**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 **WASHINGTON,
D.C. 20549**
 **________________________________**
 **FORM
10-QSB**
 
 (MARK
ONE)
 
 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES
 AND
EXCHANGE ACT OF 1934
 
 FOR NINE
MONTH PERIOD ENDED FEBRUARY 28, 2005
 
 OR
 
 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
 SECURITIES
AND EXCHANGE ACT OF 1934
 
 COMMISSION
FILE NUMBER: 001-15783
 ------------------------
 
 CASH
TECHNOLOGIES, INC.
 (Exact
name of registrant as specified in its charter)
 
 DELAWARE
    95-4558331(State
      or other jurisdiction of incorporation organization)
    (IRS
      Employer Identification No.)
 
 1434
      W. 11THSTREET, LOS ANGELES, CA
    90015(Address
      of principal executive offices)
    (Zip
      Code)
 
 (213)
745-2000
 (Registrant's
telephone number, including area code)
 
 ------------------------
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o.
 
 ------------------------
 
 Indicate
the number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date.
 
 On April
15, 2005, there were 16,967,181 shares of common stock, $ .01 par value per
share, issued and outstanding.
 
 1
 
 **CASH
TECHNOLOGIES, INC.**
 **FORM
10-QSB**
 
 **INDEX**
 
 
 
 **PAGE
      NO.****PART
      I. FINANCIAL INFORMATION**Item
      1. Consolidated Financial Statements:Consolidated
      Balance Sheet as of February 28, 2005 (unaudited) and May 31,
      2004
    **3**Consolidated
      Statements of Operations for the three and nine-month periods ended
      February 28, 2005 and February 29, 2004 (unaudited)
    **4**Consolidated
      Statements of Cash Flows for the three and nine-month periods Ended
      February 28, 2005 and February 29, 2004 (unaudited)
    **5**Notes
      to Consolidated Financial Statements for the three and nine-month periods
      ended February 28, 2005 and February 29, 2004 (unaudited)
    **6**Item
      2. Management's Discussion and Analysis of Financial Condition, Results of
      Operations, and Risk Factors
    **15**Item
      3. Controls And Procedures
    **25****PART
      II. OTHER INFORMATION**Item
      1. Legal Proceedings
    **26**Item
      2. Change in Securities
    **26**Item
      3. Defaults Upon Senior Securities
    **27**Item
      4. Submission of Matters to a Vote of Security Holders
    **27**Item
      5. Other Information
    **27**Item
      6. Exhibits and Reports on Form 8-K
    **28**SIGNATURES
    **29**
 ****
  2
 PART I   
 **ITEM
1. FINANCIAL STATEMENTS**
 
 **CASH
      TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
      BALANCE SHEETS**
  **FEBRUARY
      28,**
    
    **MAY
      31,****2005**
    
    **2004****(Unaudited)****ASSETS**CURRENT
      ASSETS:Cash
      and cash equivalents
    
    $
    1,116,312
    
    $
    20,951Accounts
      receivable
    
    
    2,178,417
    
    
    2,383Prepaid
      expenses and other current assets
    
    
    221,566
    
    
    4,000Other
      receivable
    
    
    28,035
    
    
    28,035Inventory
      (net)
    
    
    9,075,501
    
    
    —Total
      Current Assets
    
    
    12,619,831
    
    
    55,369CoinBank
      machines held for sale
    
    
    638,283
    
    
    675,439PROPERTY
      AND EQUIPMENT (net)
    
    
    33,613
    
    
    30,104CAPITALIZED
      SOFTWARE COSTS (Note 1)
    
    
    1,026,242
    
    
    1,446,068OTHER
      ASSETS
    
    
    1,247,657
    
    
    93,822**TOTAL
      ASSETS**
    
    **$**
    **15,565,626**
    
    **$**
    **2,300,802****LIABILITIES
      AND STOCKHOLDERS' EQUITY ( DEFICIENCY)**CURRENT
      LIABILITIES:Current
      maturities of Notes Payable (Note 4)
    
    $
    6,297,671
    
    $
    4,676,797Due
      to Officers and Directors (Note 4)
    
    
    8,915
    
    
    9,415Convertible
      debt (Note 5)
    
    
    513,349
    
    
    751,566Due
      to Shareholders (Note 5)
    
    
    970,588
    
    
    70,250Accounts
      payable
    
    
    2,542,536
    
    
    1,210,382Accrued
      liabilities
    
    
    2,283,180
    
    
    1,482,072Dividend
      payable
    
    
    36,661
    
    
    1,209,281Total
      Current Liabilities
    
    
    12,652,900
    
    
    9,409,763Long-Term
      Notes Payable (Note 6)Long-Term
      Convertible Debt (Note 6)
    
    
    —
    
    
    —**TOTAL
      LIABILITIES**
    
    
    12,652,900
    
    
    9,409,763COMMITMENTS
      & CONTINGENCIES (Note 2)
    
    
    —
    
    
    —MINORITY
      INTEREST
    
    
    617,498
    
    
    (23,200
    )STOCKHOLDERS'
      EQUITY (DEFICIENCY): (Note 3)Cumulative
      Redeemable Preferred Stock
    
    
    2,703,188
    
    
    1,883,688Common
      Stock
    
    
    169,757
    
    
    143,669Additional
      Paid-In-Capital
    
    
    35,715,083
    
    
    30,292,720Accumulated
      Deficit
    
    
    (36,292,800
    )
    
    (39,405,838
    )Total
      stockholders' equity (deficiency)
    
    
    2,295,228
    
    
    (7,085,761
    )**TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)**
    
    **$**
    **15,565,626**
    
    **$**
    **2,300,802**
  See
      notes to consolidated financial
statements
  
 3
  **CASH
      TECHNOLOGIES, INC.****CONSOLIDATED
      STATEMENTS OF OPERATIONS**
  **FOR
      THREE MONTHS**
    
    **FOR
      NINE MONTHS****ENDED
      FEBRUARY 28,**
    
    **ENDED
      FEBRUARY 28,****2005**
    
    **2004**
    
    **2005**
    
    **2004****(Unaudited)**
    
    **(Unaudited)**
    
    **(Unaudited)**
    
    **(Unaudited)**NET
      REVENUES
    
    $
    3,112,013
    
    $
    25,998
    
    $
    3,676,243
    
    $
    112,523COST
      OF REVENUES
    
    
    2,096,160
    
    
    8,153
    
    
    2,507,083
    
    
    42,201**GROSS
      PROFIT**
    
    
    1,015,853
    
    
    17,845
    
    
    1,169,160
    
    
    70,322SELLING,
      GENERAL, & ADMINISTRATIVE EXPENSE
    
    
    1,442,466
    
    
    796,731
    
    
    3,047,967
    
    
    2,149,120RESEARCH
      & DEVELOPMENT EXPENSE
    
    
    45,000
    
    
    30,000
    
    
    135,000
    
    
    90,000DEPRECIATION
      & AMORTIZATION EXPENSE
    
    
    140,558
    
    
    140,854
    
    
    422,062
    
    
    423,145**OPERATING
      LOSS**
    
    
    (612,171
    )
    
    (949,740
    )
    
    (2,435,869
    )
    
    (2,591,943
    )INCOME
      FROM FORGIVENESS OF DEBT (Note 10)
    
    
    (667,855
    )
    
    —
    
    
    (1,106,367
    )
    
    —INTEREST
      EXPENSE
    
    
    (94,302
    )
    
    130,128
    
    
    127,320
    
    
    425,764INCOME
      (LOSS) BEFORE INCOME TAXES
    
    
    149,986
    
    
    (1,079,868
    )
    
    (1,456,822
    )
    
    (3,017,707
    )INCOME
      TAXES
    
    
    800
    
    
    2,400
    
    
    800
    
    
    2,400Minority
      Interest
    
    $
    12,601
    
    $
    (12,492
    )
    $
    (19,298
    )
    $
    (33,590
    )Net
      Income (Loss) Before Extraordinary Gain
    
    $
    136,585
    
    $
    (1,069,776
    )
    $
    (1,438,324
    )
    $
    (2,986,517
    )**Extraordinary
      Gain**
    
    $
    —
    
    $
    —
    
    $
    5,999,951
    
    $
    —**Minority
      Interest - Extraordinary Gain**
    
    $
    —
    
    $
    —
    
    $
    659,995
    
    $
    —***
      NET INCOME (LOSS) (Note 10)**
    
    $
    136,585
    
    $
    (1,069,776
    )
    $
    3,901,632
    
    $
    (2,986,517
    )Dividends
      & deemed dividends
    
    $
    464,010
    
    $
    132,300
    
    $
    788,593
    
    $
    602,863Net
      income (loss) allocable to commonshareholders
    
    $
    (327,425
    )
    $
    (1,202,076
    )
    $
    3,113,039
    
    $
    (3,589,380
    )Basic
      and diluted net loss per share beforeextraordinary
      income
    
    $
    (0.02
    )
    $
    (0.12
    )
    $
    (0.15
    )
    $
    (0.35
    )Basic
      and diluted net income per share forextraordinary
      income
    
    $
    —
    
    
    —
    
    $
    0.36
    
    
    —Basic
      and diluted net income (loss) per share
    
    $
    (0.02
    )
    $
    (0.12
    )
    $
    0.21
    
    $
    (0.35
    )Basic
      and diluted weighted averageshares
      of common stock outstanding
    
    
    14,673,109
    
    
    10,172,309
    
    
    14,673,109
    
    
    10,172,309***
      Note 10 - Without the income from forgiveness of debt, net income (loss)
      would have been:**
    
    $
    (531,270
    )
    
    
    
    $
    2,795,265
  ****
  See
      notes to consolidated financial statements
  
 4
  **CASH
      TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
      STATEMENTS OF CASH FLOWS****(Unaudited)**
  **FOR
      THE NINE MONTHS ENDED FEBRUARY 28,****2005**
    
    **2004****OPERATING
      ACTIVITIES:**Net
      income (loss)
    
    $
    3,901,632
    
    $
    (2,986,517
    )Adjustments
      to reconcile net loss to net cash used byoperating
      activities:Extraordinary
      Gain
    
    
    (5,999,951
    )
    
    —Minority
      interest
    
    
    (9,302
    )
    
    (33,591
    )Amortization
      of capitalized software
    
    
    419,826
    
    
    419,826Noncash
      compensation expense
    
    
    —
    
    
    270,663Income
      on forgiveness of debt
    
    
    (1,106,367
    )
    
    —Depreciation
      expense
    
    
    2,237
    
    
    3,319Changes
      in operating assets and liabilities:Account
      receivable
    
    
    (151,943
    )
    
    (897
    )CoinBank
      machines held for sale
    
    
    37,156
    
    
    27,867Prepaid
      expenses and other current assets
    
    
    154,801
    
    
    4,057Inventory
    
    
    (605,276
    )
    
    —Other
      assets
    
    
    (235,605
    )
    
    (23,634
    )Accounts
      payable
    
    
    439,212
    
    
    (98,149
    )Accrued
      interest
    
    
    (2,920
    )
    
    263,276Accrued
      expenses and other current liabilities
    
    
    291,144
    
    
    420,537Net
      cash used in operating activities
    
    
    (2,865,356
    )
    
    (1,733,243
    )**INVESTING
      ACTIVITIES:**Investment
      in subsidiary
    
    
    (900,000
    )Purchase
      of property and equipment
    
    
    (5,746
    )
    
    —Net
      cash used in investing activities
    
    
    (905,746
    )
    
    —**FINANCING
      ACTIVITIES:**Proceeds
      from conversion of warrants
    
    
    188,615
    
    
    344,785Proceeds
      from issuance of warrants
    
    
    —
    
    
    75,000Proceeds
      from short-term debt
    
    
    1,162,675
    
    
    186,255Proceeds
      from minority interest
    
    
    10,000Repayments
      on short-term debt
    
    
    (339,490
    )
    
    (235,000
    )Proceeds
      on sale of preferred stock
    
    
    832,000
    
    
    —Proceeds
      from sale of common stock
    
    
    2,896,098
    
    
    1,529,805Net
      cash provided by financing activities
    
    
    4,749,898
    
    
    1,900,845**CHANGE
      IN CASH AND CASH EQUIVALENTS**
    
    
    978,796
    
    
    167,602Cash
      and Cash Equivalents, Beginning of Period
    
    
    137,516
    
    
    1,874Cash
      and Cash Equivalents, End of Period
    
    $
    1,116,312
    
    $
    169,476**SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION**Interest
      paid with cash
    
    $
    289,940
    
    $
    200,769**SUPPLEMENTAL
      DISCLOSURE OF NONCASH TRANSACTIONS**Conversion
      of preferred stock into common stock
    
    $
    12,500
    
    $
    —Conversion
      of convertible debt into common stock
    
    $
    200,024
    
    $
    3,606,695Issuance
      of common stock for services performed
    
    $
    180,000
    
    $
    270,663Dividends
      declared on preferred stock
    
    $
    168,058
    
    $
    252,087Dividends
      paid on preferred stock with common stock
    
    $
    1,340,677
    
    $
    27,000Deemed
      dividend on warrants issued
    
    $
    620,535
    
    $
    350,776Conversion
      of shareholder warrants
    
    $
    188,615
    
    $
    344,785Total
      assets purchased
    
    $
    10,798,988
    
    $
    —Total
      liabilities assumed
    
    $
    2,299,037
    
    $
    —Net
      assets purchased
    
    $
    8,499,951
    
    $
    —Bank
      debt assumed
    
    $
    (1,600,000
    )
    $
    —Loan
      assumed
    
    $
    (250,000
    )
    $
    —Cash
      paid as investment in subsidiary
    
    $
    (650,000
    )
    $
    —Extraordinary
      gain
    
    $
    5,999,951
    
    $
    —
  See
      notes to consolidated financial statements
  5
  **CASH
TECHNOLOGIES, INC.**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **NOTE
1:**  **GENERAL**
 
 GOING
CONCERN:
 
 We have
prepared the financial statements included in this Form 10-QSB assuming that we
will continue as a going concern. Although we have raised additional capital
since our initial public offering in July 1998, we have never generated
sufficient revenue-producing activity to sustain our operations. Accordingly, we
must raise significant capital to fund current operations and to repay existing
debt. Our auditors have included an explanatory paragraph in their report for
the year ended May 31, 2004, indicating there is substantial doubt regarding our
ability to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
any uncertainty.
 
 PRESENTATION
OF INTERIM INFORMATION:
 
 In the
opinion of the management of Cash Technologies, Inc. (“Cash Tech” or the
"Company"), the accompanying unaudited condensed consolidated financial
statements include all normal adjustments considered necessary to present fairly
the financial position as of February 28, 2005 and the results of operation and
cash flows for the three and nine month periods ended February 28, 2005 and
February 29, 2004. Interim results are not necessarily indicative of results to
be expected for any subsequent quarter or for the entire fiscal
year.
 
 The
condensed consolidated financial statements and notes are presented as permitted
by Form 10-QSB. These condensed financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Certain information and footnote disclosures, normally
included in financial statements prepared in accordance with generally accepted
accounting principles, have been omitted pursuant to such SEC rules and
regulations. These financial statements should be read in conjunction with the
Company's audited financial statements and the accompanying notes included in
the Company's Form 10-KSB for the year ended May 31, 2004, filed with the SEC.
The results of operations for the three and nine months period ended February
28, 2005, are not necessarily indicative of the results to be expected for any
subsequent quarter or for the entire fiscal year.
 
 In
December of 1997, we filed a patent application describing our 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 we refer to as 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.
 
 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, we 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 $45,000 for the
three month period ended February 28, 2005.
 
 6
 Amortization
of the capitalized software commenced on January 1, 2002. Amortization had been
calculated over a seven 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 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 quarter ended
February 28, 2005, we amortized an additional $139,942 of capitalized
software.
 
 In
connection with the development of our EMMA software, during the period ended
September 30, 1999 we utilized $278,000 in funds for coding and testing
activities necessary to resolve all of the identified high-risk development
issues. These costs were reflected as expenses on our financial statements.
Commencing October 1, 1999 through December 31, 2002 we incurred approximately
$2,771,536 over 27 months of coding, subsequent to the detail program design and
establishment of feasibility, until the product became available in January 2002
for general release to customers. These costs were treated as capitalized
software costs in our financial statements through December 31, 2002. We discuss
below the manner in which we developed our EMMA software, which is intended to
assist the reader in understanding the difference in our costs in the
technological feasibility using detail program design and capitalized software
costs during production (coding) phases.
 
 With
respect to the technological feasibility using the detail program design
approach, there were two primary issues, which can be classified as “high risk
development issues” that needed to be resolved as evidence that technological
feasibility had been established under paragraph 4(a)(3) of SFAS 86.
 
 The first
issue involved the testing of our proprietary messaging protocol and parallel
processing method for predicted performance and behavior. We estimate that we
expended approximately $160,000 for this activity. The messaging protocol and
processing method are what we believe differentiates us from other attempts to
develop similar software. Once these were developed, successfully tested using
simulations with existing applications and deemed workable, the development risk
for messaging was overcome and a patent application for the multi-transactional
architecture was filed on July 2, 1999. This patent was granted by the U.S.
Patent and Trademark Office in October of 2001.
 
 The
second high risk development issue was obtaining independent ATM certification
for our new messaging architecture. In order to process EFT network
transactions, the software being developed has to be certifiable by one of the
major authorized EFT networks (such as Star, MAC, etc.) for interfacing with the
global EFT network. We partnered with a third-party ATM software provider to
assist in these efforts, instead of developing the software for this step
ourselves. This significantly reduced our costs to complete this high risk
development step because we were able to incorporate and modify the third
party’s software, which had been previously certified, and re-certify it rather
than develop our own similar software from scratch. A per-transaction license
fee will be paid by us to the third party when the system starts generating
transactions, thereby further reducing development costs. Certification was
obtained in August of 1999 and the EMMA software was then deemed feasible.
 
 **COSTS
BEFORE VS. AFTER FEASIBILITY**
 
 There are
two primary reasons that the expensed costs prior to feasibility were far less
than the costs subsequent to feasibility, which were capitalized.
 
 
 First,
our proprietary messaging and processing methods were proven earlier than
expected.
 
 7
 Second,
as stated above, instead of developing our own ATM software we used a third
party software product, which saved time and money. This was completed on August
19, 1999.
 
 Partnering
with other software providers and licensing third-party software allowed us to
reduce costs below original estimates during the high-risk technological
feasibility phase using the “detail program design” approach. In contrast to the
initial high-risk development effort, the subsequent coding required more
resources and time than expected. As a result, the costs to establish
feasibility (approximately $278,000) were substantially lower than the
subsequent cost (approximately $2,770,000) incurred to make the product
available for general release to customers. It is also important to observe that
this category of transaction software is rare in the marketplace and doesn’t
follow the typical pattern of development of the vast majority of consumer and
office software, wherein most development dollars are expended early in
technological feasibility phase using a working model.
 
 Our
offered products such as ATM-X and POS-X were originally contemplated in the
detailed program design established prior to September 1999. We have given trade
names such as ATM-X and POS-X (referring to whether EMMA would be running an ATM
or at a retail point of sale) to help market the uses of EMMA.
 
 In
addition, management has identified potential uses for EMMA not originally
contemplated. These new uses were created after January 2002 and the costs
associated with these new uses, as reflected in our filings, have been treated
as general and administrative expenses and not capitalized. Certain of these
potential uses have been given trade names such as PrISM (PrISM uses EMMA’s
fraud detection to control access to a physical location). Any programming that
has been done for such products (primarily for demos, creating use-specific
screens and interfacing to third-party products) were included in General and
Administrative expenses and were minimal. In future filings, similar costs will
be charged to Research and Development Expense.
 
 Furthermore,
as in all of our applications where we expect to use biometrics, the biometrics
will be purchased/licensed from a third party.
 
 For the
reasons cited, most development costs occurred after the software program design
was completed and feasibility was achieved. These results are not typical, nor
comparable to software developers who use either the detail program design
approach, which we used, or the working model approach, under paragraph 4(b) of
SFAS 86, and these factors should be considered when reviewing our financial
statements.
 
 **NOTE
2. COMMITMENTS AND CONTINGENCIES**
 
 In June,
2002 we were notified that a vendor, Kiosk Information Systems, Inc. (“KIS”),
had obtained a judgment against us for $129,567 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. As of May 31,
2004, we had an accrued liability of $138,000 for this lawsuit. We had filed a
petition to vacate the judgment, but in December, 2004, KIS and Cash
Technologies, Inc. agreed to a settlement in which we paid KIS $50,000. The
balance of the accrued liability of approximately $92,752 has been written off
in the quarter ending February 28, 2005.
 
 In
February 2003 Samson Consulting Corp. was hired, inter
alia , to
provide consulting services and arrange financing for us. The term of the
agreement was 12 months at a monthly cost of $50,000 or an equivalent value in
shares of our stock; either party had the right to terminate after one month for
any reason.  Shortly thereafter, we terminated the agreement for Samson’s
failure to perform. In July 2004, Samson initiated arbitration in New York State
claiming that the agreement was wrongfully terminated and that Samson is owed
damages. We believe that Samson is owed nothing. Nevertheless, there is no
assurance that an arbitrator will not award Samson fees for the period prior to
the termination of the agreement or for the entire one-year term.  In any
event, we may incur significant costs of litigation.
 
 8
 In 2001
we delivered stock certificates representing 700,000 shares to an escrow agent
as collateral for a loan. The loan was never consummated, and in May 2001 we
notified the transfer agent to cancel the shares. Thereafter the escrow agent,
an attorney, passed away and we were never able to recover the certificates. In
August, 2004 it came to our attention that a party was attempting to transfer
450,000 of the 700,000 shares. We immediately initiated a lawsuit in New York to
prevent the transfer of the shares and have them retired. In December, 2004, we
reached a tentative settlement in which the shares would be returned to us
without any exchange of money, pending execution of final settlement
documentation. We intend to similarly pursue the recovery of the remaining
250,000 shares, however in the event that we cannot achieve a satisfactory
outcome in such effort, or in the event that the pending settlement is not
consummated for any reason, some or all of these shares may be treated as
outstanding and our Stockholders’ Equity line item would have to be adjusted to
reflect such additional shares.
 
 **NOTE
3: STOCKHOLDERS EQUITY**
 
 In the
fiscal quarter ended February 28, 2005, in private transactions under Section
4(2) of the Securities Act of 1933, as amended, the Company sold 1,398,216
shares of the Company’s Common Stock for gross proceeds of $1,506,100. In
addition the Company issued 816,675 5 year Common Stock purchase warrants with
exercise prices ranging from $2.00 to $5.00.
 
 In the
fiscal quarter ended February 28, 2005 the Company issued 150,000 shares of the
Company’s Common Stock to an employee and a contractor in lieu of cash payment
for gross proceeds of $180,000 for services rendered.
 
 In the
fiscal quarter ended February 28, 2005, 2 noteholders representing $200,027 of
principal and interest converted their notes into 90,440 shares of our common
stock.
 
 In the
fiscal quarter ended February 28, 2005, the Company declared issuance of
dividends to all series of preferred stock outstanding as of the November 30,
2004 record date. The Company will be paying $1,340,678 in dividends accrued via
issuing 213,678 shares of the Company’s common stock as well as 24,049 warrants
at a $12.00 exercise price.
 
 Stockholders’
Equity is based on 16,967,181 and 12,950,746 shares of common stock being
outstanding as of February 28, 2005 and February 28, 2004, respectively. In the
event that up to the remaining 250,000 shares, issued in 2001 as collateral for
a loan that was not obtained (See Note 2) are determined to be outstanding, the
Stockholders’ Equity line item would have to be adjusted to reflect such
additional shares.
 
 **NOTE
4: RELATED PARTY TRANSACTIONS**
 
 As of
February 28, 2005, we have outstanding short-term loans of an aggregate
principal amount of $8,915 from Bruce Korman (and related parties) who is this
company’s Chief Executive Officer and Chairman of the Board of Directors. The
loans are short term interest bearing loans and are payable upon demand.
Furthermore, as of February 28, 2005, we were in arrears of $315,462 for the
salary to Mr. Korman and we owed $13,160 in accrued rent for our offices to a
company in which Mr. Korman has a beneficial interest.
 
 9
 **NOTE
5: SHORT-TERM DEBT**
 
 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. In September, 2000,
due to our inability to repay G.E. on the original terms, we restructured the
loan through the first
of several loan modifications. The most recent modification, which shall expire
in November 2005, requires interest-only payments at a rate of 9.5% and the
entire unpaid balance is due at maturity. As of
February 28, 2005, we owed $3,711,994, which includes the principal, financing
fees and unpaid interest.
 
 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 through 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 secured convertible debt to the noteholders. The
proposed terms included reducing the conversion price of the notes to $2.50 per
share and the exercise price of the warrants to $0.65. As of February 28, 2005,
we still owed $513,349 in principal and interest to the seven remaining
noteholders.
 
 In May
2003 we
completed a private placement offering with one
of our stockholders consisting of convertible notes and warrants.  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. We also reduced the exercise
price of 8,000 Series C warrants owned by the stockholder from $2.50 to $0.25
per share. The note is due and payable on May 2, 2008.
 
 In May
2003 we
completed a private placement offering with one
of our stockholders consisting of convertible notes and warrants.  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 $0.65 per share. We also reduced the exercise price of 45,000
Series B warrants owned by the stockholder from $4.50 to $0.65 per share which
were converted immediately for gross proceeds to us of $29,250. The note is due
and payable on May 8, 2008.
 
 10
 We
obtained loans of $68,000 in the fiscal year ended May 31, 2002, $342,700 during
the fiscal year ended May 31, 2003 and $400,000 during the quarter ended
November 30, 2004 from Bruce Korman who is our Chief Executive Officer and
Chairman of our Board of Directors. The loans were short-term loans and as of
February 28, 2005 $8,915 is outstanding and currently payable to Mr.
Korman.
 
 The
Company’s subsidiary TAP Holdings, LLC which owns and operates Tomco auto
products has an asset based equity line with a revolving credit line which was
partially used for the acquisition of Tomco Auto Products and for operating
cashflow. On February 28, 2005 the balance for the above mentioned equity line
was approximately $1,925,743. The equity line is based upon the inventory and
receivables of the Company.
 
 **NOTE
6: LONG-TERM DEBT**
 
 NONE
 
 **NOTE
7: STOCK BASED COMPENSATION**
 
 All stock
options issued to employees have an exercise price not less than the fair market
value of our 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 our 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 and SFAS 148, our net loss and loss per share
for the three and six month periods ended February 28, 2005 and February 29,
2004, would have been increased to the pro forma amounts presented
below:
 
 **FOR
      THREE MONTHS**
    
    **FOR
      NINE MONTHS****ENDED
      FEBRUARY 28,**
    
    **ENDED
      FEBRUARY 28,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Net
      Income (Loss)As
      Reported
    
    
    (327,425
    )
    
    (1,202,076
    )
    
    3,113,039
    
    
    (3,589,380
    )Pro
      Forma
    
    
    (1,377,067
    )
    
    (1,876,811
    )
    
    2,063,397
    
    
    (4,264,115
    )Basic
      and Diluted Income (loss) Per Common ShareAs
      Reported
    
    
    (0.02
    )
    
    (0.12
    )
    
    0.21
    
    
    (0.35
    )Pro
      Forma
    
    
    (0.09
    )
    
    (0.18
    )
    
    0.14
    
    
    (0.42
    )
 
 For the
nine month period ended February 28, 2005, 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 2000-2005,
expected life of the option is 5 years, expected volatility of 37.01%, risk free
interest rate of 4.00% and a 0% dividend yield. The weighted average fair value
at the grant date for such option is $0.73 per option.
 
 11
 For the
nine month period ended February 29, 2004, 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 1999-2004,
expected life of the option is 5 years, expected volatility of 36.35%, risk free
interest rate of 2.98% and a 0% dividend yield. The weighted average fair value
at the grant date for such option is $0.87 per option.
 
 **NOTE
8: SEGMENT REPORTING**
 
 We
operate through four business segments: CoinBank machine-related activities,
EMMA-related activities, Heuristic Technologies, Inc. and TAP Holdings, LLC (aka
“Tomco”). We sell CoinBank self-service coin counting machines through existing
equipment distribution channels. Our EMMA transaction processing system has not
yet been deployed and all current software development costs are being expensed.
 
 Information
on our business segments for the:
  **Three
      months ended**
    
    **Nine
      months ended****February
      28,**
    
    **February
      28,**Net
      revenues:
    
    **2005**
    
    **2004**
    
    **2005**
    
    **2004**CoinBank
      machines
    
    
    37,840
    
    
    998
    
    
    61,662
    
    
    47,523EMMA
    
    
    —
    
    
    25,000
    
    
    —
    
    
    65,000Heuristic
    
    
    834
    
    
    —
    
    
    834
    
    
    —Tomco
    
    
    3,073,339
    
    
    —
    
    
    3,613,747Unallocated
    
    
    —
    
    
    —
    
    
    —
    
    
    —3,112,013
    
    
    25,998
    
    
    3,676,243
    
    
    112,523Interest
      expense:CoinBank
      machines
    
    
    —
    
    
    2,336
    
    
    4,761
    
    
    7,008EMMA
    
    
    —
    
    
    —
    
    
    —
    
    
    —Heuristic
    
    
    —
    
    
    —
    
    
    —
    
    
    —Tomco
    
    
    95,215
    
    
    
    
    
    119,443
    
    
    —Unallocated
    
    
    (189,517
    )
    
    127,792
    
    
    3,206
    
    
    418,756(94,302
    )
    
    130,128
    
    
    127,320
    
    
    425,764Depreciation
      & Amortization:CoinBank
      machines
    
    
    —
    
    
    —
    
    
    —
    
    
    —EMMA
    
    
    139,942
    
    
    139,942
    
    
    419,826
    
    
    419,826Heuristic
    
    
    —
    
    
    —
    
    
    —
    
    
    —Tomco
    
    
    —
    
    
    —
    
    
    —
    
    
    —Unallocated
    
    
    616
    
    
    912
    
    
    2,236
    
    
    3,319140,558
    
    
    140,854
    
    
    422,062
    
    
    423,145Segment
      Income (loss):CoinBank
      machines
    
    
    87,333
    
    
    (153,936
    )
    
    55,265
    
    
    (400,638
    )EMMA
    
    
    —
    
    
    —
    
    
    —
    
    
    —Heuristic
    
    
    (195,173
    )
    
    —
    
    
    (369,392
    )
    
    —Tomco
    
    
    132,997
    
    
    —
    
    
    29,462
    
    
    —Unallocated
    
    
    111,428
    
    
    (915,840
    )
    
    4,186,297
    
    
    (2,585,879
    )136,585
    
    
    (1,069,776
    )
    
    3,901,632
    
    
    (2,986,517
    )Net
      identifiable assets:CoinBank
      machines
    
    
    791,584
    
    
    834,223
    
    
    791,584
    
    
    834,223EMMA
    
    
    1,026,242
    
    
    1,586,010
    
    
    1,026,242
    
    
    1,586,010Heuristic
    
    
    —
    
    
    —
    
    
    —
    
    
    —Tomco
    
    
    11,915,297
    
    
    —
    
    
    11,915,297
    
    
    —Unallocated
    
    
    1,832,503
    
    
    319,445
    
    
    1,832,503
    
    
    319,44515,565,626
    
    
    2,739,678
    
    
    15,565,626
    
    
    2,739,678
  12
 **NOTE
9: MINORITY INTEREST**
 
 The
Company owns a subsidiary named CT Holdings, LLC of which shareholders own
13.65% and the Company owns 86.35%. These shareholders have contributed $443,000
and the proceeds have been used to further develop EMMA-related products for CT
Holdings, LLC as well as for working capital for CT Holdings, LLC and Cash
Technologies, Inc. During the quarter ended February 28, 2005 the Company has
allocated $3,825 of losses in CT Holdings, LLC to minority
interest.
 
 In
November 2004, the Company formed a subsidiary TAP Holdings, LLC to purchase and
operate certain assets of Tomco Auto Products, Inc. The Company owns 89% of TAP
Holdings; other shareholders own the remaining 11%. During the quarter ended
February 28, 2005, the Company has allocated $16,426 of net income in TAP
Holdings, LLC, to minority interest.
 
 13
 
 **NOTE
10: INCOME FROM FORGIVESS OF DEBT**
 
 During
the nine month period ended February 28, 2005, the Company had income from
forgiveness of debt of $1,106,367. Majority of the income of $535,416 was due to
an agreement the Company reached with a vendor of CoinBank Automated Systems, a
wholly owned subsidiary of the Company. Pursuant to the agreement the Company
agrees to certain future price adjustments. Income from forgiveness of debt also
includes $92,752 in connection with the KIS settlement (See Note 2), $108,941 in
connection with the Shaw’s lawsuit settlement as well as settlement on various
other liabilities.
 
 ****
 **NOTE
11: SUBSEQUENT EVENTS**
 
 On April
19, 2005, the Company completed an investment transaction in which it issued 100
shares with a $1,000,000 value of Series H Preferred Stock in exchange for 15%
of the common stock of CDHC Group, Inc., a startup company in the healthcare
industry. CDHC Group, led by industry veterans, is a healthcare marketing
company targeting consumers and providers who participate in consumer-driven and
high deductible health plans. The
Series H Preferred Stock shall be convertible to common stock at any time after
the second anniversary following the close of the transaction, at the then
current market price of the Company’s common stock with a floor of $1.00 per
share and a ceiling of $3.00 per share. The
Company will book this transaction as a long term asset.
 
 On April
18, 2005, the Company agreed to pay 50 shares with a $500,000 value of Series I
Preferred Stock to ClaimRemedi, Inc., a vendor of the Company’s Heuristic
Technologies, Inc. subsidiary, in exchange for a discount not to exceed
$1,000,000 on future transaction fees to be paid by Heuristic to ClaimRemedi
under the existing license agreement between the two companies. The Series I
Preferred Stock shall be convertible to common stock at any time at the then
current market price of the Company’s common stock, with a floor of $1.00 per
share and a ceiling of $3.00 per share, but has agreed not to sell any such
common stock until after the earlier of Heuristic achieving 5,000,000
transactions per quarter for 4 consecutive quarters or an aggregate of
25,000,000 transactions under the license agreement. In the event that Heuristic
never achieves the transaction benchmarks prior to the termination of the
license agreement, ClaimRemedi shall return the securities to the Company or
repay the value thereof. The Company will book this transaction as a prepaid
asset.
 
 On April
18, 2005, TAP Holdings, LLC, a majority owned subsidiary of the Company reached
a settlement agreement with N.A. Williams Co., Inc. a vendor of TAP Holdings.
Pursuant to the settlement agreement the Company will issue 156,000 5-year
common stock purchase warrants with an exercise price of $0.01 in lieu of
$280,935 owed to N.A. Williams & Co.
 
 Subsequent
to February 28, 2005, in private transactions under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 513,768 shares of the
Company’s Common Stock for gross proceeds of $545,110. In addition the Company
issued 326,000 5 year Common Stock purchase warrants with exercise prices
ranging from $2.00 to $5.00.
 
 On April
18, 2005, a shareholder of the Company agreed to convert an outstanding short
term loan in the amount of $100,000 into equity. Pursuant to the terms of the
conversion agreement the Company will issue 95,238 shares of the Company’s
Common Stock and 50,000 5 year Common Stock purchase warrants with exercise
prices of $2.00 per share.
 
 14
 
 
 **ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS**
 
 **SAFE
HARBOR STATEMENT**
 
 *In
addition to historical information, the information included in this Form 10-QSB
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 such
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, lack of revenue, market acceptance of the Company's products,
technological restrictions upon development, limited marketing experience,
uncertainty of product development, including our EMMA technology, dependence
upon new technology, need for qualified management personnel and competition.
The success of the Company also depends upon economic trends generally,
governmental regulation, legislation, and population changes. Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect management's analysis only. The Company assumes no obligation to update
forward-looking statements.*
 
 **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; CoinBank Automated
Systems, Inc., a Delaware corporation; CoinBank Automation Handels GmbH, a
subsidiary that was organized in, and operates in, Salzburg, Austria, and
Cintelia Systems Inc., a Delaware corporation. In June, 2002 we formed another
subsidiary CT Holdings, LLC., a Delaware limited liability company of which we
currently own 86.35%. In May, 2004, we formed Heuristic Technologies, Inc., a
Delaware corporation, to develop and market products for the employee benefits
and healthcare industries. In October 2004, we formed TAP Holdings, LLC., a
California limited liability company of which we currently own 89% to acquire
and operate the assets of Tomco Auto Products, Inc. Unless the context otherwise
requires, references herein to “we” or “us” refers to Cash Technologies, Inc.,
and its wholly-owned and majority owned subsidiaries.
  Until
June 2002, we were engaged in two lines of business, namely, (i) currency
processing through our main office in Los Angeles and (ii) coin counting through
machines placed in retail establishments, banks and other businesses. In the
fiscal year ended May 31. 2003 we discontinued and ceased our currency
processing business. Accordingly, no financial information is described herein
regarding those prior operations.
 
 In 1995,
we began our development of CoinBank self-service coin counting machines,
distributed through our CoinBank Automated Systems, Inc. subsidiary. 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. To date revenues from this product line have not been significant.
  15
 In
December of 1997, we filed a patent application describing a transaction
processing and networking technology, later named EMMA (E-commerce Message
Management Architecture), which resulted in the issuance of patent number
6,308,887, by the U.S. Patent and Trademark Office on October 30,
2001.
  In June
2002 we formed a subsidiary named CT Holdings, LLC to develop, market and
implement EMMA-based banking applications. CT Holdings, LLC is developing
BONUS(TM), a suite of self-service electronic banking services, including
automated check cashing, that it intends to bring to the marketplace. To date,
third party investors have invested a total of $443,000 in CT Holdings, LLC.
These investors currently own 13.65% while we own 86.35% of CT Holdings, LLC.
  In August
2004, we announced that we had completed the acquisition of certain assets of
Heuristic Technologies, LLC, a Sherman Oaks, California-based financial data
processor, through a newly formed wholly owned subsidiary, Heuristic
Technologies, Inc. ("HTI"). As part of the transaction, HTI has executed
employment agreements with the two senior executives of Heuristic who operate
the new subsidiary. The agreements call for the issuance of up to $3,700,000
worth of our preferred stock based on various revenue and income milestones of
HTI. The preferred stock is convertible to our common stock at a 20% discount to
the market price, with a floor of $2.00 per share and a ceiling of $5.00 per
share, and includes a dividend equal to 24% of the net income of HTI subject to
certain conditions . We
intend to combine the expertise of these two executives with our electronic
financial processing technologies to develop a line of products and services
that can effect and expedite electronic employee benefit, healthcare, and
insurance claims processing transactions. We believe that our EMMA technology
will enhance the products that HTI will offer in these markets. HTI is offering
(i) a stored value debit card and (ii) a suite of products designed for managing
employee benefits and insurance claims.
 
 On
November 5, 2004 the Company’s majority owned subsidiary, TAP Holdings, LLC
acquired certain assets and liabilities of Tomco Auto Products, Inc. for a
purchase price of $2,500,000, less certain adjustments, paid as follows:
$650,000 in cash and the remainder from an asset based credit line,
seller-carried financing and assumption of certain liabilities. The total assets
purchased had an approximate fair value of $11,001,478 a majority of which was
inventory, valued at $9,650,225. The difference between the net assets and the
purchase price resulted in an extraordinary gain to the Company of
$5,999,951.
 
 Tomco is
a leading provider of remanufactured fuel system components. Founded in 1947,
the Los Angeles-based company distributes its products through major auto
products retailers throughout the U.S. such as NAPA, with 6,000 stores,
CARQUEST, with more than 3,600 stores, O'Reilly Automotive, with more than 1,100
stores and others.
 
 In
December 2004, The Company’s subsidiary, Heuristic Technologies, Inc.
("Heuristic"), signed agreements with First Federal Savings Bank of the Midwest,
dba Meta Payment Systems ("Meta") and eCommLink, Inc. which allow Heuristic to
market its new stored-value debit card products. Meta,
under its agreement, shall be the issuer of the cards, providing all
card-related banking functions and access to the MasterCard(R) network.
eCommLink will provide transaction processing for all card transactions. In the
future, Heuristic intends to add proprietary features to the card using the
capabilities of Cash Tech's advanced EMMA(TM) data processing
system.
 
 16
 In
December 2004, Heuristic launched its debit card product called the
CashTech.Card(TM). The CashTech.Card, to be issued by Meta, is a stored-value
MasterCard card designed for a myriad of uses. Heuristic
plans to distribute the CashTech.Cards for expense reimbursements, Health
Reimbursement Accounts (HRA's) and Health Savings Accounts (HSA's). Other
anticipated uses include payroll, check cashing, loyalty programs and personal
uses.
 
 In
December 2004, the Company’s subsidiary, Heuristic Technologies, Inc.
("Heuristic"), has signed a Service and Joint Marketing Agreement with Navigator
Medical Management Services, LLC ("Navigator"), an administrator of employee
healthcare benefits. Under the agreement, Navigator will distribute the
CashTech.Card to beneficiaries for expense reimbursements, Health Reimbursement
Accounts (HRA's) and Health Savings Accounts (HSA's). Heuristic will provide
customer service, data processing and marketing services to Navigator. The
Company expects to receive the first orders for the cards in the third fiscal
quarter of 2005.
 17
  **RESULTS
OF OPERATIONS** ****
 
 **THREE
MONTHS ENDED FEBRUARY 28, 2005 COMPARED TO THE THREE MONTHS ENDED FEBRUARY 29,
2004.**
 
 *Net
revenues* for the
three-month period ended February 28, 2005 increased to $3,112,013 compared to
$25,998 for the same 2004 period. The increase in net revenue was directly
attributable to the sale of carburetors by Tomco, which was not in existence in
the same period last year.
 
 *Cost
of revenues* for the
three-month period ended February 28, 2005 was $2,096,160 compared to $8,153 for
the quarter ended February 29, 2004. The increase in direct costs was primarily
attributable to cost of raw materials in the manufacturing of carburetors and
direct labor incurred by Tomco, which was not in existence in the same period
last year.
 
 *Gross
profit* for the
three months ended February 28, 2005 was $1,015,853 compared to $17,845 for the
same period a year ago. The increase in gross profit was related to TAP
Holdings, LLC., which was not in existence in the same period last
year.
 
 Se *lling,
General and Administrative* expenses
for the three months ended February 28, 2005, increased to $1,442,466 compared
to $796,731 for the three months ended February 29, 2004. These expenses consist
primarily of wages (and wage related costs), outside contractor expenses,
travel/promotional expenses, professional services and facilities/office related
expenses. The primary increase is attributable to TAP Holdings, LLC., which was
not in existence in the same period last year.
 
 *Research
and development* expenses
for the three months ended February 28, 2005, was $45,000 compared to $30,000
for the three months ended February 29, 2004. The increase was the result of
additional programmer costs incurred.
 
 *Depreciation
and amortization* expenses
for the three months ended February 28, 2005, and February 29, 2004, were
$140,558 and $140,854, respectively.
 
 *Income
from Forgiveness of debt* for the
first three months ended February 28, 2005, was $667,855 compared to zero for
the same period in 2004. The increase was due to various settlements with
vendors of the Company and its subsidiaries (See Note 10).
 
 *Interest
expense* for the
three months ended February 28, 2005 and February 29, 2004, was $(94,032) and
$127,320, respectively. The difference was due to an adjustment in the interest
accrued for GE Capital and convertible debt.
 
 *Minority
Interest* for the
three months ended February 28, 2005 and February 29, 2004, was $12,601 and
$(12,492), respectively
 
 As a
result of the foregoing, *net
income (losses) from continuing operations* for the
three months ended February 28, 2005 and 2003, were $136,585 and $(1,069,776),
respectively.
 
 18
  **NINE
MONTHS ENDED FEBRUARY 28, 2005, COMPARED TO THE NINE MONTHS ENDED FEBRUARY 29,
2004.**
 
 **
 *Net
revenues* for the
nine-month period ended February 28, 2005 increased to $3,676,243 compared to
$112,523 for the same 2004 period. The increase in net revenue was attributable
to the revenues for TAP Holdings, LLC., which was not in existence in the same
period last year.
 
 *Cost
of revenues* for the
nine-month period ended February 28, 2005 was $2,507,083 compared to $42,201 for
the period ended February 29, 2004. The increase in direct costs was primarily
attributable to TAP Holdings, LLC., which was not in existence in the same
period last year.
 
 *Gross
profit* for the
nine months ended February 28, 2005 was $1,169,160 compared to $70,322 for the
same period a year ago. The increase in the gross profit was related to TAP
Holdings, LLC., which was not in existence in the same period last
year.
 
 Se *lling,
General and Administrative* expenses
for the nine months ended February 28, 2005, increased to $3,047,967 compared to
$2,149,120 for the nine months ended February 29, 2004. These expenses consist
primarily of wages (and wage related costs), outside contractor expenses,
travel/promotional expenses, professional services and facilities/office related
expenses. The increase is primarily attributable to TAP Holdings, LLC., which
was not in existence in the same period last year.
 
 *Research
and development* expenses
for the nine months ended February 28, 2005, was $135,000 compared to $90,000
for the nine months ended February 29, 2004. The increase was the result of
additional programmer costs incurred.
 
 *Depreciation
and amortization* expenses
for the nine months ended February 28, 2005, and February 29, 2004, were
$422,062 and $423,145 respectively.
 
 *Income
from Forgiveness of debt* for the
nine months ended February 28, 2005, was $1,106,367 compared to zero for the
same period in 2004. The increase was due to settlements with various vendors
of the Company and its subsidiaries  (See note 10).
 
 *Interest
expense* for the
nine months ended February 28, 2005 and February 29, 2004, was $127,320 and
$425,764, respectively. The decrease was due to the conversion of convertible
debt into shares of the Company’s common stock and an adjustment in the interest
accrued for GE Capital and convertible debt.
 
 *Minority
Interest* for the
nine months ended February 28, 2005 and February 29, 2004, was $19,828 and
$33,590, respectively
 
 *Extraordinary
Income* for the
nine months ended February 28, 2005, was $5,999,951 compared to zero for the
same period in 2004. The increase was due to the extraordinary gain recognized
in the purchase of certain assets and liabilities of Tomco Auto Products,
Inc.
 
 *Minority
Interest from extraordinary income* for the
nine months ended February 28, 2005 and February 29, 2004, was $659,995 and
zero, respectively. The increase was due to the extraordinary gain recognized in
the purchase of certain assets and liabilities of Tomco Auto Products,
Inc.
 
 As a
result of the foregoing, *net
income (losses) from continuing operations* for the
nine months ended February 28, 2005 and 2004, were $3,901,632 and $(2,986,517),
respectively.
 
 
 19
 **LIQUIDITY
AND CAPITAL RESOURCES**
 
 Our
capital requirements have been and will continue to be significant and our cash
requirements have been exceeding our cash flow from operations. At February 28,
2005, we had a working capital deficit of $33,069 compared to a working capital
deficit of $9,354,394 at May 31, 2004. At February 28, 2005, we had a cash
balance of approximately $1,116,312. Although our purchase of certain assets and
liabilities of Tomco Auto Products, Inc. is expected to provide cash flow in the
future, we are still in need of working capital. To date we have been funding
our operations through the issuance of equity in private placement transactions
with existing shareholders or persons with whom we have relationships, including
affiliates of shareholders. There can be no assurance that we will be able to
continue to raise required working capital in this manner.
 
 Our
independent certified public accountant included an explanatory paragraph in its
report for the year ended May 31, 2004, which indicated a substantial doubt as
to our ability to continue as a going concern. This concern is primarily due to
substantial debt service requirements and working capital needs.
 
 *Net
cash used in operating activities* was
($2,865,356) for the nine months ended February 28, 2005 compared to
($1,733,243) for the nine months ended February 29, 2004. The increase of net
cash used by operating activities during the 2005 period was primarily due to
the Company’s expansion into Heuristics Technologies, Inc. and TAP Holdings,
LLC.
 
 *Net
cash used in investing activities* for the
nine months ended February 28, 2005, was $905,746 as compared to zero for the
nine months ended February 29, 2004. The increase in net cash used by financing
activities for the 2005 period was attributable to an increase in investment in
subsidiary.
 
 *Net
cash provided by financing activities* for the
nine months ended February 28, 2005, was $4,749,898 as compared to $1,900,845
for the nine months ended February 29, 2004. The increase in net cash provided
by financing activities for the 2005 period was attributable to an increase in
proceeds from the issuance of preferred stock, proceeds from short-term debt and
an increase in proceeds from the sale of common stock.
 
 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. In September, 2000,
due to our inability to repay G.E. on the original terms, we restructured the
loan through the first
of several loan modifications. The most recent modification requires
interest-only payments at a rate of 9.5% and the entire unpaid balance is due at
maturity in November, 2005. As of this date we do not have sufficient capital to
repay this debt. As of
February 28, 2005, we owed $3,711,994, which includes the principal, financing
fees and unpaid interest. No assurance can be given that we will be able to
repay the G.E. loan by the due date.
 
 As of
February 28, 2005, we still owed $513,349 in principal and interest to
certain investors who purchased our convertible notes and warrants. We continue
to hold discussions with some of these investors and believe that some of these
loans will be converted into equity. However, if the loans are not converted, we
do not have the funds to repay these loans. Since these loans were secured by a
lien on our assets, a demand for the repayment of these loans may cause the
foreclosure of some of our assets, which would affect our operations and the
value of our remaining assets.
 
 20
 In fiscal
quarter ended August 31, 2004, in a private transaction under Section 4(2) of
the Securities Act of 1933, as amended, we sold 782 shares of preferred stock
for gross proceeds of $782,000. We also issued 204,930 of our common stock
purchase warrants with an exercise price of $3.00 and an additional 286,870 with
an exercise price of $5.00. All common stock purchase warrants have an exercise
life of 5 years and there was no beneficial conversion recognized in conjunction
with this transaction.
 
 In fiscal
quarter ended November 30, 2004, in a private transaction under Section 4(2) of
the Securities Act of 1933, as amended, we sold 50 shares of preferred stock for
gross proceeds of $50,000. We also issued 10,000 of our common stock purchase
warrants with an exercise price of $2.50 and an additional 15,000 with an
exercise price of $3.50. All common stock purchase warrants have an exercise
life of 5 years and there was no beneficial conversion recognized in conjunction
with this transaction.
 
 In the
fiscal quarter ended November 30, 2004, in private transactions under Section
4(2) of the Securities Act of 1933, as amended, the Company sold 456,206 shares
of the Company’s Common Stock for gross proceeds of $490,000. In addition the
Company issued 235,263 5 year Common Stock purchase warrants with exercise
prices ranging from $2.00 to $3.00.
 
 In the
fiscal quarter ended November 30, 2004 shareholders exercised 279,862 Common
Stock purchase warrants and the Company received gross proceeds of
$188,615.
 
 In the
fiscal quarter ended February 28, 2005, in private transactions under Section
4(2) of the Securities Act of 1933, as amended, the Company sold 1,398,216
shares of the Company’s Common Stock for gross proceeds of $1,506,100. In
addition the Company issued 816,675 5 year Common Stock purchase warrants with
exercise prices ranging from $2.00 to $5.00.
 
 In the
fiscal quarter ended February 28, 2005 the Company issued 150,000 shares of the
Company’s Common Stock to an employee and a contractor in lieu of cash payment
for gross proceeds of $180,000 for services rendered.
 
 In the
fiscal quarter ended February 28, 2005, 2 noteholders representing $200,027 of
principal and interest converted their notes into 90,440 shares of our common
stock.
 
 In the
fiscal quarter ended February 28, 2005, the Company declared issuance of
dividends to all series of preferred stock outstanding as of the November 30,
2004 record date. The Company will be paying $1,340,678 in dividends accrued via
issuing 213,678 shares of the Company’s common stock as well as 24,049 warrants
at a $12.00 exercise price.
  Recently,
HTI began marketing its products in the employee benefit and, healthcare
industries. Based on agreements that HTI has recently signed and on the results
of its on-going marketing efforts, we currently anticipate that HTI will
commence generating revenues during this calendar year. However, the amount and
timing of revenues generated from those agreements, and from other agreements
that HTI is currently considering, is uncertain. While we believe that HTI is
now positioned to commercially exploit its technologies and products, no
assurance can be given that HTI will, in fact, be able to generate revenues this
year, or ever, or if it does generate revenues, that such revenues will be
significant.
 
 We expect
that the extraordinary gain we recognized as a result of the acquisition of
certain assets of Tomco Automotive Products by our majority-owned subsidiary
will result in this company generating net income for the fiscal year ending May
31, 2005. While we expect to be profitable for the fiscal year, we will continue
to have negative cash flow from our operations until we commence generating
significant revenues from our other operations, including in particular the
operations of our HTI subsidiary. We believe that we currently have sufficient
financial resources to fund our expected operations through the end of the
current fiscal year on May 31, 2005. However, unless we are able to generate
additional revenues in the near future from our Tomco operations, from HTI,
and/or our other operations, we will not generate enough cash flow to fund our
anticipated level of future operations. Our operating expenses also have
increased significantly due to the operations of TAP and HTI.
 
 Through
our TAP subsidiary, we acquired the Tomco Automotive Products business and
assets in November 2004. To date, those operations have not generated any cash
flow that has been able to be distributed to Cash Technologies, nor has TAP
generated net income. However, we have recently commenced reorganizing certain
of the operations of TAP and have implemented new cost reduction procedures that
we expect will, in the near future, enable TAP to become profitable and to
generated cash from operations. In addition, we currently plan to relocate a
portion of our TAP automotive parts assembly operations to a lower cost
manufacturing location, which relocation is expected to significantly reduce our
operating costs later this year.
 21
 
 During
the past few months, HTI completed all of its licensing, banking and other
arrangements necessary to launch its products. In addition, HTI has recently
signed certain agreements for its products, which agreements are expected to
generated revenues in the near future. However, since these products are new and
HTI has no history of operations, the amount of revenues, and the timing of such
revenues, is unknown. Accordingly, while we are hopeful that HTI’s operations
will commence generating significant cash flow, the operation of HTI are highly
uncertain and speculative.
 
 Other
than the $2,500,000 revolving working capital credit line available to TAP, we
currently have no established banking arrangements to fund our operations. The
TAP credit line can, however, only be used to fund the operation of that
subsidiary and is not available to our other operations. Accordingly, we will
continue to be dependent upon the sales of debt or equity securities until we
generate sufficient revenues from existing or future operations or from the sale
of assets. In the event that we are unable to raise additional capital, we will
have to significantly reduce our operations, reduce our operating costs through
a headcount reduction and a reduction of outside professional services, or
terminate our operations.
  22
  **RISK
FACTORS**
  Investors
should carefully consider the risks described below and in our Annual Report on
Form 10-KSB. The risks and uncertainties described below and in the Annual
Report are not the only ones facing us. If any of the following risks actually
occur, our business, financial condition or results of operations could be
materially adversely affected.
  **We
have limited revenues and a history of incurring losses, which has resulted in
our independent accountants issuing opinions containing doubts about our ability
to continue as a going concern.**
  We have
generated limited revenues since our inception, and, while we expect to generate
significant revenues within the next fiscal year, there is no assurance that we
will be successful. For the fiscal years ended May 31, 2003 and 2004, we had net
sales of only $267,576 and $80,616, respectively. During the last fiscal quarter
ended February
28, 2005 , our
revenues were $3,112,013.
  We have
incurred losses since our inception. For the last two fiscal years ended May 31,
2003 and 2004, we sustained net losses of $4,048,345 and $4,382,532
respectively. We had a stockholders’ deficiency of $(7,085,761) as of May 31,
2004 which has been reduced and we have stockholders’ equity of $2,295,228 as of
February 28, 2005. In its reports accompanying our audited financial statements
for the fiscal years ended May 31, 2004 and 2003, 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
are unable to pay our current liabilities, and must rely on the continued
forbearance of specific creditors to avoid bankruptcy.**
 
 As of February
28, 2005 we had
outstanding current liabilities of $12,652,900, of which approximately $513,349
is not being paid as agreed. Our creditors have, to date, agreed not to
accelerate on these obligations and not to foreclose on our assets. However,
should the creditors demand immediate repayment, we would have to consider
filing for bankruptcy protection.
  **We
have an immediate need for capital and if we are unable to obtain the financing
we need, our business may fail.**
  As of
February 28, 2005, Cash Tech had a working capital deficit of $33,069 due to
continuing losses. On February 28, 2005, we had available cash of approximately
$1,116,312. Our capital requirements have been and will continue to be
significant and our cash requirements have exceeded cash flow from operations
since inception. We have been dependent on the proceeds of private placements 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. 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 could require us to significantly curtail, or possibly
cease altogether, our operations. There can be no assurance that our lenders
will not declare an event of default and demand immediate payment or seek to
attach our assets, including our EMMA technology. As of February 28, 2005, we
also owe $ 3,711,994 to
General Electric Capital Corporation. In 2000, we entered into the first of
several loan modifications with G.E. Capital. The current modification will
expire in November 2005, and we have no current plan or arrangement for repaying
G.E. Capital its principal.
  23
 **Our
assets serve as collateral for various loan obligations and therefore may not be
available for distribution to stockholders in the event of
liquidation.**
  We have
previously granted security interests in all of our assets to various lenders,
including equipment liens in favor of General Electric Capital Corporation
pursuant to a Master Security Agreement originally entered into in May 1997. As
of February
28, 2005 , we were
indebted to General Electric Capital Corporation in the amount of approximately $ 3,711,994 including interest. The default by us on certain secured obligations could
permit a secured creditor to foreclose on the assets securing the defaulted
indebtedness. As a result of the existing liens and continuing losses, it is
unlikely that we could obtain additional credit by securing our assets. Further,
as a result of the security interests, creditors would be entitled to collect
upon a sale of the assets prior to any distribution being available to holders
of our Common Stock or Preferred Stock.
  **Any
additional financing that we may obtain may substantially dilute the interests
of our stockholders.**
  To the
extent that we obtain additional financing through the issuance of additional
equity securities in the future, such issuance may involve substantial dilution
to our then-existing stockholders.
 
 **The
American Stock Exchange may delist our securities.**
  Our
common stock is listed on American Stock Exchange. Since we began trading on the
American Stock Exchange, the AMEX has granted us an exemption from its listing
requirements in order for our common stock to be listed for trading as we are
not, and have never been, in compliance with the AMEX’s criteria for continued
listing. Our failure to meet these maintenance criteria may eventually result in
the delisting of our common stock from the AMEX. In January, 2004 we provided
AMEX with a plan to come into compliance with the continued listing requirements
by April 20, 2005. AMEX has the right not to accept our plan and de-list our
stock, which would result in our common stock being moved to the OTC Bulletin
Board. If we have not satisfied the AMEX continued listing criteria by April 20,
2005, it is likely that AMEX will de-list our stock. In the event that our stock
is de-listed we would be required to liquidate certain of our Preferred Stock.
Although we fully expect to be in compliance by the required date, no assurance
can be given that we will be able to do so or that our progress will continue to
be satisfactory to the AMEX.
 24
 
 **ITEM
3. 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)) as of the end of the fiscal quarter ended February 28,
2005. 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 Quarterly Report on Form 10-QSB 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, based on their evaluation as
of February 28, 2005, there have been no 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 February 28, 2005.
 
 25
 ****
 **PART
II. OTHER INFORMATION**
 
 **ITEM
1. LEGAL PROCEEDINGS**
  In June,
2002 we were notified that a vendor, Kiosk Information Systems, Inc. (“KIS”),
had obtained a judgment against us for $129,567 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. As of May 31,
2004, we had an accrued liability of $138,000 for this lawsuit. We had filed a
petition to vacate the judgment, but in December, 2004, KIS and Cash
Technologies, Inc. agreed to a settlement in which we paid KIS $50,000. The
balance of the accrued liability of $92,752 has been written off in the quarter
ending February 28, 2005.
  In
February 2003 Samson Consulting Corp. was hired, inter
alia , to
provide consulting services and arrange financing for us. The term of the
agreement was 12 months at a monthly cost of $50,000 or an equivalent value in
shares of our stock; either party had the right to terminate after one month for
any reason. Shortly thereafter, we terminated the agreement for Samson’s
failure to perform. In July 2004, Samson initiated arbitration in New York State
claiming that the agreement was wrongfully terminated and that Samson is owed
damages. We believe that Samson is owed nothing. Nevertheless, there is no
assurance that an arbitrator will not award Samson fees for the period prior to
the termination of the agreement or for the entire one-year term.  In any
event, we may incur significant costs of litigation.
  In 2001
we delivered stock certificates representing 700,000 shares to an escrow agent
as collateral for a loan. The loan was never consummated, and in May 2001 we
notified the transfer agent to cancel the shares. Thereafter the escrow agent,
an attorney, passed away and we were never able to recover the certificates. In
August, 2004 it came to our attention that a party was attempting to transfer
450,000 of the 700,000 shares. We immediately initiated a lawsuit in New York to
prevent the transfer of the shares and have them retired. In December, 2004, we
reached a tentative settlement in which the shares would be returned to us
without any exchange of money, pending execution of final settlement
documentation. We intend to similarly pursue the recovery of the remaining
250,000 shares, however in the event that we cannot achieve a satisfactory
outcome in such effort, or in the event that the pending settlement is not
consummated for any reason, some or all of these shares may be treated as
outstanding and our Stockholders’ Equity line item would have to be adjusted to
reflect such additional shares.
 ****
 **ITEM
2. CHANGE IN SECURITIES**
 
 In the
fiscal quarter ended February 28, 2005, in private transactions under Section
4(2) of the Securities Act of 1933, as amended, the Company sold 1,398,216
shares of the Company’s Common Stock for gross proceeds of $1,506,100. In
addition the Company issued 816,675 5 year Common Stock purchase warrants with
exercise prices ranging from $2.00 to $5.00.
 
 In the
fiscal quarter ended February 28, 2005 the Company issued 150,000 shares of the
Company’s Common Stock to an employee and a contractor in lieu of cash payment
for gross proceeds of $180,000 for services rendered.
 
 In the
fiscal quarter ended February 28, 2005, 2 noteholders representing $200,027 of
principal and interest converted their notes into 90,440 shares of our common
stock.
 
 In the
fiscal quarter ended February 28, 2005, the Company declared issuance of
dividends to all series of preferred stock outstanding as of the November 30,
2004 record date. The Company will be paying $1,340,678 in dividends accrued via
issuing 213,678 shares of the Company’s common stock as well as 24,049 warrants
at a $12.00 exercise price.
  26
 **ITEM
3. DEFAULT UPON SENIOR SECURITIES**
 
 In
January 2000, we completed a private placement offering of convertible notes and
warrants under Section 4(2) of the Securities Act of 1933. 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 are
secured by a first priority lien on all of our assets. As of February 28, 2005,
we still owed $513,349 in principal and interest to the noteholders.
  **ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 During
this fiscal year, there have not been any matters submitted for a vote from the
security holders.
 
 **ITEM
5. OTHER INFORMATION**
 
 On
September 28, 2004, we received a notice from the American Stock Exchange
(“AMEX”) requesting an update to our previously submitted plan to come into
compliance with AMEX’s continued listing requirements. As we previously
disclosed, on October 20, 2003 AMEX advised us that we do not meet the continued
listing standards. In response, we submitted a plan to AMEX with our plan for
regaining compliance with the continued listing standards by April 20, 2005.
Periodically AMEX has requested updates to this plan to monitor our progress.
AMEX has the right not to accept our plan and de-list our stock, which would
result in our common stock being moved to the OTC Bulletin Board. In the event
that our stock is de-listed we would be required to liquidate certain of our
Preferred Stock. **** While we
strongly believe we will meet the AMEX listing criteria, if we have not
satisfied these criteria by April 20, 2005, it is likely that AMEX will de-list
our stock. ****
 
 On April
19, 2005, the Company completed an investment transaction in which it
issued 100 shares of Series H Convertible Preferred Stock (stated
value $1,000,000) in exchange for 15% of the common stock of CDHC Group, Inc., a
startup company in the healthcare industry.  CDHC Group, led by industry
veterans, is a healthcare marketing company targeting consumers and providers
who participate in consumer-driven and high deductible health
plans.  The Series H Preferred Stock shall be convertible to common
stock at any time after the second anniversary following the close of the
transaction, at the then current market price of the Company’s common stock with
a floor of $1.00 per share and a ceiling of $3.00 per share. The issuance of the
Series H Convertible Preferred Stock was not registered under the Securities Act
of 1933, as amended (the “Act”), and the shares were issued and sold in reliance
upon the exemption from registration contained in Section 4(2) of the
Act.
 
 27
 On April
18, 2005, the Company issued 50 shares value of Series I Preferred
Stock (stated value of $500,000) to ClaimRemedi, Inc., a vendor of the
Company’s Heuristic Technologies, Inc. subsidiary, in exchange for a discount on
future transaction fees to be paid by Heuristic to ClaimRemedi under the
existing license agreement between the two companies. The Series I Preferred
Stock shall be convertible to common stock at any time at the then current
market price of the Company’s common stock, with a floor of $1.00 per share and
a ceiling of $3.00 per share, but has agreed not to sell any such common stock
until after the earlier of Heuristic achieving 5,000,000 transactions per
quarter for 4 consecutive quarters or an aggregate of 25,000,000 transactions
under the license agreement. In the event that Heuristic never achieves the
transaction benchmarks prior to the termination of the license agreement,
ClaimRemedi shall return the securities to the Company or repay the value
thereof. The issuance of the Series I Preferred Stock was not registered under
the Securities Act of 1933, as amended (the “Act”), and the shares were issued
and sold in reliance upon the exemption from registration contained in
Section 4(2) of the Act."
  **ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K**
   (a)
    Exhibits
 31.1  Certification
of Chief Executive Officer
 31.2  Certification
of Chief Financial Officer
 32.1  Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act
 
 (b)  Reports
on Form 8-K incorporated by reference filed on February 13, 2004
 
 **NONE**
 28
 **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 on Form 10-QSB for the fiscal
quarter ended February 28, 2005, to be signed on its behalf by the undersigned,
thereunto duly authorized the 19th day of April, 2005.
 
 
 
 CASH
TECHNOLOGIES, INC.
 
 
 By: /S/
Bruce Korman
 ________________________________________
 Bruce
Korman
 President
and Chief Executive Officer
 
 
 By:
/S/  Edmund
King
 ________________________________________
 Edmund
King
 Chief
Financial Officer
 
  29