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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(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 29, 2004



OR



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



COMMISSION FILE NUMBER: 001-15783



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CASH TECHNOLOGIES, INC.

(Exact name
of registrant as specified in its charter)



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|                                                            |  |                                  
|----------------------------------------------------------- |  | ---------------------------------
|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)



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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 ̈.



Indicate
the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.



On April 11, 2004, there were 12,405,848 shares of common stock, $ .01 par value per share, issued and outstanding.

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##### Table of Contents

CASH TECHNOLOGIES, INC.

FORM 10-QSB



INDEX



|                              |  |                                                                                       |  |                                                                                                                                           |  |         
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                       |  |                                                                                                                                           |  | PAGE NO.
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Consolidated Financial Statements:                                                    |  |                                                                                                                                          
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Consolidated Balance Sheets as of February 29, 2004 (unaudited) and May 31, 2003                                                          |  | 3       
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Consolidated Statements of Operations for the three and nine-month periods ended February 29, 2004 and February 28, 2003 (unaudited)      |  | 4       
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Consolidated Statements of Cash Flows for the nine-month periods ended February 29, 2004 and February 28, 2003 (unaudited)                |  | 5       
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Notes to Consolidated Financial Statements for the three and nine-month periods ended February 29, 2004 and February 28, 2003 (unaudited) |  | 6       
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16                                                                                                                                       
|                              |  |                                                                                      
|Item 3.                       |  | Controls And Procedures                                                               |  | 23                                                                                                                                       
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 24                                                                                                                                       
|                              |  |                                                                                      
|Item 2.                       |  | Changes in Securities                                                                 |  | 24                                                                                                                                       
|                              |  |                                                                                      
|Item 3.                       |  | Default Upon Senior Securities                                                        |  | 25                                                                                                                                       
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 26                                                                                                                                       
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 27                                                                                                                                       
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                      |  | 27                                                                                                                                       
|                              | 
|SIGNATURES                    |  | 28                                                                                   



2



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##### Table of Contents

PART I



ITEM 1. FINANCIAL STATEMENTS



CASH TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



|                                               |  |                  |             |   |              |   |             |  
|---------------------------------------------- |  | ---------------- | ----------- | - | ------------ | - | ----------- | -
|                                               |  | FEBRUARY 29,2004 |             |   | MAY 31, 2003 |  
|                                               |  | (Unaudited)      |             |   |              |  
|ASSETS                                         |  |                  |             |   |              |   |             |  
|CURRENT ASSETS:                                |  |                  |             |   |              |   |             |  
|Cash and cash equivalents                      |  | $                | 169,476     |   |              | $ | 1,874       |  
|Prepaid expenses                               |  |                  |            |   |              |   | 4,057       |  
|Accounts receivable                            |  |                  | 3,381       |   |              |   | 2,484       |  
|Other receivables                              |  |                  | 28,035      |   |              |   | 28,035      |  
|                                               |  |                  |             |   |              |   |             |  
|Total current assets                           |  |                  | 200,892     |   |              |   | 36,450      |  
|                                               |  |                 
|COIBANK MACHINERY HELD FOR SALE                |  |                  | 834,223     |   |              |   | 862,090     |  
|                                               |  |                 
|PROPERTY AND EQUIPMENT (net)                   |  |                  | 25,732      |   |              |   | 29,051      |  
|                                               |  |                 
|CAPITALIZED SOFTWARE COSTS                     |  |                  | 1,586,010   |   |              |   | 2,005,836   |  
|                                               |  |                 
|DEFERRED FINANCING FEES                        |  |                  |            |   |              |   |            |  
|                                               |  |                 
|OTHER ASSETS                                   |  |                  | 92,821      |   |              |   | 69,187      |  
|                                               |  |                  |             |   |              |   |             |  
|TOTAL ASSETS                                   |  | $                | 2,739,678   |   |              | $ | 3,002,614   |  
|                                               |  |                  |             |   |              |   |             |  
|LIABILITIES AND STOCKHOLDERS DEFICIENCY       |  |                  |             |   |              |   |             |  
|                                               |  |                 
|CURRENT LIABILITIES:                           |  |                  |             |   |              |   |             |  
|Current maturities of notes payable            |  |                  | 4,488,844   |   |              |   | 4,371,527   |  
|Due to officers and directors                  |  |                  | 143,090     |   |              |   | 121,085     |  
|Convertible debt                               |  |                  | 901,995     |   |              |   | 4,362,731   |  
|Due to Shareholders                            |  |                  |            |   |              |   | 70,750      |  
|Accounts payable                               |  |                  | 964,021     |   |              |   | 1,062,170   |  
|Accrued liabilities                            |  |                  | 1,862,426   |   |              |   | 1,493,209   |  
|Bank overdraft                                 |  |                  | 197,800     |   |              |   | 197,800     |  
|Dividend payable                               |  |                  | 1,235,963   |   |              |   | 1,010,876   |  
|                                               |  |                  |             |   |              |   |             |  
|Total current liabilities                      |  |                  | 9,794,139   |   |              |   | 12,690,148  |  
|                                               |  |                 
|Long-term convertible debt                     |  |                  |            |   |              |   |            |  
|                                               |  |                  |             |   |              |   |             |  
|TOTAL LIABILITIES                              |  |                  | 9,794,139   |   |              |   | 12,690,148  |  
|                                               |  |                  |             |   |              |   |             |  
|COMMITMENTS & CONTINGENCIES                    |  |                  |             |   |              |   |             |  
|                                               |  |                 
|MINIORITY INTEREST                             |  |                  | (11,547     | ) |              |   | 22,044      |  
|                                               |  |                 
|STOCKHOLDERS DEFICIENCY:                      |  |                  |             |   |              |   |             |  
|Common stock                                   |  |                  | 129,586     |   |              |   | 85,191      |  
|Preferred stock                                |  |                  | 1,758,688   |   |              |   | 1,758,688   |  
|Additional paid in capital                     |  |                  | 28,965,298  |   |              |   | 22,753,598  |  
|Accumulated deficit                            |  |                  | (37,896,486 | ) |              |   | (34,307,055 | )
|                                               |  |                  |             |   |              |   |             |  
|Total stockholders deficiency                 |  |                  | (7,042,914  | ) |              |   | (9,709,578  | )
|                                               |  |                  |             |   |              |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY |  | $                | 2,739,678   |   |              | $ | 3,002,614   |  
|                                               |  |                  |             |   |              |   |             |  



See notes to
consolidated financial statements



3



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##### Table of Contents

CASH TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  
|--------------------------------------------------------------------- |  | ---------------------- | ---------- | - | --------------------- | - | ---------- | ----------------- |  | - | ----------------- | - |  | - | ---------- | -
|                                                                      |  | FOR THREE MONTHS ENDED |            |   | FOR NINE MONTHS ENDED |  
|                                                                      |  | FEBRUARY 29, 2004      |            |   | FEBRUARY 28, 2003     |   |            | FEBRUARY 29, 2004 |  |   | FEBRUARY 28, 2003 |  
|NET REVENUES                                                          |  |                        | 25,998     |   |                       |   | 62,337     |                   |  |   | 112,523           |   |  |   | 267,576    |  
|COST OF REVENUES                                                      |  |                        | 8,153      |   |                       |   | 44,773     |                   |  |   | 42,201            |   |  |   | 189,494    |  
|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  
|GROSS PROFIT                                                          |  |                        | 17,845     |   |                       |   | 17,564     |                   |  |   | 70,322            |   |  |   | 78,082     |  
|                                                                      |  |                        |            |  
|SELLING, GENERAL, & ADMINISTRATIVE EXPENSE                            |  |                        | 796,731    |   |                       |   | 615,591    |                   |  |   | 2,149,120         |   |  |   | 1,908,035  |  
|RESEARCH & DEVELOPMENT EXPENSE                                        |  |                        | 30,000     |   |                       |   | 60,000     |                   |  |   | 90,000            |   |  |   | 227,000    |  
|DEPRECIATION & AMORTIZATION EXPENSE                                   |  |                        | 140,854    |   |                       |   | 146,994    |                   |  |   | 423,145           |   |  |   | 441,705    |  
|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  
|OPERATING LOSS                                                        |  |                        | (949,740   | ) |                       |   | (805,021   | )                 |  |   | (2,591,943        | ) |  |   | (2,498,658 | )
|                                                                      |  |                        |            |  
|INTEREST EXPENSE                                                      |  |                        | 130,128    |   |                       |   | 166,069    |                   |  |   | 425,764           |   |  |   | 582,763    |  
|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  
|LOSS BEFORE INCOME TAXES                                              |  |                        | (1,079,868 | ) |                       |   | (971,089   | )                 |  |   | (3,017,707        | ) |  |   | (3,081,420 | )
|INCOME TAXES                                                          |  |                        | 2,400      |   |                       |   |           |                   |  |   | 2,400             |   |  |   |           |  
|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  
|Minority Interest                                                     |  |                        | (12,492    | ) |                       |   | (10,559    | )                 |  |   | (33,590           | ) |  |   | (21,958    | )
|                                                                      |  |                        |            |  
|LOSS - Continuing Operations                                          |  |                        | (1,069,776 | ) |                       |   | (960,530   | )                 |  |   | (2,986,517        | ) |  |   | (3,059,462 | )
|LOSS - Discontinued Operations                                        |  |                        |           |   |                       |   |           |                   |  |   |                  |   |  |   | (25,921    | )
|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  
|NET LOSS                                                              |  | $                      | (1,069,776 | ) |                       | $ | (960,530   | )                 |  | $ | (2,986,517        | ) |  | $ | (3,085,383 | )
|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  
|Dividends & deemed dividends                                          |  | $                      | 132,300    |   |                       | $ | 351,062    |                   |  | $ | 602,863           |   |  | $ | 613,302    |  
|                                                                      |  |                        |            |  
|Net loss allocable to common shareholders                             |  | $                      | (1,202,076 | ) |                       | $ | (1,311,592 | )                 |  | $ | (3,589,380        | ) |  | $ | (3,698,685 | )
|                                                                      |  |                        |            |  
|Basic and diluted net loss per share                                  |  | $                      | (0.12      | ) |                       | $ | (0.21      | )                 |  | $ | (0.35             | ) |  | $ | (0.58      | )
|                                                                      |  |                        |            |  
|Basic and diluted weighted average shares of common stock outstanding |  |                        | 10,172,309 |   |                       |   | 6,383,273  |                   |  |   | 10,172,309        |   |  |   | 6,383,273  |  
|                                                                      |  |                        |            |   |                       |   |            |                   |  |   |                   |   |  |   |            |  



See notes to
consolidated financial statements.



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CASH TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                            |  |                           |            |   |              |   |            |  
|--------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ------------ | - | ---------- | -
|                                                                            |  | FOR THE NINE MONTHS ENDED |           
|                                                                            |  | February 29,              |            |   | February 28, |  
|                                                                            |  | 2004                      |            |   | 2003         |  
|OPERATING ACTIVITIES:                                                       |  |                           |            |   |              |   |            |  
|Net loss                                                                    |  | $                         | (2,986,517 | ) |              | $ | (3,085,383 | )
|Adjustments to reconcile net loss to net cash used by operating activities: |  |                           |            |   |              |   |            |  
|                                                                            |  |                          
|Minority interest                                                           |  |                           | (33,591    | ) |              |   | (21,958    | )
|Amortization of capitalized software                                        |  |                           | 419,826    |   |              |   | 419,826    |  
|Noncash deemed interest expense                                             |  |                           |           |   |              |   | 83,333     |  
|Noncash compensation expense                                                |  |                           | 270,663    |   |              |   | 162,600    |  
|Depreciation expense                                                        |  |                           | 3,319      |   |              |   | 24,764     |  
|                                                                            |  |                          
|Changes in operating assets and liabilities:                                |  |                           |            |   |              |   |            |  
|                                                                            |  |                          
|Account receivable                                                          |  |                           | (897       | ) |              |   | 6,522      |  
|CoinBank machines held for sale                                             |  |                           | 27,867     |   |              |   | 167,202    |  
|Prepaid expenses and other current assets                                   |  |                           | 4,057      |   |              |   | (25,000    | )
|Other assets                                                                |  |                           | (23,634    | ) |              |   | (2,365     | )
|Accounts payable                                                            |  |                           | (98,149    | ) |              |   | 372,961    |  
|Accrued interest                                                            |  |                           | 263,276    |   |              |   | 338,535    |  
|Accrued expenses and other current liabilities                              |  |                           | 420,537    |   |              |   | 460,930    |  
|                                                                            |  |                           |            |   |              |   |            |  
|Net cash used in operating activities                                       |  |                           | (1,733,243 | ) |              |   | (1,098,033 | )
|                                                                            |  |                           |            |   |              |   |            |  
|INVESTING ACTIVITIES:                                                       |  |                           |            |   |              |   |            |  
|                                                                            |  |                          
|Purchase of property and equipment                                          |  |                           |           |   |              |   | (969       | )
|                                                                            |  |                           |            |   |              |   |            |  
|Net cash used in investing activities                                       |  |                           |           |   |              |   | (969       | )
|                                                                            |  |                           |            |   |              |   |            |  
|FINANCING ACTIVITIES:                                                       |  |                           |            |   |              |   |            |  
|                                                                            |  |                          
|Net proceeds from exercise of common stock warrants                         |  |                           | 344,785    |   |              |   | 100,000    |  
|Proceeds from issuance of warrants                                          |  |                           | 75,000     |   |              |   |            |  
|Proceeds from short-term debt                                               |  |                           | 186,255    |   |              |   | 98,448     |  
|Proceeds from common stock of subsidiary                                    |  |                           |           |   |              |   | 45,000     |  
|Repayments on short-term debt                                               |  |                           | (235,000   | ) |              |   | (150,000   | )
|Proceeds from sale of common stock                                          |  |                           | 1,529,805  |   |              |   | 963,483    |  
|                                                                            |  |                           |            |   |              |   |            |  
|Net cash provided by financing activities                                   |  |                           | 1,900,845  |   |              |   | 1,056,931  |  
|                                                                            |  |                           |            |   |              |   |            |  
|CHANGE IN CASH AND CASH EQUIVALENTS                                         |  |                           | 167,602    |   |              |   | (42,071    | )
|                                                                            |  |                          
|Cash and Cash Equivalents, Beginning of Year                                |  |                           | 1,874      |   |              |   |           |  
|                                                                            |  |                           |            |   |              |   |            |  
|Cash and Cash Equivalents, End of Year                                      |  | $                         | 169,476    |   |              | $ | (42,071    | )
|                                                                            |  |                           |            |   |              |   |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                            |  |                           |            |   |              |   |            |  
|                                                                            |  |                          
|Interest paid with cash                                                     |  | $                         | 200,769    |   |              | $ | 88,867     |  
|                                                                            |  |                          
|SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS                             |  |                           |            |   |              |   |            |  
|Conversion of preferred stock into common stock                             |  | $                         |           |   |              | $ | 146,000    |  
|Conversion of convertible debt into common stock                            |  | $                         | 3,606,695  |   |              | $ |           |  
|Conversion of warrants into common stock                                    |  | $                         | 344,785    |   |              | $ | 262,000    |  
|Issuance of common stock for services performed                             |  | $                         | 270,663    |   |              | $ | 162,600    |  
|Dividends declared on preferred stock                                       |  | $                         | 252,087    |   |              | $ | 257,604    |  
|Dividends paid on preferred stock                                           |  | $                         | 27,000     |   |              | $ |           |  
|Deemed dividend on warrants issued                                          |  | $                         | 350,776    |   |              | $ | 355,698    |  



See notes to
consolidated financial statements



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CASH TECHNOLOGIES, INC.



NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 1: GENERAL



GOING CONCERN:



The Company
has prepared the financial statements included in this Form 10-QSB assuming that the Company will continue as a going concern. Although the Company has raised additional capital since its public offering in July 1998, it has never generated
sufficient revenue-producing activity to sustain its operations. Accordingly, the Company must realize a satisfactory level of profitability from its current and future operation in order to remain a viable entity. In addition, the Company must
raise significant capital to fund current operations and to repay existing debt. The Companys auditors have included an explanatory paragraph in their report for the year ended May 31, 2003, indicating there is substantial doubt regarding the
Companys 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 29, 2004 and the results of
operation and cash flows for the three and nine month periods ended February 29, 2004 and February 28, 2003. 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, 2003, filed with the SEC. The results of operations for the three and nine months period ended February
29, 2004, are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year.



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



In December of 1997, the Company filed a patent application describing its transaction processing and networking
technologies, which resulted in the issuance of patent, number 6,308,887, by the U.S. Patent and Trademark Office on October 30, 2001. The technology, we refer to as EMMA (E commerce Message Management Architecture), allows for the seamless
integration of conventional ATM



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and credit card networks with non-bank networks and the Internet. The increase in Internet e commerce has created, in
managements opinion, a demand for EMMAs unique capabilities to provide advanced financial services on ATMs, POS (point of sale) terminals and wireless devices.



Technological feasibility was achieved in September of 1999 and commencing October 1, 1999 all expenses related to EMMA
software development had been capitalized. As of December 31, 2001, the Company had capitalized $2,771,536 in development and related costs. The EMMA product was available for release to the public in January 2002 thus all development costs since
have been expensed including $30,000 for the three month period ended February 29, 2004.



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 29, 2004, the Company amortized an additional $139,942 of capitalized software.



In connection with the development of our EMMA software, during the period
ending 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 the Company 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 which needed to be resolved as evidence that technological feasibility had been established under paragraph 4(a)(3) of SFAS 86.



First, there was our multi-transactional messaging architecture.
This 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 ATM transactions, the software being developed has to be certifiable by one of the major authorized ATM networks (such as Star, MAC, etc.) for interfacing with the global ATM network. We partnered with a third-party
ATM software provider to assist in these



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efforts, instead of developing the software for this step ourselves. This significantly reduced our costs to obtain
certification and 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 in-house ATM software from
scratch. A per-transaction license fee will be paid by Cash Technologies to the third party when the system starts generating transactions, thereby further reducing our development costs because we avoided upfront licensing fees. 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.



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, where 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. The
Company has 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) since such time 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 the Company used, or the working model approach, under paragraph
4(b) of SFAS 86, and these factors should be considered when reviewing the Companys financial statements.



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NOTE 2. COMMITMENTS AND CONTINGENCIES



On August 1, 2002, Cash Technologies, Inc. filed a lawsuit, captioned Cash Technologies, Inc. v. McNeely and Willmon
(Case No. BC 278823, Superior Court of the State of California), for breach of contract. In September 2002, Cash Technologies, Inc. loaned McNeely and Willmon the amount of $79,999. Pursuant to the promissory notes the funds were due to be returned
in December 2002. Despite repeated collection attempts, both McNeely and Willmon refused to repay the funds. The Companys lawsuit sought an amount in excess of $79,999. On September 25, 2002, McNeely and Willmon filed a cross complaint
claiming $500,000 in compensatory damages. In November 2003, the Company entered into a settlement agreement with McNeely and Willmon requiring McNeely and Willmon to pay a total of $50,000 over a three month period. These amounts have been paid as
of January 12, 2004, and all claims against the Company have been dismissed, satisfying all conditions of the settlement. During the quarter ended February 29, 2004, Cash Tech received settlement proceeds totaling $25,000.



In June, 2002 we were notified that a vendor, Kiosk Information Systems, Inc.
(KIS), had obtained a judgment against the Company for $129,567 allegedly owed for services rendered in 1999, plus interest and attorneys fees. Upon learning of the judgment, we notified KIS that we have never been served with a lawsuit
related to this matter and was unaware of the existence of the case. Subsequent settlement negotiations resulted in a tentative settlement agreement with KIS on July 7, 2003 which has not been performed as of January 14, 2004. If this matter is not
otherwise settled, it is likely that the Company will initiate legal action to set aside the judgment and take other appropriate measures. In such event the Company will incur substantial legal fees and there is no assurance that we would succeed in
setting aside the judgment or prevailing in any subsequent litigation.



NOTE
3: STOCKHOLDERS EQUITY



On December 1, 2003, in a private
transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $70,000 of its securities. The unit comprised of (i) 87,500 shares of Common Stock and (ii) 20,000 common stock purchase warrants.
The warrants have an exercise price of $1.00 per share and are exercisable for five years.



On December 1, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $70,000 of its securities. The unit comprised of (i) 87,500 shares
of Common Stock and (ii) 20,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years. A deemed dividend of $18,619 was recognized in conjunction with this offering.



On December 1, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $25,000 of its securities. The unit comprised of (i) 31,300 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On December 1, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $75,000 of its securities to a shareholder. The unit comprised of (i) 78,948 shares of Common Stock and (ii) 50,000 common stock purchase warrants. The warrants have an
exercise price of $1.00 per share and are exercisable for five years. A deemed dividend of $12,434 was recognized in conjunction with this offering.



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On December 16, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as
amended, the Company sold 1 unit at an aggregate of $30,000 of its securities to a shareholder. The unit comprised of (i) 37,500 shares of Common Stock and (ii) 10,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per
share and are exercisable for five years. A deemed dividend of $17,218 was recognized in conjunction with this offering.



In December 2003, the Company awarded 25,000 common stock purchase warrants to two of its shareholders. The warrants had an exercise price of $0.65 per
share and were exercisable for five years. A compensation expense of $12,454 was recognized in conjunction with this offering. The warrants were simultaneously exercised for gross proceeds of $16,250.



In December 2003, Ten (10) noteholders exercised 152,500 common stock
purchase warrants from which the Company received gross proceeds of $99,125.



In February 2004, the Company awarded 75,000 common stock purchase warrants to two of its independent contractors. These shares of the Companys Common Stock were awarded as payment for services performed in the
amount of $75,000.



In February, 2004, in a private transaction
under Section 4(2) of the Securities Act of 1933, as amended, the Company 504,475 shares of its common stock for gross proceeds of $428,800. The sale price was $0.85 per share and the Company has paid $48,500 as commissions.



In February 2004, the Company issued dividends on the Series E Redeemable
Preferred Stock of $9,000. The preferred shareholders were awarded 11,700 shares of the Companys Common Stock in lieu of cash.



In March, 2004, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 741,181 shares of its common stock
for gross proceeds of $630,000. The sale price was in each transaction $0.85 per share and the Company has paid $54,000 as commissions.



In March 2004, one noteholder of the Company exercised 20,000 common stock purchase warrants from which the Company received gross proceeds of $13,000.



In March 2004, noteholders owed $167,354 of principal and
interest converted their notes into 66,942 shares of the Companys common stock at $2.50 per share. The terms of the conversion were the same as in the past. The Company is in discussions with the remaining noteholders.



NOTE 4: RELATED PARTY TRANSACTIONS



In April 2001, the Company had obtained a short-term loan of $75,000 from
Mr. Robert Fagenson who serves on the Companys Board of Directors. In January, 2004, Cash Tech extinguished this debt and accrued interest of $20,265 by issuing 117,188 warrants to Mr. Fagenson. The warrants have an exercise price of $.01 per
share exercisable over 7 years.



As of February 29, 2004, the
Company has outstanding short-term loans of an aggregate principal



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##### Table of Contents

amount of $99,704 from Bruce Korman (and related parties) who is an affiliate, Chief Executive Officer and Chairman of
the Board of Directors of the Company. The loans are short-term non-interest bearing loans and are payable upon demand. Furthermore, as of February 29, 2004, the Company was in arrears of $269,270 for the salary to Mr. Korman and owed $85,608 in
accrued rent for Cash Techs offices to a company in which Mr. Korman has a beneficial interest.



As of February 29, 2004, the Company was in arrears in the amount of $51,537 for salary to Mr. Darryl Bergman. Mr. Bergman serves as the Chief Technology
Officer of the Company.



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. Due to the Companys inability to repay G.E. on the original terms, on September 29,
2000 the Company entered into the first of several loan modifications with G.E. The most recent modification, which shall expire in October, 2004, requires interest-only payments at a rate of 9.5% and the entire unpaid balance is due at maturity. As
of April 9, 2004 the loan is current. As of February 29, 2004, we owed $3,976,058, which includes the principal, financing fees and unpaid interest.



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



Since July 31, 2001, some of the notes have been in default, and some have
been restructured. Under the restructuring, the notes were extended for two (2) years to July 2003, the noteholders agreed to surrender all old warrants priced at $13.50 per share to receive 2 replacement warrants for every old warrant surrendered.
The new warrants were vested immediately, have a life of 5 years and were exercisable at $1.35 through December 31, 2001, $2.20 through January 15, 2002 and $4.50 thereafter. In August, 2003, the Company proposed the conversion to equity of the $3.3
million in secured convertible debt to the noteholders, expected to be consummated in January, 2004. The proposed terms include reducing the conversion price of the notes to $2.50 per share and the conversion price of the warrants to $0.65.



In November 2003, noteholders representing $3,606,695 of
principal and interest, approximately 80% of the total value of notes, have converted their notes into 1,442,682 shares of the Companys common stock at $2.50 per share. The Company is in discussions with the remaining noteholders. As of
February 29, 2004, we still owed $901,995 in principal and interest.



In March 2004, noteholders owed $167,354 of principal and interest converted their notes into 66,942 shares of the Companys common stock at $2.50 per share. The terms of the conversion were the same as in the past. The Company is in
discussions with the remaining noteholders.



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##### Table of Contents

In April 2001, the Company had obtained a short-term loan of $75,000 from Mr. Robert Fagenson who serves
on the Companys Board of Directors. In January, 2004, Cash Tech extinguished this debt and accrued interest of $20,265 by issuing 117,188 warrants to Mr. Fagenson. The warrants have an exercise price of $.01 per share and exercisable over 7
years.



NOTE 6: LONG-TERM DEBT



NONE



NOTE 7: STOCK BASED COMPENSATION



All stock options issued to employees have an exercise price not less than the fair market value of the Companys Common Stock on the date of grant,
and in accounting for such options utilizing the intrinsic value method there is no related compensation expense recorded in the Companys financial statements. If the compensation had been determined based on the fair market value of the stock
option on their dates of grant in accordance with SFAS 123 and SFAS 148, the Companys net loss and loss per share for the three and nine month periods ended February 29, 2004 and February 29, 2003, would have been increased to the pro forma
amounts presented below:



|                       |  |                                     |            |   |                                    |   |            |      |  |   |            |   |  |   |            |  
|---------------------- |  | ----------------------------------- | ---------- | - | ---------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                       |  | FOR THREE MONTHS ENDED FEBRUARY 29, |            |   | FOR NINE MONTHS ENDED FEBRUARY 29, |  
|                       |  | 2004                                |            |   | 2003                               |   |            | 2004 |  |   | 2003       |  
|Net Loss               |  |                                     |            |   |                                    |   |            |      |  |   |            |   |  |   |            |  
|                       |  |                                     |            |  
|As Reported            |  | $                                   | (1,069,776 | ) |                                    | $ | (960,530   | )    |  | $ | (2,986,517 | ) |  | $ | (3,085,383 | )
|                       |  |                                     |            |  
|Pro Forma              |  | $                                   | (1118,047  | ) |                                    | $ | (1,711,575 | )    |  | $ | (3,337,293 | ) |  | $ | (3,877,682 | )
|                       |  |                                     |            |  
|Basic and Diluted Loss |  |                                     |            |   |                                    |   |            |      |  |   |            |   |  |   |            |  
|Per Common Share       |  |                                     |            |   |                                    |   |            |      |  |   |            |   |  |   |            |  
|                       |  |                                     |            |  
|As Reported            |  | $                                   | (.10       | ) |                                    | $ | (.15       | )    |  | $ | (.29       | ) |  | $ | (.48       | )
|                       |  |                                     |            |  
|Pro Forma              |  | $                                   | (.11       | ) |                                    | $ | (.27       | )    |  | $ | (.33       | ) |  | $ | (.61       | )



For the nine month
period ended February 29, 2004, the fair value of option grants is estimated on the date of grant utilizing the Black-Scholes option-pricing model with the weighted average assumption for options granted during 1998-2003, expected life of the option
is 5 years, expected volatility of 38%, risk free interest rate of 3.46% and a 0% dividend yield. The weighted average fair value at the grant date for such option is $5.38 per option.



For the nine month period ended February 28, 2003, the fair value of option grants is estimated on the date of grant
utilizing the Black-Scholes option-pricing model with the weighted average



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##### Table of Contents

assumption for options granted during 1997-2002, expected life of the option is 5 years, expected volatility of 51%, risk
free interest rate of 3.31% and a 0% dividend yield. The weighted average fair value at the grant date for such option is $5.38 per option.



NOTE 8: SEGMENT REPORTING



The Company operates through 2 business segments: CoinBank machines and E-Commerce Message Management Architecture (EMMA). The Company discontinued its
cash processing in the fourth quarter of fiscal year ended May 31, 2003. The Company had a firm fixed price contract with the Los Angeles County Metropolitan Transportation Authority to count currency, which purchased in bulk at a discount from face
value and processed and deposited at face value in the Companys account. The Company also sells self-service coin counting machines through existing equipment distribution channels. Furthermore, the Company has developed an E-Commerce Message
Management Architecture transaction processing system, which has not yet been deployed and the software development costs are being capitalized.



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##### Table of Contents

Information on the Companys business segments for the:



|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|----------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                      |  | Three months ended February 29, |            |   | Nine months ended February 29, |  
|                                                      |  | 2004                            |            |   | 2003                           |   |           | 2004 |  |   | 2003       |  
|CoinBank machines                                     |  | $                               | 998        |   |                                | $ | 62,236    |      |  | $ | 47,523     |   |  | $ | 246,228    |  
|EMMA                                                  |  |                                 | 25,000     |   |                                |   | 101       |      |  |   | 65,000     |   |  |   | 21,348     |  
|Unallocated                                           |  |                                 |           |   |                                |   |          |      |  |   |            |   |  |   |           |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 | 25,998     |   |                                |   | 62,337    |      |  |   | 112,523    |   |  |   | 267,576    |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Interest expense:                                     |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 |            |  
|CoinBank machines                                     |  |                                 | 2,336      |   |                                |   | 2,336     |      |  |   | 7,008      |   |  |   | 7,157      |  
|EMMA                                                  |  |                                 |           |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Unallocated                                           |  |                                 | 127,792    |   |                                |   | 163,733   |      |  |   | 418,756    |   |  |   | 575,606    |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 | 130,128    |   |                                |   | 166,069   |      |  |   | 425,764    |   |  |   | 582,763    |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Depreciation:                                         |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 |            |  
|CoinBank machines                                     |  |                                 |           |   |                                |   | 5,849     |      |  |   |           |   |  |   | 17,546     |  
|EMMA                                                  |  |                                 | 139,942    |   |                                |   | 139,942   |      |  |   | 419,826    |   |  |   | 419,826    |  
|Unallocated                                           |  |                                 | 912        |   |                                |   | 1,203     |      |  |   | 3,319      |   |  |   | 4,333      |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 | 140,854    |   |                                |   | 146,994   |      |  |   | 423,145    |   |  |   | 441,705    |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Segment profit (loss) before discontinued operations: |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 |            |  
|CoinBank machines                                     |  |                                 | (153,936   | ) |                                |   | (181,209  | )    |  |   | (400,638   | ) |  |   | (566,374   | )
|EMMA                                                  |  |                                 |           |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Unallocated                                           |  |                                 | (915,840   | ) |                                |   | (779,321  | )    |  |   | (2,585,879 | ) |  |   | (2,493,088 | )
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 | (1,069,776 | ) |                                |   | (960,530  | )    |  |   | (2,986,517 | ) |  |   | (3,059,462 | )
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Net identifiable assets:                              |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 |            |  
|CoinBank machines                                     |  |                                 | 834,223    |   |                                |   | 896,584   |      |  |   | 834,223    |   |  |   | 896,584    |  
|EMMA                                                  |  |                                 | 1,586,010  |   |                                |   | 2,145,778 |      |  |   | 1,586,010  |   |  |   | 2,145,778  |  
|Unallocated                                           |  |                                 | 319,445    |   |                                |   | 523,886   |      |  |   | 319,445    |   |  |   | 523,886    |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|                                                      |  |                                 | 2,739,678  |   |                                |   | 3,566,248 |      |  |   | 2,739,678  |   |  |   | 3,566,248  |  
|                                                      |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  



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NOTE 9: DISCONTINUED OPERATIONS



Cash Technologies, Inc. operated a cash processing facility in Los Angeles, California, where it counted currency purchased
in bulk at a small discount from face value. We then sorted, wrapped and resold the currency to various retail customers at face value plus a small fee or deposited it at face value at the Federal Reserve Bank for credit to our account. The
Companys contract with the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which will and has resulted in a significant reduction in the Companys gross revenue in the future. As of
February 29, 2004, the Company does not have any cash processing customers and, due to our focus on our other businesses, we chose not to pursue other cash processing customers. Cash processing was considered as discontinued operations in the fourth
quarter of fiscal year ended May 31, 2003.



|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  
|----------------------------------------- |  | ------------------------- | - | ------------------------ | - | ---------------- |  | ---------------- | - |  | - | ------- | -
|                                          |  | FOR THE THREEMONTHS ENDED |   | FOR THE NINEMONTHS ENDED |  
|                                          |  | FEBRUARY 29,2004          |   | FEBRUARY 28,2003         |   | FEBRUARY 29,2004 |  | FEBRUARY 28,2003 |  
|NET REVENUES                              |  | $                         |  |                          | $ |                 |  | $                |  |  | $ | 27,624  |  
|COST OF REVENUES                          |  |                           |  |                          |   |                 |  |                  |  |  |   | 27,129  |  
|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  
|GROSS PROFIT (LOSS)                       |  |                           |  |                          |   |                 |  |                  |  |  |   | 495     |  
|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  
|SELLING, GENERAL & ADMINISTRATIVE EXPENSE |  |                           |  |                          |   |                 |  |                  |  |  |   | 26,415  |  
|DEPRECIATION & AMORTIZATION EXPENSE       |  |                           |  |                          |   |                 |  |                  |  |  |   |        |  
|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  
|OPERATING LOSS                            |  |                           |  |                          |   |                 |  |                  |  |  |   | (25,920 | )
|INTEREST EXPENSE                          |  |                           |  |                          |   |                 |  |                  |  |  |   |        |  
|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  
|LOSS BEFORE INCOME TAXES                  |  |                           |  |                          |   |                 |  |                  |  |  |   | (25,920 | )
|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  
|INCOME TAXES                              |  |                           |  |                          |   |                 |  |                  |  |  |   |        |  
|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  
|NET LOSSDISCONTINUED OPERATIONS          |  |                           |  |                          |   |                 |  |                  |  |  | $ | (25,920 | )
|                                          |  |                           |   |                          |   |                  |  |                  |   |  |   |         |  



NOTE 10: MINORITY INTEREST



From November 2002 through March 2003, the Company
received $443,000 in net proceeds from members for an equity share in the Companys subsidiary of CT Holdings, LLC. The shareholders own 13.65% while the Company owns 86.35%. The net proceeds from this have been used to further develop the
BONUS product for CT Holdings, LLC, as well as for working capital for CT Holdings, LLC and Cash Technologies, Inc. During the quarter ended February 29, 2004, the Company has allocated $12,492 of losses in CT Holdings, LLC to minority interest.



NOTE 11: SUBSEQUENT EVENTS



On March 10, 2004, the Company signed a Letter of Intent to acquire certain
assets and contracts of Heuristic Technologies, LLC and its subsidiary (HT) for $3.7 million in Cash Tech preferred stock. HT is privately-held financial data processor located in Sherman Oaks, California. It is anticipated that the
assets will be owned by a new, wholly-owned subsidiary of Cash Tech which will be formed to operate the acquired assets and will be managed by HTs senior management. HT is a provider of a prepaid Visa card that can be issued by employers to
their employees as a method of conveniently distributing medical, transportation and other benefits without issuing checks. The cards can be used to pay reimbursable expenses and the employees entire paycheck. HT also provides
business-to-business financial products, including payment processing for health insurers, issuing electronic payments, checks and statements on behalf of the insurers to doctors and other providers. The Letter of Intent provides that the preferred
stock be issued to HT pursuant to this transaction will be convertible to common stock of Cash Tech at a 30% discount from the market price of the common stock at the time of conversion, with a floor of $2.00 per share and a ceiling of $5.00 per
share. Cash Tech has committed to provide working capital to cover operating losses and expansion costs, which are expected to be between $2,000,000 and $5,000,000. The conclusion of this transaction is subject to numerous conditions, including the
negotiation and execution of employment agreements for the HT management, completion of due diligence and successful capital raising to finance the new business. There can be no assurance that the transaction will be consummated, or that the terms
of the transaction as outlined will not be changed dramatically during the course of negotiations.



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In March, 2004, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended,
the Company sold 741,181 shares of its common stock for gross proceeds of $630,000. The sale price for each transaction was $0.85 per share and the Company has paid $54,000 as commissions.



In March 2004, one noteholder of the Company exercised 20,000 common stock
purchase warrants from which the Company received gross proceeds of $13,000.



In March 2004, noteholders owed $167,354 of principal and interest converted their notes into 66,942 shares of the Companys common stock at $2.50 per share. The terms of the conversion were the same as in the
past. The Company is in discussions with the remaining noteholders.



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



SAFE HARBOR STATEMENT



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



Introduction



Cash Technologies, Inc., is a Delaware corporation, incorporated in August 1995. Unless the context otherwise requires,
references herein to we, our or Cash Tech refers to Cash Technologies, Inc., and its wholly-owned subsidiaries, National Cash Processors, Inc., CoinBank Automated Systems, Inc., CoinBank Automation Handels GmbH,
Salzburg, Austria, Cintelia Systems Inc., and CT Holdings, LLC, which we currently own 86.65%. Unless the context otherwise requires, references herein to we or us refers to Cash Technologies, Inc., and its wholly-owned and
majority owned subsidiaries, National Cash Processors, Inc., CoinBank Automated Systems, Inc., Cintelia Systems, Inc. and CoinBank Automation Handels GmbH, Salzburg, Austria.



Our business model has evolved over the last three years from a business based upon currency



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



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



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



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



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



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



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



Currently, our principal focus is to deploy EMMA in the financial services channels that we believe would be best served by the EMMA technology and generate revenues for the Company.



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



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



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



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



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



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



| |  |  | A supply agreement was signed with Diebold, Inc. to permit Diebold to distribute our CoinBank machines to its customers. Approximately 46 CoinBank machines have been shipped under
the Diebold agreement since August 2002.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | The Company began the Popular Cash Express (PCE) pilot in December, 2002. The pilot was successfully concluded and an agreement was signed in June, 2003 to roll out the system to
their mobile locations. The rollout, interrupted by a sale of the mobile business unit, is being pursued by the units acquirer.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company signed an agreement for the distribution of CoinBank machines in Europe through Cash Solutions Geld., Ges.m.b.H., an NCR Corporation supplier in June 2002. The product
launch, including the creation of sales literature, customer presentations, technician training, etc. is underway and the first orders have been received.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | In August, 2003, the Company proposed the conversion to equity of its $3.3 million principal value of secured convertible debt to the noteholders. In November 2003, noteholders
representing $3,606,695 of principal and interest, approximately 80% of the total value of notes, have converted their notes into 1,442,682 shares of the Companys common stock at $2.50 per share.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On March 10, 2004, the Company signed a Letter of Intent to acquire certain assets and contracts of Heuristic Technologies, LLC and its subsidiary (HT) HT is a provider
of a prepaid Visa card that can be issued by employers to their employees as a method of conveniently distributing medical, transportation and other benefits without issuing checks. The cards can be used to pay reimbursable expenses and the
employees entire paycheck. HT also provides business-to-business financial products, including payment processing for health insurers, issuing electronic payments, checks and statements on behalf of the insurers to doctors and other providers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



Technological feasibility was achieved in September of 1999 and commencing October 1, 1999 all expenses related to EMMA software development had been
capitalized. As of December 31, 2001, the Company had capitalized $2,771,536 in development and related costs. The EMMA product was available for release to the public in January 2002 thus all development costs since have been expensed including
$30,000 for the three month period ended February 29, 2004.



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 quarter ended February 29, 2004, the Company amortized an additional $139,942 of capitalized software.



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Commercial Cash Processing



Cash Technologies, Inc. operated a cash processing facility in Los Angeles, California, where it counted currency purchased
in bulk at a small discount from face value. We then sorted, wrapped and resold the currency to various retail customers at face value plus a small fee or deposited it at face value at the Federal Reserve Bank for credit to our account. The
Companys contract with the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002, which will and has resulted in a significant reduction in the Companys gross revenue. As of February 29,
2004, the Company does not have any cash processing customers and, due to our focus on our other businesses, we chose not to pursue other cash processing customers. Cash processing was considered as discontinued operations in the fourth quarter of
fiscal year ended May 31, 2003.



CoinBank Machines Business



In 1995, the Company began its development of CoinBank® self-service coin counting machines, distributed
through its CoinBank Automated Systems, Inc. subsidiary. The machines accept and count loose coin, then generate a receipt redeemable for the amount counted less a service fee of typically 7-9%. This receipt can then be exchanged for currency or
goods. The machines provide individuals and small businesses with a convenient method for the disposing of their accumulated loose coin without the need for pre-sorting or wrapping. The Company has performed extensive field tests with these machines
in the U.S. and Europe. The machines can be readily configured to count coin denominations from most countries in the world. An important feature of the machines, for which the Company has received a U.S. patent, number 6,318,536, is their ability
to reject extraneous materials such as foreign objects and slugs, minimizing down time and repairs.



The Company is marketing the 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.



During the fiscal year ended May 31, 2001, the Companys market analysis for self-service coin counting machines indicated that retailers were
demanding higher profit margins from the operation of these devices than that was being offered through the free-placement business model. The Company concluded that its free-placement program should be supplanted by direct sales of
these machines to retail store chains and removed substantially all of its free-placement machines from operation, including the termination of its agreement with Shaws Supermarkets. See Legal Proceedings. Though the Company
intends to complete certain potential direct sales of its coin machines, it intends to focus substantially all of its efforts and operations on the continued development and deployment of the EMMA technology.



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



The agreement requires that Cash Solutions purchase certain
minimum quantities each year to maintain its exclusivity and allows for the parties to share in manufacturing cost reductions realized as production quantities increase from sales.



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Since the adoption, installation and integration of EMMA by financial institutions and other potential
users is expected to occur over an extended period of time, the Company is attempting to meet its working capital and other financial needs by (i) raising funds through the sale of its securities, (ii) convert and otherwise reduce its outstanding
indebtedness, and (iii) enter into strategic partnerships with third parties who have a greater ability to market our EMMA solutions



We do not have any credit facilities under which we could obtain additional funding, nor do we have any other established sources of working capital. If
the Heuristic transaction is closed (including the proposed financing that we expect will accompany that transaction), we expect to commence generating material revenues over the next year. However, in the event that we are unable to raise
additional funds from financing transactions and/or are unable to close one or more of the proposed transactions, we may be forced to materially reduce or cease our operations.



RESULTS OF OPERATIONS



THREE MONTHS ENDED FEBRIUARY 29, 2004, COMPARED TO THE THREE MONTHS ENDED FEBRUARY 28, 2003.



Net revenues for the three-month period ended February 29, 2004 decreased to $25,998 compared to $62,337 for the same
2003 period. The decrease in net revenue was primarily attributable to the decrease in amount of CoinBank machines sold during the current period.



Cost of revenues for the three-month period ended February 29, 2004, was $8,153 compared to $44,773 for the quarter ended February 28, 2003. The
decrease in direct costs was primarily attributable to the decrease in amount of CoinBank machines sold during the current period.



Gross profitfor the three months ended February 29, 2004 was $17,845 compared to $17,564 for the same period a year ago. The increase in gross
profit was related to the decrease in the amount of CoinBank machines sold and an increase in EMMA income.



Selling, General and Administrative expenses for the three months ended February 29, 2004, increased to $796,731 compared to $615,591 for the three
months ended February 28, 2003. These expenses consist primarily of wages (and wage related costs), outside contractor expenses, travel/promotional expenses, professional services and facilities/office related expenses. The primary increase is
attributable to recognizing $140,771 of fees due to the American Stock Exchange. Such fees are now being accrued on a monthly basis.



Research and developmentexpenses for the three months ended February 29, 2004, $30,000, compared to $60,000 for the three months ended February
28, 2003. The decrease was the result of the allocation of the Companys limited resources from development to working capital.



Depreciation and amortization expenses for the three months ended February 29, 2004, and February 28, 2003, were $140,854 and $146,994,
respectively.



Interest expense for the three
months ended February 29, 2004 and 2003, was $130,128 and $166,069, respectively. The decrease related to reduction in interest expense recognized in relation to the conversion of convertible debt.



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Income tax expensefor the three months ended February 29, 2004 totaled $2,400 versus $0 for the
same period ending February 28, 2003.



As a result of the
foregoing, net losses from continuing operations for the three months ended February 29, 2004 and 2003, were $1,069,776 and $960,530, respectively.



NINE MONTHS ENDED FEBRUARY 29, 2004, COMPARED TO NINE MONTHS ENDED FEBRUARY 28, 2003.



Net revenues for the nine-month period ended February 29, 2004 decreased to $112,523 compared to $267,576 for the
2003 period. The decrease in net revenue was primarily attributable to the decrease in the amount of CoinBank machines sold offset by an increase in other revenue.



Cost of revenues for the nine-month period ended February 29, 2004, was $42,201 compared to $189,494 for the nine
months ended February 28, 2003. The decrease in direct costs was primarily the result of a decrease in the cost of coin machines sold.



Gross profitfor the nine months ended February 29, 2004 was $70,322 compared to $78,082 for the nine months ended February 28, 2003. The decrease
in gross profit was directly related to the decrease in CoinBank machines sold.



Selling, General and Administrative expenses for the nine months ended February 29, 2004, increased to $2,149,120 compared to $1,908,035 for the nine months ended February 28, 2003. 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 attributable to recognizing $140,771 of fees due to the American
Stock Exchange as well as additional consulting fees of $166,809. The stock exchange fees are now being accrued on a monthly basis.



Research and developmentexpenses for the nine months ended February 29, 2004, $90,000, compared to $167,000 for the nine months ended February 28,
2003. The decrease was the result of the allocation of the Companys limited resources from development to working capital.



Depreciation and amortization expenses for the nine months ended February 29, 2004, and February 28, 2003, were $423,145 and $441,705,
respectively.



Interest expense for the nine
months ended February 29, 2004 and February 28, 2003, was $425,764 and $582,763, respectively. The decrease is directly related to reduction in interest expense recognized in relation to GE Capital loan deferments.



Income tax expense for the nine months ending February 29, 2004
totaled $2,400 compared to $0 a year ago.



Minority Interestallocation of losses for the nine months ended February 29, 2004 was $33,590 compared to $21,958 for the same period a year ago.



As a result of the foregoing, net losses from continuing operations for the nine months ended February 29, 2004 and February 28, 2003, were
$2,986,517 and $3,059,462, respectively.



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LIQUIDITY AND CAPITAL RESOURCES



The Companys capital requirements have been and will continue to be significant and its cash requirements have been
exceeding its cash flow from operations. At February 29, 2004, the Company had a working capital deficit of $9,593,247 compared to a working capital deficit of $11,968,464 for the same quarter in 2003. At March 25, 2004, the Company had a cash
balance of approximately $328,000. The Companys current monthly operating costs without any interest or principal payments on debt, amortization of warrants and depreciation expense; is approximately $200,000 per month. We are in a desperate
need for working capital. To date we have been funding our operations through the issuance of equity in private placement transactions with existing shareholders or persons with whom we have relationships, including affiliates of shareholders. There
can be no assurance that we will be able to continue to raise required working capital in this manner.



Since inception, the Company has satisfied its working capital requirements through limited revenues generated from operations, the issuance of equity and
debt securities, borrowing under a line of credit and loans from stockholders of the Company. Furthermore, the Companys contract with the Los Angeles County Metropolitan Transit Authority (LACMTA) to count currency expired on June 30, 2002,
which has resulted in a significant reduction in the Companys gross revenue. As of February 29, 2004 the Company does not have any cash processing customers. The company chose to discontinue operations in the fourth quarter of fiscal year
ended May 31, 2003.



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



Net cash
used in operating activities was $1,733,243 for the nine months ended February 29, 2004 compared to $1,098,033 for the nine months ended February 28, 2003. The increase of net cash used by operating activities, during the 2003 period was
primarily due to the effects of the decreases in accounts payable of $471,110 and accrued interest of $75,259 which were tempered by increases in non-cash compensation expense of $108,063 and a reduction in net losses of $98,866.



Net cash provided by financing activities for the nine months ended
February 29, 2004, was $1,900,845 as compared to $1,056,931 for the nine months ended February 28, 2003. The increase in Net cash Provided By Financing Activities for the 2003 period was primarily attributable to increases in proceeds from the
issuance of warrants and common stock of $641,322 and proceeds from conversion of warrants $244,785.



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. Due to the Companys inability to repay G.E. on the original terms, on September 29, 2000 the Company entered into the first of several loan modifications with G.E.
The most recent modification requires interest-only payments at a rate of 9.5% and the entire unpaid balance is due at maturity in October, 2004. As of this date the Company does not have sufficient capital to repay this debt. The Company fully
intends to enter into another modification with G.E. There can be no assurance though. As of April 9, 2004 the loan is current. As of February 29, 2004, we owed $3,976,058, which includes the principal, financing fees and unpaid interest.



As of March 2004, noteholders representing $3,774,049 of
principal and interest, approximately 84% of the total value of notes, have converted their notes into 1,509,624 shares of the Companys common stock at $2.50 per share. The Company is in discussions with the remaining noteholders. As of March
2004, we still owed $734,641 in principal and interest.



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In the fiscal quarter ended February 29, 2004 the Company raised $730,100 from the sale of its securities
in private, unregistered sales and an additional $108,775 from the exercise of common stock warrants. In addition, during the fiscal quarter, the Company also issued 1,442,682 shares of its common stock for conversion of convertible debt, 127,981 of
7 year warrants (exercise price of $.01) in exchange for the cancellation of short term debt and 75,000 shares of its common stock in lieu of cash for services rendered.



ITEM 3. CONTROLS AND PROCEDURES



Evaluation of
Disclosure Controls and Procedures:



Our management, under the
supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c))
within 45 days of the filing date of this Quarterly Report on Form 10-QSB. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the evaluation date, our disclosure controls and procedures are
effective to ensure that all material information required to be filed in this Quarterly Report on Form 10-QSB has been made known to them.



Changes in Internal Controls:



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



Additionally, the Board, in response to the passage of the Sarbanes-Oxley Act of 2002, among other actions, formed a
Disclosure Committee comprised of various members of our management team. The Disclosure Committee is charged with, among other things, reviewing and developing policies and procedures to enhance our disclosure controls and procedures as well as
with reviewing our periodic reports and other public disclosures. Other than as described above, there have been no changes, including corrective actions with regard to significant deficiencies or material weaknesses in our internal controls or in
other factors that could significantly affect these controls subsequent to February 29, 2004.



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PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



On August 1, 2002, Cash Technologies, Inc. filed a lawsuit, captioned Cash Technologies, Inc. v. McNeely and Willmon (Case No. BC 278823, Superior Court of the State of California), for breach of contract. In September 2002, Cash
Technologies, Inc. loaned McNeely and Willmon the amount of $79,999. Pursuant to the promissory notes the funds were due to be returned in December 2002. Despite repeated collection attempts, both McNeely and Willmon refused to repay the funds. The
Companys lawsuit sought an amount in excess of $79,999. On September 25, 2002, McNeely and Willmon filed a cross complaint claiming $500,000 in compensatory damages. In November 2003, the Company entered into a settlement agreement with
McNeely and Willmon requiring McNeely and Willmon to pay a total of $50,000 over a three month period. These amounts have been paid as of January 12, 2004, and all claims against the Company have been dismissed, satisfying all conditions of the
settlement. The Company received settlement proceeds of $25,000 for the quarter ending February 29, 2004.



ITEM 2. CHANGE IN SECURITIES



On
December 1, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $70,000 of its securities. The unit comprised of (i) 87,500 shares of Common Stock and (ii) 20,000
common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years. A deemed dividend of $18,619 was recognized in conjunction with this offering.



On December 1, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $25,000 of its securities. The unit comprised of (i) 31,300 shares of Common Stock. There were no warrants awarded in conjunction with this offering.



On December 1, 2003, in a private transaction under Section 4(2) of the
Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of $75,000 of its securities to a shareholder. The unit comprised of (i) 78,948 shares of Common Stock and (ii) 50,000 common stock purchase warrants. The warrants have an
exercise price of $1.00 per share and are exercisable for five years. A deemed dividend of $12,434 was recognized in conjunction with this offering.



On December 16, 2003, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 1 unit at an aggregate of
$30,000 of its securities to a shareholder. The unit comprised of (i) 37,500 shares of Common Stock and (ii) 10,000 common stock purchase warrants. The warrants have an exercise price of $1.00 per share and are exercisable for five years. A deemed
dividend of $17,218 was recognized in conjunction with this offering.



In December 2003, the Company awarded 25,000 common stock purchase warrants to two of its shareholders. The warrants had an exercise price of $0.65 per share and were exercisable for five years. A compensation expense of $12,454 was
recognized in conjunction with this offering. The warrants were simultaneously exercised for gross proceeds of $16,250.



In December 2003, Ten (10) noteholders exercised 152,500 common stock purchase warrants from which the Company received gross proceeds of $99,125.



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In February 2004, the Company awarded 75,000 common stock purchase warrants to two of its independent
contractors. These shares of the Companys Common Stock were awarded as payment for services performed in the amount of $75,000.



In February, 2004, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 504,475 shares of its common
stock for gross proceeds of $428,800. The sale price was $0.85 per share and the Company has paid $48,500 as commissions.



In February 2004, the Company issued dividends on the Series E Redeemable Preferred Stock of $9,000. The preferred shareholders were awarded 11,700 shares
of the Companys Common Stock in lieu of cash.



In April
2001, the Company had obtained a short-term loan of $75,000 from Mr. Robert Fagenson who serves on the Companys Board of Directors. The Company also issued warrants to purchase 10,000 shares of the Companys common stock at an exercise
price of $2.00 per share and an exercise period of three years. In January, 2004, Cash Tech extinguished this debt and accrued interest of $20,265 by issuing 117,188 warrants to Mr. Fagenson. These warrants have an exercise price of $.01 per share
and are exercisable over 7 years.



As of February 29, 2004, the
Company has outstanding short-term loans of an aggregate principal amount of $99,704 from Bruce Korman (and related parties) who is an affiliate, Chief Executive Officer and Chairman of the Board of Directors of the Company. The loans are short-term
non-interest bearing loans and are payable upon demand. Furthermore, as of February 29, 2004, the Company had $269,270 in arrears in salary to Mr. Korman and rent regarding the Companys facility totaling $85,608.



As of February 29, 2004, the Company had $51,537 in arrears in salary to Mr.
Darryl Bergman. Mr. Bergman serves as the Chief Technology Officer of the Company.



In March, 2004, in a private transaction under Section 4(2) of the Securities Act of 1933, as amended, the Company sold 741,181 shares of its common stock for gross proceeds of $630,000. The sale price was $0.85 per
share and the Company has paid $54,000 as commissions.



In
March 2004, one noteholder of the Company exercised 20,000 common stock purchase warrants from which the Company received gross proceeds of $13,000.



In March 2004, noteholders owed $167,354 of principal and interest converted their notes into 66,942 shares of the Companys common stock at $2.50
per share. The terms of the conversion were the same as in the past. The Company is in discussions with the remaining noteholders.



ITEM 3. DEFAULT UPON SENIOR SECURITIES



In January 2000, we completed a private placement offering of convertible notes and warrants under Section 4(2) of the Securities Act of 1933. As a result of this offering, we issued notes in the aggregate principal amount of $3,362,000 and
336,200 Series B Common Stock Purchase Warrants The notes were originally convertible into our Common Stock at the conversion rate of $9.50 per share. The Series B Warrants were originally exercisable at a price of $13.00 per share. The notes were
originally due and payable on July 31, 2001. The notes are secured by a first priority lien on all of our assets. Since July 31, 2001, some of the notes have been in default, and some have been restructured.



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As of November 14, 2003, noteholders representing $3,606,695 of principal and interest, approximately 80%
of the total value of notes, have converted their notes into 1,442,682 shares of the Companys common stock at $2.50 per share. The Company is in discussions with the remaining noteholders. The Company remains in default with these noteholders.
As of February 29, 2004, we still owed to the noteholders $901,995 in principal and interest.



In March 2004, noteholders owed $167,354 of principal and interest converted their notes into 66,942 shares of the Companys common stock at $2.50 per share. The terms of the conversion were the same as in the
past. The Company is in discussions with the remaining noteholders.



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



The Company did hold a shareholders meeting on January 5, 2004, the first for the Company in the last three (3) calendar years.



Results of the Annual Meeting



The Meeting was held on January 5, 2004 at the Companys offices in Los Angeles, California. The Companys Proxy Statement was mailed to shareholders on or
about December 15, 2003.



Shareholders were requested to vote and act upon the
following several items:



1. the election of five directors;



2. a proposal to amend the Companys Employee Option plan, including amendments to
increase the number of shares reserved under the Employee Plan and certain grants to the Companys Chief Executive Officer;



3. a proposal to amend the Companys Director Option Plan, including amendments to increase the number of shares reserved under the Director Plan and an increase in
the number of options granted to directors; and



4. a proposal to approve the
conversion terms of the Companys outstanding Series B Preferred stock.



At the meeting, shareholders representing an aggregate of 5,029,990 shares were present either in person or by proxy, representing 51% of the total outstanding. For purpose of the Meeting, at the record date of November 24, 2003, there were
9,895,155 shares issued and outstanding.



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All of the proposals and all of the nominees for directors were approved by shareholders. The voting was as follows:



|1. |  | Election of Directors
|-- |  | ---------------------



|                |  |           |  |               |  |              
|--------------- |  | --------- |  | ------------- |  | -------------
|Name            |  | Votes For |  | Votes Against |  | Withheld Vote
|                |  |           | 
|Bruce Korman    |  | 5,025,494 |  | 4,496         |  | 0            
|                |  |           | 
|Robert Fagenson |  | 5,027,640 |  | 2,350         |  | 0            
|                |  |           | 
|Richard Miller  |  | 5,027,640 |  | 2,350         |  | 0            
|                |  |           | 
|Kevin Walls     |  | 5,027,640 |  | 2,350         |  | 0            
|                |  |           | 
|David Grano     |  | 5,027,640 |  | 2,350         |  | 0            



|2. |  | Proposal to Amend the Employee Option Plan
|-- |  | ------------------------------------------



|          |  |               |  |                     
|--------- |  | ------------- |  | --------------------
|Votes For |  | Votes Against |  | Abstentions/NonVotes
|4,837,290 |  | 187,700       |  | 5,000               



|3. |  | Proposal to Amend the Director Option Plan
|-- |  | ------------------------------------------



|          |  |               |  |                     
|--------- |  | ------------- |  | --------------------
|Votes For |  | Votes Against |  | Abstentions/NonVotes
|4,803,190 |  | 221,800       |  | 5,000               



|4. |  | Proposal to Approve Conversion Terms of Series B Preferred Stock
|-- |  | ----------------------------------------------------------------



|          |  |               |  |                     
|--------- |  | ------------- |  | --------------------
|Votes For |  | Votes Against |  | Abstentions/NonVotes
|4,992,110 |  | 32,880        |  | 5,000               



ITEM 5. OTHER INFORMATION



NONE



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------



| | 31.1 |  | Certification of Chief Executive Officer
| | ---- |  | ----------------------------------------



| | 31.2 |  | Certification of Chief Financial Officer
| | ---- |  | ----------------------------------------



| | 32.1 |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
| | ---- |  | ---------------------------------------------------------------



| | (b) |  | Reports on Form 8-K incorporated by reference filed on February 13, 2004
| | --- |  | ------------------------------------------------------------------------



NONE



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SIGNATURE



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 10QSB for the fiscal quarter ended February 29, 2004, to be signed on its behalf by the undersigned, thereunto duly authorized the 14th
day of April, 2004.



CASH TECHNOLOGIES, INC.



|    |  |                                      
|--- |  | -------------------------------------
|By: |  | /S/ Bruce Korman                     
|    |  | Bruce Korman                         
|    |  | President and Chief Executive Officer



|    |  |                        
|--- |  | -----------------------
|By: |  | /S/ Edmund King        
|    |  | Edmund King            
|    |  | Chief Financial Officer



28