**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
      THREE
      MONTH PERIOD ENDED FEBRUARY 28, 2006





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, 2006, there were 20,635,964 shares of common stock, $ .01 par value per
      share, issued and outstanding.





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


1


**CASH
      TECHNOLOGIES, INC.**


**FORM
      10-QSB**





**INDEX**








**PAGE
      NO.**





**PART
                I. FINANCIAL INFORMATION**Item
                1.
            Consolidated
                Financial Statements:Consolidated
                Balance Sheets as of February 28, 2006 (unaudited) and May 31,
                2005
            **3**Consolidated
                Statements of Operations for the three and nine-month periods ended
                February 28, 2006 and February 28, 2005 (unaudited)
            **4**Consolidated
                Statements of Cash Flows for the nine-month periods Ended February
                28,
                2006 and February 28, 2005 (unaudited)
            **5**Notes
                to Consolidated Financial Statements for the three and nine-month
                periods
                ended February 28, 2006 and February 28, 2005 (unaudited)
            **6**Item
                2.
            Management's
                Discussion and Analysis of Financial Condition, Results of Operations,
                and
                Risk Factors
            **15**Item
                3.
            Controls
                And Procedures
            **29****PART
                II. OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            **30**Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            **30**Item
                3.
            Defaults
                Upon Senior Securities
            **31**Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            **31**Item
                5.
            Other
                Information
            **32**Item
                6.
            Exhibits
                and Reports on Form 8-K
            **32**SIGNATURES
            **33**


2


**PART
      I**





**ITEM
      1. FINANCIAL STATEMENTS**





**CASH
                TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS**




**FEBRUARY
                28,**
            
            **MAY
                31,****2006**
            
            **2005****(Unaudited)****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            170,021
            
            $
            163,627Accounts
                receivable
            
            
            1,778,406
            
            
            1,734,616Prepaid
                expenses and other current assets
            
            
            868,507
            
            
            749,954Other
                receivable
            
            
            78,106
            
            
            28,035Inventory
                (net of allowance $1,180,000)
            
            
            8,873,952
            
            
            8,508,323Total
                Current Assets
            
            
            11,768,992
            
            
            11,184,555CoinBank
                machines held for sale
            
            
            615,060
            
            
            638,283PROPERTY
                AND EQUIPMENT (net)
            
            
            47,788
            
            
            51,084CAPITALIZED
                SOFTWARE COSTS
            
            
            466,473
            
            
            886,300CDHC
                PREFERRED STOCK
            
            
            900,901
            
            
            900,901CLAIMREMEDI
                PREFERRED STOCK
            
            
            3,500,000
            
            
            -OTHER
                ASSETS
            
            
            271,143
            
            
            449,745**TOTAL
                ASSETS**
            
            **$**
            **17,570,357**
            
            **$**
            **14,110,868****LIABILITIES
                AND STOCKHOLDERS' EQUITY**CURRENT
                LIABILITIES:Current
                maturities of Notes Payable (Note 5)
            
            $
            5,734,200
            
            $
            5,654,098Due
                to Officers and Directors (Note 4)
            
            
            8,915
            
            
            8,915Convertible
                debt (Note 5)
            
            
            494,893
            
            
            472,975Due
                to Shareholders (Note 5)
            
            
            120,750
            
            
            270,750Accounts
                payable
            
            
            1,719,529
            
            
            1,967,800Accrued
                liabilities
            
            
            2,120,492
            
            
            813,439Dividend
                payable
            
            
            -
            
            
            128,589Total
                Current Liabilities
            
            
            10,198,779
            
            
            9,316,566Long-Term
                Notes Payable (Note 6)
            
            
            10,595
            
            
            13,807**TOTAL
                LIABILITIES**
            
            
            10,209,374
            
            
            9,330,373COMMITMENTS
                & CONTINGENCIES (Note 2)
            
            
            -
            
            
            -MINORITY
                INTEREST (Note 9)
            
            
            616,040
            
            
            634,666STOCKHOLDERS'
                EQUITY: (Note 3)Cumulative
                  Redeemable Preferred Stock, 1,500,000 shares
                  authorized,647,496
                  and 647,093, shares issued and outstanding at February 28, 2006
                  and May
                  31, 2005.
            
            
            8,220,812
            
            
            4,195,812Common
                  Stock, $0.01 par value, 30,000,000 shares authorized,20,635,964
                  and 18,321,490, shares issued and outstanding at February 28, 2006
                  and May
                  31, 2005.
            
            
            206,445
            
            
            183,300Additional
                Paid-In-Capital
            
            
            39,072,599
            
            
            36,652,496Accumulated
                Deficit
            
            
            (40,754,913
            )
            
            (36,885,779
            )Total
                stockholders' equity
            
            
            6,744,943
            
            
            4,145,829**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            **$**
            **17,570,357**
            
            **$**
            **14,110,868**





See
      notes
      to consolidated financial statements




3


**CASH
      TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**(Unaudited)**
              
              **(Unaudited)****THREE
                  MONTH PERIOD**
              
              **FOR
                  NINE MONTHS****ENDED
                FEBRUARY
                28,**
              
              **ENDED
                FEBRUARY
                28,****2006**
              
              **2005**
              
              **2006**
              
              **2005**NET
                  REVENUES
              
              $
              2,214,721
              
              $
              3,112,013
              
              $
              6,065,830
              
              $
              3,676,243COST
                  OF REVENUES
              
              
              1,577,089
              
              
              2,096,160
              
              
              4,399,486
              
              
              2,507,083**GROSS
                  PROFIT (LOSS)**
              
              
              637,632
              
              
              1,015,853
              
              
              1,666,344
              
              
              1,169,160SELLING,
                  GENERAL, & ADMINISTRATIVE EXPENSE
              
              
              1,369,131
              
              
              1,442,466
              
              
              4,121,746
              
              
              3,047,967RESEARCH
                  AND DEVELOPMENT
              
              
              37,500
              
              
              45,000
              
              
              112,500
              
              
              135,000DEPRECIATION
                  & AMORTIZATION EXPENSE
              
              
              141,066
              
              
              140,558
              
              
              423,197
              
              
              422,062**OPERATING
                  LOSS**
              
              
              (910,065
              )
              
              (612,171
              )
              
              (2,991,099
              )
              
              (2,435,869
              )INCOME
                  FROM FORGIVENESS OF DEBT
              
              
              (16
              )
              
              (667,855
              )
              
              (51,185
              )
              
              (1,106,367
              )INTEREST
                  EXPENSE
              
              
              214,303
              
              
              (94,302
              )
              
              614,803
              
              
              127,320LOSS
                  BEFORE INCOME TAXES
              
              
              (1,124,352
              )
              
              149,986
              
              
              (3,554,717
              )
              
              (1,456,822
              )INCOME
                  TAXES
              
              
              -
              
              
              800
              
              
              7,000
              
              
              800MINORITY
                  INTEREST (Note 9)
              
              
              (6,282
              )
              
              12,601
              
              
              (18,626
              )
              
              (19,298
              )Net
                  Income (Loss) Before Extraordinary Gain
              
              **$**
              **(1,118,070**
              **)**
              $
              136,585
              
              **$**
              **(3,543,091**
              **)**
              **$**
              **(1,438,324**
              **)****Extraordinary
                  Gain**
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              5,999,951**Minrity
                  Interest - Extraordinary Gain**
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              659,995**NET
                  INCOME (LOSS)**
              
              $
              (1,118,070
              )
              $
              136,585
              
              $
              (3,543,091
              )
              $
              3,901,632Dividends
                  & deemed dividends
              
              $
              50,415
              
              $
              464,010
              
              $
              326,043
              
              $
              788,593Net
                  income (loss) allocable to common shareholders
              
              $
              (1,168,485
              )
              $
              (327,425
              )
              $
              (3,869,134
              )
              $
              3,113,039Basic
                  net income (loss) per share before extraordinary income
              
              $
              (0.06
              )
              $
              0.01
              
              $
              (0.18
              )
              $
              (0.10
              )extraordinary
                  income
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              0.36Basic
                  and diluted net income (loss) per share
              
              $
              (0.06
              )
              $
              (0.02
              )
              $
              (0.20
              )
              $
              0.21Basic
                  and diluted weighted averageshares
                  of common stock outstanding
              
              
              19,183,870
              
              
              14,673,109
              
              
              19,183,870
              
              
              14,673,109





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,****2006**
            
            **2005****OPERATING
                ACTIVITIES:**Net
                loss
            
            $
            (3,543,091
            )
            $
            3,901,632Adjustments
                to reconcile net loss to net cash used by operating
                activities:Extraordinary
                Gain
            
            
            -
            
            
            (5,999,951
            )Minority
                interest
            
            
            (18,626
            )
            
            (9,302
            )Amortization
                of capitalized software
            
            
            419,827
            
            
            419,826Noncash
                compensation expense
            
            
            3,308
            
            
            -Income
                on forgiveness of debt
            
            
            -
            
            
            (1,106,367
            )Depreciation
                expense
            
            
            6,735
            
            
            2,237Changes
                in operating assets and liabilities:Inventory
            
            
            (365,629
            )
            
            (605,276
            )Account
                receivable
            
            
            (121,896
            )
            
            (151,943
            )CoinBank
                machines held for sale
            
            
            23,223
            
            
            37,156Prepaid
                expenses and other current assets
            
            
            (90,518
            )
            
            154,801Other
                assets
            
            
            178,602
            
            
            (235,605
            )Accounts
                payable
            
            
            (47,513
            )
            
            439,212Accrued
                interest
            
            
            105,021
            
            
            (2,920
            )Accrued
                expenses and other current liabilities
            
            
            1,106,262
            
            
            291,144Net
                cash used in operating activities
            
            
            (2,344,295
            )
            
            (2,865,356
            )**INVESTING
                ACTIVITIES:**Investment
                in subsidiary
            
            
            -
            
            
            (900,000
            )Purchase
                of property and equipment
            
            
            (3,439
            )
            
            (5,746
            )Net
                cash provided by (used in) investing activities
            
            
            (3,439
            )
            
            (905,746
            )**FINANCING
                ACTIVITIES:**Proceeds
                from conversion of warrants
            
            
            340
            
            
            188,615Proceeds
                from minority interest
            
            
            -
            
            
            10,000Proceeds
                from short-term debt
            
            
            -
            
            
            1,162,675Repayments
                on short-term debt
            
            
            (103,000
            )
            
            (339,490
            )Repayments
                on long-term debt
            
            
            (3,212
            )
            
            -Proceeds
                on sale of preferred stock
            
            
            475,000
            
            
            832,000Proceeds
                from sale of common stock
            
            
            1,985,000
            
            
            2,896,098Net
                cash provided by financing activities
            
            
            2,354,128
            
            
            4,749,898**CHANGE
                IN CASH AND CASH EQUIVALENTS**
            
            
            6,394
            
            
            978,796Cash
                and Cash Equivalents, Beginning of Period
            
            
            163,627
            
            
            137,516Cash
                and Cash Equivalents, End of Period
            
            $
            170,021
            
            $
            1,116,312**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION**Income
                taxes
            
            $
            7,000
            
            $
            800**SUPPLEMENTAL
                DISCLOSURE OF NONCASH TRANSACTIONS**Conversion
                of preferred stock into common stock
            
            $
            -
            
            $
            12,500Issuance
                of preferred stock
            
            $
            3,500,000
            
            $
            -Issuance
                of common stock purchase warrants for services performed
            
            $
            3,308
            
            $
            -Dividends
                declared on preferred stock
            
            $
            317,528
            
            $
            168,058Dividends
                paid via common stock
            
            $
            446,116
            
            $
            -Deemed
                dividend on warrants issued
            
            $
            8,515
            
            $
            156,525Total
                assets purchased
            
            $
            -
            
            $
            10,798,988Total
                liabilities assumed
            
            $
            -
            
            $
            2,299,037Net
                assets purchased
            
            $
            -
            
            $
            8,499,951Bank
                debt assumed
            
            $
            -
            
            $
            (1,600,000
            )Loan
                assumed
            
            $
            -
            
            $
            (250,000
            )Cash
                paid as investment in subsidiary
            
            $
            -
            
            $
            (650,000
            )Extrodinary
                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 activities 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, 2005, 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, 2006 and the results of operation
      and
      cash flows for the three and nine-month periods ended February 28, 2006 and
      February 28, 2005. 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, 2005, filed with the SEC.
      The results of operations for the three and nine-month periods ended February
      28, 2006, 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), can perform complex data processing that involves interactivity
      with disparate platforms and devices for financial, security and other
      applications.





Technological
      feasibility of the Company’s EMMA technology 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 $37,500 for the three month period ended February 28, 2006.


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, 2006, 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**





As
      previously reported, we terminated a consulting agreement with Abraham Mirman
      of
      Samson Consulting Corp. in 2003. In July 2004, Mirman initiated an arbitration
      in New York State claiming that the agreement was wrongfully terminated and
      that
      Samson was owed $600,000 in damages plus costs. In June 2005, an arbitrator
      awarded Sampson $100,000 in unpaid fees, $21,650 in statutory interest through
      July 20, 2005 and no attorney fees or costs. In August 2004, we initiated a
      lawsuit against Mirman in California, alleging that he failed to provide
      financing promised in February, 2003, causing damages in excess of $400,000.
      In
      February 2006, both parties agreed to settle all outstanding claims without
      any
      funds exchanged; i.e. we have dismissed our California lawsuit and Samson has
      vacated its New York judgment. We had reserved $121,650 for the Samson judgment
      which has been returned to Shareholders Equity.


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, died and we were never able to recover the certificates. In August,
      2004 it came to our attention that a party was improperly 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 settlement in which the shares would be returned to us without any
      exchange of money. 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**





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to an existing shareholder.
      As
      part of that transaction we also issued five-year warrants to purchase 50,000
      shares of common stock at an exercise price of $2.50.





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 175,000 shares
      of common stock for gross proceeds of $175,000 to three existing shareholders
      and one new accredited investor. As part of that transaction we also issued
      five-year warrants to purchase 175,000 shares of common stock at an exercise
      price of $2.00.





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 52.5 shares
      of
      preferred stock for gross proceeds of $525,000 to three existing shareholders.
      The Preferred Stock shall, for a period of seven years, be convertible into
      Units, each consisting of 4 five-year Warrants to purchase common stock at
      the
      rate of one unit for each dollar invested. In each Unit, 2 Warrants shall be
      exercisable at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per
      share and 1 Warrant shall be exercisable at $2.00 per share. The Preferred
      Stock
      shall earn dividends at 8% per annum, payable quarterly in cash or common stock
      at the Company's option. If paid in common stock, the stock price shall be
      the
      lower of the Market Price or $1.37 per share. Market Price is defined as the
      average of the closing prices of the common stock for the 10 consecutive trading
      days immediately preceding the dividend due date.





On
      February 28, 2006, we completed an investment in ClaimRemedi, Inc., the licensor
      of certain healthcare software products marketed by our Heuristic
      subsidiary. Under the terms of the investment, we have issued 350 shares of
      our Series K Convertible Preferred Stock to ClaimRemedi in exchange for
      19.5% of the outstanding shares of ClaimRemedi. The Preferred Stock is
      convertible into shares of our common stock at any time at a conversion
      price of between $1.00 and $2.00 per share, determined at the time of conversion
      based on the market value of our common stock, which shall result in the
      issuance of between 1,750,000 and 3,500,000 shares of common stock. 
However, any conversion prior to February 28, 2008 shall be at a conversion
      price of $2.00 per share. The Preferred
      Stock accrues dividends at a rate of 4% per annum,
      which dividends are payable in cash or stock at our option.  If
      certain performance criteria applicable to the license agreement
      between ClaimRemedi and our subsidiary are not met, ClaimRemedi has the
      right to buy back up to 50% of the ClaimRemedi Shares beginning
      24 months after closing, and up to 100% of the ClaimRemedi Shares beginning
      30 months after closing if the conditions have still not been
      met.   Any such repurchase of ClaimRemedi Shares
      by ClaimRemedi may be made in cash or by the sale of the Preferred Stock
      back to us at the issue price.


9





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to one existing shareholder.
      As
      part of that transaction we issued five-year warrants to purchase 100,000 shares
      of common stock at an exercise price of $1.60.





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 20 shares of
      preferred stock for gross proceeds of $200,000 to an existing shareholder.
      The
      Preferred Stock shall, for a period of seven years, be convertible into Units,
      each consisting of 4 five-year Warrants to purchase common stock at the rate
      of
      one unit for each dollar invested. In each Unit, 2 Warrants shall be exercisable
      at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per share and 1
      Warrant shall be exercisable at $2.00 per share. The Preferred Stock shall
      earn
      dividends at 8% per annum, payable quarterly in cash or common stock at the
      Company's option. If paid in common stock, the stock price shall be the lower
      of
      the Market Price or $1.37 per share. Market Price is defined as the average
      of
      the closing prices of the common stock for the 10 consecutive trading days
      immediately preceding the dividend due date.








**NOTE
      4: RELATED PARTY TRANSACTIONS**





As
      of
      February 28, 2006, we were in arrears $290,874 for salary to Mr. Korman, $39,478
      in expense reimbursements and owed $50,420 in accrued rent for our offices
      to a
      company in which Mr. Korman has a beneficial interest.








**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. The General Electric
      loan is secured by certain of our CoinBank machines. In 2000, we entered into
      the first of several loan renewals with G.E., the most recent of which expired
      in November 2005. We have continued to pay G.E. in accordance with the terms
      of
      the expired note and believe based on discussions with G.E. that another renewal
      will soon be executed. We have no current plan or capability to repay G.E.
      its
      principal. As of February 28, 2006, we owed $3,654,096 including principal
      and
      financing fees.





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., 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 to 48 investors. 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, 41 out of 48 noteholders have converted their notes to equity
      at
      a conversion price of $2.50 per share. Noteholders who converted to equity
      also
      received two replacement warrants exercisable at $1.35 per share for each
      warrant previously held. The remaining 7 notes are in default of their original
      or restructured terms. As of February 28, 2006, we owed $494,893 in principal
      and interest to the 7 remaining noteholders.


10


In
      May
      2003 we
      completed a private placement offering with
      a
      stockholder consisting 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 common
      stock at the conversion rate of $0.50 per share. The Warrants are exercisable
      at
      $1.00 per share. At that time 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
      a
      stockholder consisting 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 common
      stock at the conversion rate of $0.50 per share. The Warrants are exercisable
      at
      $0.65 per share. At the time 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
      exercised immediately for gross proceeds to us of $29,250. The note is due
      and
      payable on May 8, 2008.





The
      Company’s subsidiary TAP Holdings, LLC, which owns and operates Tomco Auto
      Products, has an asset based revolving line of credit. On February 28, 2006,
      the
      balance on the line of credit was approximately $2,048,368, including interest.
      The line of credit is secured by all of the business assets of TAP Holdings,
      LLC
      as well as a limited personal guaranty from TAP's chairman (who is not an
      employee of Cash Technologies). From time to time, due to fluctuations in
      Tomco's cash flow, TAP has requested funds from the line of credit at advance
      rates higher than the contract rate. To date the lender has funded all such
      requests but is under no obligation to do so. In the event that the lender
      refuses to fund such requests in the future, TAP could be adversely affected
      and
      might not be able to pay its obligations timely causing temporary or permanent
      disruption in the company's operations.








**NOTE
      6: LONG-TERM DEBT**




As
      of
      February 28, 2006 long term debt consists of the following:




Note
                Payable - Truck (a)
            
            $
            15,330Less:
                Current Maturities
            
            
            4,735Total
            
            $
            10,595





(a)
      The
      note, which is collateralized by a security interest in a truck, is payable
      in
      monthly installments of $450, including interest at 7.49% per annum.







**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 income (loss) and income
      (loss) per share for the three and nine-month periods ended February 28, 2006
      and February 28, 2005, would have been increased to the pro forma amounts
      presented below:


11




**FOR
                THREE MONTHS**
            **FOR
              NINE MONTHS****ENDED
                FEBRUARY 28,**
            **ENDED
              FEBRUARY 28,****2006**
            **2005**
            **2006**
            **2005**Net
                Income (Loss)As
                Reported
            (1,118,070)
            136,585
            (3,543,091)
            3,901,632Pro
                Forma
            (1,515,190)
            (1,377,067)
            (4,215,839)
            2,063,397Basic
                and Diluted Income (loss) Per Common ShareAs
                Reported
            (0.06)
            0.01
            (0.18)
            0.27Pro
                Forma
            (0.08)
            (0.09)
            (0.22)
            0.14








For
      the
      three month period ended February 28, 2006, 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 2001-2006,
      expected life of the option is 5 years, expected volatility of 21.48%, risk
      free
      interest rate of 4.61% and a 0% dividend yield. The weighted average fair value
      at the grant date for such option is $0.66 per option.





For
      the
      three 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.








**NOTE
      8: SEGMENT REPORTING**





We
      operate through four business segments: Heuristic Technologies, Inc., TAP
      Holdings, LLC (aka “Tomco”), CoinBank machine-related activities and
      EMMA-related activities. 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.





12


Information
      on our business segments for the:


**Three
                  months ended**
                **February
                  28,**
              
              **Nine
                  months ended**
                **February
                  28,**Net
                  revenues:
              
              **2006**
              
              **2005**
              
              **2006**
              
              **2005**CoinBank
                  machines
              
              
              -
              
              
              37,840
              
              
              35,216
              
              
              61,662EMMA
              
              
              -
              
              
              -
              
              
              -Heuristic
              
              
              1,460
              
              
              834
              
              
              5,434
              
              
              834TAP
              
              
              2,213,261
              
              
              3,073,339
              
              
              6,025,180
              
              
              3,613,747Unallocated
              
              
              -
              
              
              -
              
              
              -
              
              
              -2,214,721
              
              
              3,112,013
              
              
              6,065,830
              
              
              3,676,243Interest
                  expense:CoinBank
                  machines
              
              
              -
              
              
              -
              
              
              -
              
              
              4,671EMMA
              
              
              -
              
              
              -
              
              
              -
              
              
              -Heuristic
              
              
              -
              
              
              -
              
              
              -
              
              
              -TAP
              
              
              118,196
              
              
              95,215
              
              
              323,243
              
              
              119,443Unallocated
              
              
              96,107
              
              
              (189,517
              )
              
              291,560
              
              
              3,206214,303
              
              
              (94,302
              )
              
              614,803
              
              
              127,320Depreciation
                  & Amortization:CoinBank
                  machines
              
              
              -
              
              
              -
              
              
              -
              
              
              -EMMA
              
              
              139,942
              
              
              139,942
              
              
              419,826
              
              
              419,826Heuristic
              
              
              -
              
              
              -
              
              
              -TAP
              
              
              -
              
              
              -
              
              
              -Unallocated
              
              
              1,124
              
              
              616
              
              
              3,371
              
              
              2,236141,066
              
              
              140,558
              
              
              423,197
              
              
              422,062Segment
                  Income (loss):CoinBank
                  machines
              
              
              (66,289
              )
              
              87,333
              
              
              (186,341
              )
              
              55,265EMMA
              
              
              -
              
              
              -
              
              
              -
              
              
              -Heuristic
              
              
              (303,320
              )
              
              (195,173
              )
              
              (957,046
              )
              
              (369,392
              )TAP
              
              
              (119,802
              )
              
              132,997
              
              
              (528,931
              )
              
              29,462Unallocated
              
              
              (628,659
              )
              
              111,428
              
              
              (1,870,773
              )
              
              4,186,297(1,118,070
              )
              
              136,585
              
              
              (3,543,091
              )
              
              3,901,632Net
                  identifiable assets:CoinBank
                  machines
              
              
              615,060
              
              
              791,584
              
              
              615,060
              
              
              791,584EMMA
              
              
              466,473
              
              
              1,026,242
              
              
              466,473
              
              
              1,026,242Heuristic
              
              
              -
              
              
              -
              
              
              -
              
              
              -TAP
              
              
              10,900,551
              
              
              11,915,297
              
              
              10,900,551
              
              
              11,915,297Unallocated
              
              
              5,588,273
              
              
              1,832,503
              
              
              5,588,273
              
              
              1,832,50317,570,357
              
              
              15,565,626
              
              
              17,570,357
              
              
              15,565,626





13





**NOTE
      9: MINORITY INTEREST**





From
      November 2002 through March 2003, we received $443,000 in net proceeds from
      members for an equity share in our subsidiary CT Holdings, LLC. The minority
      members own 13.65% while we own 86.35%. The net proceeds from this have been
      used to further develop the BONUS product as well as for working capital for
      CT
      Holdings and Cash Technologies, Inc. For the three months ended February 28,
      2006, we have allocated $6,282 of losses in CT Holdings to minority interest.




On
      November 5, 2004 TAP Holdings, LLC (dba Tomco Auto Products) acquired
      substantially all of the assets and assumed certain liabilities of Tomco Auto
      Products, Inc. We own 89% of TAP.








**NOTE
      10: SUBSEQUENT EVENTS**





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to one existing shareholder.
      As
      part of that transaction we issued five-year warrants to purchase 100,000 shares
      of common stock at an exercise price of $1.60.





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 20 shares of
      preferred stock for gross proceeds of $200,000 to an existing shareholder.
      The
      Preferred Stock shall, for a period of seven years, be convertible into Units,
      each consisting of 4 five-year Warrants to purchase common stock at the rate
      of
      one unit for each dollar invested. In each Unit, 2 Warrants shall be exercisable
      at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per share and 1
      Warrant shall be exercisable at $2.00 per share. The Preferred Stock shall
      earn
      dividends at 8% per annum, payable quarterly in cash or common stock at the
      Company's option. If paid in common stock, the stock price shall be the lower
      of
      the Market Price or $1.37 per share. Market Price is defined as the average
      of
      the closing prices of the common stock for the 10 consecutive trading days
      immediately preceding the dividend due date.








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 and majority-owned
      subsidiaries National Cash Processors, Inc., a Delaware corporation; CoinBank
      Automated Systems, Inc., a Delaware corporation; CoinBank Automation Handels
      GmbH, organized operating in Salzburg, Austria: Cintelia Systems Inc., a
      Delaware corporation: CT Holdings, LLC., a Delaware corporation of which we
      own
      86.65%: Heuristic Technologies, Inc., a Delaware company, formed in May, 2004,
      to engage in healthcare data processing and debit card issuance: and TAP
      Holdings, LLC (dba Tomco Auto Products), of which we own 89%, formed in
      November, 2004 to acquire certain assets and assume certain liabilities of
      Tomco
      Auto Products, Inc. Our address is 1434 West 11th Street, Los Angeles,
      California 90015. Our telephone number is (213) 745-2000.





Our
      independent certified public accountant included an explanatory paragraph in
      its
      report for the year ended May 31, 2005, which indicated a substantial doubt
      as
      to the ability of us 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 develop and improve our
      various products, we will have a high level of operating expenses. We anticipate
      that losses will continue for the near future. Our expenses have exceeded net
      revenues since inception. For the three-month period ended February 28, 2006
      and
      2005, we incurred net income (losses) before extraordinary gain of approximately
      $(1.12) million and $0.14 million, respectively.


15


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 was established.
      Technological feasibility is established upon completion of a detailed program
      design or working model. 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 $37,500 for the three-month period ended February 28, 2006.




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 three-month
      period ended February 28, 2006, we amortized an additional $139,942 of
      capitalized software.




The
      current EMMA asset is currently valued at $606,415, which reflects the costs
      incurred by us 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 2006 calendar year,
      and
      will be obtained fully by the end of the calendar year 2007. 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 transaction fees based upon the use
      of
      the technology through placement in various environments. The projected
      transaction fees are based upon management's discussions with potential
      customers, including bank and non-bank service providers. Management has had
      significant negotiations with representatives of various financial institutions
      and other commercial customers regarding the installation of EMMA based
      products. However, to date we have not consummated any definitive agreements
      with such customers.




Much
      of
      our SG&A costs are fixed in nature, therefore, as the volume of transactions
      and revenues increase, our 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 licensing and software fees as well as coin counting machine sales
      in
      accordance with generally accepted accounting principles.


16


We
      are
      marketing CoinBank machines to other equipment manufacturer "OEM" customers
      (manufacturers of cash handling equipment), companies with existing equipment
      distribution and service channels and directly to retailers and financial
      institutions. Although we will continue to sell our CoinBank machines, we intend
      to focus substantially all of our efforts and operations on the continued
      development and deployment of the Heuristic products and EMMA technology and
      the
      operation of our TAP Holdings, LLC subsidiary.























17


**RESULTS
      OF OPERATIONS**





**THREE
      MONTHS ENDED FEBRUARY 28, 2006 COMPARED TO THE THREE MONTHS ENDED FEBRUARY
      28,
      2005.**




*Net
      revenues* for the
      three-month period ended February 28, 2006 decreased to $2,214,721 compared
      to
      $3,112,013 for the same 2005 period. The decrease in net revenue is attributable
      to a decrease in revenues derived from our TAP Holdings subsidiary, resulting
      primarily from the one-time inventory increase for a customer’s new warehouse
      that took place in the 2005 period. During the three-month period ended February
      28, 2006, TAP Holdings generated 99.89% of the Company’s net revenues.





*Cost
      of revenues* for the
      three-month period ended February
      28, 2006 is
      $1,577,089 compared to $2,096,160 for the quarter ended February
      28, 2005 .
      The
      decrease in direct costs was attributable to a decrease in sales from the
      Company’s TAP subsidiary primarily for the reason previously cited.





*Gross
      profit* for
      the
      three months ended February
      28, 2006 is
      $637,632 compared to $1,015,853 for the same period a year ago. The decrease
      in
      gross profit was attributable a decrease in sales of the Company’s new TAP
      subsidiary primarily for the reason previously cited.





Se *lling,
      General and Administrative* expenses
      for the three months ended February
      28, 2006 ,
      decreased to $1,369,131 compared to $1,442,466 for the three months ended February
      28, 2005 .
      These
      expenses consist primarily of wages (and wage related costs), outside contractor
      expenses, travel/promotional expenses, professional services and
      facilities/office related expenses. The decrease is directly related to decrease
      in revenues.





*Research
      and development* expenses
      for the three months ended February
      28, 2006 ,
      is
      $37,500 compared to $45,000 for the three months ended February
      28, 2005 .





*Depreciation
      and amortization* expenses
      for the three months ended February
      28, 2006 ,
      and February
      28, 2005 ,
      were
      $141,066 and $140,558, respectively.





*Income
      from forgiveness of debt* for the
      three months ended February
      28, 2006 and February
      28, 2005 ,
      is $16
      and $667,855, respectively. The difference was due to settlement of certain
      liabilities by the Company in the 2005 period.





*Interest
      income (expense)* for the
      three months ended February
      28, 2006 and February
      28, 2005 ,
      is
      $(214,303) and $94,302, respectively. During the three month period ended February
      28, 2005, the Company wrote off excess interest accrued for GE
      Capital.





*Minority
      Interest* for the
      three months ended February
      28, 2006 and February
      28, 2005 ,
      is
      $(6,282) and $12,601, respectively





*Income
      Taxes* for the
      three months ended February
      28, 2006 and February
      28, 2005 ,
      is zero
      and $800, respectively





As
      a
      result of the foregoing, net income (losses) for the three months ended February
      28, 2006 and February
      28, 2006, are $(1,118,070) and $136,585, respectively.




18


**NINE
      MONTHS ENDED FEBRUARY 28, 2006 COMPARED TO THE NINE MONTHS ENDED FEBRUARY 28,
      2005.**




*Net
      revenues* for the
      nine-month period ended February 28, 2006 increased to $6,065,830 compared
      to
      $3,676,243 for the same 2005 period. The increase in net revenue is attributable
      to the operations of TAP Holdings that was acquired in November 2004.





*Cost
      of revenues* for the
      nine-month period ended February
      28, 2006 is
      $4,399,486 compared to $2,507,083 for the nine months ended February
      28, 2005 .
      The
      increase in direct costs was attributable to the operations of the Company’s TAP
      subsidiary.





*Gross
      profit* for
      the
      nine-months ended February
      28, 2006 is
      $1,666,344 compared to $1,169,160 for the same period a year ago. The increase
      in gross profit was attributable to the operations of the Company’s TAP
      subsidiary.





Se *lling,
      General and Administrative* expenses
      for the nine months ended February
      28, 2006 ,
      increased to $4,121,746 compared to $3,047,967 for the nine months ended February
      28, 2005 .
      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
      the operations of the Company’s TAP subsidiary.





*Research
      and development* expenses
      for the nine months ended February
      28, 2006 ,
      is
      $112,500 compared to $135,000 for the nine months ended February
      28, 2005 .





*Depreciation
      and amortization* expenses
      for the nine months ended February
      28, 2006 ,
      and February
      28, 2005 ,
      were
      $423,197 and $422,062, respectively.





*Income
      from forgiveness of debt* for the
      nine months ended February
      28, 2006 and February
      28, 2005 ,
      is
      $51,185 and $1,106,367, respectively. The difference was due to settlement
      of
      certain liabilities by the Company in the 2005 period.





*Interest
      expense* for the
      nine months ended February
      28, 2006 and February
      28, 2005 ,
      is
      $614,803 and $127,320, respectively. During the three month period ended February
      28, 2005, the Company wrote off excess interest accrued for GE
      Capital.





*Minority
      Interest* for the
      nine months ended February
      28, 2006 and February
      28, 2005 ,
      is
      $(18,626) and $(19,298), respectively





*Income
      Taxes* for the
      nine months ended February
      28, 2006 and February
      28, 2005 ,
      is
      $7,000 and $800, respectively





*Extraordinary
      Income* for the
      nine months ended February
      28, 2006 ,
      was
      zero compared to $5,999,951 for the same period in 2005. The decrease was due
      to
      the extraordinary gain recognized in the purchase of certain assets and
      liabilities of Tomco Auto Products, Inc. in 2004.





*Minority
      Interest from extraordinary income* for the
      nine months ended February
      28, 2006 and February
      28, 2005 ,
      was
      zero and $659,995, respectively





As
      a
      result of the foregoing, net income (losses) for the nine months ended February
      28, 2006 and February
      28, 2005, are $(3,543,091) and $3,901,632, respectively.


19


**LIQUIDITY
      AND CAPITAL RESOURCES**





Our
      capital requirements have been and will continue to be significant, and our
      cash
      requirements have exceeded cash flow from operations. At February
      28, 2006 ,
      we have
      working capital of $1,570,213 compared to working capital of $1,867,989 at
      May
      31, 2005. At February
      28, 2006 ,
      we have
      a cash balance of approximately $170,021. We are in immediate need of working
      capital to continue our business and operations. To date, we have been funding
      our operations primarily through the issuance of equity in private placement
      transactions with existing stockholders or affiliates of stockholders. There
      can
      be no assurance that we will be able to continue to raise required working
      capital in this or any other manner.




Since
      inception, we have satisfied our 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 our securityholders. Our
      independent certified public accountant included an explanatory paragraph in
      its
      report for the year ended May 31, 2005, 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
      $2,344,295 for the nine months ended February
      28, 2006 compared
      to $2,865,356 for the nine months ended February
      28, 2005 .
      The
      decrease was primarily due to an increase in accrued expenses offset by an
      income from forgiveness of debt and purchase of inventory.





*Net
      cash used in investing activities* for the
      nine months ended February
      28, 2006 ,
      was
      $3,439 as compared to $905,746 for the nine months ended February
      28, 2005 .





*Net
      cash provided by financing activities* for the
      nine months ended February
      28, 2006 ,
      was
      $2,354,128 as compared to $4,749,898 for the nine months ended February
      28, 2005 .
      The
      decrease was attributable to the net result of various fund raising activities.





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. The General Electric
      loan is secured by certain of our CoinBank machines. In 2000, we entered into
      the first of several loan renewals with G.E., the most recent of which expired
      in November 2005. We have continued to pay G.E. in accordance with the terms
      of
      the expired note and believe based on discussions with G.E. that another renewal
      will soon be executed. We have no current plan or capability to repay G.E.
      its
      principal. As of February 28, 2006, we owed $3,654,096 including principal
      and
      financing fees.





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., 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 to 48 investors. 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.





20


Since
      July 31, 2001, 41 out of 48 noteholders have converted their notes to equity
      at
      a conversion price of $2.50 per share. Noteholders who converted to equity
      also
      received two replacement warrants exercisable at $1.35 per share for each
      warrant previously held. The remaining 7 notes are in default of their original
      or restructured terms. As of February 28, 2006, we owed $494,893 in principal
      and interest to the 7 remaining noteholders.




In
      November 2004, TAP Holdings, LLC established a line of credit with BFI Business
      Finance. The maximum amount available under the line of credit is $2,000,000,
      limited to 60% of eligible accounts receivable plus 60% of eligible inventory
      up
      to $1,000,000, less any availability reserves, as defined in the loan agreement.
      Interest is payable monthly at 4.0% per annum above the prime interest rate
      (10%
      at May 31, 2005). Any outstanding balance under the credit line is due November
      5, 2006. The line of credit is collateralized by a security interest in TAP's
      accounts receivable, inventories, property and equipment and certain other
      assets as well as a limited personal guaranty from TAP's chairman (who is not
      an
      employee of Cash Technologies). TAP must also adhere to covenant limitations,
      conditions and restrictions as set forth in the loan and security agreement.
      As
      of February
      28, 2006 ,
      there
      was $2,048,368 outstanding including interest.




From
      time
      to time, due to fluctuations in Tomco's cash flow, TAP has requested funds
      from
      the BFI credit facility at advance rates higher than BFI's contract rate. To
      date BFI has funded all such requests but is under no obligation to do so.
      In
      the event that BFI refuses to fund such requests in the future, TAP could be
      adversely affected and might not be able to pay its obligations timely causing
      temporary or permanent disruption in the Company's operations.





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to an existing shareholder.
      As
      part of that transaction we also issued five-year warrants to purchase 50,000
      shares of common stock at an exercise price of $2.50.





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 175,000 shares
      of common stock for gross proceeds of $175,000 to three existing shareholders
      and one new accredited investor. As part of that transaction we also issued
      five-year warrants to purchase 175,000 shares of common stock at an exercise
      price of $2.00.





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 52.5 shares
      of
      preferred stock for gross proceeds of $525,000 to three existing shareholders.
      The Preferred Stock shall, for a period of seven years, be convertible into
      Units, each consisting of 4 five-year Warrants to purchase common stock at
      the
      rate of one unit for each dollar invested. In each Unit, 2 Warrants shall be
      exercisable at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per
      share and 1 Warrant shall be exercisable at $2.00 per share. The Preferred
      Stock
      shall earn dividends at 8% per annum, payable quarterly in cash or common stock
      at the Company's option. If paid in common stock, the stock price shall be
      the
      lower of the Market Price or $1.37 per share. Market Price is defined as the
      average of the closing prices of the common stock for the 10 consecutive trading
      days immediately preceding the dividend due date.





On
      February 28, 2006, we completed an investment in ClaimRemedi, Inc., the licensor
      of certain healthcare software products marketed by our Heuristic
      subsidiary. Under the terms of the investment, we have issued 350 shares of
      our Series K Convertible Preferred Stock to ClaimRemedi in exchange for
      19.5% of the outstanding shares of ClaimRemedi. The Preferred Stock is
      convertible into shares of our common stock at any time at a conversion
      price of between $1.00 and $2.00 per share, determined at the time of conversion
      based on the market value of our common stock, which shall result in the
      issuance of between 1,750,000 and 3,500,000 shares of common stock. 
However, any conversion prior to February 28, 2008 shall be at a conversion
      price of $2.00 per share. The Preferred
      Stock accrues dividends at a rate of 4% per annum,
      which dividends are payable in cash or stock at our option.  If
      certain performance criteria applicable to the license agreement
      between ClaimRemedi and our subsidiary are not met, ClaimRemedi has the
      right to buy back up to 50% of the ClaimRemedi Shares beginning
      24 months after closing, and up to 100% of the ClaimRemedi Shares beginning
      30 months after closing if the conditions have still not been
      met.   Any such repurchase of ClaimRemedi Shares
      by ClaimRemedi may be made in cash or by the sale of the Preferred Stock
      back to us at the issue price.





21


Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to one existing shareholder.
      As
      part of that transaction we issued five-year warrants to purchase 100,000 shares
      of common stock at an exercise price of $1.60.





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 20 shares of
      preferred stock for gross proceeds of $200,000 to an existing shareholder.
      The
      Preferred Stock shall, for a period of seven years, be convertible into Units,
      each consisting of 4 five-year Warrants to purchase common stock at the rate
      of
      one unit for each dollar invested. In each Unit, 2 Warrants shall be exercisable
      at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per share and 1
      Warrant shall be exercisable at $2.00 per share. The Preferred Stock shall
      earn
      dividends at 8% per annum, payable quarterly in cash or common stock at the
      Company's option. If paid in common stock, the stock price shall be the lower
      of
      the Market Price or $1.37 per share. Market Price is defined as the average
      of
      the closing prices of the common stock for the 10 consecutive trading days
      immediately preceding the dividend due date.




















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, 2004 and 2005, we had
      net
      sales of $80,616 and $5,718,886, respectively. For the nine month period ended
      February 28, 2006, we had net sales of $6,065,830. Virtually all of our revenues
      for the fiscal year ended May 31, 2005 and onwards have been derived from our
      TAP subsidiary; however TAP operations do not constitute the principal
      operations that we intend to conduct in the future. We intend to focus on the
      healthcare and financial data processing products which are marketed by our
      Heuristics Technologies Inc. subsidiary, which business has recently begun
      marketing its products.




Prior
      to
      the fiscal year ended May 31, 2005 we have incurred losses since our inception.
      For the last two fiscal years ended May 31, 2004 and 2005, net income (losses)
      of $(4,382,532) and $3,655,760 respectively. Net income for the fiscal year
      ended May 31, 2005, was derived principally from our purchase of the Tomco
      assets. Despite the profit generated during the last fiscal year, we have
      continued to generate operating losses and while management believes that it
      will generated operating profits in the future, no assurance can be given.
      In
      its reports accompanying our audited financial statements for the fiscal years
      ended May 31, 2005 and 2004, our independent auditors included an explanatory
      paragraph wherein they expressed substantial doubt about our ability to continue
      as a going concern. For the nine month period ended February 28, 2006 we have
      incurred additional (losses) of $(3,543,091).





**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, 2006 we had outstanding current liabilities of $10,209,374, of
      which approximately $494,893 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 raise the needed funds to satisfy the obligations, possibly on unsatisfactory
      terms or failing that, 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, 2006, Cash Tech had working capital of $1,570,213 and available
      cash of $170,021. 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 immediate need of capital to continue to operate.
      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 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 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. As of February 28, 2006, we also owe $3,654,096 to General
      Electric Capital Corporation. In 2000, we entered into the first of several
      loan
      renewals with G.E., the most recent of which expired in November 2005. We have
      continued to pay G.E. in accordance with the terms of the expired note and
      we
      believe based on discussions with G.E. that another renewal will soon be
      executed; however we have no current arrangement or capability to repay G.E.
      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 several lenders,
      including the holders of the notes in the principal and interest amount of
      $494,893 issued in a placement which was completed in January 2000, equipment
      liens in favor of General Electric Capital Corporation pursuant to a Master
      Security Agreement originally entered into in May 1997 and liens in favor of
      BFI
      Finance on all assets of TAP Holdings pursuant to a Loan and Security Agreement
      entered into in November, 2004.




The
      G.E.
      loan is secured by certain of our CoinBank machines. As of February 28, 2006,
      we
      were indebted to G.E. in the amount of approximately $3,654,096 including
      interest. As a result of the aforementioned security interests, creditors would
      be entitled to collect upon the assets prior to any distribution being available
      to holders of our Common Stock or Preferred Stock.





The
      BFI
      loan is a revolving accounts receivable credit facility secured by all of the
      business assets of TAP Holdings, LLC as well as a limited personal guaranty
      from
      TAP's chairman (who is not an employee of Cash Technologies). As of February
      28,
      2006 we owed BFI approximately $2,048,368 including interest. From time to
      time,
      due to fluctuations in Tomco's cash flow, TAP has requested funds from the
      BFI
      credit facility at advance rates higher than BFI's contract rate. To date BFI
      has funded all such requests but is under no obligation to do so. In the event
      that BFI refuses to fund such requests in the future, TAP could be adversely
      affected and might not be able to pay its obligations timely causing temporary
      or permanent disruption in the company's operations.





**TAP
      receives most of its sales from three customers.**




TAP
      is
      substantially dependent on three customers: NAPA, O'Reilly Auto Parts and
      CARQUEST. These customers combined account for approximately 77% of TAP’s
      revenue. The loss of any of these customers would have a material adverse affect
      on TAP’s revenue.




**The
      market for TAP’s products is shrinking.**




Approximately
      98% of TAP's revenue for the nine month period end February 28, 2006, was from
      the sale of rebuilt carburetors. Sales of carburetors have fluctuated and may
      continue to fluctuate or decline for two reasons. First, the availability of
      acceptable carburetor cores continues to shrink due to age or damage. TAP can
      manufacture new cores but has thus far not made the necessary investment.
      Secondly, the number of vehicles using carburetors continues to decline, as
      the
      last domestic carbureted production vehicle was manufactured in 1988. TAP may
      be
      able to compensate for this decline by increasing its market share but there
      is
      no assurance that it can succeed in this effort. In 1998 Tomco began rebuilding
      diesel pumps which have a larger user base than do carburetors. The company
      also
      has plans to unveil new products in fiscal 2006 and has explored certain
      offshore markets for its products that may be lucrative. However, there is
      no
      assurance that any of these measures can offset the continual erosion in the
      size of TAP’s primary market.




24


**TAP
      may not fully recover the carrying value of its inventory.**




As
      of
      February 28, 2006 TAP had had a carrying value of for its inventory of
      $8,873,952. In November 2004, at the time TAP's assets were purchased, an
      obsolescence reserve of $1,180,000 was established to cover potential inventory
      impairment due to low core inventory turnover. In future periods, additional
      impairment may be taken based on future carburetor sales. If TAP concludes
      that
      such impairment exists, this could give rise to a substantial expense and
      negatively impact TAP's financial results.




**Competition
      in healthcare revenue management and prepaid debit card products is
      intense.**





Heuristic’s
      healthcare products compete with products offered by companies that are larger,
      better known and better capitalized than Heuristic. Similarly, competition
      in
      the prepaid debit card market is intense and some competitors are larger and
      more established than Heuristic. Heuristic may not be able to successfully
      compete with these companies in which event Heuristic might have to withdraw
      one
      or more of its products which would have a material adverse effect on Heuristic
      and Cash Technologies.





**Heuristic
      is liable for the loss or misuse of personal
      information.**





Heuristic
      and its affiliates have custody of, or come into contact with, various types
      of
      personal information about consumers, their medical records and financial
      transactions. The company has taken steps to safeguard such information and
      requires that its suppliers safeguard such information, however, in the event
      such safeguards fail to prevent the loss or misuse of personal information,
      Heuristic might be liable for any damages caused thereby.





**Heuristic
      is substantially dependent on third parties for data processing and customer
      support.**





Most
      data
      processing and customer support for Heuristic’s products is performed by third
      parties under various exclusive and non-exclusive contracts. This reduces
      infrastructure development costs and increases speed to market, however the
      failure of a third party to perform its duties or renew a service agreement
      could be materially detrimental to Heuristic’s operations.





**Data
      processing margins generally decline as products become more
      mature.**





Data
      processing products usually become “commoditized” as they mature, with a
      corresponding reduction in profit margins. This is caused by a number of
      factors, including: Increased competition forcing lower prices; increased
      volumes creating economies of scale which permit lower prices by competitors,
      software development costs which are eventually fully amortized also permits
      lower prices, et al. There is no assurance that Heuristic can generate enough
      growth in its sales to outpace these market forces.





**Heuristic
      has liability for debit card losses.**





Under
      Heuristic’s agreement with its card issuing bank, Heuristic has liability for
      losses caused by card fraud and misuse. These losses are predicted based on
      historical statistics and compensating reserves are maintained by the issuing
      bank, however in the event that these losses were to increase due to unexpected
      behavior of a particular card program or cardholder group, Heuristic would
      be
      adversely affected.




25


**We
      are dependent on third-party marketers in our CoinBank
      business.**




The
      demand for our coin processing equipment has significantly diminished and is
      also subject to a high level of uncertainty. We do not intend to focus
      significant marketing efforts on the sale of our CoinBank machines but instead
      rely on third-party marketing organizations to sell the machines. The failure
      of
      our marketers to sell our machines would result in impairment costs for slow
      moving machine inventory.




**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. The failure of our independent contractors to
      produce machines or machine components on a timely basis or at all would harm
      sales of CoinBank machines.




**Our
      EMMA-Based Technology may not perform reliably.**




To
      date
      our deployment of EMMA-based products, such as the ATM-X and POS-X machines,
      has
      been extremely limited and we have derived no significant revenue from our
      EMMA-based applications. Thus we have insufficient information upon which we
      can
      base predictions about the reliability of the technology. Although such systems
      and machines have performed reliably to date at their previous 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.




**Effective
      marketing of our EMMA technology requires a capital investment beyond the
      Company’s current resources.**




In
      marketing our EMMA-based products and services, we have attempted to change
      the
      traditional methods by which people obtain certain financial services.
      Accordingly, the cost to effectively market such technology is significant
      and
      beyond the Company’s current resources, limiting the exposure of EMMA-based
      applications to the marketplace. Achieving market acceptance for EMMA will
      require substantial marketing efforts and the expenditure of significant funds.
      If and when the Company can expend the needed resources to properly market
      the
      EMMA technology, the potential marketplace for such products may have diminished
      or been satisfied with competing products that obviate the need for
      EMMA.




**If
      our EMMA Technology does not achieve market acceptance, its value will be
      severely diminished.**




The
      demand for EMMA-based services and our ability to deliver the technology is
      subject to a high level of uncertainty. If we do not realize market acceptance
      of these products, the technology will not be valuable to the Company and our
      investment in EMMA will be impaired.





26


**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 stockholders.





**We
      have been notified by the American Stock Exchange that our common stock may
      be
      delisted from AMEX.**




Our
      common stock is listed on American Stock Exchange ("AMEX"). When we began
      trading on AMEX in 2000, the exchange granted us an exemption from its listing
      requirements in order for our common stock to be listed for trading as we were
      not in compliance with the criteria for continued listing. In November, 2003,
      at
      the request of AMEX, we submitted a plan to come into compliance with the
      continued listing requirements by April 20, 2005. On April 20, 2005 we submitted
      a report to AMEX stating that we believed that we had met the requirements
      of
      the exchange and had achieved the plan's objectives, including increasing
      shareholder equity to greater than $4 million as well as meeting various other
      requirements. AMEX subsequently confirmed our compliance with the listing
      requirements as of the date of the report, representing the first time since
      listing on AMEX that the Company had achieved compliance with the continued
      listing standards. However, on October 31, 2005, we again received a notice
      from
      AMEX that we were out of compliance with the continued listing standards,
      requiring a plan to come into compliance by February 28, 2006. Specifically,
      as
      previously disclosed in our Form 10KSB filed September 9, 2005 and our Form
      10QSB filed October 17, 2005, the Company did not meet the requirements of
      Section 1003(a)(iii) of the Company Guide (having shareholders’ equity of less
      than $6 million following losses from continuing operations in its five most
      recent fiscal years). Amex also informed the Company that the Company was not
      in
      compliance with Section 1003(ii) of the Company Guide (having shareholders’
equity of less than $4 million following losses from continuing operations
      in
      three out of its four most recent fiscal years), Section 921 of the Company
      Guide (failing to notify Amex in writing of the appointment of a new director
      that was publicly announced in the Company’s October 18, 2005 press release) and
      Section 301 (issuing $600,000 of securities in an October 2005 private placement
      prior to applying for the listing of such securities and receiving notification
      from the Amex that the securities had been approved for listing). The Section
      921 and Section 301 violations were cured immediately following receipt of
      the
      October 31 notice. On March 1, 2006, we reported to AMEX that we had completed
      transactions on or before February 28, 2006 resulting in an increase of
      shareholders’ equity to greater than $6 million and that we believed we were in
      compliance with all AMEX continued listing guidelines. AMEX indicated that
      its
      acceptance and confirmation of our compliance report would be subject to a
      review following the filing of this Form 10-QSB. In the event that AMEX deems
      that we have not met the continued listing criteria, we could be delisted from
      AMEX. In the event that our stock is de-listed we would be required to liquidate
      certain of our Preferred Stock. No assurance can be given that we will be able
      to meet or maintain the AMEX listing criteria in the future or that our progress
      will continue to be satisfactory to the AMEX.




27


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




Our
      common stock has not been traded above $5.00 in over five years. If our common
      stock were to be delisted from trading on the American Stock Exchange and the
      trading price of the common stock remained below $5.00 per share, trading in
      our
      common stock would be subject to the requirements of certain rules promulgated
      under the Exchange Act related to so-called penny stocks. 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. 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 common stock,
      which
      could severely limit the market price and liquidity of our common stock and
      the
      ability of purchasers to sell our common stock in the secondary market.















28


**ITEM
      3. CONTROLS AND PROCEDURES**





The
      Company maintains disclosure controls and procedures (as defined in Exchange
      Act
      Rule 13a-15(e)) that are designed to assure that information required to be
      disclosed in its Securities Exchange Act of 1934 reports is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms, and that such information is accumulated
      and communicated to management, including the Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosures.




In
      designing and evaluating the disclosure controls and procedures, management
      recognizes that any controls and procedures, no matter how well designed and
      operated, can provide reasonable assurance only of achieving the desired control
      objectives, and management necessarily is required to apply its judgment in
      weighting the costs and benefits of possible new or different controls and
      procedures. Limitations are inherent in all control systems, so no evaluation
      of
      controls can provide absolute assurance that all control issues and any fraud
      within the Company have been detected.




As
      required by Exchange Act Rule 13a-15(b), as of the end of the period covered
      by
      this report the Company, under the supervision and with the participation of
      our
      Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
      of the Company’s disclosure controls and procedures. Based on this evaluation,
      our Chief Executive Officer and Chief Financial Officer concluded that the
      Company’s disclosure controls and procedures were effective as of that date.




There
      was
      no change in the Company’s internal control over financial reporting during the
      Company’s most recently completed fiscal quarter that has materially affected,
      or is reasonably likely to materially affect, the Company’s internal control
      over financial reporting.







29


**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





As
      previously reported, we terminated a consulting agreement with Abraham Mirman
      of
      Samson Consulting Corp. in 2003. In July 2004, Mirman initiated an arbitration
      in New York State claiming that the agreement was wrongfully terminated and
      that
      Samson was owed $600,000 in damages plus costs. In June 2005, an arbitrator
      awarded Sampson $100,000 in unpaid fees, $21,650 in statutory interest through
      July 20, 2005 and no attorney fees or costs. In August 2004 ,
      we
      initiated a lawsuit against Mirman in California, alleging that he failed to
      provide financing promised in February, 2003, causing damages in excess of
      $400,000. In February 2006, both parties agreed to settle all outstanding claims
      without any funds exchanged; i.e. we have dismissed our California lawsuit
      and
      Samson has vacated its New York judgment. We had reserved $121,650 for the
      Samson judgment which has been returned to Shareholders Equity.




**ITEM
      2.** **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to an existing shareholder.
      As
      part of that transaction we also issued five-year warrants to purchase 50,000
      shares of common stock at an exercise price of $2.50.





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 175,000 shares
      of common stock for gross proceeds of $175,000 to three existing shareholders
      and one new accredited investor. As part of that transaction we also issued
      five-year warrants to purchase 175,000 shares of common stock at an exercise
      price of $2.00.





During
      the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 52.5 shares
      of
      preferred stock for gross proceeds of $525,000 to three existing shareholders.
      The Preferred Stock shall, for a period of seven years, be convertible into
      Units, each consisting of 4 five-year Warrants to purchase common stock at
      the
      rate of one unit for each dollar invested. In each Unit, 2 Warrants shall be
      exercisable at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per
      share and 1 Warrant shall be exercisable at $2.00 per share. The Preferred
      Stock
      shall earn dividends at 8% per annum, payable quarterly in cash or common stock
      at the Company's option. If paid in common stock, the stock price shall be
      the
      lower of the Market Price or $1.37 per share. Market Price is defined as the
      average of the closing prices of the common stock for the 10 consecutive trading
      days immediately preceding the dividend due date.





On
      February 28, 2006, we completed an investment in ClaimRemedi, Inc., the licensor
      of certain healthcare software products marketed by our Heuristic
      subsidiary. Under the terms of the investment, we have issued 350 shares of
      our Series K Convertible Preferred Stock to ClaimRemedi in exchange for
      19.5% of the outstanding shares of ClaimRemedi. The Preferred Stock is
      convertible into shares of our common stock at any time at a conversion
      price of between $1.00 and $2.00 per share, determined at the time of conversion
      based on the market value of our common stock, which shall result in the
      issuance of between 1,750,000 and 3,500,000 shares of common stock. 
However, any conversion prior to February 28, 2008 shall be at a conversion
      price of $2.00 per share. The Preferred
      Stock accrues dividends at a rate of 4% per annum,
      which dividends are payable in cash or stock at our option.  If
      certain performance criteria applicable to the license agreement
      between ClaimRemedi and our subsidiary are not met, ClaimRemedi has the
      right to buy back up to 50% of the ClaimRemedi Shares beginning
      24 months after closing, and up to 100% of the ClaimRemedi Shares beginning
      30 months after closing if the conditions have still not been
      met.   Any such repurchase of ClaimRemedi Shares
      by ClaimRemedi may be made in cash or by the sale of the Preferred Stock
      back to us at the issue price.





30


Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to one existing shareholder.
      As
      part of that transaction we issued five-year warrants to purchase 100,000 shares
      of common stock at an exercise price of $1.60.





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 20 shares of
      preferred stock for gross proceeds of $200,000 to an existing shareholder.
      The
      Preferred Stock shall, for a period of seven years, be convertible into Units,
      each consisting of 4 five-year Warrants to purchase common stock at the rate
      of
      one unit for each dollar invested. In each Unit, 2 Warrants shall be exercisable
      at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per share and 1
      Warrant shall be exercisable at $2.00 per share. The Preferred Stock shall
      earn
      dividends at 8% per annum, payable quarterly in cash or common stock at the
      Company's option. If paid in common stock, the stock price shall be the lower
      of
      the Market Price or $1.37 per share. Market Price is defined as the average
      of
      the closing prices of the common stock for the 10 consecutive trading days
      immediately preceding the dividend due date.





**ITEM
      3. DEFAULT UPON SENIOR SECURITIES**





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. The General Electric
      loan is secured by certain of our CoinBank machines. In 2000, we entered into
      the first of several loan renewals with G.E., the most recent of which expired
      in November 2005. We have continued to pay G.E. in accordance with the terms
      of
      the expired note and believe based on discussions with G.E. that another renewal
      will soon be executed. We have no current plan or capability to repay G.E.
      its
      principal. As of February 28, 2006, we owed $3,654,096 including principal
      and
      financing fees.





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 to 48 investors in the aggregate principal amount
      of
      $3,362,000 and 336,200 Series B Common Stock Purchase Warrants. The notes,
      secured by a first priority lien on all of our assets, were originally
      convertible into our common stock at the conversion rate of $9.50 per share
      and
      were due and payable on July 31, 2001. The Series B Warrants were originally
      exercisable at a price of $13.00 per share. Since July 31, 2001, 41 out of
      48
      noteholders converted their notes to equity at a conversion price of $2.50
      per
      share. Noteholders who converted to equity also received two replacement
      warrants exercisable at $1.35 per share for each original warrant previously
      held. The remaining 7 notes are in default of their original or restructured
      terms. As of February 28, 2006, we owed $494,893 in principal and interest
      to
      the seven noteholders.








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





During
      this nine month period ended February 28, 2006, there have not been any matters
      submitted for a vote from the security holders.





31


**ITEM
      5. OTHER INFORMATION**





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 100,000 shares
      of common stock for gross proceeds of $100,000 to one existing shareholder.
      As
      part of that transaction we issued five-year warrants to purchase 100,000 shares
      of common stock at an exercise price of $1.60.





Subsequent
      to the fiscal quarter ended February 28, 2006, in a private transaction under
      Section 4(2) of the Securities Act of 1933, as amended, we sold 20 shares of
      preferred stock for gross proceeds of $200,000 to an existing shareholder.
      The
      Preferred Stock shall, for a period of seven years, be convertible into Units,
      each consisting of 4 five-year Warrants to purchase common stock at the rate
      of
      one unit for each dollar invested. In each Unit, 2 Warrants shall be exercisable
      at $1.00 per share, 1 Warrant shall be exercisable at $1.50 per share and 1
      Warrant shall be exercisable at $2.00 per share. The Preferred Stock shall
      earn
      dividends at 8% per annum, payable quarterly in cash or common stock at the
      Company's option. If paid in common stock, the stock price shall be the lower
      of
      the Market Price or $1.37 per share. Market Price is defined as the average
      of
      the closing prices of the common stock for the 10 consecutive trading days
      immediately preceding the dividend due date.








**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**




(a)
            Exhibits31.1
            Certification
                of Chief Executive Officer31.2
            Certification
                of Chief Financial Officer32.1
            Certification
                Pursuant to Section 906 of the Sarbanes-Oxley Act(b)
            Report
                on Form 8-K filed on November 4, 2005 under Item 3.01.Report
                on Form 8-K/A filed on November 9, 2005 under Item
                3.01.





32


**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, 2006, to be signed on its behalf by the undersigned,
      thereunto duly authorized the 19th day of April, 2006.











CASH
      TECHNOLOGIES, INC.








By:
      /s/
      Bruce Korman





Bruce
      Korman


President
      and Chief Executive Officer








By:
      /s/  Edmund
      King





Edmund
      King


Chief
      Financial Officer












33