<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
FOR THREE MONTH PERIOD ENDED AUGUST 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-24569
------------------------
CASH TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4558331
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
organization)
1434 W. 11/TH/ STREET, LOS ANGELES, CA 90015
(Address of principal executive offices) (Zip Code)
(213) 745-2000
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_].
------------------------
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
On September 30, 2000, there were 3,522,200 shares of common stock, $ .01 par
value, issued and outstanding.
<PAGE>
CASH TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
<S> <C>
Consolidated Balance Sheets as of August 31, 2000 (unaudited) and
May 31, 2000 ......................................................................... 3
Consolidated Statements of Operations for the three month period ended
August 31, 2000 and 1999 (unaudited) ................................................. 4
Consolidated Statements of Cash Flows for the three month period ended
August 31, 2000 and 1999 (unaudited) ................................................. 5
Notes to Consolidated Financial Statements for the three month period ended
August 31, 2000 and 1999 (unaudited) ................................................. 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................. 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................................................. 19
Item 2. Changes in Securities .......................................................................... 19
Item 3. Default Upon Senior Securities ................................................................. 20
Item 4. Submission of Matters to a Vote of Security Holders ............................................ 20
Item 5. Exhibits and Reports on Form 8-K ............................................................... 21
SIGNATURES .............................................................................................. 22
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31 MAY 31
2000 2000
----------- ------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 174,946 $ 355,364
Accounts Receivable 1,559 156,341
Inventories -- 176,163
Prepaid expenses and other current assets -- 800
------------ ------------
Total Current Assets 176,504 688,668
COINBANK MACHINES HELD FOR SALE 1,229,494 1,282,636
PROPERTY AND EQUIPMENT (net) 196,111 260,581
CAPITALIZED SOFTWARE 1,480,473 1,161,214
OTHER ASSETS 79,334 39,500
------------ ------------
TOTAL ASSETS 3,121,917 3,432,599
============ ============
LIABILITIES AND STOCKHOLDERS DEFICIENCY
CURRENT LIABILITIES:
Current maturities of Notes Payable -- 1,359,229
Current maturities of Capital Lease Obligations -- 487
Accounts Payable 867,612 370,298
Accrued expenses & other current liabilities 761,393 616,376
------------ ------------
Total Current Liabilities 1,629,005 2,346,390
Long-Term Notes Payable 2,581,549 1,293,266
Long-Term Convertible Debt 3,339,792 3,202,667
------------ ------------
Total Long-Term Liabilities 5,881,341 4,495,933
Total Libilities 7,510,345 6,842,323
STOCKHOLDERS DEFICIENCY
Common Stock 35,198 35,198
Redeemable Preferred Stock 1,122,188 1,122,188
Additional Paid In Capital 13,996,774 13,905,391
Accumulated Deficit (19,542,589) (18,472,501)
------------ ------------
Total stockholders' deficiency (4,388,429) (3,409,724)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER DEFICIENCY $ 3,121,917 $ 3,432,599
============ ============
See notes to condensed consolidated financial statements
3
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CASH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED AUGUST 31
2000 1999
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
GROSS REVENUES (Note 1) $ 9,180,322 $ 10,818,265
============ ============
NET REVENUES $ 229,807 $ 295,853
COST OF REVENUES 161,714 326,066
------------ ------------
GROSS PROFIT (LOSS) 68,093 (30,213)
SELLING, GENERAL, & ADMIN EXP 878,899 1,389,709
DEPRECIATION & AMORTIZATION EXP 20,164 17,671
------------ ------------
OPERATING LOSS (830,970) (1,437,593)
INTEREST EXPENSE 214,274 100,294
------------ ------------
LOSS BEFORE INCOME TAXES (1,045,244) (1,537,887)
INCOME TAXES 2,400 2,614
------------ ------------
NET LOSS (1,047,644) (1,540,501)
============ ============
Deemed Dividends to preferred Shareholders 22,444 80,569
------------ ------------
Net Loss Allocable to common shareholders (1,070,088) (1,621,070)
============ ============
Basic and diluted net loss per share $ (0.30) $ (0.46)
============ ============
Basic and diluted weighted average
shares of common stock outstanding 3,522,200 3,488,665
============ ============
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
CASH TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED AUGUST 31
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $(1,047,644) $(1,540,501)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization 24,102 53,642
Amortization Expense - related to discount on convertible debt 52,750 --
Non-Cash Compensation 91,384 --
Loss on disposal of equipment 368
Other 4,329 4,697
Changes in operating assets and liabilities:
Account receivable 154,783 (97,693)
Inventories 176,163 50,623
Inventories CoinBank Machines -- 42,998
Prepaid expenses and other current assets 800 (17,426)
Other assets 39,834 129,378
Accounts payable 497,314 517,500
Accrued expenses and other current liabilities 206,948 172,172
----------- -----------
Net cash provided (used) by operating activities 161,463 (684,610)
----------- -----------
INVESTING ACTIVITIES:
Sale of Coinbank machines held for sale 48,813 --
Restricted Cash -- 44,610
Capitalized Software (319,259)
Sale of Equipment 40,000 --
----------- -----------
Net cash provided (used) by investing activities (230,446) 44,610
----------- -----------
FINANCING ACTIVITIES:
Deferred financing cost -- (134,000)
Payments on capital lease obligation (487) (12,208)
Receipt of short-term financing 240,000
Repayments on long-term debt (310,948) (282,888)
Net proceeds from issuance of preferred stock -- 299,250
----------- -----------
Net cash provided (used) by financing activities (111,435) (129,846)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS (180,418) (769,846)
Cash, Beginning of period 355,364 1,028,586
----------- -----------
Cash, End of period $ 174,946 $ 258,739
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes $ 2,400 $ 2,614
Cash paid for interest $ 77,149 $ 100,294
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION
Reclasssification of depreciation from fixed assets-CoinBank
machines $ -- $ 357,470
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
CASH TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: GENERAL
GOING CONCERN:
The Company has prepared the financial statements included herewith
assuming that the Company will continue as a going concern. Although the Company
raised additional capital in 1998, 1999 and in 2000, it has not generated
sufficient revenue-producing activity to sustain its operations. Accordingly,
the Company must realize a satisfactory level of profitability from its current
and future operation in order to remain a viable entity. The Company's auditors
have included an explanatory paragraph in their report for the year ended May
31, 2000, indicating there is substantial doubt regarding the Company's ability
to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
any uncertainty. Although the Company has yet to recognize a profit, the Company
feels that it will find the appropriate funding in the Secondary Offering
scheduled later this year to continue as a going concern.
PRESENTATION OF INTERIM INFORMATION:
In the opinion of the management of Cash Technologies, Inc. (the
"Company"), the accompanying unaudited condensed consolidated financial
statements include all normal adjustments considered necessary to present fairly
the financial position as of August 31, 2000 and the results of operation and
cash flows for the three months ended August 31, 2000 and 1999. Interim results
are not necessarily indicative of results to be expected for any subsequent
quarter or for the entire fiscal year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-QSB. These condensed financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Certain information and footnote
disclosures, normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been omitted pursuant to
such SEC rules and regulations. These financial statements should be read in
conjunction with the Company's audited financial statements and the accompanying
notes included in the Company's Form 10-KSB for the year ended May 31, 2000,
filed with the SEC. The results of operations for the three-month period ended
August 31, 2000, are not necessarily indicative of the results to be expected
for any subsequent quarter or for the entire fiscal year.
Gross revenues - include the value of coin and currency processed and do not
represent revenue under generally accepted accounting principles.
BASIS OF PRESENTATION:
The unaudited condensed consolidated financial statements of Cash
Technologies, Inc. and its subsidiaries National Cash Processors Inc., CoinBank
Automated Systems, Inc. and CoinBank Automation Handels GmbH, Salzburg, Austria,
(collectively, the "Company") included herein, reflect all adjustments,
consisting only of normal recurring adjustments which, in the opinion of
management are necessary to present fairly the Company's financial position,
results of operations and cash flows, for the periods presented.
<PAGE>
NOTE 2. 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 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.
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 in 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.
On September 22, 2000, CoinBank was served with a complaint stating 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, and additional damages for contract termination
fees. 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. 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.
<PAGE>
NOTE 3: STOCKHOLDERS EQUITY
The Company issued Howard Brand, its Chief Financial Officer, thirty
thousand (30,000) Stock Purchase Warrants in September, 1999 at $11.3125. These
options have been valued at $62,431 using Black Scholes model and this amount
was expensed over a one year period. The Company has recorded an expense of
$62,431 as of the quarter ended August 31, 2000. These warrants had their
exercise price repriced to $5.00 a share in August, 2000, which was valued at
$22,606. Also in August, 2000, Mr. Brand was issued an additional 70,000 Stock
Purchase Warrants at $5.00, which was valued at $61,440. Mr. Brand serves as the
Company's Chief Financial Officer and Secretary.
NOTE 4: RELATED PARTY TRANSACTION
In July, 2000, the Company obtained a short-term loan of $240,000 from
First Bancorp, L.P. Mr. Bruce Korman, our Chief Executive Officer, is the
president and general partner of First Bancorp. As of October 13, 2000, the
Company has paid this loan.
NOTE 5: LONG-TERM DEBT
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, 67.2 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 $3,362,000
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 $52,570 was amortized during the
quarter ended August 31, 2000.
<PAGE>
NOTE 6: 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.
Terms of the transaction currently being negotiated 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. The parties are continuing to perform their
respective duties under the letter of intent and a final agreement has not yet
been executed. 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. We believe that RBSA's business approach fits the Company'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. There can be no assurance that the transaction will be completed upon
the terms outlined, if at all.
The Company has recently completed a private placement of $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 B Stock is convertible into shares of Common Stock, at
anytime at the option of the holder, at the liquidation price divided by the
lesser of: (i) $5.50 per share; or (ii) the average closing price for the
Company's Common Stock for the five (5) trading days ending on the trading day
prior to the date of the conversion notice; provided, however, in no event will
the conversion rate be less than $2.50 per share. The liquidation price is $5.00
per share. By way of example, for each $100,000 unit, an investor would be
entitled to approximately 18,181 shares of Common Stock upon conversion of
Series B Stock. The Series C Warrants have an exercise price of $2.00 per share.
The Company will record deemed dividends in conjunction with this offering. This
amount will be based on the difference between the closing market price and the
Series B Preferred Stock plus the value of the Series C Warrants, using the
Black-Scholes model, associated with the Series B Preferred Stock. The Company
intends to use the proceeds for working capital and debt repayment. The
securities in the private offering are 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 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. As
of September 30, 2000, the Company had received gross proceeds of $2,000,000 in
conjunction with this placement and paid commissions of $144,000 out of $160,000
due.
In August 2000, the Company entered into an agreement to hire Ken Paull as
Senior Vice-President of Sales and Marketing. Mr. Paull commenced his duties in
September, 2000. 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
<PAGE>
ranges from $3.33 to $5.00. Mr. Paull may receive additional bonus payments and
options based upon income and revenue of the Company.
In 1997, 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. The line is secured by a lien on certain of our Coinbank machines. As
of August 31, 2000, there was approximately $2,574,000 of principal outstanding.
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 negotiated a
modification of the payment terms and on June 29, 2000, obtained a waiver to be
in compliance with the payments terms. On September 29, 2000 the Company entered
into an agreement with GE to defer principal payments on the debt for twelve
(12) months and to defer interest payments for six (6) months. As part of this
Agreement, GE provided the Company with a waiver to be in compliance with all
payment terms. Both interest and principal will start amortizing upon completion
of a public stock offering, or after twelve months for the remainder of the
original term. As consideration for the extension, the Company and GE have
agreed to increase the principal portion of the loan by $500,000. If the Company
repays the loans in full within twelve (12) months, then $400,000 of the
$500,000 increase will be waived. The Company has agreed to give GE a lien on
all of the assets of the Company subject to any pre-existing liens, including
liens in favor of the debt holders from the January 2000 private offering.
A majority of the Company's present revenue is derived from its agreement
with the Los Angeles County Metropolitan Transportation Authority. On September
16, 2000, the employees of the Metropolitan Transit Authority (MTA) went on
strike. While the employees are on strike, the Company has not been receiving
currency to process under its agreement with MTA. This lack of currency
processing will have a negative and material impact on revenue and earnings.
There are no assurances on how long the strike will last or when the MTA will
resume sending currency to the Company to process. For the year ended May 31,
2000, revenues from MTA represented 48% of total net revenues.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE HARBOR STATEMENT
In addition to historical information, the information included in this
Form 10-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.
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)(TM) 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(TM). 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.
<PAGE>
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 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 31, 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
<PAGE>
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.
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 August 31, 2000, the machines are
<PAGE>
in operation and fully functional, providing automated check cashing and ATM
functions. As of August 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, will 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.
The Company currently generates revenues through the purchase of United
States 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
from CoinBank machine sales and the fees from the operation of self-service
CoinBank Machines. The Company's expenses have exceeded net revenues since
inception. For the fiscal year ended May 31, 1998, 1999 and 2000, the Company
sustained net losses of $2,727,145, 5,711,964 and $6,639,901, respectively. The
Company incurred net losses of $1,047,644 and $1,540,501 for the quarter ended
August 31, 2000 and 1999, respectively.
The Company records as revenue the service fee charged for coin and
currency processed on behalf of a customer. The Company also records as revenue
the service fee charged to persons using CoinBank machines and revenues from the
sale of CoinBank machines. Gross revenues include the value of coin and currency
processed and does not represent revenue under generally accepted accounting
principles.
Due to its e-commerce systems development effort, the Company will continue
to be required to make certain up-front expenditures. The Company anticipates
that losses will continue for the foreseeable future.
Revenues generated from the sale of CoinBank machines were approximately
27%, fee income from "free placement" machines, which accounted for
approximately 11% and currency processing accounted for 62% of net revenues for
the three months ended August 31, 2000. The Company anticipates that transaction
and licensing fees derived from the EMMA transaction processing system will
eventually become the largest source of the Company's future revenues.
The Company was awarded a contract to count, process and purchase currency
for the Los Angeles County Metropolitan Transportation Authority ("LACMTA") for
a fee of approximately 1% of all currency processed commencing on April 1, 2000,
and with subsequent renewals, ending on March 31, 2005. The Company expects to
purchase and process between $35 and $40 million dollars of currency on this
contract during fiscal 2001. The Company records as revenue the service fee
charged for the processing of currency.
A majority of the Company's present revenue is derived from its agreement
with the Los Angeles County Metropolitan Transportation Authority. On September
16, 2000, the employees of the Metropolitan Transit Authority (MTA) went on
strike. While the employees are on strike, the Company has not been receiving
currency to process under its agreement with MTA. This lack of currency
processing will have a negative and material impact on revenue and earnings.
There are no assurances on how long the strike will last or when the MTA will
resume sending currency to the Company to process. For the year ended May 31,
2000, revenues from MTA represented 48% of total net revenues.
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 2000, COMPARED TO THREE MONTHS ENDED
AUGUST 31, 1999.
Gross revenues include the value of the cash processed, CoinBank machine
sales and fee income for the three months ended August 31, 2000, amounted to
$9,180,322 compared to $10,818,265 for the quarter ended August 31, 1999. Gross
revenues do not represent revenues under Generally Accepted Accounting
Principles. Net revenues for the 2001 period decreased to $229,807 or 2.50% of
gross revenues, compared to $295,853, or 2.73% of gross revenues for 1999
period. The decrease in net revenue was primarily attributable to the
termination of the Shaw's contract.
Cost of revenues for the three months ended August 31, 2000, was $161,714
compared to $326,066 for the quarter ended August 31, 1999. The decrease in
direct costs was primarily the result of significant reduction in third-party
maintenance and collection costs as well as labor and other direct costs.
Gross profit for the three months ended August 31, 2000, was $68,093
compared to a gross loss of $(30,213) for the three months ended August 31,
1999. The increase in Gross profit/loss was impacted by the factors stated in
revenues and cost of revenues.
Selling, General and Administrative expenses for the three months ended
August 31, 2000, decreased to $878,899 compared to $1,389,709 for the three
months ended August 31, 1999. These expenses consist primarily of wages (and
wage related costs), outside contractor expenses, travel/promotional expenses,
professional services and facilities/office related expenses. The decrease was
primarily attributable to the termination of the Shaw's contract, which resulted
in a reduction of labor and other administrative costs. Also for the same period
ended last year, $278,693 in EMMA related system developments costs were
expensed compared to $319,259 which was capitalized for the current quarter,
resulting from portions of the Company's transaction processing platform
reaching technological feasibility.
Depreciation and amortization expenses for the three months ended August
31, 2000, and 1999, were $20,164 and $17,671. The increase was the result of
additions to fixed assets.
Interest expense for the three months ended August 31, 2000, and 1999, was
$214,274 and $100,294. The increase was primarily due to the amortization of the
discount on long-term notes payable, an expense of $52,750 and amounts
outstanding on long-term notes payable.
As a result of the foregoing, net losses for the three months ended August
31, 2000, and 1999, were $1,047,644 and $1,540,501, respectively.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to suffer recurring losses from operations as of
August 31, 2000, and has not generated sufficient revenue producing activity to
sustain its operations. The Company's independent certified public accountants
have included a modification to their opinion, which indicated there is
substantial doubt about the Company's ability to continue as a going concern.
The Company is attempting to raise additional capital to meet future working
capital requirement and launch new products, but may not be able to do so. While
the Company is confident that it will raise the additional capital required,
should the Company not be able to do so, it may have to curtail operations.
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. As of August 31, 2000, the Company had unrestricted cash and cash
equivalents of $174,946 compared to $258,739 as of August 31, 1999. On September
22, 2000, the Company had cash and cash equivalents of $1,209,545, resulting
from the private placement. Since inception, the Company has satisfied its
working capital requirements through limited cash flow generated from
operations, the issuance of equity and debt securities, and various borrowings.
Net cash provided by operating activities was $121,643 for the three months
ended August 31, 2000, as compared to net cash used in operating activities of
$684,610 for the three months ended August 31, 1999. The decrease in net cash
used in operating activities, during the 2000 period was primarily due to the
result of decreases in cash inventory of $176,163, accounts receivables of
$154,783 and an increase in accrued expenses of $206,948.
Net cash used in investing activities was $230,446 for the three months
ended August 31, 2000, as compared to net cash provided by investing activities
of $44,610 for the three months ended August 31, 1999. The decrease in net cash
provided in investing activities was attributable to an increase in sale of
equipment of $40,000, release of restricted cash of $44,610 and increase in
capitalized software cost of $319,259.
Net cash used in financing activities for the three months ended August 31,
2000, was $71,433 as compared to $129,846 for the three months ended August 31,
1999. The decrease in net cash used by financing activities for the 2000 period
was primarily attributable to decreases in deferred financing costs and payment
on long term debt offset by receipt of short-term financing.
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.
<PAGE>
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).
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 67.2 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 $3,362,000
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 $52,570 was amortized during the
quarter ended August 31, 2000.
The Company has recently completed a private placement of $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 $2.00 per share. The
Company will record deemed dividends in conjunction with this offering. This
amount will be based on the difference between the closing market price and the
Series B Preferred Stock plus the value of the Series C Warrants, using the
Black-Scholes model, associated with the Series B Preferred Stock. The Company
intends to use the proceeds for working capital and debt repayment. The
securities in the private offering are 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 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. As
of September 30, 2000, the company has received $2,000,000 in conjunction with
this placement and paid approximately $144,000 of $160,000 due in commissions
and offering expenses. The Company has used approximately $1,200,000 of the
proceeds to date to repay a loan from First Bancorp LP, an entity controlled by
Bruce Korman, our Chief Executive Officer ($240,000 plus interest and fee),
<PAGE>
commissions paid to Gunn Allen the placement agent ($144,000), loans made to
shareholders of RBSA ($121,666) and working capital obligations.
Based on the Company's current proposed plans and assumptions, the Company
anticipates that the net proceeds of its private offering will be sufficient to
satisfy its contemplated cash requirements for approximately four months. In the
event that the Company's plans change or its assumptions prove to be inaccurate
(due to unanticipated expenses, decreased demand for its services or otherwise),
the Company could be required to obtain additional financing sooner than
currently anticipated. The Company is currently negotiating additional
financing, however there can be no assurance that these negotiations will
successfully result in additional financing when needed, on commercially
reasonable terms, or at all.
In 1997, 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.
The line is secured by a lien on certain of our Coinbank machines. As of August
31, 2000, there was approximately $2,574,000 of principal outstanding. 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 negotiated a
modification of the payment terms and on June 29, 2000, obtained a waiver to be
in compliance with the payments terms. On September 29, 2000 the Company entered
into an agreement with GE to defer principal payments on the debt for twelve
(12) months and to defer interest payments for six (6) months. As part of this
Agreement, GE provided the Company with a waiver to be in compliance with all
payment terms. Both interest and principal will start amortizing upon completion
of a public stock offering, or after twelve months for the remainder of the
original term. As consideration for the extension, the Company and GE have
agreed to increase the principal portion of the loan by $500,000. If the Company
repays the loans in full within twelve (12) months, then $400,000 of the
$500,000 increase will be waived. The Company has agreed to give GE a lien on
all of the assets of the Company subject to any pre-existing liens, including
liens in favor of the debt holders from the January, 2000, private offering.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 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.
The Company has negotiated an agreement with Tecwings Industrialisierung
und Electronickproduktion GmbH for the continued manufacturing of CoinBank
machines.
On September 22, 2000, CoinBank was served with a complaint stating 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, and additional damages 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.
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.
ITEM 2. CHANGE IN SECURITIES
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
<PAGE>
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 has recently completed a private placement of $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 $2.00 per share. The
Company will record deemed dividends in conjunction with this offering. This
amount will be based on the difference between the closing market price and the
Series B Preferred Stock plus the value of the Series C Warrants, using the
Black-Scholes model, associated with the Series B Preferred Stock. The Company
intends to use the proceeds for working capital and debt repayment. The
securities in the private offering are 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 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. As
of September 30, 2000, the company has received $2,000,000 in conjunction with
this placement and paid approximately $144,000 of $160,000 due in commissions
and offering expenses. The Company has used approximately $1,200,000 of the
proceeds to date to repay a loan from First Bancorp LP, an entity controlled by
Bruce Korman, our Chief Executive Officer ($240,000 plus interest and fee),
commissions paid to Gunn Allen the placement agent ($144,000), loans made to
shareholders of RBSA ($121,666) and working capital obligations.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
<PAGE>
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1 Form of Series B Preferred Stock Designation
4.1 Form of Series C Warrants
10.1 Form of Employment Agreement between the Company and Ken
Paull dated as of August 7, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K
NONE
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report on Form 10QSB for the
fiscal quarter ended August 31,2000, to be signed on its behalf by the
undersigned, thereunto duly authorized the 13th day of October 2000.
CASH TECHNOLOGIES, INC.
By: /S/ Bruce Korman
----------------------------------------
Bruce Korman
President and Chief Executive Officer
By: /S/ Howard Brand
----------------------------------------
Howard Brand
Chief Financial Officer
