 86.35% of CT Holdings, LLC. The proceeds from this have been used to further develop the BONUS product for
CT holdings, LLC as well as working capital for CT holdings, LLC and Cash Technologies, Inc.



In May 2003 we completed a private placement offering with one of our shareholders consisting of convertible notes and warrants under Section 4(2) of the Securities Act of 1933. The offering consisted of an unsecured
convertible promissory note in the principal amount of $50,000, bearing interest at the rate of 5% per annum and redeemable warrants to purchase 100,000 shares of common stock. The note is convertible into our Common Stock at the conversion rate of
$0.50 per share. The Warrants are exercisable at a price of $1.00 per share. The Company also reduced the exercise price of 8,000 Series C warrants owned by the shareholder from $2.50 to $0.25 per share. The note is due and payable on May 2, 2004. A
deemed dividend expense of $25,331 was recognized in conjunction with the warrants offered in this placement.



In May 2003 we completed a private placement offering with one of our shareholders consisting of convertible notes and warrants under Section 4(2) of the Securities Act of 1933. The offering consisted of an unsecured
convertible promissory note in the principal amount of $20,750, bearing interest at the rate of 5% per annum and redeemable warrants to purchase 30,000 shares of common stock. The note is convertible into our Common Stock at the conversion rate of
$0.50 per share. The Warrants are exercisable at a price of $0.65 per share. The Company also reduced the exercise price of 45,000 Series B warrants owned by the shareholder from $4.50 to $0.65 per share which were converted immediately for gross
proceeds to the Company of $29,250. The note is due and payable on May 8, 2008. A deemed dividend expense of $25,901 was recognized in conjunction with the warrants offered in this placement.



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On June 1, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended,
the Company sold 1 unit at an aggregate of $50,000 of its securities to a shareholder. The unit comprised of 100,000 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On June 2, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $25,000 of its securities to a shareholder. The unit comprised of (i) 38,462 shares of Common Stock and (ii); 15,000 common stock purchase warrants. The warrants have an
exercise price of $1.00 per share and are exercisable for five years.



On June 12, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $75,000 of its securities to a shareholder. The unit comprised of (i) 150,000 shares of
Common Stock and (ii); 75,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



In July, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 26 units at an aggregate of $10,000
of its securities to 7 shareholders. The unit comprised of (i) 15,385 shares of Common Stock and (ii); 5,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



On July 30, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $50,000 of its securities to a shareholder. The unit comprised of 76,924 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On September 2, 2003, in a private transaction under Section
4(2) of the Securities Act of 1933, as amended, the Company sold 5 units at an aggregate of $25,000 of its securities to 2 European shareholders. The unit comprised of (i) 38,462 shares of Common Stock and (ii); 12,821 common stock purchase
warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



7. 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. As of May 31, 2003, the Company had
393,780 of such options outstanding. 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.



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The Company has granted the following options/warrants to purchase common stock as of May 31, 2003.



|                                          |  | Number ofOptions/Warrants |  | Weighted AveragePrice $/Sh
|----------------------------------------- |  | ------------------------- |  | --------------------------
|Options OutstandingJune 1, 2002          |  | 2,016,329                 |  | $                         
|Employee Stock Options                    |  |                           |  |                           
|Granted                                   |  | 161,830                   |  | $                         
|Expired                                   |  |                          |  |                           
|Exercised                                 |  |                          |  |                           
|Shareholder Warrants                      |  |                           |  |                           
|Granted                                   |  | 1,690,300                 |  |                           
|Expired                                   |  | 393,830                   |  |                           
|Exercised                                 |  | 5,000                     |  |                           
|                                          |  |                           |  |                           
|Options/Warrants outstandingMay 31, 2002 |  | 3,887,992                 |  | $                         
|                                          |  |                           |  |                           
|Employee Stock Options                    |  |                           |  |                           
|Granted                                   |  |                          |  |                           
|Expired                                   |  | 373,649                   |  |                           
|Exercised                                 |  |                          |  |                           
|Shareholder Warrants                      |  |                           |  |                           
|Granted                                   |  | 1,433,129                 |  |                           
|Expired                                   |  |                          |  |                           
|Exercised                                 |  | 370,000                   |  |                           
|                                          |  |                           |  |                           
|Options/Warrants outstandingMay 31, 2003 |  | 4,517,472                 |  | $                         
|                                          |  |                           |  |                           



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, 2003 and 2002, would have been
increased to the pro forma amounts presented below:



|                                        |  | 2003 |            |   | 2002 |  
|--------------------------------------- |  | ---- | ---------- | - | ---- | -
|Net Loss                                |  |      |            |   |      |  
|As Reported                             |  | $    | (4,048,345 | ) |      | $
|Pro Forma                               |  | $    | (4,532,358 | ) |      | $
|Basic and Diluted Loss Per Common Share |  |      |            |   |      |  
|As Reported                             |  |      | (1.58      | ) |      |  
|Pro Forma                               |  |      | (0.64      | ) |      |  



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For the fiscal year ended May 31, 2003, 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 1998-2003, expected life of the option is 5 years, expected volatility of 52%, risk free interest rate of 2.58% and a 0% dividend yield. The weighted
average fair value at the grant date for such option is $5.38 per option.



For
the fiscal year ended May 31, 2002, 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 1997-2002, expected life of the
option is 5 years, expected volatility of 111%, 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 $5.38 per option.



|Exercise Price Per Share           |        | Outstanding Weighted Average |      | Exercisable Weighted Average
|---------------------------------- | ------ | ---------------------------- | ---- | ----------------------------
|                                   | Shares |                              | Life |                             
|$  0.01                            |        | 117,118                      |      |                             
|$  0.25                            |        | 8,000                        |      |                             
|$  0.50                            |        | 252,231                      |      |                             
|$  0.65                            |        | 30,000                       |      |                             
|$  0.95                            |        | 150,000                      |      |                             
|$  1.00                            |        | 587,931                      |      |                             
|$  1.20                            |        | 20,000                       |      |                             
|$  1.36                            |        | 50,000                       |      |                             
|$  1.46                            |        | 100,000                      |      |                             
|$  1.50                            |        | 280,000                      |      |                             
|$  1.70                            |        | 7,500                        |      |                             
|$  1.88                            |        | 50,000                       |      |                             
|$  2.00                            |        | 195,300                      |      |                             
|$  2.12                            |        | 50,000                       |      |                             
|$  2.50                            |        | 114,000                      |      |                             
|$  3.50                            |        | 290,000                      |      |                             
|$  4.50                            |        | 424,900                      |      |                             
|$  4.75                            |        | 45,000                       |      |                             
|$  5.00                            |        | 222,250                      |      |                             
|$  6.00                            |        | 24,000                       |      |                             
|$  6.30                            |        | 50,000                       |      |                             
|$  7.00                            |        | 476,830                      |      |                             
|$  8.00                            |        | 350,000                      |      |                             
|$10.38                             |        | 280,500                      |      |                             
|$10.75                             |        | 100                          |      |                             
|$11.31                             |        | 100,000                      |      |                             
|$11.55                             |        | 74,250                       |      |                             
|$12.00                             |        | 59,062                       |      |                             
|$12.25                             |        | 6,000                        |      |                             
|$12.94                             |        | 25,000                       |      |                             
|$13.00                             |        | 77,500                       |      |                             
|                                   |        |                              |      |                             
|Total Options/Warrants Outstanding |        | 4,517,472                    |      | $                           



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NOTE 8: SEGMENT REPORTING



The Company operates through 3 business segments: Cash processing, CoinBank machines, and E-Commerce Message Management Architecture (EMMA). The Company had a firm
fixed price contract with the Los Angeles County Metropolitan Transportation Authority to count currency, which purchased in bulk at a discount from face value and processed and deposited at face value in the Companys account. The Company also
sells self-service coin counting machines through existing equipment distribution channels. Furthermore, the Company is developing an E-Commerce Message Management Architecture transaction processing system, which has not yet been deployed and the
software development costs are being capitalized.



Information on the
Companys business segments for the fiscal years ended May 31,



|                            |  | 2003       |   |  | 2002       |  
|--------------------------- |  | ---------- | - |  | ---------- | -
|Net Revenues and Sales:     |  |            |   |  |            |  
|Coinbank machines           |  | 246,229    |   |  | 133,936    |  
|EMMA                        |  | 21,347     |   |  | 10,000     |  
|                            |  |            |   |  |            |  
|                            |  | 267,576    |   |  | 143,936    |  
|                            |  |            |   |  |            |  
|Interest expense            |  |            |   |  |            |  
|Coinbank machines           |  | 9,943      |   |  | 9,593      |  
|EMMA                        |  |           |   |  |           |  
|Unallocated                 |  | 757,673    |   |  | 1,220,929  |  
|                            |  |            |   |  |            |  
|                            |  | 767,616    |   |  | 1,230,522  |  
|                            |  |            |   |  |            |  
|Depreciation & Amortization |  |            |   |  |            |  
|Coinbank machines           |  | 19,426     |   |  | 34,455     |  
|EMMA                        |  | 559,768    |   |  | 205,931    |  
|Unallocated                 |  | 5,537      |   |  | 50,104     |  
|                            |  |            |   |  |            |  
|                            |  | 584,731    |   |  | 290,490    |  
|                            |  |            |   |  |            |  
|Segment profit (loss)       |  |            |   |  |            |  
|Coinbank machines           |  | (264,762   | ) |  | (875,526   | )
|EMMA                        |  |           |   |  |           |  
|Unallocated                 |  | (3,757,663 | ) |  | (2,870,831 | )
|                            |  |            |   |  |            |  
|                            |  | (4,022,425 | ) |  | (3,746,357 | )
|                            |  |            |   |  |            |  
|Net identifiable assets:    |  |            |   |  |            |  
|Coinbank machines           |  | 912,268    |   |  | 1,077,667  |  
|EMMA                        |  | 2,005,836  |   |  | 2,565,605  |  
|Unallocated                 |  | 84,510     |   |  | 638,360    |  
|                            |  |            |   |  |            |  
|                            |  | 3,002,614  |   |  | 4,281,632  |  
|                            |  |            |   |  |            |  



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9. RELATED PARTY TRANSACTIONS



|Loan               |  | Bal. @ 6/01/02 |  | Additions 6-1-02 to 5/31/03 |  | Payments 6-1-02 to 5/31/03 |   |  | Bal. @ 5/31/03
|------------------ |  | -------------- |  | --------------------------- |  | -------------------------- | - |  | --------------
|NotesShareholders |  | 75,000         |  | 98,449                      |  | (52,364                    | ) |  | 121,085       
|                   |  |                |  |                             |  |                            |   |  |               
|Total              |  | 75,000         |  | 98,449                      |  | (52,364                    | ) |  | 121,085       
|                   |  |                |  |                             |  |                            |   |  |               



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 bears an interest rate of 10% annually 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 had been recorded in 2001 in conjunction with the warrants. The company has
accrued interest expense of $16,250 in conjunction with this loan. On March 28, 2003, the Board of Directors approved that in lieu of repayment of the $75,000 loan from Mr. Fagenson to the Company, Mr. Fagenson shall be issued 117,188 warrants
exercisable at $0.01 per share with a term of 7 years. Any of such warrants can be redeemed at any time for a cash payment from the Company of $0.65 per warrant share.



The Company obtained loans of $68,000 in the fiscal year ended May 31, 2002 and $342,700 during the fiscal year ended May 31, 2003 from
Bruce Korman who is an affiliate, Chief Executive Officer and Chairman of the Board of Directors of the Company. The loans were short-term loans and as of May 31, 2003 $46,085 are outstanding to Mr. Korman.



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 expired on September 13, 2002. Although the lease
agreement expired in September 2002 we continue to rent the facility on a month-to-month basis. 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 May 31, 2003 the Company was $50,753 in
arrears under its lease obligations.



10. COMMITMENTS AND CONTINGENCIES



The Company is committed under non-cancelable facility lease agreements,
which expires on September 2002 in the amount of $67,416. Rent expense was $67,416 and $67,416 for the fiscal years ended May 31, 2003 and 2002, respectively.



We previously 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.



Shaws Supermarkets has filed a lawsuit, captioned Shaws Supermarkets, Inc. v. Cash Technologies, Inc., CoinBank Automated Systems Inc. (United States District Court, District of Massachusetts),
against us claiming



60



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breach of contract and damages. We operated CoinBank machines in Shaws locations in New England on a free-placement basis since June, 1999 and had been
negotiating a settlement and termination agreement with Shaws to terminate the CoinBank machine placements in light of our decision to exit the free placement business. Shaws is claiming damages in excess of $75,000, for contract
termination fees and reimbursements. We believe that the amount owed is approximately $55,000 and have accrued for the liability. Furthermore, we have potential claims against Shaws for damages to the machines. Although we intend to vigorously
defend the suit, we may not be successful in our defense.



We have commenced a
lawsuit in Austria against Geld Bearbeitungs Systeme GES.M.B.H., an Austrian entity which had been manufacturing certain of our CoinBank machines. As previously described in our SEC Reports, we have a five year licensing and manufacturing services
agreement with Geld. We had previously entered into a letter of intent to acquire Geld 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. Although we believe, based upon advice of our Austrian counsel, that we have a meritorious and strong claim, we may not be successful in our suit.



We are involved in a litigation titled 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, we first became aware that an entity to which we had sold 23 CoinBank machines in October 1999 had filed suit against us in Louisiana court
and obtained a default judgment against us. 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 us in California based on the judgment of the Louisiana court and a writ of execution was issued.



Upon learning of this matter, we immediately initiated legal actions in Louisiana and California. At a hearing in the Louisiana court, we were granted a Temporary
Restraining Order staying enforcement of the judgment. We contend that the Louisiana court had no jurisdiction over it and that we were never properly served with either the original Louisiana lawsuit, the judgment issued by the Louisiana court or
the California sister- state judgment. We also contend that Kane Cortes allegations are without merit and that his desire to return the machines is a result of his failed business practices. The Company 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. In May 2003, the Louisiana Court decided in favor of the Company and vacated its
previous judgment against us. The plaintiff, however, immediately refiled its lawsuit. The Company has entered into settlement negotiations and has reached a tentative settlement agreement involving the resale of the Plaintiffs machines. There
can be no assurance that the Company will be successful in completing the settlement arrangement satisfactorily.



On August 1, 2002, Cash Technologies, Inc. filed a lawsuit, captioned Cash Technologies, Inc. v. McNeely and Willmon (Case No. BC 278823, Superior Court of the
State of California), for breach of contract. In September 2002, Cash Technologies, Inc. loaned McNeely and Willmon the amount of $79,999. Pursuant to the promissory notes the funds were due to be returned in December 2002. Despite repeated
collection attempts, both McNeely and Willmon have refused to repay the funds. The Company is seeking an amount in excess of $79,999. On September 25, 2002, McNeely and Willmon filed a cross complaint claiming $500,000 in compensatory damages. The
next scheduled court hearing is in November, 2003. The Company believes that the cross complaint has no merit. The Company is confident that it will prevail in this matter, however there can be no assurance of a successful outcome.



In June, 2002 we were notified that a vendor, Kiosk Information Systems, Inc.
(KIS), had obtained a judgment against the Company for $129,567.34 allegedly owed for services rendered in 1999, plus interest and attorneys fees. Upon learning of the judgment, we notified KIS that we have never been served with a
lawsuit related to this matter and were unaware of the existence of the case. Subsequent settlement negotiations resulted in a tentative settlement



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agreement with KIS on July 7, 2003. Under the agreement the Company will inspect the CoinBank machine inventory held at the KIS location. If the Company
agrees to pay $20,000 down and $3000 per unit to KIS for shipping 5 machines, KIS will hold the remainder of the judgment for a period of six months. The Company also has a period of 60 days to pay the entire original balance of $77,851 and KIS will
release the entire inventory. If the settlement agreement is not completed, it is likely that the Company will initiate legal action to set aside the judgment and take other appropriate measures. In such event the Company will incur substantial
legal fees and there is no assurance that we would succeed in setting aside the judgment or prevailing in any subsequent litigation.



11. MINORITY INTEREST



During the fiscal year ended May 31, 2003, the Company received an additional $75,000 from 5 of its shareholders for an equity share in the Companys subsidiary of CT Holdings, LLC. As of May 31, 2003 the Company
has received $443,000 in net proceeds and the shareholders own 13.65% while the Company owns 86.35% of CT Holdings, LLC. The proceeds from this have been used to further develop the BONUS product for CT holdings, LLC as well as working capital for
CT holdings, LLC and Cash Technologies, Inc. During the fiscal year ended May 31, 2003 the Company has allocated $33,092 of losses in CT Holdings, LLC to minority interest and there is an asset on the balance sheet in the amount of $22,044,
representing 13.65% owned by the minority shareholders.



|                                          |  | FISCAL YEAR ENDEDMAY 31, |        
|----------------------------------------- |  | ------------------------ | -------
|                                          |  | 2003                     |        
|NET REVENUES                              |  | $                        | 27,624 
|COST OF REVENUES                          |  |                          | 27,129 
|                                          |  |                          |        
|GROSS PROFIT (LOSS)                       |  |                          | 495    
|SELLING, GENERAL & ADMINISTRATIVE EXPENSE |  |                          | 26,415 
|DEPRECIATION & AMORTIZATION EXPENSE       |  |                          |       
|                                          |  |                          |        
|OPERATING LOSS                            |  |                          | (25,920
|INTEREST EXPENSE                          |  |                          |       
|                                          |  |                          |        
|LOSS BEFORE INCOME TAXES                  |  |                          | (25,920
|INCOME TAXES                              |  |                          |       
|                                          |  |                          |        
|NET LOSS - DISCONTINUING OPERATIONS       |  | $                        | (25,920
|                                          |  |                          |        



12. SUBSEQUENT EVENTS



On June 1, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $50,000 of its securities to a shareholder. The unit comprised of 100,000 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On June 2, 2003, in a private transaction under Section 4(2) of the Securities
Act of 1933, as amended, the Company sold 1 unit at an aggregate of $25,000 of its securities to a shareholder. The unit comprised of (i) 38,462 shares of Common Stock and (ii); 15,000 common stock purchase warrants. The warrants have an exercise
price of $1.00 per share and are exercisable for five years.



On June 12, 2003,
in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $75,000 of its securities to a shareholder. The unit comprised of (i) 150,000 shares of Common Stock and (ii); 75,000
common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



62



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The agreement requires that Cash Solutions purchase certain minimum quantities each year to maintain its exclusivity and
allows for the parties to share in manufacturing cost reductions realized as production quantities increase from sales. The machines, engineered in the U.S. and Austria by Cash Tech and CoinBank Europe, are manufactured under contract to CoinBank
Europe by a prestigious European equipment maker that operates more than 500,000 square feet of ISO 2002 manufacturing facilities in Austria.



The European coin machine market has expanded dramatically since the introduction of euro coins in January 2001. All coins previously issued by the
European Union countries have been replaced with euro coins, creating an enormous demand for new coin counting equipment that can efficiently sort and count the new denominations.



On July 7, 2003 the Company reached a tentative agreement with Kiosk Information Systems, Inc. (KIS), an entity
the Company is in litigation with. Under the agreement the Company will inspect the CoinBank machine inventory held at the KIS location. If the Company agrees to pay $20,000 down and $3000 per unit to KIS for shipping 5 machines, KIS will hold the
remainder of the judgment for a period of six months. The Company also has a period of 60 days to pay the entire original balance of $77,851 and KIS will release the entire inventory. If the settlement agreement is not completed, it is likely that
the Company will initiate legal action to set aside the judgment and take other appropriate measures. In such event the Company will incur substantial legal fees and there is no assurance that we would succeed in setting aside the judgment or
prevailing in any subsequent litigation.



In July, 2003, in a
private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 26 units at an aggregate of $10,000 of its securities to 7 shareholders. The unit comprised of (i) 15,385 shares of Common Stock and (ii); 5,000
common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



On July 30, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of
$50,000 of its securities to a shareholder. The unit comprised of 76,924 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



In August, 2003, the Company proposed the conversion to equity of the $3.3 million in secured convertible debt to the
noteholders, to be consummated in September, 2003. Under the terms of the agreement the conversion price of the notes will be reduced to $2.50 plus the exercise price of the warrants will also be reduced to $0.65 per share. As of August 25, 2003,
noteholders representing approximately 27% of the total value of notes have converted to equity. Noteholders representing an additional 48% of the total value of notes have given non-binding written indications of their intent to convert on the
terms proposed upon receipt of formal documentation. There can be no assurance we will be successful in converting or restructuring these remaining notes.





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for the industry since the majority of banks and financial services providers have little or no ability to detect check fraud, which costs the industry
billions of dollars per year, at the point of presentment.



On
September 2, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 5 units at an aggregate of $25,000 of its securities to 2 European shareholders. The unit comprised of (i) 38,462 shares of
Common Stock and (ii); 12,821 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years.



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



There have been no changes in the Companys independent accountants or disagreements
with the Companys independent accountants in the last two fiscal years.



ITEM 8A. CONTROLS AND PROCEDURES



Evaluation of Disclosure
Controls and Procedures



Our management, under the supervision and with the
participation of our chief executive officer and chief financial officer, conducted an evaluation of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)) within 90 days of the filing
date of this Annual Report on Form 10-K. Based on their evaluation, our chief executive officer and chief financial officer have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that all
material information required to be filed in this Annual Report on Form 10-K has been made known to them.



Changes in Internal Controls



The Board
of Directors adopted, effective, August 25, 2003 a Code of Ethics for its Chief Executive Officer and Chief Financial Officer, as well as a Code of Ethics for its employees. These Codes are intended to ensure compliance with rules and regulations,
promote honest and ethical behavior and to prevent wrongdoing.



Additionally,
the Board, in response to the passage of the Sarbanes-Oxley Act of 2002, among other actions, formed a Disclosure Committee comprised of various members of our management team. The Disclosure Committee is charged with, among other things, reviewing
and developing policies and procedures to enhance our disclosure controls and procedures as well as with reviewing our periodic reports and other public disclosures. Other than as described above, there have been no significant changes, including
corrective actions with regard to significant deficiencies or material weaknesses in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date set forth above.



PART III



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



|Name               |  | Age |  | Position                                                    
|------------------ |  | --- |  | ------------------------------------------------------------
|Bruce R. Korman    |  | 44  |  | President, Chief Executive Officer and Chairman of the Board
|Edmund King        |  | 39  |  | Chief Financial Officer/Secretary                           
|Richard Miller     |  | 51  |  | Director                                                    
|Robert B. Fagenson |  | 51  |  | Director                                                    
|David Grano        |  | 41  |  | Director                                                    
|Kevin Walls        |  | 40  |  | Director                                                    



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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.



Dave Grano has been a director of the Company since October, 2001. Mr. Grano has been President and Chief
Executive Officer of Card Capture Services (CCS), the largest independent ATM network in the U.S., for four years. Previously, Mr. Grano was the Vice-President of Nextel, Inc. and National Indirect Sales Manager for U.S. West.



Kevin Wallshas 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.



66



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



Directors do not receive cash compensation for serving on the board of
directors. We reimburse directors who are not our employees the costs of attending meetings. Directors who are employees 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 our 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, 2003,
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.



On March 28, 2003 the Board of Directors approved amendments to the
Non-Executive Director Stock Option Plan. Under the amendments the directors will have the exercise price of their current options reduced to $0.65 and receive a one time grant of 110,000 additional options to bring the total to 140,000 options for
each director. The fair market value of our Common Stock as of such date was $0.65. The number of shares under the option plan will also be required to be increased and approved by the shareholders. The amendments are subject to shareholder approval
and have not been booked in the current fiscal year ended May 31, 2003.



The Board has authorized the repricing of the Board of Directors Options in order to compensate the Board of Directors for unanticipated time and assistance that they have provided over the past year. Mr. Kormans options have
also been repriced to compensate him for providing loans to the Company and in exchange for deferred compensation and expenses. The repricings are subject to shareholder approval and have not been booked in the current fiscal year ended May 31,
2003.



The board of directors has established two committees.
The Audit Committee is comprised of Kevin Walls and David Grano. All of the members of the Audit Committee are independent directors. The audit committees duties include:



 reviewing with our independent auditors, the scope and results of any audits; and



 reviewing with the independent auditors and management, our
accounting, financial and operating controls and staff.



In
addition, the board of directors has established a Compensation Committee comprised of Robert Fagenson, David Grano and Richard Miller. All of the members of the Compensation Committee are independent directors. The Compensation Committee will
administer our Employee Stock Option Plan and negotiate and approve employment agreements between the Company and its executive officers.



Compensation Committee Interlocks and Insider Participation in Compensation Decisions Robert Fagenson, David Grano and Richard Miller served on the
Compensation Committee during the last fiscal year ended May 31, 2003. There are no interlocks between our Directors and Directors of other companies.



During the fiscal year ended May 31, 2003, no meetings of the Board of Directors were held and the Board acted by unanimous by written consent on 7
occasions. Furthermore neither the Audit Committee nor the Compensation Committee met during the fiscal year ended May 31, 2003. Prior to this report being filed the Compensation and Disclosure Committees have met and the Audit Committee and
reviewed this filing with management and the Companys auditors.



67



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Certain Key Employees



Willi Muhr, 41, 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, 36, has been Chief Technology Officer 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.



ITEM 10. EXECUTIVE
COMPENSATION



Summary of Cash and Certain Other Compensation



The following table sets forth certain compensation paid
by us during the fiscal years ended May 31, 2003 May 31, 2002 and May 31, 2001 to our President and Chief Executive Officer.



Summary Compensation Table



|Name and Principal
Position |      | Annual Compensation |        | Long TermCompensation |         | All OtherCompensation | 
|--------------------------- | ---- | ------------------- | ------ | --------------------- | ------- | --------------------- | 
|                            | Year |                     | Salary |                       |         | Bonus                 | 
|Bruce Korman                |      | 2003                |        | $                     | 180,000 | (1)                   | 
|President and               |      | 2002                |        | $                     | 180,000 |                       | 
|Chief Executive Officer     |      | 2001                |        | $                     | 180,000 |                       | 
|                            |      |                     |        |                       |         |                      
|Edmund King                 |      | 2003                |        | $                     | 138,000 |                       | 
|Chief Financial Officer     |      | 2002                |        | $                     | 120,000 |                       | 
|                            |      | 2001                |        | $                     | 60,000  |                       | 

---

|(1) |  | As of May 31, 2003 the Company owed Mr. Korman $61,308 in back wages.
|--- |  | ---------------------------------------------------------------------

|(2) |  | Amount represents Company paid additional benefits.
|--- |  | ---------------------------------------------------

|(3) |  | Amount represents Company paid bonus wages.
|--- |  | -------------------------------------------



The following table discloses information concerning stock options granted in the year ended May 31, 2003 to our Chief Executive Officer.



68



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Option Grants in Fiscal Year Ended May 31, 2003



|Name         |                                                 | Individual Grants in Last Fiscal Year
|------------ | ----------------------------------------------- | -------------------------------------
|             | Number of SecuritiesUnderlying Options/Warrants |                                      
|Bruce Korman |                                                 | 1,350,000                            
|             |                                                 |                                      
|Edmund King  |                                                 | 0                                    

---

|(1) |  | On March 28, 2003, the Board of Directors approved the award of 1,350,000 options/warrants to Mr. Bruce Korman. The options/warrants will have an exercise price of $0.65 per share.
The award is subject to shareholder approval. The figures are included in this table, but have not been booked during the current fiscal year ended May 31, 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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, 2003. No options were exercised by any of the named officers during the fiscal year ended May 31, 2003:



|Name         |             | Number of SecuritiesUnderlying UnexercisedOptions at May 31, 2003 |     | Value of Unexercised In-the-Money Options atMay 31, 2003(1)
|------------ | ----------- | ----------------------------------------------------------------- | --- | -----------------------------------------------------------
|             | Exercisable |                                                                   |     | Un-exercisable                                             
|Bruce Korman |             | 1,350,000                                                         | (2) |                                                            
|             |             | 80,915                                                            |     |                                                            
|             |             | 72,444                                                            |     |                                                            
|             |             | 46,821                                                            |     |                                                            
|Edmund King  |             | 33,333                                                            |     |                                                            

---

|(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.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | On March 28, 2003, the Board of Directors approved the award of 1,350,000 options/warrants to Mr. Bruce Korman. The options/warrants will have an exercise price of $0.65 per share.
The award is subject to shareholder approval. The figures are not included in this table.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



69



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Employment Agreements



We previously 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 share, the closing price of the Companys stock on December 7, 2000. The options vest in one-third increments commencing December 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 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,
2003, there were 393,780 options outstanding under the 1996 Employee Stock Option Plan.



70



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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,
2003, 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 is 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.



On March 28, 2003 the Board of Directors approved amendments
to the Non-Executive Director Stock Option Plan. Under the amendments the directors will have the exercise price of their current options reduced to $0.65 and receive a one-time grant of 110,000 additional options to bring the total to 140,000
options for each director. The amendments are subject to shareholder approval.



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



71



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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.



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



PRINCIPAL STOCKHOLDERS SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT



The following table sets forth certain
information as of September 1, 2003 with respect to each executive officer and director, each nominee for 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 us to be the beneficial owner of more than five percent of any class of the common stock, the sole class of voting securities. At September 1, 2003 there were 9,453,819 shares of common
stock outstanding.



|Name and Address of Beneficial Owners (1) (2)                                                            |  | Amount and Natureof Beneficial Owner (2a) |  | Percentage of SharesBeneficially Owned |  
|-------------------------------------------------------------------------------------------------------- |  | ----------------------------------------- |  | -------------------------------------- | -
|Bruce Korman (3)(15)                                                                                     |  | 716,447                                   |  | 7.42                                   | %
|Richard Miller (4)(13)                                                                                   |  | 746,657                                   |  | 7.71                                   | %
|Robert B. Fagenson (5)(13)(14)                                                                           |  | 178,626                                   |  | 1.85                                   | %
|David Grano (6)(13)                                                                                      |  | 30,000                                    |  | *                                      |  
|Kevin Walls (7)(13)                                                                                      |  | 198,467                                   |  | 2.06                                   | %
|Eric Butlein (8)                                                                                         |  | 1,934,683                                 |  | 17.49                                  | %
|Edmund King (9)                                                                                          |  | 50,000                                    |  | *                                      |  
|Darryl Bergman (10)                                                                                      |  | 75,000                                    |  | *                                      |  
|Willi Muhr (11)                                                                                          |  | 50,000                                    |  | *                                      |  
|Peter & Irene Gauld (12)                                                                                 |  | 1,755,860                                 |  | 18.00                                  | %
|All directors and executive officers as a group (persons)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14) |  | 5,735,740                                 |  | 46.48                                  | %

---

|* |  | Denotes less than 1%.
|- |  | ---------------------

Footnotes appear on next page



72



---

|(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, we believe 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 June 1, 2003, 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 this Prospectus.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2a) |  | Includes all securities held (common stock, warrants, etc.)
|---- |  | -----------------------------------------------------------



|(3) |  | Includes 516,267 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 200,180 shares subject to outstanding exercisable and unexercisable employee options.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Includes 546,477 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 warrants and an additional 30,000 executive options.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | Includes 2,625 Series A Preferred Stock, 146,001 warrants to purchase common stock and an additional 30,000 executive options. Figures include all vested and unvested options.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) |  | Includes executive options to purchase an aggregate of 30,000 shares.
|--- |  | ---------------------------------------------------------------------



|(7) |  | Includes options to purchase an aggregate of 12,000 shares, 120,000 shares issuable upon conversion of Series B preferred stock, 36,467 shares issued as dividends on Series B
preferred stock and an additional 30,000 executive options.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) |  | Includes 360,000 shares issued upon conversion of convertible notes, 80,000 shares issued upon conversion of Series B preferred stock, 480,769 shares issued upon conversion of
Series C preferred stock, 736,681 shares of common stock, and an aggregate of 277,231 shares issuable upon exercise of 277,231 Series D and other misc. warrants. Includes shares beneficially owned through Ejada Limited Partnership, his spouse Jada
Butlein, ADA Partners, Tikkum Olam Foundation, ADA Greater Trust and Ejada Butlein Trust.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) |  | Includes options to purchase an aggregate of 50,000 shares.
|--- |  | -----------------------------------------------------------



|(10) |  | Includes options to purchase an aggregate of 75,000 shares
|---- |  | ----------------------------------------------------------



|(11) |  | Includes options to purchase an aggregate of 50,000 shares
|---- |  | ----------------------------------------------------------



|(12) |  | Includes 325,860 shares issued upon conversion of Series D preferred stock and 500,000 shares issued upon conversion of Series F preferred stock, 576,923 shares of common stock,
53,077 shares of common stock issued in lieu of interest and an aggregate of 300,000 shares issuable upon exercise of 300,000 Series E, G and H warrants.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



73



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|(13) |  | On March 28, 2003 the Board of Directors approved amendments to the Non-Executive Director Stock Option Plan. Under the amendments the directors will have the exercise price of
their current options reduced to $0.65 and receive a one-time grant of 110,000 additional options to bring the total to 140,000 options for each director. The amendments are subject to shareholder approval. The figures are neither included in this
table nor been booked during the current fiscal year ended May 31, 2003.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(14) |  | On March 28, 2003, the Board of Directors approved that in lieu of repayment of the $75,000 loan from Mr. Fagenson to the Company, Mr. Fagenson shall be issued 117,188 warrants
exercisable at $0.01 per share with a term of 7 years. Any of such warrants can be redeemed at any time for a cash payment from the Company of $0.65 per warrant share. The figures are included in this table.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(15) |  | On March 28, 2003, the Board of Directors approved the award of 1,350,000 options/warrants to Mr. Bruce Korman. The options/warrants will have an exercise price of $0.65 per
share. The award is subject to shareholder approval. The figures are neither included in this table nor been booked during the current fiscal year ended May 31, 2003.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



EQUITY COMPENSATION PLAN INFORMATION



The following table sets forth certain information as of September 1, 2003, with respect to each employee, officer and director, each nominee for
director, all directors and officers as a group and the persons known by us to hold options under the Companys Employee Stock Option and Non-Executive Director Stock Option Plan. As of September 1, 2003 a reserve of 775,887 shares of the
Companys Common Stock had been established for issuance under the Employee Plan and 150,000 under the Non-Executive Director Plan. There are 393,780 options outstanding under the Employee Plan and 120,000 under the Non-Executive Director Plan.



|Number of securities to be issued uponexercise of options, warrants and rights |  | Weighted average ofexercise price ofoutstanding options,warrants and rights |  | Weighted averageexercise price ofoutstandingoptions, warrantsand rights |      | Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in
column(a))
|------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------
|Equity Compensation plans approved by Security holders                         |  | 513,780                                                                     |  | $                                                                       | 4.12 |                                                                                                                                     
|Equity Compensation plans not approved by Security holders                     |  |                                                                            |  |                                                                         |     |                                                                                                                                     
|                                                                               |  |                                                                             |  |                                                                         |      |                                                                                                                                     
|Total                                                                          |  | 513,780                                                                     |  | $                                                                       | 4.12 |                                                                                                                                     
|                                                                               |  |                                                                             |  |                                                                         |      |                                                                                                                                     



74



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Certain Reports



Other than the individuals disclosed below, during the fiscal year ended May 31, 2003, based upon the information and reports received by the Company, other than a
shareholder of the Company described below, 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.



Mr. Robert Fagenson, a director of the Company, failed to timely file a report on Form 4 with
respect to a transaction in March, 2003 whereby he received warrants to purchase 117,188 shares of Common Stock. The warrants were issued to Mr. Fagenson in lieu of repayment of a loan in the principal amount of $75,000, which Mr. Fagenson had
previously made to the Company.



Mr. Eric Butlein and his affiliated entities
(Ejada Limited Partnership, Eric & Javen Butelin 1994 Rev. Trust, ADA Partners LLC, Tikkun Olam Foundation, Inc. EADA Grantor Retained Trust and JADA Grantor Retained Trust) failed to timely file the following reports:



1. Form 4 for June, 2002 to reflect the acquisition of 14,787 shares ofCommon Stock as a
dividend on shares of Series B Preferred Stock.



2. Form 4 for the month of
September 2002 to reflect the exercise of Series D Warrants.



3. Form 4 for the
month of October 2002 to reflect the acquisition of 312,500 shares of Common Stock and 150,000 warrants from the Company in a private transaction for a subscription price of $250,000.



4. Form 4 for the month of November 2002 to reflect the purchase of 5,000 shares of Common Stock in an open market transaction.



5. Form 4 for the month of December 2002 to reflect the purchase 200 shares of Common
Stock in an open market transaction.



6. Form 4 for the month of May, 2003 to
reflect the acquisition of 14,787 shares of Common Stock as a payment of dividends on shares of Series B Preferred Stock.



Code of Ethics



On August 25, 2003 the Board of Directors approved a Code of Ethics for its management, including the Chief Executive Officer and the Chief Financial Officer, as well as Codes of Ethics for all of its employees. The
Codes are designed to deter wrongdoing and to promote honest and ethical behavior by the Companys employees and management, as well as to ensure compliance with applicable rules and regulations. The Code of Ethics for the Companys Chief
Executive Officer and Chief Financial Officer is filed as an exhibit to this Report on Form 10-KSB for the fiscal year ended May 31, 2003.



75



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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Certain Transactions



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 expired on September 13, 2002. Although the lease agreement expired in September
2002 we continue to rent the facility on a month-to-month basis. 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 May 31, 2003 the Company was $50,753 in arrears under its lease
obligations.



In connection with our initial public offering in
July 1998, approximately $1,324,700 amount of outstanding corporate indebtedness was converted by certain lenders into approximately 292,745 shares of Common Stock, of which approximately 161,830 are beneficially owned by Messrs. Korman and Miller.
In connection with this transaction, we issued Messrs. Korman and Miller options to purchase approximately 161,800 shares of Common Stock at an exercise price of $7.00 per share.



The Company obtained loans of $68,000 in the fiscal year ended May 31, 2002 and $342,700 during the fiscal year ended May
31, 2003 from Bruce Korman who is an affiliate, Chief Executive Officer and Chairman of the Board of Directors of the Company. The loans were short-term loans and as of May 31, 2003 $46,085 are outstanding to Mr. Korman.



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 bore an interest rate of 10% annually 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 had been recorded in 2001 in conjunction with the warrants. The company has accrued interest expense of
$16,250 in conjunction with this loan. On March 28, 2003, the Board of Directors approved that in-lieu of repayment of the $75,000 loan from Mr. Fagenson to the Company, Mr. Fagenson shall be issued 117,188 warrants exercisable at $0.01 per share
with a term of 7 years. Any of such warrants can be redeemed at any time for a cash payment from the Company of $0.65 per warrant share.



Our board of directors has adopted a policy which requires that all transactions with officers, directors or 5% or greater stockholders must be on terms
no less favorable than could be obtained from unaffiliated third parties and that, following the election of one or more independent disinterested directors, any such transaction must be approved by a majority of such directors.



76



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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.



77



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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.



|       | 
|------ | 
|*3.1   | 
|       | 
|*3.2   | 
|       | 
|*3.3   | 
|       | 
|*4.1   | 
|       | 
|*4.2   | 
|       | 
|*10.1  | 
|       | 
|*10.2  | 
|       | 
|*10.3  | 
|       | 
|*10.4  | 
|       | 
|*10.5  | 
|       | 
|*10.6  | 
|       | 
|*10.7  | 
|       | 
|*10.8  | 
|       | 
|*10.9  | 
|       | 
|*10.10 | 
|       | 
|*10.11 | 
|       | 
|14.    | 
|       | 
|23.    | 
|       | 
|31.1   | 
|       | 
|31.2   | 
|       | 
|32.1   | 
|       | 
|(b)    | 





78



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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 15th day of September, 2003.



CASH TECHNOLOGIES, INC.By:

/s/    BRUCE
KORMANBruce 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.



|Signature                           |  | Title                                                                        |  | Date              
|----------------------------------- |  | ---------------------------------------------------------------------------- |  | ------------------
|                                    |  |                                                                             
|/s/    BRUCE KORMANBruce Korman     |  | President, Chief Executive Officer And Director (Principal Executive Officer |  | September 15, 2003
|                                    |  |                                                                             
|/s/    EDMUND KINGEdmund King       |  | Chief Financial Officer (Principal Financial Officer                         |  | September 15, 2003
|                                    |  |                                                                             
|/s/    RICHARD MILLERRichard Miller |  | Director                                                                     |  | September 15, 2003
|                                    |  |                                                                             
|Robert Fagenson                     |  | Director                                                                     |  |                   
|                                    |  |                                                                             
|/s/    DAVID GRANODavid Grano       |  | Director                                                                     |  | September 15, 2003
|                                    |  |                                                                             
|/s/    KEVIN WALLSKevin Walls       |  | Director                                                                     |  | September 15, 2003



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