UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549







FORM
10-Q





(MARK
ONE)





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





FOR
THREE MONTH PERIODS ENDED NOVEMBER 30, 2008 AND NOVEMBER 30,
2007





OR





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





COMMISSION
FILE NUMBER: 001-15783






CASH
TECHNOLOGIES, INC.


(Exact
name of registrant as specified in its charter)





DELAWARE
              95-4558331(State
      or other jurisdiction of incorporation organization)
              (IRS
      Employer Identification No.)





1434
      W. 11 THSTREET, LOS ANGELES, CA
              90015(Address
      of principal executive offices)
              (Zip
      Code)





(213)
745-2000


(Registrant's
telephone number, including area code)





_____________




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes   xNo   o







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




On
January 20, 2009, there were 24,753,726 shares of common stock, $ .01 par value
per share, issued and outstanding.





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)


Yes oNo x












CASHTECHNOLOGIES, INC.


FORM
10-Q





INDEX





PAGE
      NO.PART I.
      FINANCIAL INFORMATIONItem
      1.
                      
                      Condensed
      Consolidated Financial Statements:Condensed
      Consolidated Balance Sheets as of November 30, 2008 (unaudited) and May
      31, 2008
                      3Condensed
      Consolidated Statements of Operations for the three and six month periods
      ended November 30, 2008 and November 30, 2007 (unaudited)
                      4Condensed
      Consolidated Statements of Cash Flows for the six month periods Ended
      November 30, 2008 and November 30, 2007 (unaudited)
                      5Notes to
      Condensed Consolidated Financial Statements for the three and six month
      periods ended November 30, 2008 and November 30, 2007 (unaudited)
                      6Item
      2.
                      
                      Management's
      Discussion and Analysis of Financial Condition, Results of Operations, and
      Risk Factors
                      12Item
      4.
                      
                      Controls And
      Procedures
                      22PART
      II. OTHER INFORMATIONItem
      1.
                      
                      Legal Proceedings
                      22Item
      2.
                      
                      Unregistered Sales
      of Equity Securities and Use of Proceeds
                      23Item
      3.
                      
                      Defaults Upon Senior
      Securities
                      23Item
      4.
                      
                      Submission of
      Matters to a Vote of Security Holders
                      23Item
      5.
                      
                      Other Information
                      24Item
      6.
                      
                      Exhibits and Reports
      on Form 8-K
                      24SIGNATURES
                      25


Index




PART
I





ITEM1. FINANCIAL STATEMENTS





CASHTECHNOLOGIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)





NOVEMBER 30,
                              
                              
                              MAY 31,2008
                              
                              
                              2008(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                              
                              $
                              177,492
                              
                              
                              $
                              410,305Accounts
      receivable
                              
                              
                              406,395
                              
                              
                              
                              128,622Prepaid
      expenses and other current assets
                              
                              
                              524,834
                              
                              
                              
                              529,896Other
      receivable (net of allowance $50,000)
                              
                              
                              176,197
                              
                              
                              
                              118,456Inventory
                              
                              
                              13,234,311
                              
                              
                              
                              11,967,341Assets
      of discontinued operationsCash
                              
                              
                              41
                              
                              
                              
                              41Prepaid
      expenses and other current assets
                              
                              
                              90,000
                              
                              
                              
                              117,000Inventory
      (net of allowance $121,000)
                              
                              
                              93,553
                              
                              
                              
                              93,553Other
      assets
                              
                              
                              18,230
                              
                              
                              
                              18,230Total
      assets of discontinued operations
                              
                              
                              201,824
                              
                              
                              
                              228,824Total
      Current Assets
                              
                              
                              14,721,053
                              
                              
                              
                              13,383,444CoinBank
      machines held for sale
                              
                              
                              464,890
                              
                              
                              
                              609,890PROPERTY
      AND EQUIPMENT (net)
                              
                              
                              1,519
                              
                              
                              
                              3,027HPS
      PREFERRED STOCK
                              
                              
                              218,401
                              
                              
                              
                              218,401CLAIMREMEDI
      PREFERRED STOCK
                              
                              
                              3,500,000
                              
                              
                              
                              3,500,000OTHER
      ASSETS
                              
                              
                              228,743
                              
                              
                              
                              -TOTAL
      ASSETS
                              
                              $
                              19,134,606
                              
                              
                              $
                              17,714,762LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIENCY)CURRENT
      LIABILITIES:Current
      maturities of Notes Payable  (Note 5)
                              
                              $
                              3,938,524
                              
                              
                              $
                              3,938,524Due
      to Officers and Directors
                              
                              
                              8,915
                              
                              
                              
                              8,915Convertible
      debt (Note 6)
                              
                              
                              110,012
                              
                              
                              
                              147,337Due
      to Shareholders (Note 4)
                              
                              
                              569,823
                              
                              
                              
                              398,805Accounts
      payable
                              
                              
                              844,311
                              
                              
                              
                              894,202Accrued
      liabilities
                              
                              
                              3,421,685
                              
                              
                              
                              1,956,702Dividend
      payable
                              
                              
                              562,077
                              
                              
                              
                              461,246Liabilities
      of discontinued operationsNotes
      payable
                              
                              
                              336,344
                              
                              
                              
                              336,344Total
      liabilities of discontinued operations
                              
                              
                              336,344
                              
                              
                              
                              336,344Total
      Current Liabilities
                              
                              
                              9,791,691
                              
                              
                              
                              8,142,075Long-Term
      Notes Payable  (Note 6)
                              
                              
                              3,152,180
                              
                              
                              
                              1,933,673TOTAL
      LIABILITIES
                              
                              
                              12,943,871
                              
                              
                              
                              10,075,748MINORITY
      INTEREST
                              
                              
                              (129,189
                              )
                              
                              
                              (122,640
                              )TOTAL
      MINORITY INTEREST
                              
                              
                              (129,189
                              )
                              
                              
                              (122,640
                              )STOCKHOLDERS'
      EQUITY (DEFICIENCY):Stockholder's
      equity of discontinued operationsAdditional
      paid in capital
                              
                              
                              979,367
                              
                              
                              
                              979,367Accumulated
      equity
                              
                              
                              (1,113,887
                              )
                              
                              
                              (1,086,887
                              )Total
      stockholder's equity of discontinued operations
                              
                              
                              (134,520
                              )
                              
                              
                              (107,520
                              )Cumulative
      Redeemable Preferred Stock, 1,500,000 shares authorized, 649,045 shares
      issued and outstanding at Aug 31, 2008 and Aug 31, 2007
                              
                              
                              11,031,811
                              
                              
                              
                              10,906,811Common
      Stock, $0.01 par value, 65,000,000 shares authorized, 24,753,726 and
      24,442,976  shares issued and outstanding at Aug 31, 2008
      and  Aug 31, 2007
                              
                              
                              368,132
                              
                              
                              
                              368,132Additional
      Paid-In-Capital
                              
                              
                              42,255,361
                              
                              
                              
                              42,265,826Accumulated
      Deficit
                              
                              
                              (47,200,859
                              )
                              
                              
                              (45,671,595
                              )Total
      stockholders' Equity
                              
                              
                              6,319,925
                              
                              
                              
                              7,761,654TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
                              
                              $
                              19,134,606
                              
                              
                              $
                              17,714,762


See notes
to consolidated financial statements


3
 Index




CASH
TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
  THREE
      MONTH PERIOD ENDED
                    
                    
                    THREE
      SIX PERIOD ENDEDNOVEMBER
      30,
                    
                    
                    NOVEMBER
      30,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007(Unaudited)NET
      REVENUES
                    
                    $
                    453,840
                    
                    
                    $
                    35,348
                    
                    
                    $
                    675,429
                    
                    
                    $
                    78,935COST
      OF REVENUES
                    
                    
                    355,448
                    
                    
                    
                    22,669
                    
                    
                    
                    758,418
                    
                    
                    
                    48,243GROSS
      PROFIT (LOSS)
                    
                    
                    98,392
                    
                    
                    
                    12,679
                    
                    
                    
                    (82,989
                    )
                    
                    
                    30,692SELLING,
      GENERAL, & ADMINISTRATIVE EXPENSE
                    
                    
                    572,605
                    
                    
                    
                    753,919
                    
                    
                    
                    1,035,552
                    
                    
                    
                    1,500,703Impairment
      of Investment in BIPS
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,000,000GAIN
      ON SALE OF HPS/CDHC STOCK
                    
                    
                    -
                    
                    
                    
                    (79,580
                    )
                    
                    
                    -
                    
                    
                    
                    (79,580
                    )GOODWILL
      CHARGEOFF
                    
                    
                    200,000
                    
                    
                    
                    
                    
                    
                    
                    200,000GAIN
      ON INVENTORY
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    -RESEARCH
      AND DEVELOPMENT
                    
                    
                    -
                    
                    
                    
                    18,750
                    
                    
                    
                    -
                    
                    
                    
                    37,500DEPRECIATION
      & AMORTIZATION EXPENSE
                    
                    
                    120,650
                    
                    
                    
                    406
                    
                    
                    
                    390,145
                    
                    
                    
                    1,160OPERATING
      LOSS
                    
                    
                    (794,863
                    )
                    
                    
                    (680,816
                    )
                    
                    
                    (1,708,686
                    )
                    
                    
                    (3,429,091
                    )OTHER
      INCOMEINTEREST
      EXPENSE
                    
                    
                    44,757
                    
                    
                    
                    179,331
                    
                    
                    
                    169,961
                    
                    
                    
                    252,752PROFIT/(LOSS)
      BEFORE INCOME TAXES
                    
                    
                    (839,620
                    )
                    
                    
                    (860,147
                    )
                    
                    
                    (1,878,647
                    )
                    
                    
                    (3,681,843
                    )INCOME
      TAXES
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    -MINORITY
      INTEREST (Note 9)
                    
                    
                    -
                    
                    
                    
                    (6,291
                    )
                    
                    
                    (6,549
                    )
                    
                    
                    (12,840
                    )NET
      INCOME (LOSS) FROM CONTINUING OPERATIONS
                    
                    $
                    (839,620
                    )
                    
                    $
                    (853,856
                    )
                    
                    $
                    (1,872,098
                    )
                    
                    $
                    (3,669,003
                    )DISCONTINUED
      OPERATIONSNET
      REVENUES
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -FORGIVENESS
      OF DEBT
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -COST
      OF REVENUES
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -SELLING,
      GENERAL & ADMINISTRATIVE EXPENSE
                    
                    
                    -
                    
                    
                    
                    (18,579
                    )
                    
                    
                    -
                    
                    
                    
                    293,791INTEREST
      EXPENSE
                    
                    
                    -
                    
                    
                    
                    (13,403
                    )
                    
                    
                    -
                    
                    
                    
                    (35,702
                    )GAIN
      (LOSS) FROM DISPOSITION OF SUBSIDIARY'S ASSETS
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -WIRTE
      OFF OF LONG OUTSTANDINGESTIMATED
      LIIABILITIES
                    
                    
                    -
                    
                    
                    
                    312,500
                    
                    
                    
                    -
                    
                    
                    
                    -GAIN/(LOSS)
      FROM WRITE OFF OF LONG TERM NOTE
                    
                    
                    -
                    
                    
                    
                    420,545
                    
                    
                    
                    -
                    
                    
                    
                    (7,518,118
                    )Extraordinary
      Gain on purchase of CPI assets
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -INCOME
      (LOSS) FROM DISCONTINUED OPERATIONS
                    
                    
                    -
                    
                    
                    
                    701,063
                    
                    
                    
                    -
                    
                    
                    
                    (7,260,029
                    )NET
      INCOME (LOSS)
                    
                    $
                    (839,620
                    )
                    
                    $
                    (152,793
                    )
                    
                    $
                    (1,872,098
                    )
                    
                    $
                    (10,929,032
                    )Dividends
      & deemed dividends
                    
                    $
                    50,000
                    
                    
                    $
                    50,000
                    
                    
                    $
                    100,831
                    
                    
                    $
                    100,000Net
      income (loss) allocable to common shareholders
                    
                    $
                    (889,620
                    )
                    
                    $
                    (202,793
                    )
                    
                    $
                    (1,972,929
                    )
                    
                    $
                    (11,029,032
                    )Basic
      and diluted net income (loss) per share before discontinued
      operations
                    
                    $
                    (0.04
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.08
                    )
                    
                    $
                    (0.32
                    )Basic
      and diluted net income (loss) per share for discontinued
      operations
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    (0.32
                    )Basic
      and diluted weighted average shares of common stock
      outstanding
                    
                    
                    24,753,726
                    
                    
                    
                    34,671,863
                    
                    
                    
                    24,753,726
                    
                    
                    
                    34,671,863
  See notes
to consolidated financial statements
  4
 Index




CASHTECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS




PERIOD
      ENDEDNOVEMBER 30,2008
                      
                      
                      2007(Unaudited)OPERATING
      ACTIVITIES:Net
      loss
                      
                      $
                      (443,146
                      )
                      
                      $
                      (10,929,032
                      )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Bad
      Debt Expense-discontinued operations
                      
                      
                      -
                      
                      
                      
                      7,938,663Impairment
      of investment in BIPS
                      
                      
                      -
                      
                      
                      
                      2,000,000Gain
      on sale of investment
                      
                      
                      -
                      
                      
                      
                      (79,580
                      )Minority
      interest
                      
                      
                      (6,549
                      )
                      
                      
                      (12,840
                      )Amortization
      deemed interest expense
                      
                      
                      211,984
                      
                      
                      
                      10,907Depreciation
      expense
                      
                      
                      1,508
                      
                      
                      
                      1,160Other
      Assets
                      
                      $
                      (228,743
                      )
                      
                      
                      -Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      $
                      (277,773
                      )
                      
                      
                      (10,323
                      )Inventory
                      
                      $
                      (1,267,330
                      )
                      
                      
                      -Coinbank
      Machinery Held for Sale
                      
                      
                      145,000
                      
                      
                      
                      -Prepaid
      expenses and other current assets
                      
                      
                      5,062
                      
                      
                      
                      (21,000
                      )Other
      receivable
                      
                      
                      (57,741
                      )
                      
                      
                      (10,427
                      )Accrued
      interest
                      
                      
                      (47,931
                      )
                      
                      
                      47,068Accounts
      payable
                      
                      
                      (49,891
                      )
                      
                      
                      (564,058
                      )Change
      in net assets of business held for sale
                      
                      
                      27,000
                      
                      
                      
                      (678,634
                      )Accrued
      expenses and other current liabilities
                      
                      
                      2,086,599
                      
                      
                      
                      713,615Net
      cash provided by (used in) operating activities
                      
                      
                      98,049
                      
                      
                      
                      (1,594,481
                      )INVESTING
      ACTIVITIES:Proceeds
      from sale of investment
                      
                      
                      -
                      
                      
                      
                      500,000Purchase
      of property and equipment
                      
                      
                      -
                      
                      
                      
                      (3,486
                      )Net
      cash provided by (used in) investing activities
                      
                      
                      -
                      
                      
                      
                      496,514FINANCING
      ACTIVITIES:Net
      proceeds from issuance of preferred stock
                      
                      
                      125,000
                      
                      
                      
                      -Proceeds
      from Long-term debt
                      
                      
                      -
                      
                      
                      
                      260,000Proceeds
      from short term debt
                      
                      
                      -
                      
                      
                      
                      (78,100
                      )Repayments
      on short-term debt
                      
                      
                      (400,573
                      )
                      
                      
                      -Repayments
      on long-term debt
                      
                      
                      (55,289
                      )
                      
                      
                      -Proceeds
      from sale of common stock
                      
                      
                      -
                      
                      
                      
                      86,310Net
      cash provided by (used in) financing activities
                      
                      
                      (330,862
                      )
                      
                      
                      268,210CHANGE
      IN CASH AND CASH EQUIVALENTS
                      
                      
                      (232,813
                      )
                      
                      
                      (829,757
                      )Cash
      and Cash Equivalents, Beginning of Period
                      
                      
                      410,305
                      
                      
                      
                      1,107,649Cash
      and Cash Equivalents, End of Period
                      
                      $
                      177,492
                      
                      
                      $
                      277,892SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONIncome
      taxes
                      
                      
                      2,400
                      
                      
                      
                      -SUPPLEMENTAL
      DISCLOSURE OF NONCASH TRANSACTIONSGain
      (Loss) on operations of discontinued operations
                      
                      $
                      -
                      
                      
                      $
                      (7,492,949
                      )Dividends
      declared on preferred stock
                      
                      $
                      100,831
                      
                      
                      $
                      100,000


See notes
to consolidated financial statements


5
 Index




CASHTECHNOLOGIES, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





NOTE 1:  GENERAL





GOING
CONCERN:





We have
prepared the financial statements included in this Form 10-Q assuming that we
will continue as a going concern. Although we have raised additional capital
since our initial public offering in July 1998, we have never generated
sufficient revenue-producing activities to sustain our operations. Accordingly,
we must raise significant capital to fund current operations and to repay
existing debt. Our auditors have included an explanatory paragraph in their
report for the year ended May 31, 2008, indicating there is substantial doubt
regarding our ability to continue as a going concern. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of any uncertainty.





PRESENTATION
OF INTERIM INFORMATION:





In the
opinion of the management of Cash Technologies, Inc. (“Cash Tech” or the
"Company"), the accompanying unaudited condensed consolidated financial
statements include all normal adjustments considered necessary to present fairly
the financial position as of November 30, 2008 and the results of operation and
cash flows for the three and six-month periods ended November 30, 2008 and
November 30, 2007. 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-Q. 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, 2008, filed with the SEC.
The results of operations for the three and six-month periods ended November 30,
2008, are not necessarily indicative of the results to be expected for any
subsequent quarter or for the entire fiscal year.





The
research and development of new software products and enhancements to existing
software products were expensed as incurred (and recorded in the consolidated
statement of operation) until technological feasibility has been established.
Technological feasibility is established upon completion of a detailed program
design or working model. Amortization of the capitalized software commenced on
January 1, 2002. As of May 31, 2008, capitalized software costs had been fully
amortized. Technological feasibility was achieved in September of 1999 and
commencing October 1, 1999 all expenses related to EMMA software development had
been capitalized. As of December 31, 2001, we had capitalized $2,771,536 in
development and related costs. The EMMA product was available for release to the
public in January 2002 thus all development costs since have been
expensed.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS
157”). SFAS 157 defines fair value, establishes a framework for measuring fair
value and expands disclosure of fair value measurements. SFAS 157 applies under
other accounting pronouncements that require or permit fair value measurements
and, accordingly, does not require any new fair value measurements. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. We evaluated the impact of the adoption and determined that
it does not have any impact on our current financial condition or results of
operations.


6
 Index




In
February 2007, the Financial Accounting Board (FASB) issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”)
which permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured
at fair value. SFAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007. We evaluated the impact of the adoption
and determined that it does not have any impact on our current financial
condition or results of operations.





In June
2007, the Emerging Issues Task Force of the FASB issued EITF Issue no. 07-3,
Accounting for Nonrefundable
Advance Payments for Goods or Services to be Used in Future Research and
Development Activities, (“EITF 07-3”) which is effective for fiscal
years beginning after December 15, 2007.  EITF 07-3 requires that
nonrefundable advance payments for future research and development activities be
deferred and capitalized.  Such amounts will be recognized as an
expense as the goods are delivered or the related services are
performed.  We evaluated the impact of the adoption and determined
that it does not have any impact on our current financial condition or results
of operations.





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations(“SFAS
No. 141(R)”), which requires entities to record fair value estimates of
contingent consideration and certain other potential liabilities during the
original purchase price allocation, expense acquisition costs as incurred and
does not permit certain restructuring activities previously allowed under
Emerging Issues Task Force Issue No. 95-3 to be recorded as a component of
purchase accounting.  SFAS 141(R) is effective for financial
statements issued for fiscal years beginning after December 15,
2008.    We have not determined the effect that the adoption
of SFAS No. 141(R) will have on its consolidated financial statements, but the
impact will be limited to any future acquisitions beginning in our 2010 fiscal
year.





In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements—an amendment ofARBNo. 51, (“SFAS No. 160”),
which causes non-controlling interests in subsidiaries to be included in the
equity section of the balance sheet.  SFAS 160 is effective for
financial statements issued for fiscal years beginning after December 15,
2008.  We have not determined the effect that the adoption of SFAS No.
160 will have on its consolidated financial statements.





In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities" ("SFAS No. 161"). SFAS 161 requires companies with
derivative instruments to disclose information that should enable
financial-statement users to understand how and why a company uses derivative
instruments, how derivative instruments and related hedged items are accounted
for under FASB Statement No. 133 "Accounting for Derivative Instruments and
Hedging Activities" and how derivative instruments and related hedged items
affect a company's financial position, financial performance and cash flows.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. We are currently evaluating
the impact, if any, that SFAS 161 will have on our financial position or results
of operations.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles (“SFAS No. 162”). SFAS 162 identifies a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S.
generally accepted accounting principles for nongovernmental entities (the
“Hierarchy”). The Hierarchy within SFAS 162 is consistent with that previously
defined in the AICPA Statement on Auditing Standards No. 69, “The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles”
(“SAS 69”). SFAS 162 is effective 60 days following the United States Securities
and Exchange Commission’s (the “SEC”) approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles”. The adoption of SFAS
162 will not have a material effect on our Consolidated Financial Statements
because we have utilized the guidance within SAS 69.





In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No. 60 (“SFAS No. 163”).
SFAS 163 requires recognition of an insurance claim liability prior to an event
of default when there is evidence that credit deterioration has occurred in an
insured financial obligation. SFAS 163 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and all interim
periods within those fiscal years. Early application is not permitted. Our
adoption of SFAS 163 will not have a material effect on our Consolidated
Financial Statements


7
 Index


IMPAIRMENT
OF BIPS




During
the twelve months ended May 31, 2008, management concluded that due to adequate
quarterly data no longer being available, that the resulting uncertainty
requires us to take a 100% reserve on the BIPS investment. Although we believe
that our investment in BIPS has the potential for returns previously indicated,
we have concluded that we can no longer support the value of the investment
under FSP 115-1.





NOTE
2. COMMITMENTS AND CONTINGENCIES





In 2001
we delivered stock certificates representing 700,000 shares to an escrow agent
as collateral for a loan. The loan was never consummated, and in May 2001 we
notified the transfer agent to cancel the shares. Thereafter the escrow agent,
an attorney, died and we were never able to recover the certificates. In 2004 it
came to our attention that a party was attempting to transfer 450,000 of the
700,000 shares. We immediately initiated a lawsuit in New York to prevent the
transfer of the shares and have them retired. In December, 2004, we reached a
settlement in which the shares would be returned to us without any exchange of
money. We intend to similarly pursue the recovery of the remaining 250,000
shares, however in the event that we cannot achieve a satisfactory outcome in
such effort, or in the event that the pending settlement is not consummated for
any reason, some or all of these shares may be treated as outstanding and our
Stockholders' Equity line item would have to be adjusted to reflect such
additional shares.





NOTE
3: STOCKHOLDERS EQUITY





During
the Quarter ended November 30, 2008 th Company raised $125,000 through the sale
of the Company’s Preferred Stock.





NOTE
4: RELATED PARTY TRANSACTIONS





As of
November 30, 2008, we were in arrears of approximately $473,000 for the salary
to Mr. Korman, and owed $278,000 in accrued rent for our offices to a
company in which Mr. Korman has a beneficial interest.




In
addition, for the same period we were in arrears of approximately $32,000 for
the salary to Mr. King.




NOTE
5: NOTE PAYABLE





In 1997,
we entered into a credit agreement with G.E. Capital Corporation, or G.E.
Capital, pursuant to which we borrowed $ 5,500,000 for the purchase of CoinBank
component equipment, working capital and general corporate purposes. Due to our
inability to repay G.E. Capital on the original terms, on September 29, 2000 we
entered into the first of several loan modifications with G.E. The most recent
modification requires interest-only payments at a rate of 11% until February 1,
2010 at which time the entire unpaid balance shall be due and payable. We have
no current plan or capability to repay G.E. its principal. A default of this
obligation could result in the delisting and/or bankruptcy of the Company. As of
November 30, 2008, we owed G.E. Capital approximately $4 million, which includes
the principal, financing fees and unpaid interest.





NOTE
6: CONVERTIBLE DEBT





In May
2003 we completed a private placement offering with a stockholder consisting of
an unsecured convertible promissory note in the principal amount of $50,000,
bearing interest at the rate of 5% per annum and redeemable Warrants to purchase
100,000 shares of common stock. The note is convertible into common stock at the
conversion rate of $0.50 per share. The Warrants are exercisable at $1.00 per
share. At that time we also reduced the exercise price of 8,000 Series C
warrants owned by the stockholder from $2.50 to $0.25 per share. The note was
due and payable on May 2, 2008. This note was converted on September 11, 2006
and was reclassified into equity.


8
 Index




On May
22, 2007 we completed a private placement consisting of a convertible note,
common stock and common stock warrants. The total placement was for $1,500,000
and consisted of:





·
            a 6% interest 3 year convertible
      note for $1,200,000 with a conversion price of $1.05 per
      share,





·
            $300,000 of common stock at $0.80
      per share, or 375,000 shares of common
  stock,





·
            common stock purchase warrants to
      purchase 759,000 shares of common stock at $1.75 per
      share





In May
2003 we completed a private placement offering with one of our stockholders
consisting of convertible notes and warrants under Section 4(2) of the
Securities Act of 1933. The offering consisted of an unsecured convertible
promissory note in the principal amount of $50,000, bearing interest at the rate
of 5% per annum and redeemable warrants to purchase 100,000 shares of common
stock. The note is convertible into our common stock at the conversion rate of
$0.50 per share. The Warrants are exercisable at a price of $1.00 per share. We
also reduced the exercise price of 8,000 Series C warrants owned by the
stockholder from $2.50 to $0.25 per share. The note is due and payable on May 2,
2008 and remains unpaid. A deemed dividend expense of $25,331 was recognized in
conjunction with the warrants offered in this placement.




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





As of
November 30, 2008, we still owed $120,750 in principal and interest to the
remaining noteholders. There can be no assurance that we will be able to pay the
remaining noteholders when the notes are due and that the noteholders will not
declare an event of default and demand immediate payment or seek to attach our
assets, including our EMMA technology. (See Risk Factors).





In May
2008 we completed a private placement offering with 5 investors consisting of
(i) convertible debentures totaling $1,590,000, convertible into common stock at
$0.25 per share, with interest at 12% per annum payable quarterly, secured by
the assets of CPI Holdings; and (ii) 5-year warrants to purchase 3.18 million
shares of common stock, exercisable at $0.50 per share; and (iii) warrants
expiring on November 7, 2008 to purchase 1.59 million shares of common stock
exercisable at $.35 per share.





In
accordance with EITF 98-05, “Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustment Conversion Ratios
Abstract”, the Company allocated the proceeds according to the value of the
convertible note and the warrants based on their relative fair
values.  Fair value of the warrants was determined using the
Black-Scholes valuation model.  For the 6-month
warrants,  risk-free interest rate used ranged from 1.64% to 1.74%,
volatility rate ranged from 172% to  208%, and exercise price is
$0.35.  For the 5-year warrants, risk-free interest rate used ranged
from 2.99% to 4.86%, volatility rate ranged from 406% to 593%, and exercise
price is $0.75 and $0.50.





In
accordance with EITF 00-27, “Application of Issue No. 98-5 to Certain
Convertible Instruments”, the issue costs, value of the beneficial conversion
feature and value of the warrants amounting to $150,440, $1,134,538 and
$908,345, respectively, have been recorded as a discount to convertible notes
and are being amortized over the term of the notes using the straight-line
method.  For the three months ended November 30, 2008,
amortization of the discount was $7,072, $82,203 and $30,621,
respectively.  For the six months ended November 30, 2008,
amortization of the discount was $14,067, $229,650 and $144,920,
respectively.  Unamortized debt discount as of November 30, 2008 are
$114,542, $878,734 and $732,622, respectively




9
 Index




NOTE
7: STOCK BASED COMPENSATION





Effective
June 1, 2006 the Company adopted SFAS 123(R) using the modified prospective
approach and accordingly prior periods have not been restated to reflect the
impact of SFAS 123(R). Under SFAS 123(R), stock-based awards granted prior to
its adoption will be expensed over the remaining portion of their vesting
period. These awards will be expensed under the accelerated amortization method
using the same fair value measurements which were used in calculating pro forma
stock-based compensation expense under SFAS 123. For stock-based awards granted
on or after June 1, 2006, the Company will amortize stock-based compensation
expense on a straight-line basis over the requisite service period, which is
five years.





SFAS
123(R) requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from initial
estimates. Stock-based compensation expense has been recorded net of estimated
forfeitures for such that expense was recorded only for those stock-based awards
that are expected to vest. Previously under APB 25 to the extent awards were
forfeited prior to vesting, the corresponding previously recognized expense was
reversed in the period of forfeiture.




SFAS 123
requires the Company to provide pro-forma information regarding net loss as if
compensation cost for the stock options granted to the Company’s employees had
been determined in accordance with the fair value based method prescribed in
SFAS 123. Options granted to non-employees are recognized in these financial
statements as compensation expense under SFAS 123 using the Black-Scholes
option-pricing model.





For the
six month period ended November 30, 2008, 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 2003-2008,
expected life of the option is 5 years, expected volatility of 134.46%, risk
free interest rate of 3.76% and a 0% dividend yield. No option grants occurred
during the period.




NOTE
8: SEGMENT REPORTING





We
operate through t principal business segments: CPI Holdings, LLC and Veredi,
Inc. (formerly Claim-Remedi Services, Inc.)





Information
on our business segments for the:


Three
      months ended
                                                                    
                                                                    
                                                                    Six
      months endedNovember
      30,
                                                                    
                                                                    
                                                                    November
      30,Net
      revenues:
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    2007ClaimRemedi/CashTechCard,Coin
      Machines
                                                                    
                                                                    
                                                                    79,748
                                                                    
                                                                    
                                                                    
                                                                    35,348
                                                                    
                                                                    
                                                                    
                                                                    118,837
                                                                    
                                                                    
                                                                    
                                                                    78,935CPI
      Holdings
                                                                    
                                                                    
                                                                    374,092
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    556,592
                                                                    
                                                                    
                                                                    
                                                                    -Unallocated
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -453,840
                                                                    
                                                                    
                                                                    
                                                                    35,348
                                                                    
                                                                    
                                                                    
                                                                    675,929
                                                                    
                                                                    
                                                                    
                                                                    78,935Interest
      expense:ClaimRemedi/CashTechCard,Coin
      Machines
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -CPI
      Holdings
                                                                    
                                                                    
                                                                    36,554
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    75,554
                                                                    
                                                                    
                                                                    
                                                                    -Unallocated
                                                                    
                                                                    
                                                                    8,203
                                                                    
                                                                    
                                                                    
                                                                    179,331
                                                                    
                                                                    
                                                                    
                                                                    94,407
                                                                    
                                                                    
                                                                    
                                                                    252,75244,757
                                                                    
                                                                    
                                                                    
                                                                    179,331
                                                                    
                                                                    
                                                                    
                                                                    169,961
                                                                    
                                                                    
                                                                    
                                                                    252,752Depreciation
      & Amortization:ClaimRemedi/CashTechCard,Coin
      Machines
                                                                    
                                                                    
                                                                    120,650
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    390,145
                                                                    
                                                                    
                                                                    
                                                                    -CPI
      Holdings
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -Unallocated
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    406
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    1,160120,650
                                                                    
                                                                    
                                                                    
                                                                    406
                                                                    
                                                                    
                                                                    
                                                                    390,145
                                                                    
                                                                    
                                                                    
                                                                    1,160Segment
      Income (loss):ClaimRemedi/CashTechCard,Coin
      Machines
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (853,856
                                                                    )
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (3,669,003
                                                                    )CPI
      Holdings
                                                                    
                                                                    
                                                                    (276,647
                                                                    )
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (625,647
                                                                    )
                                                                    
                                                                    
                                                                    -Unallocated
                                                                    
                                                                    
                                                                    (562,973
                                                                    )
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (1,253,000
                                                                    )
                                                                    
                                                                    
                                                                    -(839,620
                                                                    )
                                                                    
                                                                    
                                                                    (853,856
                                                                    )
                                                                    
                                                                    
                                                                    (1,878,647
                                                                    )
                                                                    
                                                                    
                                                                    (3,669,003
                                                                    )
  10
 Index




On May 5,
2008 CPI Holdings, LLC (dba Champion Parts) acquired assets of Champion
Parts, Inc. for $2.97 million.




NOTE
9: MINORITY INTEREST





For the
three month periods ended November 30, 2008 and November 30, 2007, we
allocated $0 and $6,291 of losses in CT Holdings to minority
interest.  For the six month periods ended November 30, 2008 and 2007,
we allocated $6,549 and $12,840 of losses in CT Holdings to minority
interest.




NOTE
10: NOTE RECEIVABLE





On
October 31, 2007, the Company's TAP Holdings, LLC (dba Tomco Auto Products)
subsidiary sold most of its assets to competitor Champion Parts, Inc. TAP
received $1.3 million in cash and a secured promissory note for $9.5 million
subject to certain offsets to be paid over a maximum of 11 years, however,
Champion defaulted on the note when it filed for Chapter 11 bankruptcy
protection on October 10, 2007. Champion's bankruptcy and default of the $9.5
million secured note owed by Champion to TAP Holdings required us to write-off
the adjusted $7.9 million remaining note balance.





On May 5,
2008 the Company’s CPI Holdings, LLC (dba Champion Parts) subsidiary acquired
most of the assets of Champion Parts, Inc. from its lender, PNC Bank, following
a court-ordered foreclosure, for $2.97 million.  To fund the
acquisition and working capital, Cash Tech raised approximately $3.4 million in
debt and convertible debt.


11
 Index




The
acquired assets consist of finished goods, raw materials, component parts, all
manufacturing and office equipment, furniture, computers, intangible assets such
as the company name, IP, software, records, etc.




NOTE
11: SUBSEQUENT EVENTS




On
December 23, 2008 Cash Tech’s CPI Holdings LLC subsidiary acquired certain
turbocharger technology assets of Turbomotive, Inc. and Robert McKeirnan,
its founder for $1.75 million.  The purchase price was in the form of
preferred stock with a face value of $1.65 million (subject to certain
adjustments), with a conversion price equal to the market price of Cash Tech's
common stock with a floor of $0.75 per share and a ceiling of $1.50 per share,
and cash payments totaling $100,000 of which $40,000 was paid at
closing.  The assets acquired consist of patents, purchase orders,
manufacturing processes, other intellectual property and tooling.





ITEM2. 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-Q
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the ''Securities Act''), and Section 21E of
the Securities Exchange Act of 1934, as amended (the ''Exchange Act''), such as
those pertaining to the Company's capital resources, performance and results of
operations. Forward-looking statements involve numerous risks and uncertainties
and should not be relied upon as predictions of future events. Certain such
forward-looking statements can be identified by the use of forward-looking
terminology such as ''believes,'' ''expects,'' ''may,'' ''will,'' ''should,''
''seeks,'' ''approximately”, ''intends,'' ''plans,'' ''pro forma,''
''estimates,'' or ''anticipates'' or the negative thereof or other variations
thereof or comparable terminology, or by discussions of strategy, plans or
intentions. Such forward-looking statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and may be
incapable of being realized. The following factors, among others, could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements: significant and immediate need
for capital, lack of revenue, market acceptance of the Company's products,
technological restrictions upon development, limited marketing experience,
uncertainty of product development, including our EMMA technology, dependence
upon new technology, need for qualified management personnel and competition.
The success of the Company also depends upon economic trends generally,
governmental regulation, legislation, and population changes. Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect management's analysis only. The Company assumes no obligation to update
forward-looking statements.





Introduction





Cash
Technologies, Inc., is a Delaware corporation, incorporated in August 1995.
Unless the context otherwise requires, references herein to "we," "our" or "Cash
Tech" refers to Cash Technologies, Inc., and its wholly-owned and majority-owned
subsidiaries National Cash Processors, Inc., a Delaware corporation; CoinBank
Automated Systems, Inc., a Delaware corporation; CoinBank Automation Handels
GmbH, organized operating in Salzburg, Austria, Cash Tech Card Systems, Inc., a
Delaware corporation, CT Holdings, LLC., a Delaware limited liability company of
which we own 86.65%, CPI Holdings, LLC dba Champion Parts, an Arkansas limited
liability company, Veredi, Inc. (formerly Claim-Remedi Services, Inc., a
Delaware company and TAP Holdings, LLC (formerly dba Tomco Auto Products), a
California limited liability company. Our address is 1434 West 11th Street, Los
Angeles, California 90015. Our telephone number is (213)
745-2000.





Our
independent certified public accountant included an explanatory paragraph in its
report for the year ended May 31, 2008, which indicated a substantial doubt as
to the ability of us to continue as a going concern. This concern is primarily
due to substantial debt service requirements and working capital needs. See
independent certified public accountant's letter.


12
 Index




The
research and development of new software products and enhancements to existing
software products were expensed as incurred (and recorded in the consolidated
statement of operation) until technological feasibility has been established.
Technological feasibility is established upon completion of a detailed program
design or working model. Amortization of the capitalized software commenced on
January 1, 2002. As of May 31, 2007, capitalized software costs had been fully
amortized . Technological feasibility was achieved in September of 1999 and
commencing October 1, 1999 all expenses related to EMMA software development had
been capitalized. As of December 31, 2001, we had capitalized $2,771,536 in
development and related costs. The EMMA product was available for release to the
public in January 2002 thus all development costs since have been expensed
including $25,000 for the fiscal year ended May 31, 2008 and $93,750 for the
fiscal year ended May 31, 2007 .





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





We record
as revenue licensing and software fees as well as coin counting machine sales in
accordance with generally accepted accounting principles.





We are
currently engaged principally in the auto products business.





RESULTS
OF OPERATIONS




THREE
MONTHS ENDED NOVEMBER 30, 2008 COMPARED TO THE THREE MONTHS ENDED NOVEMBER 30,
2007.
 
 Net revenuesfor the
three-month period ended November 30, 2008 increased to $453,840 compared to
$35,348 for the same 2007 period. The increase in net revenue is attributable
primarily to the acquisition of the Champion assets and the corresponding start
of operations of CPI Holdings.
 
 Cost of revenuesfor the
three-month period ended November 30, 2008 was $355,448 compared to $22,669 for
the same 2007 period. The increase in cost of revenues is directly related to
the increase in sales from the start of our CPI Holdings
subsidiary.
 
 Grossprofit (loss)for the three months
ended November 30, 2008 was $98,392 compared to a Gross profitof $12,679 for
the same period a year ago.
 
 Selling, General and Administrativeexpenses for the three months ended November 30, 2008, decreased to
$572,605 compared to $753,919 for the same three months ended November 30, 2007.
These expenses consist primarily of wages (and wage related costs), outside
contractor expenses, travel/promotional expenses, professional services and
facilities/office related expenses.
 
 Research and developmentexpenses for the three months ended November 30, 2008 were $0 and for
2007, were $18,750.
 
 Depreciation and amortizationexpenses for the three months ended November 30, 2008, and November 30,
2007, were $120,650 and $406, respectively.
 
 Interest expensefor the
three months ended November 30, 2008 and November 30, 2007, was $44,757 and
$179,331.
 
 Minority Interestfor the
three months ended November 30, 2008 and November 30, 2007, was $0 and $(6,291),
respectively.
 
 As a
result of the foregoing, net income (losses) for the three months ended November
30, 2008 and November 30, 2007, were $(839,620) and $(853,856),
respectively.
  13
 Index
 
 SIX
MONTHS ENDED NOVEMBER 30, 2008 COMPARED TO THE SIX MONTHS ENDED NOVEMBER 30,
2007.
 
 Net revenuesfor the
six-month period ended November 30, 2008 increased to $675,429 compared to
$78,935 for the same 2007 period. The increase in net revenue is attributable
primarily to the acquisition of the Champion assets and the corresponding start
of operations of CPI Holdings.
 
 Cost of revenuesfor the
six-month period ended November 30, 2008 was $758,418 compared to $48,243 for
the same 2007 period. The increase in cost of revenues is directly related to
the increase in sales from the start of our CPI Holdings
subsidiary.
 
 Grossprofit (loss)for the six months
ended November 30, 2008 was $(82,989) compared to a Gross profitof $30,692 for
the same period a year ago.
 
 Selling, General and Administrativeexpenses for the six months ended November 30, 2008, decreased to
$1,035,552 compared to $1,500,703 for the same six months ended November 30,
2007. These expenses consist primarily of wages (and wage related costs),
outside contractor expenses, travel/promotional expenses, professional services
and facilities/office related expenses.
 
 Research and developmentexpenses for the six months ended November 30, 2008 were $0 and for 2007,
were $37,500.
 
 Depreciation and amortizationexpenses for the six months ended November 30, 2008, and November 30,
2007, were $390,145 and $1,160, respectively. The increase is due to the
amortization of deemed interest expense.
 
 Interest expensefor the six
months ended November 30, 2008 and November 30, 2007, was $169,961 and
$252,752.
 
 Minority Interestfor the six
months ended November 30, 2008 and November 30, 2007, was $(6,549) and
$(12,840), respectively.
 
 As a
result of the foregoing, net (losses) for the six months ended November 30, 2008
and November 30, 2007, were $(1,872,098) and $(3,669,003),
respectively.
  LIQUIDITY
AND CAPITAL RESOURCES
 
 Our
capital requirements have been and will continue to be significant, and our cash
requirements have exceeded cash flow from operations. At November 30, 2008, we
had a working capital of $4,929,362 compared to working capital of
$5,241,369 at May 31, 2008. At November 30, 2008, we had a cash balance of
approximately $177,492. We are in immediate need of working capital to continue
our business and operations. To date, we have been funding our operations
primarily through the issuance of equity in private placement transactions with
existing stockholders or affiliates of stockholders. There can be no assurance
that we will be able to continue to raise required working capital in this or
any other manner.
 
 Since
inception, we have satisfied our working capital requirements through limited
revenues generated from operations, the issuance of equity and debt securities,
borrowing under a line of credit and loans from our security holders. Our
independent certified public accountant included an explanatory paragraph in its
report for the year ended May 31, 2008, which indicated a substantial doubt as
to our ability to continue as a going concern. This concern is primarily due to
substantial debt service requirements and working capital needs.
  14
 Index
  Net cashprovided byoperating activitieswas
$98,049 for the six-months ended November 30, 2008 compared to net cash (used
in) of $(1,594,481) for the six-months ended November 30, 2007.
 
 Net cash provided by (used
in)investingactivitiesfor the six-months ended November 30, 2008, was $0 as compared to
$496,514 for the six-months ended November 30, 2007. The increase was
attributable to the sale of investment.
 
 Net cash provided by (used in)
financing activitiesfor the six-months ended November 30, 2008, was
$(330,862) as compared to $268,210 for the six-months ended November 30, 2007.
The decrease was attributable to the net result of repayment of debt offset by
various fund raising activities.
 
 In 1997,
we entered into a credit agreement with G.E. Capital Corporation, or G.E.
Capital, pursuant to which we borrowed $ 5,500,000 for the purchase of CoinBank
component equipment, working capital and general corporate purposes. Due to our
inability to repay G.E. Capital on the original terms, on September 29, 2000 we
entered into the first of several loan modifications with G.E. The most recent
modification requires a payment of certain fees and interest following which GE
has agreed to extend the loan on interest-only terms at a rate of 9.5% for 12
additional months at which time the entire unpaid balance shall be due and
payable. We have no current plan or capability to repay G.E. its principal. A
default of this obligation could result in the delisting and/or bankruptcy of
the Company. As of November 30, 2008, we owed G.E. Capital approximately $4
million which includes the principal, financing fees and unpaid
interest.
  In May
2003 we completed a private placement offering with one of our stockholders
consisting of convertible notes and warrants under Section 4(2) of the
Securities Act of 1933. The offering consisted of an unsecured convertible
promissory note in the principal amount of $50,000, bearing interest at the rate
of 5% per annum and redeemable warrants to purchase 100,000 shares of common
stock. The note is convertible into our common stock at the conversion rate of
$0.50 per share. The Warrants are exercisable at a price of $1.00 per share. We
also reduced the exercise price of 8,000 Series C warrants owned by the
stockholder from $2.50 to $0.25 per share. The note was due and payable on May
2, 2008 and remains unpaid. A deemed dividend expense of $25,331 was recognized
in conjunction with the warrants offered in this placement.
 
 In May
2003 we completed a private placement offering with one of our stockholders
consisting of convertible notes and warrants under Section 4(2) of the
Securities Act of 1933. The offering consisted of an unsecured convertible
promissory note in the principal amount of $20,750, bearing interest at the rate
of 5% per annum and redeemable warrants to purchase 30,000 shares of common
stock. The note is convertible into our common stock at the conversion rate of
$0.50 per share. The Warrants are exercisable at a price of $0.65 per share. We
also reduced the exercise price of 45,000 Series B warrants owned by the
stockholder from $4.50 to $0.65 per share which were converted immediately for
gross proceeds to us of $29,250. The note was due and payable on May 8, 2008 and
remains unpaid. A deemed dividend expense of $25,901 was recognized in
conjunction with the warrants offered in this placement.
 
 In
November 2004, TAP Holdings, LLC established a line of credit with BFI Business
Finance. The maximum amount available under the line of credit is $2,000,000,
limited to 60% of eligible accounts receivable plus 60% of eligible inventory up
to $1,000,000, less any availability reserves, as defined in the loan agreement.
Interest is payable monthly at 4.0% per annum above the prime interest rate (10%
at May 31, 2005). The line of credit is collateralized by a security interest in
TAP's accounts receivable, inventories, property and equipment and certain other
assets as well as a limited personal guaranty from TAP's chairman (who is not an
employee of Cash Technologies). TAP must also adhere to covenant limitations,
conditions and restrictions as set forth in the loan and security agreement. As
of November 30, 2008, there was $205,703 outstanding including
interest.
 
 The
outstanding balance is expected to be paid from the sale of certain assets of
TAP and refunded insurance deposits.




15
 Index




RISK
FACTORS





The
following factors, in addition to those discussed elsewhere, should be
considered carefully in evaluating our business and us. An investment in our
shares involves a high degree of risk and is suitable only for those investors
who can bear the risk of loss of their entire investment.





Risks
Related to Our Financial Condition





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





We have
generated limited revenues since our inception, and, while we expect to generate
significant revenues within the next fiscal year, there is no assurance that we
will be successful. For the fiscal years ended May 31, 2008 and 2007, we had net
sales of $336,615 and $313,946, respectively. Virtually all of our revenues for
the fiscal year beginning June 1, 2008 until the quarter ending November 30,
2006 were derived from our CPI Holdings subsidiaryVeredi.





Prior to
the fiscal year ended May 31, 2008 we have incurred losses since our inception.
For the last two fiscal years ended May 31, 2007 and 2008, net income (losses)
of ($3,065,247) and $(800,052) respectively. In its reports accompanying our
audited financial statements for the fiscal years ended May 31, 2007 and 2008,
our independent auditors included an explanatory paragraph wherein they
expressed substantial doubt about our ability to continue as a going concern.
For the six-month period ended November 30, 2008 we have incurred additional
losses of $(1,872,098)


We
are unable to pay our current liabilities, and must rely on the continued
forbearance of specific creditors to avoid bankruptcy.




As of
November 30, 2008 we had outstanding current liabilities of $9,791,691,
consisting of obligations and accruals for loans, dividends and notes payable,
trade payables, taxes, unpaid salaries and other items of which approximately
$1,820,000 is not being paid as agreed. Our creditors have, to date, agreed not
to accelerate on these obligations and not to foreclose on our assets. However,
should the creditors demand immediate repayment, we would have to raise the
needed funds to satisfy the obligations, possibly on unsatisfactory terms or
failing that, we would have to consider ceasing operations and/or filing for
bankruptcy protection.
 
 We
have an immediate need for capital and if we are unable to obtain the financing
we need, our business may fail.
 
 As of
November 30, 2008, Cash Tech had working capital of $$4,929,362 and
available cash of $177,492. Our capital requirements have been and will continue
to be significant, and our cash requirements have exceeded cash flow from
operations since inception. We are in immediate need of capital to continue to
operate. We have been dependent on the proceeds of private placements of our
debt and equity securities to satisfy our working capital requirements. We will
be dependent upon the proceeds of future private placement offerings or other
public offerings to fund our short-term working capital requirements, to fund
certain marketing activities and to continue implementing our business strategy.
There can be no assurance we will be able to raise necessary capital. To the
extent that we incur indebtedness or issue debt securities, we will be subject
to all of the risks associated with incurring indebtedness, including the risks
that interest rates may fluctuate and cash flow may be insufficient to pay
principal and interest on any such indebtedness. Any inability to obtain
additional financing when needed could require us to significantly curtail, or
possibly cease altogether, our operations. There can be no assurance that our
lenders will not declare an event of default and demand immediate payment or
seek to attach our assets. As of November 30, 2008, we also
owe  approximately $4 million to General Electric Capital
Corporation. In 2000, we entered into the first of several loan renewals with
G.E., the most recent of which shall expire on February 1, 2010 at which time
all sums owing to GE are due and payable. A default of this obligation or
failure to negotiate a renewal could result in the delisting and/or bankruptcy
of the Company.




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


16
 Index




We have
previously granted security interests in all of our assets to several lenders,
including the holder of notes in the principal and interest amount of $178,520
issued in a placement which was completed in January 2000, General Electric
Capital Corporation pursuant to a Master Security Agreement originally entered
into in May 1997 and liens in favor of BFI Finance on all assets of TAP Holdings
pursuant to a Loan and Security Agreement entered into in November,
2004.





As of
November 30, 2008, we were indebted to G.E. in the amount of approximately $4
million including interest. As a result of the aforementioned security
interests, creditors would be entitled to collect upon the assets prior to any
distribution being available to holders of our Common Stock or Preferred
Stock.





The BFI
loan is a revolving accounts receivable credit facility secured by all of the
business assets of TAP Holdings, LLC as well as a limited personal guaranty from
TAP's former chairman (who is not an employee of Cash Technologies). As of
November 30, 2008 we owed BFI approximately $205,703 including interest. The
outstanding balance owed to BFI is expected to be paid from the sale of certain
assets of TAP and refunded insurance deposits.





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





To the
extent that we obtain additional financing through the issuance of additional
equity securities in the future, such issuance may involve substantial dilution
to our then-existing stockholders.





Risks
Related to CPI Holdings, LLC





CPI is
expected to be substantially dependent on its major customers; initially
Autozone, Pep Boys, and CARQUEST, Mercury Marine and ATG.  These
customers have accounted thus far for approximately 77% of CPI's
revenue.  The loss of any of these customers would have a material
adverse affect on CPI's revenue.





The market for fuel system products
is shrinking.





Until and
unless CPI begins sales of turbocharger and/or other products under
consideration, all or virtually all of CPI’s revenue will be from the sale of
rebuilt carburetors and air conditioning compressors.  Sales of
carburetors have fluctuated and may continue to fluctuate or decline as the
number of vehicles using carburetors continues to decline.  CPI
expects to compensate for this decline by increasing its market share and from
routine price increases but there is no assurance that it can succeed in this
effort.





CPImay not fully recover the carrying
value of its inventory.




As of
November 30, 2008, CPI had a carrying value of $13,234,311 for its
inventory.  In May 2008, at the time CPI's assets were purchased, an
obsolescence reserve of $1,113,200 was established to cover potential inventory
impairment.  In future periods, additional reserves may be taken based
on CPI’s inventory, which could result in a substantial expense and negatively
impact CPI’s financial results.




The
turbocharger market is competitive and sales are uncertain





Following
the acquisition of the Turbomotive assets (see above), CPI intends to
manufacture and distribute turbochargers though its retail and other
channels.  While CPI’s retailers have indicated their interest in
carrying the company’s turbo products, there can be no assurance that the retail
channel will be timely activated or produce sufficient revenues to meet CPI’s
objectives.  In addition, other larger manufacturers of turbos, such
as Honeywell and Borg-Warner, are better capitalized and better known than CPI
and could negatively impact CPI’s sales if they targeted the same
markets.


17
 Index


Turbocharger
manufacturing may be delayed





Following
the acquisition of the Turbomotive assets, CPI will begin to establish
manufacturing operations to produce turbochargers at its factory in Hope,
Arkansas.  While CPI’s management has manufactured turbos in the past
and believes that it possesses the necessary expertise to do so in the future,
various manufacturing start-up problems, including engineering, supply chain,
quality control or other issues, or insufficient capital to purchase needed
tooling or equipment, can delay or impede the start or continuation of turbo
production and materially impact turbocharger sales.




Risks
Related to TAP Holdings, LLC





TAP’s
revenues have ceased





On
October 31, 2007, the Company's TAP Holdings, LLC (dba Tomco Auto Products)
subsidiary sold most of its assets to competitor Champion Parts, Inc. TAP
received $1.3 million in cash and a secured promissory note for $9.5 million
subject to certain offsets to be paid over a maximum of 11 years, however,
Champion defaulted on the note when it filed for Chapter 11 bankruptcy
protection on October 10, 2007. Champion's bankruptcy and default of the $9.5
million secured note owed by Champion to TAP Holdings required us to write-off
the adjusted $7.9 million remaining note balance.





On May 5,
2008 the Company’s CPI Holdings, LLC (dba Champion Parts) subsidiary acquired
most of the assets of Champion Parts, Inc. from its lender, PNC Bank, following
a court-ordered foreclosure, for $2.97 million.  To fund the
acquisition and working capital, Cash Tech raised approximately $3.4 million in
debt and convertible debt.




The
acquired assets consist of finished goods, raw materials, component parts, all
manufacturing and office equipment, furniture, computers, intangible assets such
as the company name, IP, software, records, etc.




Risks
Related to Our Healthcare Products





Competition
in healthcare software is intense.




Veredi
Inc.’s (formerly Claim-Remedi Services, Inc.) healthcare products compete with
products offered by companies that are larger, better known and better
capitalized than Veredi. Veredi has taken steps and developed features designed
to differentiate its products, however these steps may prove inadequate in which
event Veredi might have to withdraw one or more of its products which would have
a material adverse effect on Cash Technologies.





Veredi
is liable for the loss or misuse of personal information.





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





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





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


18
 Index




Essential
services related to CashTechCard have ceased.





In
December, 2007 the Company’s CashTechCard Systems, Inc. subsidiary received
notice that its card issuer, First Premier Bank, would be exiting the prepaid
debit card industry and its card transaction processing would cease by April 10,
2008. CashTechCard began efforts to secure a replacement issuer on acceptable
terms. However, as a result of the significant costs and requirements of
replacement issuers and the limited resources available from the Company as it
plans to acquire the Champion assets, on April 18, 2008 the board of
CashTechCard decided not to continue card issuance and processing
activities.





Data
processing margins generally decline as products become more
mature.





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




Risks
Related to Our CoinBank Machines





Impairment
Charge





We are
currently holding for sale approximately 190 CoinBank machines which were
manufactured when the Company was actively engaged in the sale of such
equipment. The machines have a carrying value of approximately $464,890 at
November 30, 2008, 2008 and $609,890 at May 31, 2008. We have taken an
impairment charge of $100,000 in the quarter ended August 31, 2008 for the
carrying value of our CoinBank machines. The impairment was taken due to low
inventory turnover for the coin machines. In October, 2008 we sold 10 CoinBank
machines for $69,500.  In future periods, while we intend to liquidate
the remaining machines, additional impairment may be taken. If we conclude that
such impairment exists, this could give rise to a substantial expense, which
would increase our reported losses. We have identified parties interested in
acquiring the remaining units, although there is no assurance that such sales
will be consummated and we may not fully recover the carrying value of our
CoinBank machines held for sale.





We
may not successfully compete with our competitors.





The
automotive and healthcare industries are fully developed markets served by large
companies who are better able to finance, develop and market products than is
the Company. We have attempted to differentiate our products from those of our
competitors but competitive products aimed at our target markets could obviate
the need for our products or severely limit our market penetration.





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





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





Risks
Related to Government Regulation and Patent and Licensing matters





Uncertainty
of patent and trademark protection.





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


19
 Index




Risks
Related to Our Management





The
success of our business also requires that we retain other qualified management
personnel.





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





Our
directors and officers have limited personal liability.





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





Risks
Related to our Common Stock





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





Our
common stock has not been traded above $5.00 in over seven years. If our common
stock were to be delisted from trading on the American Stock Exchange and the
trading price of the common stock remained below $5.00 per share, trading in our
common stock would be subject to the requirements of certain rules promulgated
under the Exchange Act related to so-called penny stocks. A penny stock is
defined generally as any non-exchange listed equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. These rules
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as a penny stock and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors, generally institutions. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in our common stock, which
could severely limit the market price and liquidity of our common stock and the
ability of purchasers to sell our common stock in the secondary
market.


20
 Index




If
our common stock is delisted from the American Stock Exchange, we may not be
able to raise essential investment capital.





If our
common stock is delisted from the American Stock Exchange, particularly as a
result of failing to accomplish our plan to regain compliance with the Amex
listing standards (see below) we may find it difficult or impossible to raise
additional investment capital, without which we cannot survive.





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





The
market price of our common stock has fluctuated over a wide range, and it is
likely that the price of our common stock will fluctuate in the future. The one
year sale price for our common stock, as reported by the American Stock Exchange
has fluctuated from a low of $0.10 to a high of $1.05 per share. The market
price of our common stock could be impacted by a variety of factors,
including:





·
            announcements of technological
      innovations or new commercial products by us or our
      competitors.





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





·
            developments in the patents or
      other proprietary rights owned or licensed by us or our
      competitors.





·
            matters related to our financial
      condition, including our ability to obtain necessary
      capital.





·
            litigation affecting us or our
      products.





·
            general market conditions in our
      industry.





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





We
have the discretion to issue additional shares of preferred stock with rights
and preferences superior to those granted to holders of our common
stock.





Our
Certificate of Incorporation authorizes our board of directors to issue up to
1,500,000 shares of preferred stock, from time to time, in one or more series.
Our board of directors is authorized, without further approval of the security
holders, to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each new series of
preferred stock. The issuance of such stock could adversely affect the voting
power of the holders of common stock and, under certain circumstances, make it
more difficult for a third party to gain control of us, discourage bids for our
common stock at a premium, or otherwise adversely affect the market price of our
common stock.





Risks
Related to our listing on the American Stock Exchange





In
November 2007, as a result failing to meet the minimum continued listing
standards of the AMEX, including the reduction in our stockholders equity below
$6,000,000, which was caused by various factors including the write-off of the
Champion note (see Note Receivables), we were notified by AMEX that we were
subject to delisting in accordance with AMEX rules. We submitted, and Amex
approved, our plan to regain compliance with the listing standards and have
since reported that we believe we are now in compliance with such listing
standards, including the re-establishment of stockholders equity in excess of
the $6,000,000 threshold, however AMEX is evaluating our compliance report and
has not yet provided its approval.  If for any reason AMEX deems that
we are not in compliance with the continued listing standards it is likely that
AMEX will move to delist our stock.


21
 Index




ITEM4. CONTROLS AND PROCEDURES





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





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





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





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




PART
II. OTHER INFORMATION





ITEM1. LEGAL PROCEEDINGS





On August
22, 2008, TAP Holdings, LLC, a wholly owned subsidiary of Cash Technologies,
Inc. filed a lawsuit against PNC Bank National Association, PNC Business Credit,
John Stanescki, Lee Labine, Tom Stoltz and Does 1-10 (“Defendants”), in
California Superior Court (TAP Holdings, LLC vs. PNC Bank, National Association
et al, Case No. BC396800) alleging that Defendants and each of
them:





(i)
Fraudulently induced TAP to enter into a Subordination and Standstill Agreement
as part of TAP’s sale of most of its assets to Champion Parts, Inc. (“Champion”)
in 2006;





(ii)
Conspired to defraud TAP of payments to which it was entitled from Champion
through the use of the mail and wire in violation of the Racketeering Influenced
and Corrupt Organizations Act (RICO), 18 U.S.C. §1962;





(iii)
Exercised dominion and control over Champion and its management, ultimately
resulting in the bankruptcy of Champion and the evisceration of the Promissory
Note owed by Champion to TAP with a remaining balance of approximately $8.5
million;





(iv)
Breached the covenant of good faith and fair dealing in the agreements they
signed in the sale of the TAP assets to Champion;





(v)
Breached their fiduciary duty to TAP in their handling of the loan(s) to
Champion; and


22
 Index


(vi)
Negligently misrepresented and/or omitted material facts to TAP involving
Champion, the agreement and sale of the TAP assets to Champion, and the ability
of Champion to repay the Promissory Note owed to TAP.





In
subsequent court proceedings, the case was transferred to federal court,
following which TAP dismissed and re-filed the case, omitting the allegations
described in item (ii).  Defendants have filed a cross-complaint
alleging that TAP owes them $600,000 for payments allegedly improperly paid by
Champion Parts, Inc. to TAP.  The company will incur significant costs
to pursue this litigation and there can be no assurance that it will
prevail.





On April
14, 2008, Del Rey Ventures, Inc. filed a lawsuit in California against TAP
Holdings, LLC, for breach of contract and common counts in the amount of
$77,663, plus interest, costs and attorney’s fees.  The lawsuit also
named Cash Technologies, Inc. and TAP Holdings boardmembers Edmund King and
Bruce Korman as alter egos of TAP Holdings.  TAP Holdings and the
other defendants filed cross-complaints against Del Rey Ventures and
Richard Schoenfeld seeking no less than $3 million in compensatory damages,
as well as punitive damages, rescission, interest and costs for the wrongful
conduct of the cross-defendants, including:




i.
            Multiple acts of fraud, including
      material misrepresentations and/or omissions in connection withTAP’s sale of assets to Champion in
      October 1996 and the fraudulent inducement of an assignment of an
      employment contract from Mr. Schoenfeld to Del Rey
      Ventures;


ii.
            Breach of fiduciary duty,
      including the defendants’ concealment of unanticipated returns before the
      1996TAPsale of assets to Champion
      resulting in a shortfall at
closing;


iii.
            Corporate waste, includingMr.Schoenfeld’s misreporting ofTAP’s inventory betweenJune2006 and October
      2006;


iv.
            Conversion and the taking of
      corporate opportunity in the secret and unauthorized sale of approximately
      11,000 finished goods fromTAP’s inventory for Mr. Schoenfeld’s
      personal gain to the detriment ofTAPand its shareholders;
      and


v.
            Breach of contract for the
      defendants’ failure to provide the services required under the assigned
      employment contract.





TAP
Holdings and Cash Tech will incur significant costs to pursue this litigation
and there can be no assurance that they will prevail.





In 2001
we delivered stock certificates representing 700,000 shares to an escrow agent
as collateral for a loan. The loan was never consummated, and in May 2001 we
notified the transfer agent to cancel the shares. Thereafter the escrow agent,
an attorney, died and we were never able to recover the certificates. In August,
2004 it came to our attention that a party was attempting to transfer 450,000 of
the 700,000 shares. We immediately initiated a lawsuit in New York to prevent
the transfer of the shares and have them retired. In December, 2004, we reached
a settlement in which the shares would be returned to us without any exchange of
money. We intend to similarly pursue the recovery of the remaining 250,000
shares, however in the event that we cannot achieve a satisfactory outcome in
such effort, or in the event that the pending settlement is not consummated for
any reason, some or all of these shares may be treated as outstanding and our
Stockholders' Equity line item would have to be adjusted to reflect such
additional shares.





ITEM2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





None





ITEM3. DEFAULT UPON SENIOR SECUR IT IES





None





ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None


23
 Index


ITEM5. OTHER INFORMATION





None





ITEM 6. EXHIB IT SANDREPORTS ON FORM 8-K





(a)
            
            Exhibits31.1
            
            Certification
      of Chief Executive Officer31.2
            
            Certification
      of Chief Financial Officer32.1
            
            Certification
      Pursuant to Section 906 of the Sarbanes-Oxley Act(b)
            
            Report
      on Form 8-K filed on March 15, 2007 under Item 7.01.Report
      on Form 8-K filed on June 6, 2007 under Item 1.01 and
  3.02.


24
 Index




SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this Report on Form 10-Q for the fiscal
quarter ended November 30, 2008, to be signed on its behalf by the undersigned,
thereunto duly authorized the 20th day of January 2009.





CASH
      TECHNOLOGIES, INC.By:
      /S/ Bruce KormanBruce KormanPresident
      and Chief Executive OfficerBy:
      /S/   Edmund KingEdmund
      KingChief
      Financial Officer






25