CASH TECHNOLOGIES INC, 10KSB40, 2000-09-13

CASH TECHNOLOGIES INC
10KSB40, 2000-09-13
BUSINESS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the fiscal year ended May 31, 2000

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

For the transition period from _______________ to ______________

Commission File Number 000-24569

CASH TECHNOLOGIES, INC.
(Name of small business issuer in its charter)

Delaware 95-4558331
(State or other jurisdiction (I.R.S. Employer
Of incorporation or organization) Identification No.)

1434 W. 11th Street Los Angeles, CA 90015
(Address of principal executive offices) (Zip code)

(213) 745-2000
(Issuer's telephone number, including area code)

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

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

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

Name of Each Exchange
---------------------
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, $ .01 Par Value American Stock Exchange
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X Check whether the issuer (1) filed all reports required to be filed by
---
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---

X Check if there is no disclosure of delinquent filers in response to Item
---
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. Yes X No
--- ---

The Company's gross revenues, for its fiscal year ended May 31, 2000, were
$42,301,355 and its net revenues were $1,161,764. Gross revenue does not
represent revenue under generally accepted accounting principles. See
"Management Discussion and Analysis".

On May 31, 2000, the aggregate market value of the Common Stock of
Registrant held by non-affiliates of Registrant computed by reference to the
closing bid price $7.875 at which the stock was sold on such date was,
approximately $27,737,325.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

On May 31, 2000, there were 3,522,200 shares of Common Stock, $ .01 par
value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

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In addition to historical information, the information included in this Form
10-KSB contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such as
those pertaining to the Company's capital resources, performance and results of
operations. Forward-looking statements involve numerous risks and uncertainties
and should not be relied upon as predictions of future events. Certain 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, 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. See also the Company's reports filed from
time to time with the Securities and Exchange Commission pursuant to the
Securities Act or the Exchange Act.

PART I

Item 1. Description of Business
-------------------------------

Introduction
------------

Cash Technologies, Inc., is a Delaware Corporation, incorporated in August,
1995. Unless the context otherwise requires, references herein to the Company
refer to Cash Technologies, Inc., and its wholly-owned subsidiaries, National
Cash Processors, Inc., a Delaware corporation, incorporated in May, 1994, which
became a subsidiary of the Company in January, 1996; CoinBank Automated Systems,
Inc., a Delaware corporation, incorporated in November, 1995; and CoinBank
Automation Handels GmbH, Salzburg, Austria incorporated in February, 1998.

Electronic Message Management Architecture (EMMA) Transaction Processing System

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

In December of 1997, the Company filed a patent application describing its
transaction processing and networking technologies. The technology, which was
later named EMMA (E-commerce Message Management Architecture), allows for the
seamless integration of conventional ATM and credit card (point-of-sale)
networks with non-bank networks and the Internet. The explosion of Internet e-
commerce has created, in management's

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opinion, a demand for EMMA's unique capabilities to provide e-commerce access
from ATMs and Point-Of-Sale (POS) terminals, as well as increased security for
financial transactions conducted over the public Internet.

EMMA's capabilities, with interfaces to the Company's various e-commerce
partners, allows it to seamlessly interface financial networks, particularly the
four main channels through which trillions of dollars are transacted each year:
(1) the ATM network; (2) the credit card network; (3) the Automated Clearing
House (ACH) network; and (4) cash, thus allowing individuals with no ATM card or
credit card to access the services offered.

In December, 1999, the Company entered into an agreement with Rent Way, Inc.
and installed three ATM-X machines in the Rentway stores as a pilot program in
early 2000. As of August 5, 2000, the machines are in operation and fully
functional providing check cashing and standard ATM functions.

Commercial Cash Processing

While the Company has, in recent years, expanded its operations into other
technologies, it began and continues to do business as a cash processor through
its National Cash Processors, Inc. subsidiary. Typically, currency is purchased
in bulk at a discount of between 1% and 2% from face value. After counting,
sorting and/or wrapping, the Company either promptly resells the processed
currency at face value plus a small fee (approximately $10.00 per $1,000 worth
of bills sorted) to a variety of customers, including armored car companies, or
deposits it at face value at the Federal Reserve Bank for credit to the
Company's account. The Company continues to process currency but has ceased its
coin processing operation and does not intend to actively engage in the coin
processing business in the future.

Coin Counting Equipment

In 1995, the Company began its development of CoinBank(R) self-service coin
counting machines, distributed through its CoinBank Automated Systems, Inc.
subsidiary. The machines accept and count loose coin, then generate a receipt
redeemable for the amount counted less a service fee of typically 7-9%. This
receipt can then be exchanged for currency or goods. The machines provide
individuals and small businesses with a convenient method for the disposing of
their accumulated loose coin without the need for pre-sorting or wrapping. The
Company has performed extensive field tests with these machines in Southern
California, New England and Europe. The machines can be readily configured to
count coin denominations from most countries in the world. An important feature
of the machines, for which the Company filed for patent protection in 1997, is
their ability to reject extraneous materials such as foreign objects and slugs,
minimizing down time and repairs.

The Company is marketing the machines to other equipment manufacturer "OEM"
customers (manufacturers of cash handling equipment), companies with existing
equipment distribution and service channels and directly to retailers and
financial institutions.

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

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Product Development
--------------------

Electronic Message Management Architecture (EMMA) Transaction Processing
System

Technical Description

The EMMA Platform implements a flexible message class format that allows
for constructing multiple transactions and transaction types at a financial
terminal, such as an ATM or Point-Of-Sale (POS) terminal, or other client
device, such as a wireless device (cellular phone, PDA, etc.) and transmitting
those as a single message or transaction request, to the EMMA Host. These
messages can then be easily converted into message structures that are widely
used in the financial industry.

The EMMA Host parses the EMMA Message from the client and prioritizes the
enclosed transactions. The EMMA specification allows sophisticated
relationships to be created between transactions that require inter-dependencies
between the various legs of each transaction. The EMMA Host then manages each
leg, or sub-transaction, individually. It also manages each sub-transaction as a
separate communication process. For example, an electronic bill payment
transaction might first require access to a customer's bank account to verify
available funds, then notification of the payment to the biller (through a
remittance processor such as Checkfree) and finally the transfer of funds to the
biller. In this example, each leg required management, routing and a distinct
communication protocol.

A unique capability of EMMA is its ability to manage and communicate the
various transaction messages in parallel, or asynchronously, expediting
transaction processing and permitting the aggregation of transactions for
payment purposes. For example, a customer may select four different services at
an ATM, such as the payment of a bill, the purchase of a movie ticket, the
transfer of funds and getting cash, and, once selected, these transactions can
be completed simultaneously and with a single payment.

Designed from the ground up to work in the institutional transaction
processing environment, EMMA is robust, scaleable and reliable, expandable as
needed to meet larger transaction flows as market demand for "advanced-function
services" increases.

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

The Company has developed the client software for an enhanced version of an
automated teller machine, designated the ATM-X and a POS terminal, designated
POS-X. The software permits these devices to offer a full range of financial
services not typically offered by ATMs and POS terminals, such as check cashing,
electronic bill payment, instant activated phone cards, event ticketing and
Internet products and services. In partnership with ATM manufacturer Diebold,
Inc., in March, 2000, the Company completed installation of the first ATM-X
pilot at three stores owned by Rent Way. As of May 31, 2000, the machines are
in operation and fully functional, providing automated check cashing and ATM
functions. As of May 31, 2000, no POS-X terminals have yet been deployed. As
intended, the Company used a portion of the proceeds of its initial public
offering for further testing and refinements of these products. There can be no
assurance that third-party manufacturers, such as Diebold, continue to provide
the hardware needed for the ATM-X and POS-X machines or that they or we, will be
able to successfully market the device.

Industry (Market) Overview
--------------------------

Electronic Message Management Architecture (EMMA) Transaction Processing
System

Data networking has been an enabling technology for the financial industry.
Using financial networks, financial institutions can present and collect
financial information at the locations where transactions are initiated and

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provide services that are an improvement over paper-based transactions. As a
result of networking, financial institutions have changed the normal course of
doing business and have encouraged the growth of global enterprises.

In recent years, however, the limitations of the aging infrastructure of the
financial networks are being highlighted by the rise of public networking. The
most notable example of public networking, the Internet, depends for its high
availability and security upon advances in network hardware, new protocols, and
high-speed digital communications lines. In contrast, the standard in financial
networking infrastructure is a generation behind the majority of business and
consumer networks.

This disparity in infrastructure introduces limitations such as the need for
more bandwidth and easier access. But bandwidth is only one problem. Each
existing aging financial network transacts independently via specific industry
protocols which by design prohibit the free flow of information from one network
to another--e.g., the POS network only communicates within the POS network,
ATM's transact exclusively via the ATM network and neither can interface with
the Internet. This problem becomes the significant stumbling block for the
implementation of advances in security, network control and routing.

EMMA potentially offers the financial industry a bridge technology that
provides remedy to the disparity within existing systems. The EMMA Platform is
meant to provide a solution that will work in parallel with the current
financial networks, interacting with each without any requirement for those
networks to change their current operation. It supports the beneficial features
of those networks and overcomes their limitations. It promises to provide an up-
to-date solution that can implement the newest technologies, as well as carry
the weight of the transaction volume from older terminals and, in effect,
converts these legacy systems into unaware participants in a more sophisticated
network.

Commercial Cash Processing Services
-----------------------------------

Cash Processing Facility
-------------------------

The Company operates a cash processing facility in Los Angeles, California,
where it counts currency, which it purchases in bulk from a variety of
commercial institutions at a small discount from face value. The Company then
sorts, wraps and resells the processed coin and currency to various retail
customers at face value plus a small fee or deposits it at face value at the
Federal Reserve Bank for credit to the Company's account. During the fiscal year
ended May 31, 2000, the Company derived gross revenue of $39,098,945.00 from its
cash processing business. The Company currently has 7 employees engaged in this
business.

Cash Processing Security

The Company's operations are substantially dependent on maintaining the
security of the inventories of currency transported to the Company's facility
and stored on the Company's premises. The Company's currency processing facility
is located in a secured building. There are no windows in the facility other
than a single, bulletproof glass guard lookout. Steel doors provide the only
entrances and a security monitoring company hired by the Company monitors the
facility 24 hours per day, 365 days per year for robbery, fire and any loss of
power or telephone services. Guards control all incoming and outgoing visitors,
as well as, employee access to the facility. Closed circuit TV cameras, motion
sensors and a computerized access control system monitor and record all activity
inside and immediately outside the facility at all times.

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The physical security systems in place at the Company's facility have been
rated "AA" (the same top rating maintained by most bank and armored car cash
vaults) by Underwriters Laboratories, Inc., which rating will remain effective
until at least 2000, so long as the Company maintains its present monitoring
procedures. Although the Company believes that it has in place adequate security
systems and procedures to safeguard its quantities currency, there can be no
assurance that the Company's systems and procedures will be sufficient to ensure
against robbery, embezzlement or other losses.

The Company maintains insurance against losses on its premises, including
those due to theft or embezzlement by independent contractors or the Company's
employees, up to an aggregate amount of $5,000,000. Though the Company believes
that it can increase the amount of such coverage if needed with a corresponding
increase in premium payments, there can be no assurance that such insurance will
provide the Company with an adequate level of coverage in the event of any loss,
or that it will be renewed or increased in the future as needed, on commercially
reasonable terms or at all. Moreover, the Company may experience an
unanticipated loss not covered by such insurance. Partially or completely
uninsured losses, if of sufficient magnitude, could have a materially adverse
effect on the Company's business and results of operations. The Company also
maintains insurance for off-site theft of coin from and damages to its CoinBank
machines.

Sale of CoinBank Machines
-------------------------

CoinBank Machine Features

In December, 1995, the Company commenced developing and marketing CoinBank
machines, automated self-service coin counting and processing machines designed
to accept and count loose coins for a fee. The CoinBank machine is a
freestanding machine that incorporates hardware and electronic components and
certain software. The Company has developed three different CoinBank machine
models, with variations in coin storage capacity, customer interfaces and
external appearance. The most recently developed CoinBank machine model is
approximately 65" high, 30" wide and 28" deep and contains a large color
interactive touch screen which provides the user prompts as to how to use the
machine and which may be used for advertising displays, a credit/debit card
reader (some versions support smart cards), an encryption PIN pad, a pre-paid
phone card dispenser, a Pentium PC and a thermal printer. Previous models were
slightly smaller and did not contain a computer screen. Customers place batches
of coins into a CoinBank machine's hopper that feeds coins past a set of sensors
that electronically measure the thickness, diameter and metallic properties of
each coin. The CoinBank machine returns to the user all extraneous materials
such as foreign coins and slugs. The CoinBank machine's software compares these
sets of measurements with standard measurements and acceptable tolerances for
U.S. coin denominations previously programmed in its memory (re-programmable for
another country's denominations), identifies each coin, and either accepts the
coin or rejects it to an outside receptacle. The accepted coins are rapidly
counted and collected in an internal box.

The CoinBank machine calculates the gross value of each batch of coins placed
into it by a customer, deducts a percentage of the gross batch total (typically
7 1/2% to 9%) and prints out a receipt for the net amount. The CoinBank machine
can offer the user a wide assortment of payout options, including a cash
receipt, and with the implementation of EMMA, prepaid phone cards or other like
services. The customer can bring the receipt to a teller window in a financial
institution, or cashier; in the case of a retail location, for deposit to a bank
account or in exchange for currency or goods. The CoinBank machine is also
capable of being linked to the ATM network in order to permit customers to
directly deposit funds to a bank account.

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supplanted by direct sales of these machines to retail store chains and removed
substantially all of its free-placement machines from operation.

CoinBank Machine Assembly and Supply

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

The Company currently contracts with one of its suppliers to fabricate the
housing and integrate the components of CoinBank machines, including software
that is proprietary to the Company.

Marketing
---------

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

EMMA is envisioned to link global financial systems together for the first
time. Using the existing worldwide ATM, POS, Internet and financial services
infrastructure, the Company expects to provide consumers with direct access to
every major method of commerce, including Internet Commerce, from a single
terminal or "e-appliance".

Marketing studies are currently underway. The Company envisions producing
revenues through the following methods: (1) transaction processing for third
parties; (2) licensing EMMA to other ATM operators worldwide; and (3)
advertising and the sale of transaction data.

Commercial Cash Processing and Coin Machines

Since inception, the Company has conducted only limited marketing activities
and currently has limited marketing and technical experience and limited
financial, personnel and other resources to independently undertake extensive
marketing activities. The Company conducts substantially all of its own
marketing activities and may hire additional marketing personnel, including
possibly independent contractors to assist it in marketing CoinBank machines. To
date, the Company has conducted marketing of its cash processing services by
means of press releases and articles in trade journals targeted at cash-
intensive industries. The Company's marketing of CoinBank machines has consisted
of entering into market testing arrangements with a limited number of financial
institutions and retailers and attending certain industry shows. The Company
intends to focus its future coin-machine marketing efforts on the sale of
CoinBank machines rather than the free-placement/shared revenue model.

Competition
------------

EMMA - Electronic Message Management Architecture Transaction Processing
System

There is intense growth is the development and distribution of off-premise (non-
bank) financial services, particularly on ATMs, Point-Of-Sale (POS) terminals,
specialty kiosks and other devices, including cellular phones and wireless PDAs.
Most of this equipment has a limited user interface, although recent equipment
models have high-powered, graphical user interfaces. Many support peripherals
for dispensing new financial products. While

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there are a number of companies who have developed transaction processing
solutions for specific applications, such as check cashing, event or airline
ticketing, prepaid phone cards, etc., the Company is not aware of any competitor
that has the Company's plan to provide "advanced function" transaction
processing services as its core business. There are no assurances that the
market will accept the Company's method of processing or operations. There can
be no assurance that another data processing company with greater financial or
technical resources will not develop software competitive with EMMA and make the
Company's products and services less attractive to prospective customers.

Coin Machines

The Company is aware of only one company, CoinStar, Inc., that offers self-
service coin counting machines for distribution to the U.S. retail industry. To
the Company's knowledge, unlike the Company, which currently focuses its efforts
on selling CoinBank machines, this competitor focuses its marketing efforts on
installing "free placement" machines. This competitor has installed a number of
its machines throughout the United States, and in some cases, such installations
are near where the Company has installed or may seek to sell CoinBank machines.
There can be no assurance that potential purchasers of CoinBank machines will
not prefer to employ this competitor's "free placement" machines. Moreover,
there can be no assurance that other companies are not developing or will not
seek to develop functionally equivalent products or services for the disposal of
large amounts of coins in the future. Certain of the potential competitors may
have substantially greater financial, personnel, marketing and other resources
than the Company. In addition, there are many companies in the coin processing
industry that have the expertise and resources that may encourage them to
develop and market products or services that compete with CoinBank machines or
that would render CoinBank machines obsolete or less marketable. Moreover,
potential customers may elect to establish their own facilities for counting and
processing coins or utilize other methods which they believe to be less costly
or possess other advantages over CoinBank machines. There can be no assurance
that the Company will be able to compete successfully.

In addition, alternatives to the use of coin and currency, such as checks,
credit cards and wire transfer, debit cards, "smart" cards and other forms of
electronic currency are increasing. Increasing use of these alternative forms of
payment could reduce the frequency of circulation of coin and currency, which
would result in decreased need for CoinBank machines and the Company's cash
processing services. The market for alternative forms of money transfer is
characterized by frequent introduction of new products and services and is
subject to changing consumer preferences and economic trends. There can be no
assurance that the demand for methods of disposing of coin and currency will not
decrease significantly or that other factors, over which the Company will have
no control, will not have a material adverse effect on the Company's business
and results of operations.

Intellectual Property
---------------------

Although the Company has filed applications with the U.S. Patent Office to
obtain a patent on its CoinBank counting and dispensing machine and an
additional application with respect to its EMMA Platform, there can be no
assurance that any patent will be granted, or that if granted, it will afford
the Company any meaningful protection. The Company does not currently hold any
patents with respect to any software or hardware used by it in its operations
and there can be no assurance that any issued patents will be granted to it. The
Company relies on a combination of trade secrets, technical measures, copyright
protection and nondisclosure agreements with its employees to establish and
protect the ideas, concepts and documentation of certain software developed by
it and used primarily in its cash processing operations ("Developed Software").
Such methods may not afford complete protection, and there can be no assurance
that third parties will not independently develop such technology or obtain
access to the Developed Software. Although the Company believes that the
Developed Software and other software used in its operations does not infringe
upon the rights of others, there can be no assurance that the Developed Software
or such other software does not and will not infringe upon the patents or
intellectual property rights of others. See "Legal Proceedings" and " Risk
Factors"-Litigation

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In the event of infringement, the Company could, under certain circumstances,
be required to obtain a license or modify aspects of the Developed Software or
such other software or refrain from using such software. There can be no
assurance that the Company will have the necessary financial resources to defend
any infringement claim made against it or to successfully terminate any
infringement in a timely manner, upon acceptable terms and conditions or at all.
Failure to do any of the foregoing could have a material adverse effect on the
Company. Moreover, if the Developed Software or other software used in the
Company's business is deemed to infringe upon the rights of others, the Company
could, under certain circumstances, become liable for damages, which could have
a material adverse effect on the Company.

The Company believes that product recognition is an important competitive
factor and promotes the CoinBank name in connection with its marketing
activities. The Company received United States trademark registration for the
"CoinBank" name in September, 1997. Although the Company is not aware of any
claims of infringement or other challenges to the Company's rights to use this
trademark, there can be no assurance that the Company's marks do not or will not
infringe upon the proprietary rights of others or that the Company's marks would
be upheld if challenged.

Employees
----------

As of May 31, 2000, the Company employed 41 employees and 4 contractors on a
full-time basis, of which 15 were engaged in cash processing, 3 were engaged in
facilities and security, 4 were engaged in customer service and sales, 9 were
engaged in accounting and administration and 14 were engaged in system support
and development. None of the Company's employees are subject to collective
bargaining agreements. The Company believes that its relations with its
employees are good. On August 1, 2000, the Company had reduced its staff to 30
employees and 5 contractors on a full-time basis, resulting from the curtailment
of some of its cash processing activities of which 17 were engaged in system
support and technical development. In addition, the Company utilizes the
services of two offshore technical development groups, totaling approximately 26
engineers, for some of its software development activities.

Risk Factors
------------

Limited Operating History; Significant and Continuing Losses. The Company
opened its cash processing facility in May, 1994, and commenced installations of
CoinBank machines at a limited number of bank branches in December, 1995. As of
August 1, 2000, the company has removed substantially all of its free-placement
CoinBank machines from field operation. Additionally, the Company is continuing
to develop its EMMA Platform and has not had any commercial activity from the
system, except for the pilot at three Rent Way stores. Accordingly, the Company
has a limited operating history upon which an evaluation of the Company's
performance and prospects can be made. The Company is subject to numerous risks,
expenses, delays, problems and difficulties frequently encountered in the
establishment of any new business. In the last two years, the Company has
incurred significant losses, including net losses of $6,639,901 and $5,711,964
respectively, for its fiscal years ended May 31, 2000 and 1999. At May 31, 2000,
the Company had stockholders deficiency of $3,409,724 and an accumulated deficit
of $18,472,501. The Company will continue to have a high level of operating
expenses and will be required to make significant up-front expenditures in
connection with the development of its EMMA Platform (including, without
limitation, salaries of executive, technical, marketing and other personnel).
The Company anticipates that it will continue to incur significant and
increasing losses for the foreseeable future until such time, if ever, as the
Company is able to generate sufficient revenues to finance its operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Financial Statements."

Going Concern. The Company's independent certified public accountants
included an explanatory paragraph in their report for the year ended May 31,
2000, which indicated a substantial doubt as to the ability of

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the Company to continue as a going concern. This concern is due primarily to
substantial debt service requirements and working capital needs. See independent
certified public accountant's letter and Item 6. "Liquidity".

Working Capital Deficit; Significant Capital Requirements. At May 31, 2000,
the Company had a working capital deficit of $1,657,722 and available cash of
$355,364. On September 8, 2000, the Company had available cash of $562,721. The
Company's capital requirements have been and will continue to be significant,
and its cash requirements have exceeded cash flow from operations since
inception. As a result, the Company was substantially dependent on the proceeds
of its initial public offering in July, 1998, and private placements since then
of its debt and equity securities to satisfy its working capital requirements.
The Company will be dependent upon the proceeds of future private placement
offerings or other public offerings to fund development of the EMMA technology,
its short-term working capital requirements, fund certain marketing activities
and to continue implementing its expansion strategy, including acquisitions such
as the proposed acquisition of RBSA (see Proposed Acquisition).

The Need for Substantial Additional Financing; No Assurance of Additional
Personal Guarantees of Corporate Debt by Officers. In the event that the
Company's plans or assumptions relating to its operations change or prove to be
inaccurate or if the net proceeds of future private placements or other public
offerings together with revenues generated from operations prove to be
insufficient (due to, among other things, unanticipated expenses, increased
competition, unfavorable general economic conditions, decreased demand for cash
processing services, inability to successfully market its products, or other
unforeseen circumstances), the Company could be required to seek other
alternatives available to it. The Company currently requires and expects over
the next fiscal year to continue to need substantial additional capital in order
to continue operations There can be no assurance that additional financing from
any source will be available to the Company when needed, on commercially
reasonable terms, or at all. To the extent that the Company obtains additional
financing through the issuance of additional equity securities, any such
issuance may involve substantial dilution to the Company's then-existing
stockholders. Additionally, to the extent that the Company incurs indebtedness
or issues debt securities, the Company will be subject to all of the risks
associated with incurring substantial indebtedness, including the risks that
interest rates may fluctuate and cash flow may be insufficient to pay principal
and interest on any such indebtedness. Any inability to obtain additional
financing when needed will have a material adverse effect on the Company that
could require the Company to significantly curtail or possibly cease its
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations.

Uncertainty of Market Acceptance. In marketing its services, the Company
is attempting to change the traditional methods, such as in-house processing or
bank processing, by which holders dispose of large quantities of cash.
Commercial establishments and individuals may elect to utilize other methods
which they believe to be less costly or possess other advantages over the
Company's cash processing services, including establishing their own cash
processing operations. Demand for and market acceptance of the EMMA technology
is subject to a high level of uncertainty. To date the Company has installed and
sold only a limited numbers of CoinBank machines. To date a small number of ATM-
X machines utilizing the EMMA technology have been installed for public use.
There can be no assurance that the results of the use of the EMMA system when
deployed will be well-received or that prior results will be indicative of
future market acceptance of the Company's products or services. Commercial
establishments and individuals may elect to utilize other methods, which they
believe to be less costly or possess other advantages over the EMMA system.
Achieving market acceptance will require substantial marketing efforts and the
expenditure of a significant amount of funds. See "Business--Market Overview"
and "Business--CoinBank Machines."

Limited Marketing Capabilities. Since inception, the Company has conducted
only limited marketing activities and currently has limited marketing and
technical experience and limited financial, personnel and other resources to
independently undertake extensive marketing activities. The Company's marketing
plans may be subject to change as a result of a number of factors, including
changes in market conditions, the nature of the

11
<PAGE>

marketing requested or provided by customers for EMMA transaction processing and
other factors. There can be no assurance that the Company's efforts will result
in significant initial or continued market acceptance, that emerging markets for
the EMMA system and the Company's coin and currency processing services will not
be limited, or that the Company will succeed in positioning ATM-X and EMMA
system as a preferred method of financial transaction processing. See
"Business--Marketing."

Security Risks; Potential Uninsured Losses. The Company's currency-
processing operations are substantially dependent upon maintaining the security
of the inventories of currency transported to the Company's facility and held on
the Company's premises. Although the Company believes that it has in place
adequate security systems and procedures to safeguard, there can be no assurance
that the Company's systems and procedures will be sufficient to ensure against
theft, embezzlement or other losses. The Company also maintains insurance
against losses, including those due to theft or embezzlement by independent
contractors or the Company's employees, up to an aggregate amount of $5,000,000.
However, there can be no assurance that such insurance will provide the Company
with an adequate level of coverage in the event of any loss, or that it can be
renewed or increased in the future as needed, on commercially reasonable terms
or at all. Moreover, the Company may experience an unanticipated loss not
covered by such insurance. Partially or completely uninsured losses, if of
sufficient magnitude, could have a material adverse effect on the Company's
business and results of operations. See "Business--Security."

Technological Factors; Uncertainty of Product Development. There can be no
assurance that the Company's EMMA system will perform satisfactorily all of its
intended functions or will prove to be reliable in extensive utilization. See
"Business-- Proposed Products."

Dependence on Third-Party Manufacturers and Third-Party Technology. EMMA
system will rely upon existing financial network for transaction processing. As
a result, the Company is dependent on third parties for continued operation.
Failure of the existing financial network providers to allow access to their
network could also have an adverse effect, or cause the company to cease to
operate as an EMMA provider. " See "Management Discussion and Analysis of
Financial Conditions and Results of Operations."

Uncertainty of Proposed Expansion. To date, the Company has generally been
dependent on processing cash purchased directly from third parties to generate
substantially all of its revenues. The Company intends to increase its current
level of operations, with an emphasis on marketing its EMMA. The Company has
achieved limited growth to date, and there can be no assurance that the Company
will be able to successfully expand its operations. Expansion of the Company's
operations will be largely dependent upon the Company's ability to successfully
utilize EMMA via ATMs, POS terminal and other devices; hire and retain skilled
technical, marketing and other personnel; establish and maintain satisfactory
relationships with banks and retail businesses; and achieve significant market
acceptance for the use of advance function services, EMMA and the Company's cash
processing services. There can be no assurance that the Company will be able to
successfully implement its business plan or that unanticipated expenses,
problems or technical difficulties will not occur which would result in material
delays in its implementation. The Company's prospects could be adversely
affected by a decline in the economic prospects of particular individual or
commercial customers or segments of cash-intensive markets, which could result
in reduction or deferral of requirements for Coinbank machines or the use of
EMMA-driven terminals and the EMMA system by prospective customers. There can be
no assurance that the Company will be able to achieve significant market
acceptance for, EMMA or the Company's Coinbank machines, achieve significant
penetration in new geographic markets or successfully expand its operations. See
"Business--CoinBank Machines."

Competition; Technological Obsolescence. The cash processing industry is
characterized by intense competition and the Company competes primarily with
banks (which typically utilize the services of armored car carriers for their
coin and currency processing), most of which possess substantially greater
financial, personnel, marketing and other resources than the Company. With
respect to CoinBank machines, the Company is aware of one other company that
offers self-service coin counting. To the Company's knowledge, unlike the
Company,

12
<PAGE>

which has recently focused its efforts on selling CoinBank machines, this
competitor focuses its marketing efforts on installing its machines in
supermarkets on a free placement basis. This competitor has installed a number
of its machines in the Los Angeles area as well as in other areas of the United
States, and, in some cases, such installations are near where the Company has
installed or may seek to install and/or sell CoinBank machines. There can be no
assurance that potential users of CoinBank machines will not prefer to utilize
this competitor's machines, whether because of preference or perceived
convenience of location or hours of service or otherwise, or that this
competitor will not seek to sell its machines. Moreover, there can be no
assurance that other companies are not developing or will not seek to develop
functionally equivalent products or services for the disposal of large amounts
of coins in the future. In addition, the Company's recently developed EMMA
Platform will compete with existing automated teller machines and services
offered by financial institutions and other companies that provide services
similar to those offered by the ATM-X and EMMA. Certain of the current
competitors of the Company as well as potential competitors may have
substantially greater financial, personnel, marketing and other resources than
the Company. In addition, there are many companies in the coin processing
industry that have the expertise and resources that may encourage them to
develop and market products or services that compete with the Company or that
could render the Company's products and services obsolete or less marketable.
Moreover, with respect to the marketing of CoinBank machines, potential
customers may elect to establish their own facilities for counting and
processing coins or utilize other methods which they believe to be less costly
or possess other advantages over CoinBank machines. There can be no assurance
that the Company will be able to compete successfully. See "Business--
Competition."

Potential Adverse Effect of Changing Industry Trends. Alternatives to the
use of coin and currency, such as checks, credit cards and wire transfer, debit
cards, "smart" cards and other forms of electronic currency are increasing.
Increasing use of these alternative forms of payment could reduce the frequency
of circulation of coin and currency, resulting in decreased need for CoinBank
machines. The market for alternative forms of money transfer is characterized by
frequent introduction of new products and services and is subject to changing
consumer preferences and economic trends. There can be no assurance that the
demand for methods of disposing of coin and currency will not decrease
significantly or that other factors, over which the Company will have no
control, will not have a material adverse effect on the Company's business and
results of operations. See "Business--Competition."

Geographic Concentration of Business; Changes in Economy. To date, the
Company's operations have been concentrated primarily in Southern California and
the Northeastern, U.S.A. The Company's growth prospects will be largely
dependent on its ability to achieve greater penetration in these markets as well
as significant penetration in new geographic markets. The Company's prospects
could be adversely affected by unfavorable general economic conditions,
including any downturns in the California or national economies, which could
result in an unwillingness by consumers to pay cash processing fees or an
increased interest in developing alternative methods of counting and sorting
coins, including creating in-house processing facilities. See "Business."

Risks Relating to International Installations and Sales. The Company is
seeking to sell additional CoinBank machines outside of the United States. To
the extent that the Company is able to expand its operations and sales outside
of the United States, of which there can be no assurance, it will become subject
to the risks associated with international operations and sales, including
economic and political instability, currency fluctuations, credit risks,
shipping delays, customs duties, export quotas, foreign government regulations
and other trade restrictions, any of which could have a significant impact on
the Company's ability to deliver CoinBank machines overseas to purchasers on a
competitive and timely basis. See "Business--Possible International Sales of
CoinBank Machines."

Litigation Although the Company has not been served with a complaint, it
is aware that Shaw's Supermarkets has filed a lawsuit (Shaw's Supermarkets, Inc.
v. Cash Technologies, Inc., CoinBank Automated Systems Inc. United States
District Court, District of Massachusetts) against the Company claiming breach
of contract and damages. The Company had operated Coinbank machines in Shaw's
locations in New England on a free-placement basis since June, 1999 and had been
negotiating a settlement and termination agreement with

13
<PAGE>

Shaw's to terminate the CoinBank machine placements in light of the Company's
decision to exit the free placement business. Shaw's is claiming damages in
excess of $75,000, for contract termination fees and reimbursements. The Company
believes that the amount owed is approximately $55,000 and has accrued for the
liability. Furthermore, the Company has potential claims against Shaw's for
damages to the machines. The Company intends to defend itself in the suit, if
served. There can be no assurance that the Company will be successful in the
defense, however the case is not expected to have a material effect on the
Company's business.

In December 1997, Vindex USA, Inc. filed a complaint against CAS, a
subsidiary of the Company, in the Superior Court of California, Los Angeles
County seeking to recover $40,000, an unspecified amount of commissions and
interest accrued thereon allegedly due it under the terms of a consulting
agreement it alleges was breached by the Company. The court has entered
judgement against Coinbank in favor of Vindex in the sum of $97,864.40. The
Company has filed an appeal, which is pending and there are settlement
discussions still in progress although the outcome is uncertain.

We have commenced a lawsuit in Austria against Geld Bearbeitungs Systeme
GES.M.B.H., an Austrian entity which had been manufacturing certain of our
CoinBank machines. As previously described in our SEC Reports, we have a five
year licensing and manufacturing services agreement with Geld. We had
previously entered into a letter of intent to acquire Geld and certain disputes
have arisen regarding the acquisition and licensing agreements between the
parties. We instituted the suit to enforce certain licensing rights under our
agreements and to enforce the acquisition letter of intent. Although we
believe, based upon advice of our Austrian counsel, that we have a meritorious
and strong claim, there can be no assurance that we will be successful in our
suit. Recently the Austrian Courts awarded the Company a 10% ownership interest
in Geld resulting from a ruling adverse to one of its principals.

Uncertainty of Patent and Trademark Protection. Although the Company has
recently filed applications with the U.S. Patent Office to obtain a patent on
its CoinBank counting and dispensing machine and with respect to its EMMA
Platform, there can be no assurance that any patent will be granted, or that if
granted, it will afford the Company any meaningful protection. The Company does
not currently hold any patents with respect to any software or hardware used in
its operations. The Company intends to rely primarily on a combination of trade
secrets, technical measures, copyright protection and nondisclosure agreements
with its employees to establish and protect the ideas, concepts and
documentation of certain software developed by it and used primarily in its cash
processing operations (the "Developed Software"). Such methods may not afford
complete protection, and there can be no assurance that third parties will not
independently develop such technology or obtain access to the Developed
Software. Although the Company believes that its use of the Developed Software
and other software used in its operations does not infringe upon the rights of
others, there can be no assurance that the Company's use of the Developed
Software or such other software does not and will not infringe upon the patents
or intellectual property rights of others. In the event of infringement, the
Company could, under certain circumstances, be required to obtain a license or
modify aspects of the Developed Software or such other software or refrain from
using such software. There can be no assurance that the Company will have the
necessary financial resources to defend any infringement claim made against it
or to successfully terminate any infringement in a timely manner, upon
acceptable terms and conditions or at all. Failure to do any of the foregoing
could have a material adverse effect on the Company. Moreover, if the Developed
Software or any other software or hardware used in the Company's business is
deemed to infringe upon the rights of others, the Company could, under certain
circumstances, become liable for damages, which could have a material adverse
effect on the Company. The Company received United States trademark registration
for the "CoinBank" name in September, 1997. Although the Company is not aware
of any claims of infringement or other challenges to the Company's rights to use
this trademark, there can be no assurance that the Company's marks do not or
will not infringe upon the proprietary rights of others or that the Company's
marks would be upheld if challenged. See "Business--Proprietary Information."

14
<PAGE>

Dependence on Key Personnel; Need for Qualified Management Personnel. The
success of the Company will be dependent on the efforts of certain key personnel
of the Company, including Mr. Korman, its President and Chief Executive Officer.
The Company has a three year employment agreement with Mr. Korman (expiring
2001) which will require Mr. Korman to devote not less than 40 hours per week of
his business time to the business of the Company and provides for an initial
annual base salary of $120,000 and base salaries of $150,000 and $180,000 in the
second and third years, respectively. The loss of the services of Mr. Korman
could have a material adverse effect on the Company's business and prospects.
Mr. Korman also participates in other business endeavors, which require a
portion of his business time. Although Mr. Korman has advised the Company that
his participation in outside business matters should not interfere with his
performance of his duties as President and Chief Executive Officer of the
Company, there can be no assurance that a conflict of interest will not arise
with respect to the allocation of Mr. Korman's time or that such conflict would
be resolved in favor of the Company. The success of the Company is also
dependent upon its 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 the Company 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 the Company. See "Management."

Control by Management. Mr. Bruce Korman and Mr. Richard Miller, and their
respective affiliates, beneficially own, in the aggregate, approximately 29% of
the outstanding Common Stock, as a result, they maybe in a position to act
together to effectively control the Company, elect the Company's directors,
cause an increase in the authorized capital or the dissolution, merger or sale
of the assets of the Company, and generally direct the affairs of the Company.
See "Management" and "Principal Stockholders."

Limitations of Liability of Directors and Officers. The Company's
Certificate of Incorporation includes provisions to limit, to the full extent
permitted by Delaware law, the personal liability of directors of the Company
for monetary damages arising from a breach of their fiduciary duties as
directors. In addition, the Company's by-laws require the Company to indemnify
any director, officer, employee or agent of the Company to the full extent
permitted by Delaware law. As a result of such provisions in the Certificate of
Incorporation and the by-laws of the Company, stockholders may be unable to
recover damages against the directors and officers of the Company for actions
taken by them which constitute negligence, gross negligence or a violation of
their fiduciary duties, which may reduce the likelihood of stockholders
instituting derivative litigation against directors and officers and may
discourage or deter stockholders from suing directors, officers, employees and
agents of the Company for breaches of their duty of care, even though such an
action, if successful, might otherwise benefit the Company and its stockholders.
See "Management--Limitations of Liability and Indemnification."

Shares Eligible for Future Sale. As of August 30, 2000, we had 3,522,200
shares of common stock outstanding, of which approximately 2,426,132 shares of
common stock are freely tradeable without restriction or further registration
under the Securities Act of 1933, as amended. All of the remaining 1,096,068
shares of common stock outstanding are restricted securities as that term is
defined under Rule 144 promulgated under the Securities Act. The sale of these
shares of common stock may have a depressive effect on the market prices
prevailing from time to time. This could impair our ability to raise capital
through the sale of its equity securities.

Possible De-listing of Securities from Nasdaq System; Risks Relating to Low
Priced "Penny" Stocks. The Company's common stock is listed on American Stock
Exchange. In order to continue to be listed on the American Stock Exchange,
however, we must, in addition to other requirements, maintain stockholders'
equity of at least $4,000,000 and market capitalization of at least $1,000,000.
AMEX also receives the right to de-list an entity in its discretion. In
connection with the original listing, AMEX granted the Company a waiver to the
minimum equity requirement. Among other criteria, AMEX will consider the
Company's financial condition and operating results, the public distribution of
securities and other non-quantitative criteria. Our failure to meet these
maintenance criteria in the future may result in the de-listing of our common
stock from AMEX, and trading, if

15
<PAGE>

any, in our securities would thereafter be conducted in the non-Nasdaq over-the-
counter market. As a result of such de-listing, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, our securities.

Although we anticipate that our common stock will be continue to be listed for
trading on AMEX, if the common stock were to become de-listed from trading on
AMEX and the trading price of the common stock were to fall below $5.00 per
share on the date the common stock was de-listed, trading in such securities
would also be subject to the requirements of certain rules promulgated under the
Exchange Act, which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny stock,
generally, any non-exchange listed equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors, generally
institutions. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage broker-
dealers from effecting transactions in our securities, which could severely
limit the market price and liquidity of such securities and the ability of
purchasers to sell our securities in the secondary market.

No Dividends. To date, the Company has not paid cash dividends on the
Common Stock and does not expect to declare or pay dividends on the Common Stock
in the foreseeable future. In addition, the payment of cash dividends may be
limited or prohibited by the terms of future loan agreements or the future
issuance of Preferred Stock. See "Description of Securities."

Authorization and Discretionary Issuance of Preferred Stock. The Board of
Directors are authorized, without further approval of the stockholders, to fix
the dividend rights and terms, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, and any other rights, preferences,
privileges and restrictions applicable to each new series of Preferred Stock.
The issuance of such stock could adversely affect the voting power of the
holders of Common Stock and, under certain circumstances, make it more difficult
for a third party to gain control of the Company, discourage bids for the Common
Stock at a premium, or otherwise adversely affect the market price of the Common
Stock. There are presently 118,125 shares of Series A Preferred Stock issued
and outstanding. See "Description of Securities."

ITEM 2. DESCRIPTION OF PROPERTY
----------------------------------

The Company owns no real estate. The Company leases approximately 13,000
square feet of space at 1434 West 11th Street, Los Angeles, CA, which it uses
for its executive offices and coin processing facility from Prime Financial
Partners, Ltd., an affiliate of Messrs. Korman and Miller. The lease agreement
expires in September, 2002 and provides for a base monthly rent of approximately
$5,600. The Company believes that its facilities are sufficient to accommodate
the Company's anticipated future requirements at the present time.

ITEM 3. LEGAL PROCEEDINGS
----------------------------

16
<PAGE>

CoinBank machine placements in light of the Company's decision to exit the free
placement business. Shaw's is claiming damages in excess of $75,000, for
contract termination fees and reimbursements. The Company believes that the
amount owed is approximately $55,000 and has accrued for the liability.
Furthermore, the Company has potential claims against Shaw's for damages to the
machines. The Company intends to defend itself in the suit, if served. There can
be no assurance that the Company will be successful in the defense.

On October 1, 1999, the Company and Coinstar, Inc. agreed to settle all
outstanding litigation between them. Under the terms of the settlement, the
Company received payment from Coinstar of $600,000 in cash and 30,000 shares of
common stock of Coinstar for a total value of $923,438. The Company granted
Coinstar a non-exclusive license to certain technology related to bulk coin
processing and certain other rights. The parties agreed to dismiss all claims in
the suit with prejudice. In October, 1999, the shares were recorded at market
price of $323,428 and in January, 2000, they were sold for $353,170, recognizing
a gain of $29,732.

In December, 1997, Vindex USA, Inc. filed a complaint against CAS, a
subsidiary of the Company, in the Superior Court of California, Los Angeles
County seeking to recover $40,000, an unspecified amount of commissions and
interest accrued thereon allegedly due it under the terms of a consulting
agreement it alleges was breached by the Company. The court has entered
judgement against Coinbank in favor of Vindex in the sum of $97,864.40. The
Company has filed an appeal which is pending and there are settlement
discussions still in progress although the outcome is uncertain.

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

NONE

PART II

ITEM 5. Market of Common Equity and Related Stockholder Matters
-----------------------------------------------------------------

The Company's Common Stock commenced trading on the Nasdaq-SmallCap Market on
July 9, 1998. The Company's Common Stock was not traded in any public securities
market prior to July 9, 1998. On April 3, 2000, the Company's common stock
commenced trading on the American Stock Exchange under the symbol, "TQ".

The following is the range of closing bid prices for the Common Stock for the
periods indicated below:

17
<PAGE>

Year Ending May 31, 2000 High Low
------- -------
<S> <C> <C>
Q1 June 1 - August 31 $11.875 $ 10.375
Q2 September 1 - November 30 13.375 11.3125
Q3 December 1 - February 29 20.750 13.3125
Q4 March 1 - May 31 23.500 6.125

Year Ending May 31, 1999 High Low
------- -------

Q1 July 9 - August 31 $ 9.875 $ 7.875
Q2 September 1 - November 30 8.625 5.250
Q3 December 1 - February 28 11.875 7.375
Q4 March 1 - May 31 13.750 10.125
</TABLE>

On August 30, 2000, the Company had a 52 week high and low price of $23.50 and
$5.00, respectively.

Dividend Policy
---------------

The Company has never paid any dividends on the Common Stock and the Board of
Directors does not intend to declare or pay any dividends on the Common Stock in
the foreseeable future. The Board of Directors currently intends to retain all
available earnings (if any) generated by the Company's operations for the
development and growth of its business. The declaration in the future of any
cash or stock dividends on the Common Stock will be at the discretion of the
Board and will depend upon a variety of factors, including the earnings, capital
requirements and financial position of the Company and general economic
conditions at the time in question. Moreover, the payment of cash dividends on
the Common Stock in the future could be further limited or prohibited by the
terms of financing agreements that may be entered into by the Company (e.g., a
bank line of credit or an agreement relating to the issuance of other debt
securities of the Company) or by the terms of any preferred stock that are or
may be issued and then outstanding.

Recent Sales of Unregistered Securities
---------------------------------------

In a private placement completed in November, 1999, the Company offered up to
52,500 Units, each Unit consisting of Ten Shares of Series A 8% Cumulative
Convertible Redeemable Preferred Stock, $.01 par value per share (the "Shares")
and five Series A Common Stock Purchase Warrants (the "Warrants"). Each Unit
had a purchase price of $95.00. Unless redeemed by the Company, each Share is
convertible into one share of Common Stock. Cumulative annual dividends of $.76
(8% per annum) per share will accrue from the date of original issue on the
Shares and be payable, when and as declared by the Board of Directors out of
funds legally available therefore, to holders of record on the 10th business day
prior to the dividend date of June 30, of each year, in cash, or at the option
of the Company, Warrants valued at $12.00 per Warrant. The Shares are redeemable
by the Company on not less than 30 nor more than 60 days written notice to the
registered holders, at any time, at a redemption price of $9.50 per share, plus
accumulated dividends. Each Warrant entitles the holder to purchase one share of
Common Stock during an exercise period commencing on the date of issuance and
terminating three years thereafter, at an exercise price equal to $12.00 per
share, subject to adjustments under certain circumstances. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, subject to the prior preferences and other rights of any
Senior Stock, but before any distribution or payment shall be made to the
holders of Junior Stock, the holders of the Series A Preferred Stock shall be
entitled to be paid $9.50 per share, and no more, in cash and/or in property
taken at its fair value as determined by the Board of Directors, at the election
of the Board of Directors.

On December 31, 1999, the company commenced a private offering pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation D. The Company
engaged Gunn Allen Financial, Inc. as placement agent and paid

18
<PAGE>

commissions of 10% and reimbursement of expenses. Pursuant to this offering 67.5
Units were sold. Each Unit consisted of (i) a Secured Convertible Promissory
Note in the principal amount of $50,000 convertible into Common Stock at a
conversion price of $9.50 per share and (ii) Series B Redeemable Warrants to
purchase an aggregate of 5,000 Warrant Shares at an exercise price of $13.00 per
share. The Company completed the Offering on January 5, 2000 and raised
approximately $3,360,000 in gross proceeds. The Company incurred approximately
$400,000 in offering expenses, consisting of legal costs, sales commissions and
other related costs. The Series B Warrants are redeemable by the by the Company
at a price of $.01 per Warrant provided that the underlying securities are
registered, the market price has averaged $18.00 per share for 20 consecutive
trading days and the Company has given the Warrant holders at least 20 days
written notice to exercise. This Note is secured by substantially all of the
assets of the Company. The holders of the notes are Entitled to a first priority
lien on the Company's assets subject to preexisting liens.

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

Overview
---------

The Company was organized in August, 1995, but its cash processing
operations were commenced by its now wholly owned subsidiary, National Cash
Processors, Inc. ("NCP") in May, 1994. The Company acquired NCP in January,
1996, from certain affiliates of the Company. The CoinBank portion of the
business is conducted through the Company's wholly owned subsidiary CoinBank
Automated Systems, Inc., which was incorporated in November, 1995.

The Company currently generates revenues through the purchase of loose
currency which is acquired in bulk at a small discount from face value and then
counted, sorted, wrapped and re-sold primarily to a variety of retail businesses
at face value plus a small fee or deposited to the Federal Reserve Bank for
credit to the Company's account. The Company also generates revenues through the
operation of self-service coin counting and processing machines (CoinBank
Machines). The Company's expenses have exceeded net revenues since inception.
For the fiscal year ended May 31, 1997, the Company sustained net losses of
$1,547,805. For the fiscal year ended May 31, 1998, the Company sustained net
losses of $2,727,145. For the fiscal year ended May 31, 1999, the Company
sustained net losses of $5,711,964. The Company incurred a net loss of
$6,639,901 for the year ended May 31, 2000.

Systems development expenses, marketing expenses, executive salaries and
general and other administrative costs are expected to increase as the Company
continues to develop its EMMA Platform. Inasmuch as the Company will continue to
have a high level of operating expenses, the Company will continue to be
required to make certain up-front expenditures in connection with its proposed
CoinBank machine sales effort and development of EMMA transaction processing
system. The Company anticipates that losses will continue for the foreseeable
future.

The Company records as revenue the service fee charged for coin and
currency processed on behalf of a customer but not purchased by the Company. The
Company also records as revenue the service fee charged to persons using
CoinBank machines. Gross revenues include the value of coin and currency
processed and does not represent revenue under generally accepted accounting
principles.

To the limited extent that the Company will market its CoinBank machines, it
intends to focus its future efforts on marketing CoinBank machines for sale
rather than "free placement". Revenues generated from CoinBank machines
accounted for approximately 46% of net revenues for the fiscal year ended May
31, 2000, compared to approximately 54% of net revenues generated from currency
processing. Company anticipates that the revenue associated with processing
fees derived from EMMA transaction processing system will become the primary
source of the Company's future revenues.

19
<PAGE>

The Company was awarded a contract to count, process and purchase currency for
the LACMTA for the period from April 1, 1997 to March 31, 1999, for a fee of
approximately 1% of all currency processed. The Company expects to purchase and
process between $35 and $40 million worth of currency on this contract during
fiscal 2000. The contract was renewed April 1, 2000 to March 31, 2005. The
Company records as revenue the service fee charged for the processing of
currency pursuant to such contracts. From time to time, the Company may submit
bids for additional similar contracts.

Results of Operations
----------------------

Fiscal Year Ended May 31, 2000, Compared to Year Ended May 31, 1999

Gross revenues include the value of the coins and currency processed for the
fiscal year ended 2000 and amounted to $ 42,301,355 compared to $ 46,381,668 for
fiscal year 1999. The decrease in coin and currency processed was primarily
attributable to a decrease in the number of coin processing customers during
fiscal 2000. This decrease was a direct result of the Company's planned
reduction of certain low margin coin processing activities. As a result of the
elimination of these low margin coin processing customers, net revenues, (as a
percentage of gross revenues) for the fiscal 2000, increased to $1,161,764 or
2.7% of gross revenues compared to $899,836 or 1.9% of gross revenues for fiscal
1999.

Cost of revenues for the year ended May 31, 2000, was $1,221,247 or 2.9% of
gross revenue compared to $765,220 or 1.8% of gross revenue in fiscal 1999. The
increase in direct costs was primarily the result of the increased costs
associated with servicing remote CoinBank installations and reclassification of
certain direct labor, telephone and depreciation costs into the cost of sales
from selling, general and administrative expenses.

Gross loss for the year ended May 31, 2000, was $59,483 or 0.5% of net
revenues, as compared to a gross profit of $134,616 or 15% of net revenues for
the year ended May 31, 1999. The decrease in gross profit was primarily
attributable to the increased direct costs associated with the operation of
CoinBank Automated Systems and reclassification of certain direct labor,
telephone and depreciation costs into the cost of sales from selling, general
and administrative expenses.

Selling, general and administrative expenses for the year ended May 31, 2000,
increased to $4,973,344 compared to expenses of $4,872,676 for the fiscal year
1999. These expenses consisted primarily of wages (and wage related costs),
outside contractor expenses, travel/promotional expenses, professional services
and facilities/office related expenses. The increase in selling, general and
administrative costs is due to increase in non-cash compensation cost offset by
a decrease in other costs due to cut backs in spending. Included in selling,
general and administrative expenses is non-cash compensation expense of $926,918
and $0 for the year ended May 31, 2000 and 1999, respectively. This expense was
due to the Company issuing 31,159 shares of common stock in conjunction with the
cashless exercise of stock options by the employees as well as issuing various
warrants.

Impairment on coin machines for fiscal year ended May 31, 2000 was $1,033,759.
The impairment was taken due to low inventory turnover for the coin machines. In
future periods, additional impairment may be taken based of future sales of coin
machines.

Depreciation and amortization expenses decreased to $156,749 during fiscal
2000 from $299,255 in fiscal 1999. The decrease was primarily attributable to
reclassification into cost of sales and transfer of coin machines from property
plant and equipment to machines held for sale.

20
<PAGE>

shares of common stock of Coinstar, for a total value of $923,438. In October
1999, the shares were recorded at a market price of $323,428 and in January
2000, they were sold for $353,170, recognizing a gain of $29,732.

Net interest expense for the fiscal years 2000 and 1999 was $1,332,335 and
$516,948 respectively. The decrease in interest expense was due to lower
indebtedness. Moreover a deemed interest expense of $852,632 was also recognized
in conjunction with the beneficial conversion of debt, associated with the
second private placement.

As a result of the foregoing, net losses for the years ended May 31, 2000 and
1999 were $6,639,901 and $5,711,964, respectively. The increase in net loss was
a direct result of the impairment loss on the coin machines held for sale.

Fiscal Year Ended May 31, 1999, Compared to Year Ended May 31, 1998

Gross revenues include the value of the coins and currency processed for the
year ended 1999 and amounted to $ 46,381,668 compared to $55,529,942 for Fiscal
1998. The decrease in coin and currency processed was primarily attributable to
a decrease in the number of coin processing customers during fiscal 1999. This
decrease was a direct result of the Company's planned reduction of certain low
margin coin processing activities. As a result of the elimination of these low
margin coin processing customers net revenues, as a percentage of gross
revenues, for the fiscal 1999, increased to $899,836 or 1.9% of gross revenues
compared to $878,852 or 1.6% of gross revenues for fiscal 1998.

Cost of revenues for the year ended May 31, 1999, was $765,220 or 1.7% of
gross revenue compared to $509,443, or 0.9% of gross revenue in fiscal 1998.
The increase in direct costs was primarily the result of the increased costs
associated with servicing remote CoinBank installations.

Gross profit for the year ended May 31,1999, was $134,616 or 15% of net
revenues, as compared to a gross profit of $369,409 or 42% of net revenues for
the year ended May 31, 1998. The decrease in gross profit was primarily
attributable to the increased direct costs associated with the operation of
CoinBank Automated Systems. Additionally National Cash Processing experienced a
decrease in the volume of MTA currency plus the elimination of a large coin
processing customer.

Selling, general and administrative expenses for the year ended May 31, 1999,
increased to $5,027,693 compared to expenses of $2,342,610 for the fiscal 1998.
These expenses consisted primarily of wages (and wage related costs), outside
contractor expenses, travel/promotional expenses, professional services and
facilities/office related expenses. The increase in selling, general and
administrative expenses were attributable to the increase in administrative &
marketing personnel and promotion as the Company has expanded its operations and
customer base. Selling, general and administrative expenses also increased as a
direct result of an increase in systems development personnel and activities
associated with the development of the EMMA transaction processing system. The
Company also recorded a charge on the assets held for sale, a result of changing
CoinBank machines from "free placement" units to for-sale units.

Net interest expense for the fiscal years 1999 and 1998 was $516,948 and
$499,840 respectively. The increase in interest expense was due to a one-time
bridge financing expense of $80,000.

Depreciation and amortization expenses increased to $299,255 during fiscal
1999 from $251,090 in fiscal 1998. The increase was primarily attributable to
increase in the depreciable value of CoinBank machines, during the period.

21
<PAGE>

As a result of the foregoing, net losses for the years ended May 31, 1999,
and 1998 were $5,711,964 and $2,727,145, respectively.

Liquidity and Capital Resources
-------------------------------

The Company's capital requirements have been and will continue to be
significant and its cash requirements have been exceeding its cash flow from
operations. At May 31, 2000, the Company had a working capital deficit of
$1,657,722 and unrestricted cash and cash equivalents of $355,364 compared to a
working capital deficit of $392,219 and unrestricted cash and cash equivalents
of $1,028,586 at May 31, 1999. At September 8, 2000, the Company had a cash
balance of $562,721. Since inception, the Company has satisfied its working
capital requirements through limited revenues generated from operations, the
issuance of equity and debt securities, borrowing under a line of credit, and
loans from stockholders and an affiliate of a previous executive officer of the
Company.

The Company's independent certified public accountants included an
explanatory paragraph in their report for the year ended May 31, 2000, which
indicated a substantial doubt as to the ability of the Company to continue as a
going concern. This concern is due primarily to substantial debt service
requirements and working capital needs. See independent certified public
accountant's letter.

Net cash used in operating activities was $2,769,086 for the year ended May
31, 2000, as compared to net cash used in operating activities of $5,285,060 for
the year ended May 31, 1999. The decrease in net cash used in operating
activities during fiscal 2000 was primarily the result of the Company's
downsizing of Coinbank operations, increase in accounts receivable of $20,064
and an increase in accounts payable of $161,678.

Net cash used in investing activities was $1,181,436 for the fiscal year ended
May 31, 2000, as compared to $997,688 for the fiscal year ended May 31, 1999.
The decrease in net cash used in investing activities was attributable to an
increase in capitalized software.

Net cash provided by financing activities for the year ended May 31, 2000, was
$3,277,300, as compared to net cash used of $2,587,881 for the year ended May
31, 1999. The amount of $3,277,300 primarily consists of financing costs and
debt repayment offset by proceeds from the private placement offering outlined
below. The increase in net cash provided by financing activities for the 2000
period was primarily attributable to the Company's initial public Offering plus
the exercise of the over allotment option for the 1999 period, which netted
approximately $9.5 million.

The Company entered into a credit agreement with GE Capital Corporation
("GE") pursuant to which the Company has borrowed $5,500,000 for the purchase of
CoinBank component equipment, working capital and general corporate purposes. As
of May 31, 2000, there was approximately $2,574,000 of principal outstanding.
Some of the amounts drawn under the line of credit are secured by coin machines.
Amounts borrowed under this line bear interest at approximately 9.0% per annum,
payable over a period of 60 months, subject to certain pre-payment penalties.
The Company cannot borrow any further under this credit agreement. The Company
is required to make monthly payments of principal and interest on this line of
credit, currently approximately $120,000. In May, 2000, the Company began
negotiating a modification of the payment terms and on June 29, 2000, obtained a
waiver to be in compliance with the payments terms. On September 12, 2000 the
Company entered into an agreement in principle with GE to defer principal
payments on the debt for twelve (12) months and to defer interest payments for
six (6) months. Both interest and principal will start amortizing upon
completion of a public stock offering. As consideration for the extension, the
Company and GE have agreed to increase the principal portion of the loan by
$100,000 and, after twelve (12) months, restart the amortization of the loans
for thirty (30) months. If the Company does not repay the loans in full within
twelve (12) months, then an additional $400,000 will be added

22
<PAGE>

to the principal portion of the loan. This addition will be financed by GE and
amortized over thirty (30) months as described above. The Company has agreed to
give GE a lien on all of the assets of the Company subject to any pre existing
liens. This agreement is subject to the Company obtaining equity of at least
$2,000,000 and final documentation.

In July, 1998, the Company completed an initial public offering of 1,485,000
shares. Net proceeds to the Company was approximately $8,845,000 after deducting
offering-related expenses of approximately $1,550,000. The Company used a
portion of the proceeds to repay outstanding indebtedness of $2,178,000. The
majority of the remaining proceeds were used in the development of new products
and upgrades, expansion of the Company's sales and marketing efforts and general
working capital.

On August 18, 1998, the Company sold 172,750 shares of common stock, in
connection with the partial exercise of the underwriter's over-allotment option,
at a price of $7.00 per share for gross proceeds of $1,209,250. Net of
underwriting commissions and the expenses, the Company received net proceeds of
approximately $1,055,000.

As of November 30, 1999, the Company completed this offering and received
gross proceeds of $1,122,188. The Company also paid sales commission of $69,825
in January of 2000. The Company has issued (I) 118,125 shares of Series A 8%
Cumulative Convertible Redeemable Preferred Stock and (II) 53,809 Series A
Common Stock Purchase Warrants (exercisable at $12.00 each).

The Company completed the offering on January 5, 2000 and raised approximately
$3,360,000 in gross proceeds. The Company incurred approximately $400,000 in
offering expenses, consisting of legal costs, sales commissions and other
related costs.

The Offering was comprised of both debt and equity components. The debt
offering had a beneficial conversion feature of $852,632, which was recorded as
deemed interest. The warrants issued in conjunction with the debt created
$316,500 of deferred interest expense of which $87,917 was amortized during the
three months ended May 31, 2000.

NEW ACCOUNTING PRONOUNCEMENT
----------------------------

Statement of Financial Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) issued by the FASB is
effective for financial statements with fiscal quarters of fiscal years

23
<PAGE>

beginning after June 15, 2000. The new standard provides for standardized
accounting and reporting for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. The
guidance applies to all entities. SFAS 133 requires companies to recognize all
derivative contracts as either assets or liabilities in the balance sheet and to
measure them at fair value. Fair value measurements are based on the guidance
contained in SFAS 107, Disclosures about Fair Value of Financial Instruments.
The Company does not expect adoption of SFAS No. 133 to have a material effect,
if any, on its results of operations.

ITEM 7. FINANCIAL STATEMENTS
----------------------------

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT

To the Board of Directors and Stockholders of
Cash Technologies, Inc.
Los Angeles, California:

We have audited the accompanying consolidated balance sheets of Cash
Technologies, Inc. and subsidiaries (The "Company") as of May 31, 2000 and 1999,
and the related consolidated statements of operations, stockholders' deficiency,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at May 31, 2000 and
1999, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1(a) to
the financial statements, the Company has suffered significant recurring losses
from operations and at May 31, 2000, had a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ BDO Seidman LLP

Los Angeles, California
August 31, 2000, except for Note 9
which is as of September 12, 2000

24
<PAGE>

CASH TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
MAY 31 MAY 31
2000 1999
-------------------- --------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 355,364 $ 1,028,586
Restricted Cash (Note 1(h)) - 44,610
Accounts Receivable 156,341 136,277
Inventories 176,163 201,555
Prepaid expenses and other current assets 800 9,256
-------------------- --------------------

Total Current Assets 688,668 1,420,284

COINBANK MACHINES HELD FOR SALE (Note 1(j)) 1,282,636 1,577,065

PROPERTY AND EQUIPMENT (net) (Note 2 & 3) 260,581 1,393,689

CAPITALIZED SOFTWARE COSTS (Note 1(r)) 1,161,214 -

OTHER ASSETS 39,500 56,682
-------------------- --------------------

TOTAL ASSETS 3,432,599 4,447,720
==================== ====================

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Current maturities of Notes Payable (Note 3) 1,359,229 1,172,732
Current maturities of Capital Lease Obligations 487 42,563
Accounts Payable 370,298 208,620
Accrued expenses & other current liabilities 616,376 388,588
-------------------- --------------------

Total Current Liabilities 2,346,390 1,812,503

Long-Term Notes Payable (Note 3) 1,293,266 2,564,723
Long-Term Convertible Debt (Note 3) 3,202,667 -

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS EQUITY (DEFICIENCY): (Note 5)
Common Stock, $0.01 par value, 20,000,000 shares authorized, 3,522,200 35,198 34,887
and 3,488,665 issued and outstanding at May 31, 2000 and 1999

8% Cumulative Redeemable Preferred Stock, $0.01 par value; 1,000,000 shares 1,122,188 -
authorized;
118,125 and '0' shares issued and outstanding at May 31, 2000 and 1999

Additional Paid In Capital 13,905,391 11,323,780
Accumulated Deficit
(18,472,501) (11,288,173)
-------------------- --------------------

Total stockholders' equity (deficiency) (3,409,724) 70,494
-------------------- --------------------

TOTAL LIABILITIES AND STOCKHOLDER EQUITY (DEFICIENCY) $ 3,432,599 $ 4,447,720
==================== ====================
</TABLE>

See notes to consolidated financial statements

25
<PAGE>

CASH TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED
ENDED MAY 31
2000 1999
-------------------- --------------------
<S> <C> <C>
GROSS REVENUES (Note 1 (e)) $ 42,301,355 $ 46,381,668
==================== ====================

NET REVENUES 1,161,764 899,836
COST OF REVENUES 1,221,247 765,220
-------------------- --------------------

GROSS PROFIT (LOSS) (59,483) 134,616

SELLING, GENERAL, & ADMINISTRATIVE EXPENSE 4,973,344 4,872,676
IMPAIRMENT ON COIN MACHINES 1,033,759 155,017
DEPRECIATION & AMORTIZATION EXPENSE 156,749 299,255
-------------------- --------------------

OPERATING LOSS (6,223,335) (5,192,332)

OTHER INCOME (Note 6) 923,438 -
INTEREST EXPENSE (1,332,335) (516,948)
-------------------- --------------------

LOSS BEFORE INCOME TAXES (6,632,232) (5,709,280)
INCOME TAXES (Note 4) 7,669 2,684
-------------------- --------------------

NET LOSS $ (6,639,901) $ (5,711,964.00)
==================== ====================

Deemed Dividends to preferred Shareholders 544,427 -

Net income (loss) Allocable to common
shareholders (7,184,328) (5,711,964)

Basic and diluted net loss per share $ (2.05) $ (1.74)

Basic and diluted weighted average
shares of common stock outstanding 3,500,917 3,288,871
==================== ====================
</TABLE>

See notes to consolidated financial statements

26
<PAGE>

CASH TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR TWELVE MONTHS ENDED MAY 31
2000 1999
------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $ (6,639,901) $ (5,711,964)
Adjustments to reconcile net loss to net cash used by
operating activities:

Noncash Deemed Interest Expense 852,632 -
Noncash Compensation Expense 926,918 -
Depreciation and amortization 156,749 299,255
Impairment of CoinBank Machines held for Sale 1,033,759 155,017
Gain on sale of asset - (511)
Changes in operating assets and liabilities:
Accrued interest 56,250 -
Account receivable (20,064) (95,879)
Inventories 25,392 (121,770)
Coinbank machinery held for sale 424,074 -
Prepaid expenses and other current assets 8,456 49,042
Other assets 17,182 337,759
Accounts payable 161,678 (351,191)
Accrued expenses and other current liabilities 227,788 155,182
------------------- -------------------

Net cash provided by (used in) operating activities (2,769,086) (5,285,060)
------------------- -------------------

INVESTING ACTIVITIES:
Purchase of Property and Equipment (64,832) (784,885)
Expenditures for Capitalized Software (1,161,214) -
Restricted Cash 44,610 (2,637)
------------------- -------------------
Net cash provided by (used in) investing activities (1,181,436) (787,522)
------------------- -------------------

FINANCING ACTIVITIES:
Deferred financing cost - (134,000)
Payments on capital lease obligation (42,076) (62,716)
Repayments on long-term debt (1,162,812) (1,145,741)
Proceeds from issuance of convertible debt 3,360,000 -
Net proceeds from issuance of preferred stock 1,122,188 (995,424)
Long Term- Note Payable - (250,000)
------------------- -------------------

Net cash provided by (used in) financing activities 3,277,300 (2,587,881)
------------------- -------------------

CHANGE IN CASH AND CASH EQUIVALENTS (673,222) 817,863
Cash and Cash Equivalent, Beginning of Year 1,028,586 210,723
------------------- -------------------

Cash and Cash Equivalent, End of Year $ 355,364 $ 1,028,586
=================== ===================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes $ 7,669 $ 16,968
Cash paid for interest $ 274,469 $ 516,948

SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION
The company issued shares of common stock as consideration for loans
due to stockholders $ - $ 1,412,106
The company transfered certain assets from property and equipment to
coinbank machines held for sale $ 943,705 $ 1,557,065
Purchase of property and equipment in exchange for vendor note $ 77,852 $ -
</TABLE>

See notes to consolidated financial statements

27
<PAGE>

Cash Technologies, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Years ended May 31, 1999 and 2000

<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, May 31, 1998 1,700,000 $ 17,000 - $ -

IPO common stock and warrants issued 1,788,665 17,887 - -
Net Loss - - - -

-------------------------------------------------------------------
Balance, May 31, 1999 3,488,665 34,887 - -

Issuance of redeemable preferred stock 118,125 1,122,188
Issuance of warrants for services
Issuance of common stock in conjunction
with the exercise of employee stock options 33,535 311
Issuance of warrants in conjunction
with sale of convertible debt (Note 3)
Beneficial conversion recognized in
conjunction with the sale of convertible debt (Note 3)
Net Loss

-------------------------------------------------------------------
Balance May 31, 2000 3,522,200 $35,198.00 118,125 $ 1,122,188
===================================================================
</TABLE>

<TABLE>
<CAPTION>
Additional Total
Paid-in Accumulated Stockholder's
Capital Deficit Equity (Deficiency)
----------------------------------------------------------------------
<S> <C> <C> <C>
Balance, May 31, 1998 $ 451,235 $ (5,576,209) $ (5,107,974)

IPO common stock and warrants issued 10,872,545 - 10,890,432
Net Loss - (5,711,964) (5,711,964)

----------------------------------------------------------------------
Balance, May 31, 1999 11,323,780 (11,288,173) 70,494

Issuance of redeemable preferred stock 485,871 (544,427) 1,063,632
Issuance of warrants for services 609,760 609,760
Issuance of common stock in conjunction
with the exercise of employee stock options 316,848 317,159
Issuance of warrants in conjunction
with sale of convertible debt (Note 3) 316,500 316,500
Beneficial conversion recognized in
conjunction with the sale of convertible debt (Note 3) 852,632 852,632
Net Loss (6,639,901) (6,639,901)

----------------------------------------------------------------------
Balance May 31, 2000 $ 13,905,391 $ (18,472,501) $ (3,409,724)
======================================================================

</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

CASH TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ORGANIZATION AND BASIS OF
PRESENTATION

(a) "Going Concern"--The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. The
Company has significant losses from operations and has used significant amounts
of cash for operations during the last three years. As of May 31, 2000, the
Company has both working capital and net capital deficiencies. Operating losses
and cash flow deficiencies have continued throughout 2000.

In view of the financial deficiencies, there is substantial doubt about the
Company's ability to continue as a going concern. The recoverability of recorded
assets and satisfaction of the liabilities is dependent on the continued
operations of the Company, which is in turn dependent upon the Company's ability
to meet its financing requirements on a continuing basis as well as to succeed
in its future operations. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
or liabilities.

Due to the unfavorable results of operations and cash flows, the Company is
in the process of negotiating payment terms with vendors representing a
significant portion of its accounts payable and is managing the payments of the
remaining accounts payable on a case-by-case basis. Management is also taking
certain steps to obtain additional equity financing to improve its operating
results and financial position.

Management estimates that the proceeds contemplated by a $2,000,000 private
placement, which is currently in process, will be sufficient to fund the
Company's operations through the third Quarter of fiscal 2001. The Company also
entered into a Letter of Intent with a brokerage firm to perform a secondary
public offering for gross proceeds of $10,000,000, which is anticipated to be
completed during the second Quarter of fiscal 2001, however the market
conditions and other factors can delay or preclude the proposed offering. The
information contained herein does not constitute an offer of any securities for
sale. The securities may not be sold until a registration statement is with the
Securities and Exchange Commission is effective. This notice is not an offer to
sell the securities and the Company is not soliciting an offer to buy the
securities in any state where the offer or sale is not permitted. The Securities
and Exchange Commission or any other regulatory agency has not approved or
disapproved the Securities for offer or sale. Any representation to the contrary
is a criminal offense. The Company also plans to increase revenues and reduce
costs in order to generate sufficient positive cash flow beginning in second
quarter of fiscal 2002. While the Company believes that its financing and
revenue generation plans will be successful, no assurances can be given that the
Company will be successful and that the Company will continue as a going
concern.

(b) Basis of Consolidation--The accompanying consolidated financial
statements include the accounts of Cash Technologies, Inc. ("CTI"), a Delaware
corporation, and its wholly owned subsidiaries, National Cash Processors, Inc.
("NCP"), and CoinBank Automated Systems ("CAS") together the "Company." CoinBank
Automation Handels GmbH, Salzburg, Austria ("CoinBank Europe" or "CBE") was
treated as a division of CoinBank Automated Systems during this period and was
consolidated into CoinBank Automated Systems. All significant inter-company
transactions and accounts have been eliminated in consolidation. CTI was
incorporated in August, 1995. In January, 1996, certain affiliates of the
Company exchanged their stock in NCP as part of a combination of entities under
common control. CAS was incorporated in November, 1995.

(c) Business--The principal business activity of each entity is as follows:
CTI is a holding company; NCP is a full-service cash-processing entity providing
sorting, counting and wrapping functions to cash-intensive businesses; CAS
offers self-service coin-counting machines. CBE functions as a European sales
office for the Company.

29
<PAGE>

Approximately 48% of the Company's net revenues were derived from one customer
for the year ended May 31, 2000, and 75% of the Company's net revenue was
derived from one customer for the year ended May 31, 1999.

(d) Revenue Recognition--The Company recognizes service fee income when coins
and currency are processed. In certain instances, customers will remit funds to
the Company in advance of the coin shipments to them. In certain instances,
coins are deposited by customers before payment is made by the Company. Included
in accounts payable are $20,843 and $66,102 at May 31, 2000 and 1999,
representing funds received in advance of coin shipment and deposits/collection
of coins received before payment was made to the customer.

(e) Gross revenues-- Include the value of coin and currency processed and do
not represent revenue under generally accepted accounting principles.

(f) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.

(g) Cash Equivalents--The Company considers all investments purchased with an
original maturity of three months or less to be cash equivalents.

(h) Cash-Restricted--The Company no longer maintains a cash deposit as
security toward the daily purchase of currency.

(i) Inventories--Inventory consists of coins and currency stated at face
value.

(j) CoinBank Machines Held for Sale--The Company has designated its CoinBank
machines as being held for sale. CoinBank machines held for sale are recorded at
the lower of the cost or estimated fair value, which includes an estimate of the
costs to sell these assets. The estimated fair value is based on information
including recent sales of CoinBank machines and estimated present value
techniques. During the fiscal year ended May 31, 2000, the Company transferred
$943,705 from property plant and equipment to coin machines held from sale.
During the fourth quarter management evaluated the estimated fair market value
of these machines and subsequently recorded an impairment loss of $1,015,826.

(k) Property and Equipment--Property and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful life of the related asset, which ranges from 3
to 7 years. Amortization of leasehold improvements is computed using the
straight-line method over the lesser of the estimated life of the asset or the
remaining term of the lease.

(l) Impairment of Long-Lived Assets--The Company evaluates long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. If the estimated future cash
flows (un-discounted and without interest changes) from the use of an asset are
less than the carrying value, a write-down would be recorded to reduce the
related asset to its estimated fair value.

(m) Income Taxes--The Company files a consolidated federal income tax return
and a combined California franchise tax return. Deferred income taxes have been
recognized for temporary differences between the financial reporting and income
tax bases of assets and liabilities, which are based on the enacted tax rates
expected to be in effect when such amounts are expected to be realized or
settled. A valuation allowance is established when necessary, to reduce deferred
income tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the year plus or minus the change during the
year in deferred income taxes.

30
<PAGE>

(n) Employee Stock Option--The Company adopted statement of financial
accounting standard No. 123, "Accounting Based Compensation"(SFAS No. 123), as
of June 1, 1998, which establishes a fair value method of accounting for stock-
based compensation plans. In accordance with SFAS No. 123, the Company has
chosen to continue to account for stock-based compensation utilizing the
intrinsic value method prescribed in APB 25. Accordingly, compensation cost for
stock option is measured as the excess, if any, of the fair market price of the
company's stock at the date of grant over the amount an employee must pay to
acquire the stock.

Also, in accordance with SFAS No. 123, the Company has provided footnote
disclosure with respect to stock-based employee compensation. The cost of stock-
based employee compensation is measured at the grant date on the value of the
award and is recognized over the service period. The value of the stock-based
ward is determined using a pricing model whereby compensation cost in excess of
the fair value of the stock as determined by the model at the grant date or
other measurement date over the amount an employee must pay to acquire the
stock.

(o) Basic and Diluted Net Loss per Common Share--Basic and diluted net loss
per common share is based on the weighted average number of common shares
outstanding during the respective periods. Statement of Financial Accounting
Standards No. 128, "Earnings per Share" issued by the FASB is effective for
financial statements with fiscal years and interim periods ending after December
15, 1997. SFAS 128 provides for the calculation of Basic and Diluted earnings
per share. Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding during the periods presented. Diluted earnings per
share reflect the potential dilution of securities that could share in the
earnings, such as stock options, warrants or convertible debentures. Stock
options and warrants outstanding during the periods presented were not included
in diluted earnings per share since their effect would be anti-diluted.

(p) Fair Value of Financial Instruments--Financial instruments consist of
accounts receivable and payable, which have a fair value approximating the book
value due to their short-term nature; notes payable for which fair value
approximates book value due to interest rates on long-term debt approximate
current interest rates, and amounts due to stockholders have a fair value that
cannot be determined due to the related-party nature of the transactions.

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

(r) Capitalized Software --The research and development of new software
products and enhancements to existing software products which 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. Once
technological feasibility is established all software production cost will be
capitalized and reported at the lower of unamortized cost or net realizable
value until the product is available for general release to customers.
Capitalized software cost will be amortized based on current and future expected
revenue for each product subject to an annual minimum based on straight-line
amortization over the remaining estimated life of the product, not to exceed 5
years. The Company will evaluate the recoverability of all capitalized software
cost on a quarterly basis by comparing the net realizable value, determined
pursuant to management's estimates of future product cash flows, with the
unamortized capitalized software cost

31
<PAGE>

balance. As of May 31, 2000, capitalized software costs amounted to $1,161,214.
No amortization has been expensed as the product is not yet available for
general release to customers.

(s) Concentration of Credit Risk--Financial instruments that potentially
subject the Company to a concentration of credit risk consists primarily of
accounts receivable. The receivables are unsecured, and the Company performs
ongoing credit evaluations of its customers. At May 31, 2000, the receivable
from a major customer was $133,103.

2. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
2000 1999
-------- ----------
<S> <C> <C>
Machinery and equipment ............................................ $ 49,977 $1,562,643
Security systems ................................................... 26,219 7,523
Furniture and fixtures ............................................. 13,714 22,519
Vehicles ........................................................... 14,415 14,415
Computer equipment ................................................. 225,644 148,561
Leasehold improvements............................................... 125,444 117,989
Equipment under capital Lease........................................ 289,716 289,716
-------- ----------
Total Property and Equipment...................................... $745,129 $2,163,366
Less accumulated depreciation . 484,548 769,677
-------- ----------
$260,581 $1,393,689
======== ==========
</TABLE>

Included in property and equipment are the following assets held under capital
leases:

<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Machinery and equipment ......................................... $206,970 $206,970
Security systems ................................................ 35,264 35,264
Computer equipment .............................................. __47,482 47,482
-------- --------
289,716 289,716
Less accumulated depreciation at May 31, 2000 and 1999............ 256,961 215,573
-------- --------
$ 32,755 $ 74,143
======== ========
</TABLE>

Depreciation expense for the years ended May 31, 2000 and 1999 on assets held
under capital leases was $41,388 and $44,100.

32
<PAGE>

CASH TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. NOTES PAYABLE

<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Equipment loans, were secured by the personal guarantees of the two
Principal Stockholders of the Company. The guarantors were released 90
days after the Company's initial public offering. Interest rates range
from 3.88% to 9.25%, with the loans maturing through 2002. Pursuant to
a loan and security agreement and related note, as revised (collectively
the "Agreement"), with a finance company, the Company borrowed
$5,500,000. The finance company has indicated that all funds advanced to
the Company are to be secured by equipment subsequent to year end the
Company entered into an agreement with the finance company subsequent to
year end the Company entered into an agreement with the finance Company.
(Note 9)................................................................ $2,574,643 $3,737,455

Enhancement work done on coin machines was converted into a notes
payable with the vendor. The loan will mature on February, 2001. The
interest rate is at 10% and interest payments are made on a monthly
basis................................................................... 77,852 -----
---------- ----------

2,652,495 3,737,455
Less current portion ................................................ 1,359,229 1,172,732
------------------------
Long term maturity ..................................................... $1,293,266 $2,564,643
========== ==========
</TABLE>

Maturity of Notes Payable are as follows at May 31, 2000

<TABLE>
<CAPTION>
Year Ending
------------------------------------------------------
May 31,
------------------------------------------------------
<S> <C>
2001 ..................................... 1,359,229
2002 ..................................... 1,293,266
----------
$2,652,495
==========
</TABLE>

33
<PAGE>

In order to raise funds for the development of EMMA, on December 31, 1999, the
company commenced a private offering pursuant to Section 4(2) of the Securities
Act of 1933 and Regulation D ("the Offering"). The Company engaged Gunn Allen
Financial, Inc. as placement agent and paid commissions of 10% and reimbursement
of expenses. Pursuant to this offering 67.5 Units were sold. Each Unit
consists of (i) a Secured Convertible Promissory Note in the principal amount of
$50,000 convertible into Common Stock at a conversion price of $9.50 per share
(maturity date of the note is five years from the date of issuance and can be
converted immediately) and (ii) Series B Redeemable Warrants to purchase an
aggregate of 5,000 Warrant Shares at an exercise price of $13.00 per share
(warrants are vested immediately and expire five years from the date of
issuance). The securities in the private offering memorandum were sold in
reliance upon the availability of an exemption from the registration provisions
of the Securities Act of 1933 by virtue of the Company's intended compliance
with the provisions of sections 4(2), 4(6) thereof and rule 506 adopted by the
Securities and Exchange Commission thereunder. The securities may not be
transferred or resold except pursuant to registration under the Securities Act
or an exemption therefrom.

The Company completed the Offering on January 5, 2000 and raised $3,360,000 in
gross proceeds. The Company incurred approximately $400,000 in offering
expenses, consisting of legal costs, sales commissions and other related costs.

CASH TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. INCOME TAXES

As of May 31, 2000, the Company has available federal net operating loss
("NOL") carry-forwards that approximate $16,400,000 and may be applied against
future taxable income through 2020. State NOL carry-forward are approximately
$10,800,000 and expire through 2004. Since management can not determine if it is
more likely than not that the deferred tax asset will be realized, a 100%
valuation reserve has been set up to entirely offset the deferred tax asset of
$6,500,000. The utilization of NOLs may be limited in the future if significant
changes in stock ownership occur. Temporary differences other than the NOL are
not material. The current tax expense is due to payment of minimum state taxes.

As of May 31, 1999, the Company has available federal net operating loss
("NOL") carry-forwards that approximate $10,800,000 and may be applied against
future taxable income through 2019. State NOL carry-forward are approximately
50% of federal amounts and expire through 2004. Since management can not
determine if it is more likely than not that the deferred tax asset will be
realized, a 100% valuation reserve has been set up to entirely offset the
deferred tax asset of $4,200,000. The utilization of NOLs may be subject to
limitations imposed by the Internal Revenue Code. Temporary differences other
than the NOL are not material. The current tax expense is due to payment of
state minimum taxes.

5. STOCKHOLDERS EQUITY

34
<PAGE>

In February, 1997, the Company amended its certificate of incorporation to
increase the number of authorized shares of common stock to 20,000,000.

In July, 1998, the Company completed an initial public offering of 1,485,000
shares and in August, 1998 completed an over-allotment of 172,790 shares of its
common stock. As of May 31, 2000, the Company had 3,519,824 out standing shares
of common stock. (Note 7 on Stock Option Plan and Warrants).

On July 9, 1998, the Company completed an initial public offering of 1,485,000
shares of its common stock and received net proceeds of approximately $8,845,000
after deducting commissions and expenses of $1,550,000. At the same time, the
Company issued approximately 130,915 shares of its common stock and certain
officers and stockholders exchanged approximately 161,830 shares of the
Company's common stock owned by them in exchange for approximately $1,412,106 of
indebtedness to shareholders.

The Company granted options under the Employee Option Plan to purchase common
stock. 227,643 options were granted at $7.00 per share and 285,887 options were
granted at $3.50 per share.

Prior to the initial public offering, the Company had issued various
subordinated promissory notes. These notes were repaid with a portion of the net
proceeds from the initial public offering of the Company's common stock. In
conjunction with liquidation of the notes, the Company issued warrants to
purchase 653,300 shares of Common Stock at prices ranging from of $3.50 to $8.00
per share. (Note 6)

In August, 1998, the Company issued 172,790 shares of common stock in
connection with the partial exercise of the over-allotment option. Net proceeds
to the Company were approximately $1,055,071 after deducting $154,179 for
commissions and expenses.

In order to raise funds for working capital and the development of the
Company's E-Commerce Message Management Architecture (EMMA) system, on July 27,
1999, the Company commenced a private offering pursuant to Section 4(2) of the
Securities Act of 1933 and Regulation D. The Company was offering up to 52,500
units, each unit comprised of (I) 10 shares of Series A 8% Cumulative
Convertible Redeemable Preferred Stock and (II) 5 Series A Common Stock Purchase
Warrants. Each share of the Series A Preferred Stock is convertible into one
share of Common Stock. The Series A Warrants are exercisable at $12.00 per
share. The securities in the private offering were being sold in reliance upon
the availability of an exemption from the registration provisions of the
Securities Act of 1933 by virtue of the Company's intended compliance with the
provisions of sections 4(2), 4(6) thereof and rule 506 adopted by the Securities
and Exchange Commission thereunder. The securities may not be transferred or
resold except pursuant to registration under the Securities Act of 1933 or an
exemption therefrom.

On November 30, 1999, the Company completed this offering and received gross
proceeds of $1,122,188. The Company also paid sales commission of $69,825 in
January of 2000. The Company has issued (i) 118,125 shares of Series A 8%
Cumulative Convertible Redeemable Preferred Stock and (ii) 53,809 Series A
Common Stock Purchase Warrants (exercisable at $12.00 per share).

The Company recorded deemed dividends of $522,640 for the Preferred Stock
issued for the period. This amount was based on (i) the difference between the
closing market price and the offering price of the Preferred Stock plus (ii) the
value of the Warrants associated with the Preferred Stock, valued using the
Black Scholes model.

The Company issued one hundred thousand (100,000) Stock Purchase Warrants to
Starr Securities at $10.375 each for consulting services including advice
related to future merger, acquisition, financing and other capital transactions.
These options have been valued at $190,856 using the Black Scholes model and are
recorded as deferred offering costs.

35
<PAGE>

The Company issued Gunn Allen Securities twenty five thousand (25,000) Stock
Purchase Warrants at $10.375 for services related to assisting the Company with
future capital transactions in late August of 1999. These options were not
recorded in the first quarter of 1999 and were subsequently recorded in the
second quarter of 1999. These options have been valued at $47,714 using the
Black Scholes model and this amount was recorded as an expense.

The Company also issued Gunn Allen Securities one hundred thousand (100,000)
Stock Purchase Warrants at $11.3125 for services related to assisting the
Company with future capital transactions in September of 1999. These options
have been valued at $208,099 using the Black Scholes model and this amount was
recorded as an expense.

The Company also issued WAB Capital twenty five thousand (25,000) Stock
Purchase Warrants at $12.9375 for consulting and research services in November
of 1999. These options have been valued at $51,291 using the Black Scholes
model and this amount was recorded as an expense.

The Company also issued Howard Brand thirty thousand (30,000) Stock Purchase
Warrants at $11.3125. These options have been valued at $62,431 using Black
Scholes model and this amount is being expensed over a one year period. The
Company has recorded an expense of $31,214 for the fiscal year ended May 31,
2000. These warrants had their exercise price reprised to $5.00 a share in
August, 2000. Also in August, 2000, Mr. Brand was issued an additional 70,000
Stock Purchase Warrants at $5.00.

During the fiscal year ended May 31, 2000, the Company issued 31,159 shares of
common stock in conjunction with the exercise of stock options by its employees.
In order to effect a cashless transaction, an additional 58,059 incentive stock
options were forfeited. These shares of common stock are restricted for a
period of one year from the date of exercise. This cashless transaction resulted
in a charge to noncash compensation of $317,159.

The Company issued 337,500 Stock Purchase Warrants in connection with the
convertible debt offering. See Note 3.

6. OTHER INCOME

7. STOCK OPTION PLAN AND WARRANTS

The Company adopted a 1996 stock option plan (the "Option Plan"). As of May
31, 2000, a total of 775,887 shares of the Company's common stock have been
reserved for issuance under the Option Plan. The Option Plan is administered by
the Board of Directors, or a committee appointed by the Board of Directors,
which determine the recipients and term of the awards granted (Item 10. "Stock
Options").

In addition to the above mentioned stock options, in July, 1998, in
conjunction with the Company's initial public offering certain debt holders were
granted options/warrants in exchange for note repayments.

36
<PAGE>

The Company has granted the following options to purchase common stock as of
May 31, 2000.

<TABLE>
<CAPTION>
Number of Weighted Average
Options Price $/Sh
---------- ----------------
<S> <C> <C>
Options Outstanding - June 1, 1998 285,887 $3.50

Employee Stock Options
----------------------
Granted 383,143 7.06
Exercised - -

Shareholder Warrants and Options
--------------------------------
Granted 653,300 7.46
Exercised - -

--------------------------------------
Options outstanding - May 31, 1999 1,322,330 $6.49
--------------------------------------

Employee Stock Options

Granted 64,000 $10.73
Expired 54,971 8.95
Exercised 61,592 7.85

Shareholder Warrants and Options

Granted 746,562 11.94
Expired - -
Exercised - -
--------------------------------------
Options outstanding - May 31, 2000 2,016,329 $ 8.53
--------------------------------------
</TABLE>

Stock Based Compensation

All stock options issued to employees have an exercise price not less than the
fair market value of the company's Common Stock on the date of grant, and in
accounting for such options utilizing the intrinsic value method there is no
related compensation expense recorded in the Company's financial statements. If
the compensation had been determined based on the fair market value of the stock
option on their dates of grant in accordance with SFAS 123, the Company's net
loss and loss per share for the years ended May 31, 2000 and 1999, would have
been increased to the pro forma amounts present below:

<TABLE>
<CAPTION>
2000 1999
Net Loss ----------- -----------
--------
<S> <C> <C>
As Reported ..................................................... $(6,639,901) $(5,711,964)
Pro Forma ....................................................... $(7,450,875) $(7,806,292)

Basic and Diluted Loss Per Common Share
---------------------------------------
As Reported ..................................................... (2.05) (1.74)
Pro Forma ....................................................... (2.13) (2.37)
</TABLE>

For the fiscal year ended May 31, 2000, 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

37
<PAGE>

1997-2000, expected life of the option is 5 years, expected volatility of 29%,
risk free interest rate of 5.75% and a 0% dividend yield. The weighted average
fair value at the grant date for such option is $4.85 per option.

For the fiscal year ended May 31, 1999, the fair value of option grants was
estimated on the date of grant utilizing the Black-Scholes option-pricing model
with the weighted average assumption for options granted during 1997-1999,
expected life of the option was 5 years, expected volatility of 51%, risk free
interest rate of 6% and a 0% dividend yield. The weighted average fair value at
the grant date for such options was $6.49 per option.

Outstanding Exercisable
Weighted Average Weighted Average
--------------------------------------- -----------------------------
Life Exercise Exercise
Exercise Price Per share Shares (Years) Price Shares Price
------------------------------------------------------------------------ -----------------------------
<S> <C> <C> <C> <C> <C>
$ 3.50 290,000 3.00 $ 3.50 241,629 $ 3.50
--------------------------------------------------------------------------------------------------------------------------

$ 6.00 60,170 3.50 $ 6.00 17,167 $ 6.00

$ 6.30 50,000 3.50 $ 6.30 33,333 $ 6.30

$ 7.00 476,830 3.50 $ 7.00 403,044 $ 7.00

$ 8.00 350,000 3.50 $ 8.00 350,000 $ 8.00

$ 8.50 33 3.50 $ 8.50 33 $ 8.50

$ 10.375 201,500 4.75 $10.375 201,500 $10.375

$ 10.5625 30,000 4.75 $ 10.56 5,000 $ 10.56

$ 10.75 1,234 3.75 $ 10.75 500 $ 10.75

$ 11.3125 130,000 4.75 $ 11.31 130,000 $ 11.31

$ 12.00 59,062 4.50 $ 12.00 59,062 $ 12.00

$ 12.25 5,000 4.75 $ 12.25 5,000 $ 12.25

$ 12.9375 25,000 4.75 $ 12.94 25,000 $ 12.94

$ 13.00 337,500 4.50 $ 13.00 337,500 $ 13.00
----------------------------------------------------------------------------------------
Total options outstanding 2,016,329 $ 8.53 1,808,768 $ 8.78
----------------------------------------------------------------------------------------
</TABLE>

A total of 60,559 of employee and shareholders warrants/options were exercised
as of the fiscal year end May 31, 2000.

8. COMMITMENTS AND CONTINGENCIES

In January, 1997, the Company entered into a five-year licensing and
manufacturing services agreement with Geld Bearbeitungs Systeme GmbH, an
Austrian corporation ("Geld"). Pursuant to that agreement Geld granted the
Company the exclusive, perpetual right to use certain technology incorporated in
CoinBank machines in North and South America and Asia, provided that the Company
purchases a minimum quantity of coin-counting components used in CoinBank
machines over the term of the agreement.

In August, 1998, the Company entered into a three-year distribution agreement
with Geld, subject to successive one-year renewal periods. Pursuant to that
agreement Geld granted the Company the exclusive right to distribute

38
<PAGE>

and sell cash processing equipment in all areas of the world not covered by the
January, 1997 agreement between Geld and the Company (the "Territory"), except
to certain financial institutions in Austria, provided that the Company
purchases a minimum number of cash processing machines from Geld over a
specified period during the initial three-year term of the April, 1997
agreement.

In March, 1999, the Company entered into a letter of intent to acquire 51% of
the capital stock of the Geld (the "Acquisition") and at that time the parties
were completing their due diligence and financial statements while continuing to
negotiate the terms of a definitive purchase agreement, as well as side
agreements such as the terms of the employment agreements for key employees.

We have commenced a lawsuit against Geld Bearbeitungs Systeme GES.M.B.H., an
Austrian entity which had been manufacturing certain of our CoinBank machines.
As described in our SEC Reports, we have a five year licensing and manufacturing
services agreement with Geld. We had previously entered into a letter of intent
to acquire Geld and certain disputes have arisen regarding the acquisition and
licensing agreements between the parties. We instituted the suit to enforce
certain licensing rights under our agreements and to enforce the acquisition
letter of intent. Although we believe, based upon advice of our Austrian
counsel, that we have a meritorious and strong claim, there can be no assurance
that we will be successful in our suit. Recently the Austrian Courts awarded
the Company a 10% ownership interest n Geld resulting from a ruling adverse to
one of its principals.

The Company has negotiated an agreement with Tecwings Industrialisierung und
Electronickproduktion GmbH for the continued manufacturing of CoinBank machines.

Although the Company has not been served with a complaint, it is aware that
Shaw's Supermarkets has filed a lawsuit (Shaw's Supermarkets, Inc. v. Cash
Technologies, Inc., CoinBank Automated Systems Inc. United States District
Court, District of Massachusetts) against the Company claiming breach of
contract and damages. The Company had been placing Coinbank machines in Shaw's
locations in New England and had been negotiating a settlement and termination
agreement with Shaw's to terminate the CoinBank machine placements in light of
the Company's decision to exit the free placement business. Shaw's is claiming
damages in excess of $75,000, for contract termination fees. The Company
believes that the amount owed is about $55,000 and has accrued for the
liability. Furthermore, the Company has potential claims against Shaw's for
damages to the machines. The Company intends to defend itself in the suit, if
served. There can be no assurance that the Company will be successful in the
defense.

In December, 1997, Vindex USA, Inc. filed a complaint against CAS, a
subsidiary of the Company, in the Superior Court of California, Los Angeles
County seeking to recover $40,000, an unspecified amount of commissions and
interest accrued thereon allegedly due it under the terms of a consulting
agreement it alleges was breached by the Company. The court has entered
judgement against Coinbank in favor of Vindex in the sum of $97,864.40 and has
substantially accrued for the liability. The Company has filed an appeal, which
is pending and there are settlement discussions still in progress although the
outcome is uncertain.

The Company has entered into a three (3) year employment agreement with Mr.
Korman effective July, 1998, which provides for an initial annual base salary of
$120,000, base salaries of $150,000 and $180,000 in the second and third years,
respectively, and payment of such bonuses as the Board of Directors determines.
Any such bonus will be voted on by the entire Board, including Mr. Korman,
unless Mr. Korman or another director chooses to abstain from voting on the
matter. Mr. Korman also receives the use of a company automobile. The
agreement includes Mr. Korman's covenant not to compete with the Company's
business during the term of the Agreement and for a period of one year
thereafter. The agreement requires Mr. Korman to devote not less than 40 hours
per week of his business time to the business of the Company. Mr. Korman also
participates in other business endeavors which require a portion of his business
time. Although Mr. Korman has advised the Company that his participation in
outside business matters should not interfere with his performance of his duties
as President and Chief Executive Officer of the Company, there can be no
assurance that a conflict of interest will not arise with respect to the

39
<PAGE>

allocation of Mr. Korman's time or that such conflict would be resolved in the
Company's favor. The loss of the services of Mr. Korman could have a material
adverse effect on the Company's business and prospects.

The Company has entered into an employment agreement with Christine Dobbings
effective January 1, 1998, whereby Ms. Dobbings is employed as Vice President of
Marketing and Sales. The agreement terminates in January, 2003. Pursuant to
the employment agreement, Mrs. Dobbings receives a base salary of $8,533 per
month subject to annual increases of 15% per annum. Ms. Dobbings also receives
a monthly automobile allowance of $500 per month. In addition, Ms. Dobbings
received five-year Common Stock options under the Employee Stock Option Plan to
purchase an aggregate of 50,000 shares with exercise prices ranging between
$3.50 and $7.00 per share. The options have vested. The agreement further
provides that Ms. Dobbings may receive a severance payment equal to the total
amount of her previous twelve-month's base salary if she is terminated without
cause.

On September 12, 1997, the Company entered into a commercial single tenant
lease agreement with a related party. The new lease became effective on
September 13, 1997 and will expire on September 13, 2002. The annual rent is
67,416. Rent expense is recognized using the effective rent method over the life
of the lease. The lease contains rent escalations and certain rent abatements.
There is a provision for a 60-month renewal option. The lease requires the
payment of costs such as insurance and other operating costs in addition to
minimum rentals.

The Company is committed under non-cancelable facility lease agreements and
equipment operating and capital leases as follows:

<TABLE>
<CAPTION>
Years Ending
-------------
May 31
------ Capital Operating
--------------------------
<S> <C> <C>
2001 ........................................................ $486 $ 67,416
2002 ........................................................ 0 67,416
2003 ........................................................ -- 0
--------------------------
486 134,832
Less interest .............................................. 0 0
Less current maturity ...................................... 486 0
--------------------------
$ 0 $134,832
==== ========
</TABLE>

Rent expense was $67,413 and $71,971 for the years ended May 31, 2000 and
1999.

9. SUBSEQUENT EVENTS

On August 24, 2000, Cash Technologies, Inc., entered into a letter of
intent to acquire up to 100% of privately-held RBSA, Inc., an ATM transaction
processor headquartered in Carrolton, Texas, for $6,000,000 in cash and stock.
RBSA is an ATM processor, driving approximately two million transactions per
month from approximately 5,000 ATMs located across the United States. RBSA
provides an array of advanced customer service tools to its clients, including
real-time Internet-accessible transaction reports and the ability to perform
rapid new-ATM setups automatically though the company's website, rather than the
laborious call-center operation used by other processors. RBSA's approach fits
Cash Technology's philosophy to utilize state-of-the-art technologies to enhance
traditional institutional transaction processing methods. The Robinson-Humphrey
Company, LLC, is acting as financial advisor to the Company in this transaction.
Closing of the transaction is subject to execution of a final agreement,
approval by the Board of Directors of Cash Technologies, normal closing
conditions and pending financing. Terms of the transaction provide for the
acquisition of at least 51% of RBSA. The final purchase price will be dependent
upon the percentage of ownership to be acquired and satisfaction of RBSA's post-
closing revenue and income targets. There can be no assurance that the
transaction will be completed upon the terms outlined, if at all.

40
<PAGE>

The Company is currently engaged in a private placement and is offering up
to $2,000,000 of units comprised of Series B 8% Preferred Stock and Series C
Warrants. Each unit has a purchase price of $100,000 and is comprised of 20,000
shares of Series B Stock and 4,000 Series C Warrants. The Series B Stock has
annual dividends payable at 8% per year, payable in cash or Common Stock at the
option of the Company. The Series C Warrants have an exercise price of $2.50 per
share. The Company intends to use the proceeds for working capital and debt
repayment. The securities in the private offering are being sold made in
reliance upon the availability of an exemption from the registration provisions
of the Securities Act of 1933 by virtue of the Company's intended compliance
with the provisions of sections 4(2), 4(6) thereof and rule 506 adopted by the
Securities and Exchange Commission thereunder. The securities have neither been
registered with, nor approved or disapproved by, the SEC or by the securities
regulatory authority of any state, and neither the SEC nor any such state
authority has passed upon or endorsed the merits of the offering, and it is not
intended that any of them will. Any representation to the contrary is a criminal
offense. There can be no assurance that the transaction will be completed upon
the terms outlined.

On September 11, 2000, the Company entered into an agreement to hire Ken
Paull as Senior Vice-President of Sales and Marketing. The agreement terminates
in September, 2003. Pursuant to the employment agreement, Mr. Paull receives a
yearly salary of $225,000. Mr. Paull was also awarded 185,000 options vesting
over three years, the exercise price ranges from $3.33 to $5.00. Mr. Paull may
receive additional bonus payments and options based upon income and revenue of
the Company.

On July, 2000, the Company entered in to an agreement to hire Robinson-
Humphrey Company, LLC, a subsidiary of Smith Barney, as advisors in certain
financial transactions, including the above referenced proposed acquisition of
RBSA, Inc.

41
<PAGE>

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

NONE

PART III

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

Name Age Position
---- --- --------
<S> <C> <C>

Bruce R. Korman 40 President, Chief Executive Officer and
Chairman of the Board

Howard N. Brand 46 Chief Financial Officer/Secretary

S. Christine Dobbings 49 Vice President Marketing

Richard Miller 47 Director/Assistant Secretary

Robin Richards 43 Director

Robert B. Fagenson 50 Director

Vincent A. Carrino 43 Director

Edward G. Harshfield 62 Director
</TABLE>

Bruce Korman has been President, Chief Executive Officer and Chairman of
the Board of Directors of the Company since its inception, and has served in the
same capacities at National Cash Processors, Inc. ("NCP") and CoinBank
Automated Systems, Inc. ("CAS"), the Company's wholly- owned subsidiaries,
since their respective inceptions. Since 1984, Mr. Korman has been a principal
and general partner in a series of real estate limited partnerships engaged in
the development, construction and management of multi-family housing projects in
Southern California.

Howard N. Brand has been Chief Financial Officer of the Company since
February, 2000. He is currently a principal in Tibrand Capital Ventures LLC, an
investment banking firm. Mr. Brand has been doing consulting work for technology
firms ranging from system integrators to point of sale companies. From December
of 1998 to October of 1999, Mr. Brand was Vice-President of Corporate Finance
for Kann Capital. Prior to Kann Capital, Mr. Brand was President and CEO of
Weslock, a national manufacturer of residential door locks. Also, he was Chief
Financial Officer and a principal in Fairway Salvage, a metal recycler.

S. Christine Dobbings has been Vice President of Marketing of the Company
since August, 1995 and has been the Sales Manager of NCP since August, 1994.
From 1992 to 1994, Ms. Dobbings was Senior Wholesale Account Executive for EFM
Mortgage Bankers, and served as Senior Loan Agent for Home Savings of America
from 1989 to 1991. From 1984 to 1988, Ms. Dobbings was Regional Wholesale
Marketing Manager for Western Federal Savings and Loan and co-founded its
wholesale lending division.

Richard Miller was Vice President, Secretary, Chief Financial Officer and a
Director of the Company since its inception and has served in the same
capacities at NCP and as Chief Financial Officer, Secretary and Director at CAS
since their respective inceptions. Effective January 11, 1999, Mr. Miller
resigned as a Vice President and Chief Financial Officer and Secretary of the
Company and it subsidiaries. Since 1985, Mr. Miller has served as

42
<PAGE>

President and Chief Executive Officer of Union Fidelity, a mortgage banking firm
which he founded. Mr. Miller is also the President of M.R. International
Enterprises, Ltd., which is the general partner of Lakeview Enterprises Limited
Partnership, a private real estate limited partnership.

Robin Richards was appointed to the Company's Board of Directors in March
of 1999. Mr. Richards serves as the President and Chief Operating Officer of
MP3.Com, an Internet music company, positions he has held since January 1999.
Prior to joining MP3.Com, Mr. Richards was a President and Chief Executive
Officer at Lexi International, a direct marketing company from October 1985.
Mr. Richards also serves on the Board of Directors of Tickets.Com, Inc. and is
the President of The Chase Foundation.

Robert B. Fagenson has been a director of the Company since August 4, 1998.
Mr. Fagenson has, for more than the last five years, been a director and
President of Fagenson & Co., Inc., a New York Stock Exchange ("NYSE")
specialist firm, and a Vice President and director of Starr Securities, Inc. a
registered broker-dealer and member of the NYSE. Mr. Fagenson has been
director and Vice Chairman of the NYSE; a director of Rent-Way, Inc., a company
listed on the NYSE; a director of Intrenet, Inc., a company listed on the Nasdaq
SmallCap Market; and a director of Hudson Hotel Corporation, a company listed on
the Nasdaq National Market. Mr. Fagenson serves as the representative of Starr
Securities, Inc., the co-underwriter in the Company's initial public offering.

Edward Harshfield has been a director of the Company since August 4, 1998.
Mr. Harshfield is currently Chairman, Chief Executive Officer and Director of
MFN Financial Corporation, a specialty finance company. Mr. Harshfield was Vice
Chairman and Director of California Federal Bank from 1997 to 1998 and
President, Chief Executive Officer and Director from 1993 until 1997, when the
bank was acquired by its current management. From October 1992 to March 1993,
Mr. Harshfield served as Chief Executive Officer and Director of First City
Texas National Bank and directed its restructure and sale. Mr. Harshfield was
President, Chief Executive Office of Household Financial Services from 1984 to
1987, and from 1988 to 1955 Chairman, Chief Executive Officer and General
Partner of U.S. Thrift Opportunity Partners, a Merrill Lynch sponsored
partnership investing in undercapitalized thrift institutions. Prior to
Household, Mr. Harshfield held management positions at Ford Motor Credit,
Pepsico and Citicorp/Citibank. He also currently serves as Chairman, Financial
Pacific Corp.; Director, California Federal Bank; and Advisory Board Member,
Provender Capital Group and Argonaut Private Equity Management, LLC.

Vincent A. Carrino has been a director of the Company since August 4, 1998.
Mr. Carrino founded Brookhaven Capital Management, Inc., an investment
management company headquartered in Menlo Park, California in 1986 and has been
its President since such time. Mr. Carino serves as a director of Rent Way,
Inc., a company listed on the NYSE.

Pursuant to the terms of the Underwriting Agreement between the Company and
Starr Securities, Inc, and Gunn Allen Financial Corp., the underwriters in its
initial public offering, the underwriters may appoint a designee as either a
member of the Board of Directors or as an advisor to attend all Board Meetings,
until July, 2001. Mr. Fagenson serves as the nominee of the underwriters.

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

During the fiscal year ended May 31, 2000, the Company did not pay any
consideration to Mr. Korman or Mr. Miller for their services as members of the
Board. Mr. Korman and Mr. Miller were the only members of the Board of Directors
until August 4, 1998 when Messrs. Fagenson, Carrino and Harshfield were
appointed. Mr. Richard was appointed to the Board of Directors on March 16,
1999. Prior to August 4, 1998 the Board of Directors had no committees.

43
<PAGE>

Directors do not receive cash compensation for serving on the Board of
Directors. The Corporation reimburses Directors who are not employees of the
Corporation the costs of attending meetings. Directors employed by the
Corporation are not entitled to any additional compensation as such. All non-
employee directors are eligible to participate in the Non-Executive Director
Stock Option Plan which was approved by the Board of Directors in August, 1998
and by the Shareholders in June, 1999. Under the Non-Executive Director Plan
each non-employee director received 30,000 options upon joining the Board of
Directors. The options vest as follows: 10,000 options vest upon the date of
joining the Board; 10,000 options vest on the first anniversary date; and 10,000
options vest on the director's second anniversary date. As of May 31, 2000,
there were 120,000 options issued under the plan to directors. There are no
annual grants of options to directors under the Non-Executive Director Plan. See
"Non-Executive Director Stock Option Plan".

The Board of Directors has established two committees. The Audit Committee
is comprised of Robin Richards, Vincent Carrino and Richard Miller. Mr.
Richards serves as the Chairman of the Audit Committee. All of the members of
the Audit Committee are independent directors of the Company. The audit
committees' duties include: (i) reviewing with the Company's independent
auditors, the scope and results of any audits; and (ii) reviewing with the
independent auditors and management, the Company's accounting, financial and
operating controls and staff.

In addition, the Board of Directors has established a Compensation
Committee comprised of Messrs. Richards, Harshfield and Fagenson. Mr.
Harshfield serves as Chairman of the Compensation Committee. All of the members
of the Compensation Committee are independent directors of the Company. The
Compensation Committee will administer the Company's Employee Stock Option Plan
and negotiate and approve employment agreements between the Company and
executive officers of the Company.

During the fiscal year ended fiscal year ended May 31, 2000, meetings of
the Board of Directors were held on 3 occasions and the directors took action by
unanimous written consent in lieu of a meeting on 2 occasions. Each Director of
the Corporation attended all meetings of the Board of Directors held during the
period in which he served.

Certain Key Employees

Willi Muhr, 38, has been Vice President of the Company since August, 1996,
establishing and managing the Company's European Operations. From June, 1993 to
March, 1996, Mr. Muhr served as Chief Executive Officer of Adcon Telemetry, an
international wireless data communications company. From August, 1986 to
February, 1993, Mr. Muhr was a principal in a series of real estate limited
partnerships engaged in the development, construction and management of multi-
family housing projects in Southern California.

Darryl J. Bergman, 33, has been Vice-President of Technical Development for
the Company since January, 1997. From January, 1991 to December, 1996, Mr.
Bergman served first as Software Developer and later as Software Project Leader
at Harte-Hanks, a leading media and marketing firm, where he had senior
responsibility for database applications software development for major accounts
including Sony Corporation, Prudential Insurance , Cigna Health Care and others.

Aftab "Jeff" Zahed, 43, has been the Controller and Chief Accounting Officer
of the Company since April, 1997.

44
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION
----------------------------------

Summary of Cash and Certain Other Compensation

The following table sets forth certain compensation paid by the Company
during the fiscal years ended May 31, 2000 May 31, 1999 and May 31, 1998 to its
President and Chief Executive Officer (the "Named Executives").

Summary Compensation Table

<TABLE>
<CAPTION>
Name and All Other
Principal Position Annual Compensation Long Term Compensation Compensation
------------------------- -------------------------------------- ------------------------------ ---------------
Year Salary Bonus Securities Options (#)
------------------------- ---------- -------------- -------- ------------- --------------
Underlying
-------------
<S> <C> <C> <C> <C> <C> <C>
Bruce Korman 2000 $150,000 $0.00 $0.00
President and 1999 $120,000 $ 119,265 $0.00
Chief Executive Officer 1998 $ 0(1) $ 0 $0.00

Howard N. Brand 2000 $ 15,000 $0.00 $ 0

Chief Financial Officer

S. Christine Dobbings 2000 $136,100 $0.00 $6,000 (2)
Vice President Marketing 1999 $108,700 $0.00 16,666 $6,000 (2)
1998 $ 72,000 $0.00 $ 0.00
</TABLE>

(1) Mr. Korman waived his salary for the fiscal year ended May 31, 1998.
(2) Amount represents Company paid allowance for Automobile Allowance.

The following table discloses information concerning stock options granted
in the year ended May 31, 2000 to the Named Executive.

Option Grants in Fiscal Year Ended May 31, 2000

Individual Grants in Last Fiscal Year
--------------------------------------------------------

Exercise
Name Number of Securities Underlying Percent of Total Options/Warrantsto Price Expiration
---- Options/Warrants Employees in Fiscal Year (%) ($/Sh) Date
----------------------------------- ------------------------------------- --------- ----------
<S> <C> <C> <C> <C>
Howard N. Brand 30,000 46% 5.00 1/11/04

Darryl Bergman 20,000 31.25% 6.00/12.25 1/11/04
</TABLE>

Aggregated Option Exercises And Fiscal Year-End Option Values

45
<PAGE>

The following table sets forth information concerning the number of options
owned by the Named officers and the value of any in-the-money unexercised stock
options as of May 31, 2000. No options were exercised by any of the named
officers during the fiscal year ended May 31, 2000:

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at May 31, 2000 May 31, 2000(1)

Name Exercisable Un-exercisable $Exercisable $Un-exercisable

<S> <C> <C> <C> <C>
Bruce Korman 80,915 70,800
72,444 316,942
46,821 40,968
Howard N. Brand 22,500 7,000 64,687 21,562

Christine Dobbings 14,667 7,333 64,168 32,081
18,667 9,333 16,333 8,166
</TABLE>

(1) Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end
market value of the Common Stock. An Option is "in-the-money" if the fiscal
year end fair market value of the Common Stock exceeds the option exercise
price.

Employment Agreements

The Company has entered into a three (3) year employment agreement with Mr.
Korman effective July, 1998 which provides for an initial annual base salary of
$120,000, base salaries of $150,000 and $180,000 in the second and third years,
respectively, and payment of such bonuses as the Board of Directors determines.
Any such bonus will be voted on by the entire Board, including Mr. Korman,
unless Mr. Korman or another director chooses to abstain from voting on the
matter. Mr. Korman also receives the use of a company automobile. The agreement
includes Mr. Korman's covenant not to compete with the Company's business during
the term of the Agreement and for a period of one year thereafter. The agreement
requires Mr. Korman to devote not less than 40 hours per week of his business
time to the business of the Company. Mr. Korman also participates in other
business endeavors which require a portion of his business time. Although Mr.
Korman has advised the Company that his participation in outside business
matters should not interfere with his performance of his duties as President and
Chief Executive Officer of the Company, there can be no assurance that a
conflict of interest will not arise with respect to the allocation of Mr.
Korman's time or that such conflict would be resolved in the Company's favor.
The loss of the services of Mr. Korman could have a material adverse effect on
the Company's business and prospects.

The Company has entered into an employment agreement with Christine Dobbings
effective January 1, 1998, whereby Ms. Dobbings is employed as Vice President of
Marketing and Sales. The agreement terminates in January, 2003. Pursuant to the
employment agreement, Mrs. Dobbings receives a base salary of $8,533 per month
subject to annual increases of 15% per annum. Ms. Dobbings also receives a
monthly automobile allowance of $500 per month. In addition, Ms. Dobbings
received five-year Common Stock options under the Employee Stock Option Plan to
purchase an aggregate of 50,000 shares with exercise prices ranging between
$3.50 and $7.00 per share. The options have vested. The agreement further
provides that Ms. Dobbings may receive a severance payment equal to the total
amount of her previous twelve-month's base salary if she is terminated without
cause.

Employee Stock Option Plans

46
<PAGE>

In 1996, Company adopted the 1996 Employee Stock Option Plan (the "Employee
Plan"). The purpose of the Employee Plan is to attract and retain qualified
personnel, to provide additional incentives to employees, officers and
consultants of the Company and to promote the success of the Company's business.
A reserve of 775,887 shares of the Company's Common Stock had been established
for issuance under the Employee Plan. The Employee Plan is currently
administered by the Board of Directors. Subject to the Employee Plan, the Board
has complete discretion to determine which eligible individuals are to receive
option grants, the number of shares subject to each such grant, the exercise
price of the option, the status of any granted option as either an incentive
stock option or a non-qualified option, the vesting schedule to be in effect for
the option grant and the maximum term for which any granted option is to remain
outstanding.

Each option granted under the Employee Plan will have a maximum term of
five years, subject to earlier termination following the optionee's cessation of
service with the Company. All options granted to date have a term of five years.
The exercise price of incentive stock options and non-qualified stock options
granted under the Employee Plan must be at least 100% of the fair market value
of the stock subject to the option on the date of grant, respectively (or 110%
with respect to incentive options granted to holders of more than 10% of the
voting power of the Company's outstanding stock). Such payment may be made in
cash, or at the discretion of the Board, in outstanding shares of Common Stock
held by the participant, through a full recourse promissory note payable in
installments over a period of years or any combination of the foregoing. The
Board is submitting for Shareholder approval a proposal to increase the number
of shares reserved under the 1996 Plan by 200,000 shares.

At the Annual Meeting of Shareholders held on June 21, 1999, the Company's
shareholders approved an amendment to the 1996 Employee Stock Option Plan to
increase the number of shares eligible for issuance by 200,000 shares from
557,887 to 775,887 shares. As of May 31, 2000, there were 617,467 options
granted under the 1996 Employee Stock Option Plan.

Non-Executive Director Stock Option Plan

In August, 1998 the Board of Directors approved a stock option plan for
Non-Employee Directors who are not eligible to participate in the 1996 Employee
Plan. The Director Stock Option plan was approved by the Company's shareholders
at the Annual Meeting held in June 1999.

The Director Plan provides each non-executive director with options to
purchase 30,000 options upon joining the Board of Directors. The options vest as
follows: 10,000 options vest upon joining the Board; 10,000 options vest on the
first anniversary date; and 10,000 options vest on the director's second
anniversary date. There are no annual grants of options to directors under the
Director Plan. Only non-employee directors of the Company are eligible to
participate in the Director Plan.

The Director Plan is intended to attract and retain key personnel whose
performance is expected to have a positive effect on the Company's profits and
growth potential by encouraging and assisting those persons to acquire equity in
the Company. The Board believes that by compensating Directors with stock
options the Board will have similar interests to the shareholders of the Company
to promote growth and enhanced shareholder value.

As of May 31, 2000, options to purchase a total of 120,000 shares of the
Company's Common Stock have been issued under the Director Plan. Options may be
granted under the Director Plan until the year 2008 to (I) non-executive
directors as defined and (II) members of any advisory board established by the
Company who are not full time employees of the Company or any of its
subsidiaries.

The exercise price for options granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date of grant. Until
otherwise provided in the Director Plan the exercise price of options granted
under the Director Plan must be paid at the time of exercise, either in cash, by
delivery of shares of

47
<PAGE>

Common Stock of the Company or by a combination of each. The term of each option
commences on the date it is granted and, unless terminated sooner as provided in
the Director Plan, expires five years from the date of grant. Options granted
under the Director Plan are not qualified for incentive stock option treatment.

Limitations of Liability and Indemnification

The Company's Restated Certificate of Incorporation and by-laws provide that
the Company shall, to the maximum extent permitted from time to time under the
Delaware General Corporation Law (the "DGCL"), indemnify and advance expenses to
any officer, director, employee or agent of the Company in connection with any
threatened, pending or completed action, suit or proceeding. The Restated
Certificate of Incorporation also permits the Company to secure insurance on
behalf of any person who was or is a director, officer, employee or agent of the
Company against any liability incurred by such person in such capacity,
regardless of whether indemnification would be permitted under the applicable
provisions of the DGCL or the Restated Certificate of Incorporation.

Section 102(b)(7) of the DGCL permits a provision in the certificate of
incorporation of each corporation organized thereunder eliminating or limiting,
with certain exceptions, the personal liability of a director to the corporation
or its stockholders for monetary damages for certain breaches of fiduciary duty
as a director.

Section 145 of the DGCL ("Section 145"), in summary, empowers a Delaware
corporation, within certain limitations, to indemnify its officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by them
in connection with any nonderivative suit or proceeding, if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to a criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.

With respect to derivative actions, Section 145 permits a corporation to
indemnify its officers, directors, employees and agents against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit, provided such person meets the
standard of conduct described in the preceding paragraph, except that no
indemnification is permitted in respect of any claim where such person has been
found liable to the corporation, unless the Court of Chancery or the court in
which such action or suit was brought approves such indemnification and
determines that such person is fairly and reasonably entitled to be indemnified.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------------------------------------------------------------------------

PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of September 5, 2000,
with respect to each Executive Officer and Director, all Directors and Officers
as a group and the persons (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), known by
the Company to be the beneficial owner of more than five percent of any class of
the Common Stock, the sole class of voting securities.

<TABLE>
<CAPTION>
Name and Address of Amount and Nature Percentage of Shares
Beneficial Owners (1) (2) of Beneficail Owner Beneficially Owned
<S> <C> <C>
Bruce Korman (3) 716,477 19.2%

Richard Miller (4) 716,657 19.25%
</TABLE>

48
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
Robert B. Fagenson (5)(6) 30,000 *

Vincent A. Carrino (5)(7) 211,239 5.75%

Edward G. Harshfield (5) 30,000 *

Robin Richards (5) 30,000 *

Howard N. Brand (8) 100,000 2.76%

Christine Dobbings (9) 50,000 1.39%

Darryl Bergman (10) 75,000 2.08%

Willi Muhr (11) 50,000 1.39%

All directors and executive officers as a group 2,009,373 45.9%
(10 persons) (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
</TABLE>

* Denotes less than 1%.

Footnotes appear on next page

49
<PAGE>

(1) Unless otherwise indicated, the address for each named individual or group
is in care of Cash Technologies, Inc., 1434 West 11th Street, Los Angeles,
California 90015.

(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. A person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60 days from May
12, 1999, upon the exercise of options, warrants or convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that options,
warrants or convertible securities that are held by such person (but not those
held by any other person) and which are exercisable within 60 days of the date
of proxy statement.

(3) Includes 516,477 shares owned by First Bancorp L.P. Mr. Korman is a limited
partner of First Bancorp L.P. and the President of the general partner of First
Bancorp L.P. Also includes (i) 200,180 shares subject to outstanding exercisable
and unexercisable options.

(4) Includes 516,477 shares owned by Lakeview Enterprises, Ltd. Mr. Miller is a
limited partner of Lakeview Enterprises, Ltd. and the President of the general
partner of Lakeview Enterprises, Ltd. Also includes 200,180 shares subject to
outstanding exercisable and unexercisable options.

(5) Messrs. Fagenson, Harshfield and Carrino were elected to the Board of
Directors on August 4, 1998. Mr. Richards was appointed to the Board of
Directors effective March 16, 1999. The Board members each own 30,000 option
under the. Non-Executive Director Plan, options vest in 1/3 increments
commencing on the date of the grant. The date of the grant is the date that such
Director is elected to the Board of Directors.

(6) Does not include any shares of Common Stock or other securities owned by
Starr Securities, Inc. of which Mr. Fagenson is an officer and director or the
Fagenson & Co., Inc. Employee Pension Plan & Trust of which Mr. Fagenson is an
employee.

(7) Includes 30,000 options under the Non-Executive Direct Plan (See footnote
48,125 warrants exercisable at $8.00 per share, 70,000 warrants at $10.375 per
share and 63,114 shares of common stock).

(8) Includes five-year warrants to purchase an aggregate of 100,000 shares
exercisable at $5.00 per share. The options vest July 28, 2000.

(9) Includes five-year options to purchase an aggregate of 50,000 shares
exercisable at prices between $3.50 and $7.00 per share. The options vest in
increments of 1/3 commencing July, 1998.

(10) Includes five-year options to purchase an aggregate of 75,000 shares
(22,000 options exercisable at $3.50 per share, 28,000 options exercisable at
$7.00, 15,000 options exercisable at $6.00, 5,000 options exercisable at
$10.375 and 5,000 options exercisable at $12.25).

(11) Includes five-year options to purchase an aggregate of 50,000 shares
exercisable at prices between $3.50 and $7.00 per share. The options vest in
increments of 1/3 commencing July, 1998.

Certain Reports

Other than the individuals disclosed below, during the fiscal year ended May 31,
2000, was a Director, officer of beneficial owner of more than ten percent of
the Corporation's Common Stock (which is the only class of securities of the
Corporation registered under Section 12 of the Securities Exchange Act of 1934
(the "Act"), (a "Reporting Person") failed to file on a timely basis, reports
required by Section 16 of the Act during the most recent fiscal year. Vincent
Carrino and Robin Richards, directors of the Company, failed to file Form 4
reports for the months of August, 1999 and March, 1999, respectively. The
Corporation was not subject to the reporting requirements under the Act prior to
its initial public offering in July, 1998.

50
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
---------------------------------------------------------

Certain Transactions

In October, 1995, in consideration of certain loans made to the Company by Mr.
Miller and Lakeview, the Company issued a secured promissory note in the amount
of $812,000 to Lakeview, bearing interest at the rate of 10.5% per annum,
secured by a pledge of substantially all of the Company's then existing assets,
which note matured on April 19, 1997. Since 1997, Lakeview sold approximately
$305,000 of this debt to certain third parties. The Company repaid approximately
$146,000 of the loan from the proceeds at its initial public offering. The
Company converted the remaining portion of the loan to approximately 104,500
shares of Common Stock.

Prior to November, 1996, the Company licensed certain technology and software
used in its operations from First Bancorp, pursuant to an agreement that
required the Company to pay to First Bancorp monthly royalties in the amount of
the greater of 2.5% of the Company's earnings before interest and taxes or
$3,000. In November, 1996, the Company purchased such software and related
intellectual property rights from First Bancorp for $50,000, which is
represented by a non-interest bearing promissory note which was paid following
the Company's initial public offering.

The Company leases approximately 13,000 square feet of space at 1434 West 11th
Street, Los Angeles, CA, which it uses for its executive offices and coin
processing facility from Prime Financial Partners, Ltd., an affiliate of Messrs.
Korman and Miller. The lease agreement expires in September, 2002 and provides
for a base monthly rent of $5,600.

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

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

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Delaware Anti-takeover Law

The Company is subject to certain anti-takeover provisions under Section 203
of the Delaware General Corporation Law. In general, under Section 203, a
Delaware corporation may not engage in any business combination with any
"interested stockholder" (a person that owns, directly or indirectly, 15% or
more of the outstanding voting stock of a corporation or is an affiliate of a
corporation and was the owner of 15% or more of the outstanding voting stock)
for a period of three years following the date such stockholder became an
interested stockholder, unless (i) prior to such date the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, or (II)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, or (III) on or subsequent to such date, the business combination is
approved by the board of directors and unauthorized at an annual or special
meeting of stockholders by at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder. The restrictions imposed by
Section 203 will not apply to a corporation if the corporation's initial
certificate of incorporation contains a provision expressly electing not to be
governed by this section or the corporation by action of its stockholders
holding a majority of the outstanding stock adopts an amendment to its
certificate of incorporation or by-laws expressly electing not to be governed by
Section 203.

The Company has not elected out of Section 203, and upon consummation of the
Company's initial public offering and the listing of Common Stock on Nasdaq, the
restrictions imposed by Section 203 apply to the Company. Such provision could
have the effect of discouraging, delaying or preventing a takeover of the
Company, which could otherwise be in the best interest of the Company's
stockholders, and have an adverse effect on the market price for the Company's
Common Stock.

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ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(a) Exhibits

The following Exhibits designated by an asterisk (*) have been previously
filed with the Securities and Exchange Commission and, pursuant to Rule 17
C.F.R. 230.411, are incorporated by reference to the document referenced in
brackets following the descriptions of such exhibits.

*3.1 Restated Certificate of Incorporation of the Company [Exhibit 3.1 to the
Company's Registration Statement on Form SB-2 (File No. 333-6436)]
*3.2 Bylaws of the Company [Exhibit 3.2 to the Company's Registration
Statement on Form SB-2 (File No. 333-6436)]
*3.3 Certificate of Designation of Series A 8% Cumulative Convertible
Preferred Stock [filed as Exhibit 3.1 (a) to the Company's Form 10 QSB
for the quarter ended August 31, 1999.
*4.1 Form of the Company's Common Stock Certificate [Exhibit 4.1 to the
Company's Registration Statement on Form SB-2 (File No. 333-6436)]
*4.2 Form of the Underwriter's Warrant Agreement, including Form of Warrant
Certificate dated as of July 9, 1998 between the Company, Starr
Securities, Inc. and GunnAllen Financial Inc. (the
"Underwriters")[Exhibit 4.1 to the Company's Registration Statement on
Form SB-2 (File No. 333-6436)]
*10.1 Lease for the Company's Facilities at 1422 -34 West 11th Street, Los
Angeles Ca [Exhibit 10.1 to the Company's Registration Statement on Form
SB-2 (File No. 333-6436)]
*10.2 Agreement dated November 22, 1996 between National Cash Processors Inc.
and First Bancorp LP [Exhibit 10.2 to the Company's Registration
Statement on Form SB-2 (File No. 333-6436)]
*10.3 Manufacturing and License Agreement dated January 17, 1997 between the
Company and Geld Bearbeitungs Systeme GES.M.B.H.[Exhibit 10.3 to the
Company's Registration Statement on Form SB-2 (File No. 333-6436)]
*10.4 Form of Employment Agreement between the Company and Bruce Korman
[Exhibit 10.4 to the Company's Registration Statement on Form SB-2 (File
No. 333-6436)]
*10.5 Employee Stock Option Plan [Exhibit 10.5 to the Company's Registration
Statement on Form SB-2 (File No. 333-6436)]
*10.6 Form of Consulting Agreement between the Company and the Underwriters
dated as of July 9, 1998 [Exhibit 10.6 to the Company's Registration
Statement on Form SB-2 (File No. 333-6436)]
*10.7 Stock Purchase Agreement and Plan of Reorganization of the Company
[Exhibit 10.7 to the Company's Registration Statement on Form SB-2 (File
No. 333-6436)]
*10.8 Contract between the Company and Los Angeles County Metropolitan
Transportation Authority [Exhibit 10.8 to the Company's Registration
Statement on Form SB-2 (File No. 333-6436)]
*10.9 Promissory Note issued to G.E. Capital Corp, Security Agreement and
related Guarantees [Exhibit 10.9 to the Company's Registration Statement
on Form SB-2 (File No. 333-6436)]
*10.10 Form of Bridge Notes and Bridge Warrant [Exhibit 10.10 to the Company's
Registration Statement on Form SB-2 (File No. 333-6436)]
*10.11 Non-Executive Director Stock Option Plan [filed as Exhibit A to the
Company's Proxy Statement for its Annual Meeting held on June 21, 1999].
21. Subsidiaries of the Company
23. Consent of BDO Seidman LLP, independent auditors
27. Financial Data Schedule

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized the 12the day of September,
2000.
CASH TECHNOLOGIES, INC.

By: /s/ Bruce Korman
Bruce Korman
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>

/s/ BRUCE KORMAN President, Chief Executive September 12, 2000
Officer
Bruce Korman And Director (Principal
Executive Officer)

/s/ HOWARD N. BRAND Chief Financial Officer and September 12, 2000
Secretary (Principal
Howard N. Brand Financial Officer)

/s/ RICHARD MILLER Director September 12, 2000

Richard Miller

/s/ ROBERT FAGENSON Director September 12, 2000

Robert Fagenson

/s/ VINCENT A. CARRINO Director September 12, 2000

Vincent A. Carrino

/s/ ROBIN RICHARDS Director September 12, 2000

Robin Richards
Director September 12, 2000
/s/ EDWARD G. HARSHFIELD

Edward G. Harshfield
</TABLE>