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Registration No. 333-
As filed with the Securities and Exchange Commission on July 14, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_________________
CASH TECHNOLOGIES, INC.
(Exact name of Registrant as specified in charter)
Delaware 95-4558331
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1434 West 11/th/ Street
Los Angeles, California 90015
(213) 745-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_________________
Bruce Korman
President and Chief Executive Officer
1434 West 11/th/ Street
Los Angeles, California 90015
(213) 745-2000
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
_________________
With copies to:
Brian C. Daughney, Esq.
Goldstein & DiGioia, LLP
369 Lexington Avenue
New York, New York 10017
Telephone (212) 599-3322
Facsimile (212) 557-0295
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plan, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Maximum Aggregate Amount of
Title of Each Class of Securities Amount to be Offering Price Offering Registration
Being Registered Registered per Share(1) Price(1) Fee
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value(2)............................ 118,125 $ 9.50 $ 1,122,188 $ 296
---------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value(3)........................... 59,063 $12.00 $ 708,756 $ 187
---------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value(4)............................ 336,000 $13.00 $ 4,368,000 $ 1,153
---------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value(5)............................ 353,684 $ 9.50 $ 3,359,400 $ 887
---------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value(6)............................ 948,720 $12.94 $12,276,436 $ 3,241
---------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value(7)............................ 15,000 $12.00 $ 180,000 $ 48
---------------------------------------------------------------------------------------------------------
Total............................... 1,830,592 $ $22,014,768 $ 5,812
=========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee, based
on the maximum exercise price of the Warrants and convertible securities
with respect to which the underlying Common Stock is being registered.
(2) Shares of Common Stock issuable upon conversion of Series A Preferred Stock
held by certain Selling Security Holders which are convertible into Common
Stock of the Company on a one for one basis based upon a conversion price
of $9.50 per share.
(3) Shares of Common Stock issuable upon exercise of outstanding Series A
Common Stock Purchase Warrants held by certain Selling Security Holders
which are exercisable at $12.00 per share. Pursuant to Rule 416, there are
also being registered such additional number of shares of Common Stock as
may become issuable pursuant to the anti-dilution provisions of the
Warrants.
(4) Shares of Common Stock issuable upon exercise of outstanding Series B
Common Stock Purchase Warrants held by certain Selling Security Holders.
Pursuant to Rule 416, there are also being registered such additional
number of shares of Common Stock as may become issuable pursuant to the
anti-dilution provisions of the Warrants.
(5) Shares of Common Stock issuable upon conversion of outstanding convertible
promissory notes in the aggregate principal amount of $3,360,000 held by
certain Selling Security Holders which are convertible at $9.50 per share.
(6) Shares of Common Stock issuable upon exercise of outstanding Common Stock
Purchase Warrants held by certain Selling Security Holders. Pursuant to
Rule 416, there are also being registered such additional number of shares
of Common Stock as may become issuable pursuant to the anti-dilution
provisions of the Warrants.
(7) Shares of Common Stock issuable upon exercise of additional Series A Common
Stock Purchase Warrants which may be issued to holders of the Series A
Preferred Stock in payment of dividends on the Series A Preferred Stock,
based upon an issue price of $12.00 per warrant.
___________________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to Section 8(a) may
determine.
================================================================================
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. We +
+ may not sell these securities until the registration statement filed with +
+ the Securities and Exchange Commission is effective. This prospectus is not+
+ an offer to sell these securities and it is not soliciting an offer to buy +
+ these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, July 14, 2000
P R O S P E C T U S
-------------------
1,830,592 Shares of Common Stock
CASH TECHNOLOGIES, INC.
We are registering for resale an aggregate of 1,830,592 shares of common
stock, $.001 par value of Cash Technologies, Inc., issuable upon the conversion
or exercise of the following securities held by certain selling security
holders: 118,125 shares issuable upon the conversion of shares of our Series A
Preferred Stock; 59,063 shares issuable upon the exercise of our Series A Common
Stock Purchase Warrants; 353,684 shares issuable upon the conversion of
outstanding convertible Promissory Notes; 336,000 shares issuable upon the
exercise of our Series B Common Stock Purchase Warrants; 350,000 shares issuable
upon the exercise of common stock purchase warrants issued in our pre-initial
public offering financings; and 732,030 shares issuable upon the exercise of
other outstanding common stock purchase warrants and options held by certain
selling security holders.
Our Common Stock is listed on the American Stock Exchange under the symbol
"TQ". On June 5, 2000, the high and low prices for the Common Stock as reported
by Amex were $6.75 and $6.50, respectively.
We will not receive any proceeds from the sale of the shares by the selling
security holders.
The shares may be sold from time to time by the selling security holders,
or by their transferees. No underwriting arrangements have been entered into by
the selling security holders. The distribution of the shares by the selling
security holders may be effected in one or more transactions that may take place
on the over the counter market, including ordinary brokers transactions,
privately negotiated transactions or through sales to one or more dealers for
resale of the shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the selling security holders in connection with such
sales. The selling security holders and intermediaries through whom such shares
are sold may be deemed underwriters within the meaning of the Act, with respect
to the shares offered.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 8 TO READ ABOUT CERTAIN FACTORS
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is __________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
AVAILABLE INFORMATION............................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..... 1
PROSPECTUS SUMMARY.................................. 3
THE COMPANY......................................... 3
THE OFFERING........................................ 7
RISK FACTORS........................................ 8
SELLING SECURITY HOLDERS............................ 18
PLAN OF DISTRIBUTION................................ 24
REPORTS TO SHAREHOLDERS............................. 25
LEGAL MATTERS....................................... 25
EXPERTS............................................. 25
ADDITIONAL INFORMATION.............................. 25
PART II-INFORMATION NOT REQUIRED IN THE PROSPECTUS.. 26
SIGNATURES.......................................... 32
</TABLE>
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AVAILABLE INFORMATION
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information that we file with the Commission pursuant to
the informational requirements of the Exchange Act may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of
the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048; and Chicago Regional Office, 500 West Madison Street, Room
1400, Chicago, Illinois 60661. Copies of such material may be obtained from the
public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintain an Internet site, http://www.sec.gov, that contains reports,
proxy and information statements and other information that we file
electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by Cash Technologies with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. Our Annual Report on Form 10-K, as amended, for the fiscal year ended
May 31, 1999, including information specifically incorporated by
reference into our Form 10-KSB from our definitive Proxy Statement.
2. A description of our common stock contained in our registration
statement on Form 8-A filed July 2, 1998.
3. Our Form 10-QSB for the quarters ended August 31, 1999, November 30,
1999 and February 28, 2000.
Each document filed subsequent to the date of this prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated by reference in this
prospectus and shall be part hereof from the date of filing of such document.
All documents filed by the registrant after the date of filing the initial
registration statement on Form S-3 of which this prospectus forms a part and
prior to the effectiveness of such registration statement pursuant to Section
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 shall be
deemed to be incorporated by reference into this prospectus and to be part
hereof from the date of filing of such documents.
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The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Cash Technologies, Inc., 1434 West 11/th/
Street, Los Angeles, California 90015, telephone (213) 745-2000, Attention:
2
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PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the our annual report on Form 10-KSB for
the Fiscal year ended May 31, 1999 (the "Form 10-KSB") and our quarterly report
on Form 10-QSB for the quarters ended August 31, 1999, November 30, 1999 and
February 28, 2000 (the "Forms 10-QSB"), incorporated by reference into this
prospectus.
THE COMPANY
Introduction
Cash Technologies, Inc., was incorporated in Delaware in 1995 and operates
through 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. Unless the context otherwise requires, references
herein to the Company refers to Cash Technologies, Inc., and its wholly-owned
subsidiaries, National Cash Processors, Inc., CoinBank Automated Systems, Inc.
and CoinBank Automation Handels GmbH, Salzburg, Austria.
On July 9, 1998, the Company's registration statement for its initial
public offering was declared effective. The offering consisted of 1,485,000
shares of the Company's Common Stock with an initial offering price of $7.00 per
share. Starr Securities, Inc. and Gunn Allen Financial, acted as underwriters
for the Company's initial public offering. The Company received gross proceeds
(without deduction for commissions and expenses) of $10,395,000 in the offering
and net proceeds of $8,467,880. On August 18, 1998, the underwriters exercised
the over-allotment option and purchased an additional 172,750 shares from the
Company, the result of which the Company received gross proceeds (without
deduction for commissions and expenses) of $1,209,250 and net proceeds of
$1,010,446. To date the Company has utilized substantially all of the proceeds
of the initial offering for marketing, research and development, debt repayment
and for working capital.
Since April 3, 2000 the Company's Common Stock has been listed on the
American Stock Exchange under the symbol "TQ", and on June 5, 2000, closing
price of the Common Stock was $6.3125. From the date of our initial public
offering on July 8, 1998 through March 31, 2000, the Company's Common Stock was
listed for trading on the Nasdaq SmallCap Market under the symbol "CHNG".
The Company began and continues to do business as a currency and coin
processor through its National Cash Processors, Inc. subsidiary. In 1996, the
Company began its development of an enhanced version of an automated teller
machine (ATM) technology which was designated the ATM-X. The ATM-X was designed
to provide a range of services not typically offered by ATM
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machines, such as electronic bill payment, instant activated phone cards, event
ticketing and others.
In December of 1997, the Company filed a patent application describing the
transaction processing and networking technologies designed to drive ATM-X and
similar devices. 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 a demand for EMMA's
unique capabilities to provide e-commerce access from ATMs, POS and other
terminals, as well as increased security for financial transactions conducted
over the public Internet.
Focus on the rapid deployment of ATM-X and EMMA has resulted in increases
in the size of the Company's technical staff. EMMA's capabilities, with
interfaces to the Company's various e-commerce partners, will allow it to
seamlessly interface financial networks and provide a universal portal for the
use of the five main methods of payment through which trillions of dollars are
transacted each year: (1) the ATM network; (2) the credit card (POS) network;
(3) the Automated Clearing House (ACH) network ; and (4) checks; and (5) cash.
The EMMA system has been certified through the financial networks and the first
pilot installations which provide automated check cashing have begun.
Business
In 1996, we began our 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, we discovered a significant market
demand for this 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, we filed a patent application describing our
transaction processing and networking technologies. The technology, which was
later designated as E-commerce Message Management Architecture or EMMA, 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 a demand for EMMA's unique capabilities to provide e-
commerce access from ATMs, as well as increased security for financial
transactions conducted over the public Internet.
EMMA's capabilities, with interfaces to our various e-commerce partners,
will allow it to seamlessly interface financial networks by utilizing currency
acceptors on the ATM-X which allows individuals with no ATM card or credit card
to access the services offered. The five main
4
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channels in which EMMA will operate and through which trillions of dollars are
transacted each year are:
- the ATM network;
- the credit card/point-of-sale network;
- the Automated Clearing House network;
- checks; and
- cash.
We have, in recent years, expanded our operations into other technologies,
however we began and continue to do business as a cash and coin processor
through our 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, we either promptly resell the processed coin
and currency at face value plus a small fee, typically $1.50 to $3.00 per box of
50 rolls of coins and $.50 to $41.50 per $1,000 worth of bills sorted, to a
variety of customers, including armored car companies, or deposit it at face
value at the Federal Reserve Bank for credit to our account.
Recent Events
Recently Completed Private Offerings
In order to raise funds for working capital and development of EMMA, on
July 27, 1999, we commenced a private offering pursuant to Section 4(2) of the
Securities Act of 1933 and Regulation D. The offering terminated on November 30,
1999. We offered units, each unit comprised of 10 shares of Series A 8%
Cumulative Convertible Redeemable Preferred Stock and 5 Series A Common Stock
Purchase Warrants. The Units were offered for sale at $95.00 per Unit. Each
share of the Series A Preferred Stock is convertible into one share of Common
Stock, based upon a conversion price of $9.50. The Series A Warrants are
exercisable at $12.00 per share. Dividends on the Series A Preferred Stock are
cumulative annual dividends at the rate of 8% per annum and are payable
annually. Dividends may be paid in cash, or at our option, in additional Series
A Warrants based upon a price of $12.00 per Series A Warrant. The registration
statement of which this prospectus forms a part includes an additional 15,000
shares of Common Stock underlying Series A Warrants which may be issued as
dividends.
At November 30, 1999 we had received gross proceeds from this completed
offering of approximately $1,122,188. As a result of this offering we have
issued 118,125 shares of Series A 8% Cumulative Convertible Redeemable Preferred
Stock and 59,062 Series A Common Stock Purchase Warrants. This registration
statement includes the shares underlying the Series A Preferred Stock and the
Series A Warrants.
We recorded deemed dividends of $522,640 for both the Series A Preferred
Stock and Series A Warrants issued for the nine months ended February 28, 2000.
This amount was based on the difference between the closing market price and the
offering price of the Series A Preferred Stock
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plus the value of the Series A Warrants associated with the Series A Preferred
Stock, value using the "Black Scholes" model.
On December 31, 1999, we commenced a second private offering pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation D. GunnAllen
Financial, Inc., one of our investment bankers and an underwriter in our initial
public offering, was engaged as placement agent for this offering. The offering
consisted of units, each unit comprised of a secured convertible promissory note
in the principal amount of $50,000, bearing interest at the rate of 10% per
annum and Series B Redeemable Warrants to purchase 5,000 shares of common stock.
The notes are convertible into our Common Stock at the conversion rate of $9.50
per share. The Series B Warrants are exercisable at a price of $13.00 per
share.
At January 5, 2000, we received gross proceeds from this completed offering
of $3,360,000. As a result of this offering we issued notes in the aggregate
principal amount of $3,360,000 and 336,000 Series B Common Stock Purchase
Warrants. This registration statement and prospectus includes the shares
underlying the convertible notes and the Series B Warrants.
GBS Lawsuit/Acquisition
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.
6
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THE OFFERING
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<S> <C>
Common Stock outstanding prior to
Offering (1)......................... 3,522,200
Shares being offered for
Sale by Selling Security Holders 1,830,592
Common Stock outstanding after the
Offering............................. 5,352,792
Risk Factors ........................ This Offering involves a high degree of risk.
See "Risk Factors."
Use of Proceeds(2)................... All of the proceeds of this offering will be
paid to the respective Selling Security Holders
and none of the proceeds will be received by
our company. We anticipate that proceeds received
from exercise of any warrants will be used for
working capital purposes. See "Use of Proceeds."
AMEX
Market Symbol........................ TQ
_______________
</TABLE>
(1) As of June 6, 2000. Does not include:
. 775,887 shares reserved under our company's Stock Option Plan of which
693,030 options are issued and outstanding.
. 150,000 shares reserved under our company's Non-Executive Director Plan of
which 120,000 options are issued and outstanding.
. Up to approximately 1,592,362 shares reserved for issuance upon exercise
of outstanding warrants, including shares underlying warrants included in
this prospectus.
(2) We will receive approximately $17,533,192 in proceeds if all of the
warrants are exercised.
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RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. The following factors, in addition to those discussed elsewhere, should
be considered carefully in evaluating us and our business. An investment in the
securities is suitable only for those investors who can bear the risk of loss of
their entire investment.
Immediate Need for Capital; If we are unable to obtain needed additional
financing, our business may fail.
Our capital requirements have been and will continue to be significant. At
June 30, 2000, we had only $468,000 of unrestricted cash and cash equivalents,
creating an immediate need to raise additional capital. We have significant
liabilities outstanding of approximately $7,005,000 at June 30, 2000. Our
current monthly operating costs are approximately $430,000. Our working capital
deficit June 30, 2000 was $1,746,000. We have undertaken various measures to
raise the capital we need, including: (i) we have entered into a Letter of
Intent with our investment banking firm, GunnAllen Financial, Inc. to undertake
a secondary offering of the Company's stock of approximately $10,000,000 on a
"firm commitment" basis; (ii) the Company has engaged Robinson-Humphrey Company,
LLC to provide additional financial and strategic advice; and (iii) the Company
is negotiating short term borrowing to improve its current cash position. There
can be no assurance that these contemplated actions will be consummated. While
we are optimistic that these measures will, if completed, satisfy our financial
requirements for the foreseeable future, such financings may not be available to
us when needed, on commercially reasonable terms, or at all. If we are unable to
obtain any such additional financing, we may be required to curtail our
marketing and production plans and possibly cease operations.
Any additional financing we seek may substantially dilute the interests of
our shareholders.
To the extent that we obtain additional financing through the issuance of
additional equity securities, any such issuance may involve substantial dilution
to our then-existing stockholders. Additionally, to the extent that we incur
indebtedness or issue debt securities, we 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 us that could
require us to significantly curtail or possibly cease our operations.
We have a history of incurring losses which resulted in our independent
accountants' issuing a going concern opinion.
We have incurred losses since our inception. For the years ended May 31
1999, 1998 and 1997 we sustained net losses of $5,711,964, $2,727,145 and
$1,547,805, respectively. At May 31, 1999 we had a stockholders' equity of
$70,494 and an accumulated deficit of $11,288,173.
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At February 28, 2000, we had a stockholders' deficit of $1,134,727 and an
accumulated deficit of $16,167,560. In its report accompanying our audited
financial statements for the fiscal year ended May 31, 1999, our independent
auditors included an explanatory paragraph wherein they expressed substantial
doubt about our ability to continue as a going concern. At August 31, 1999 we
reported a loss of $1,540,501 for the three months ended August 31, 1999. We had
a net loss of $1,862,892 for the six months ended November 30, 1999 and a net
loss of $4,356,747 for the nine months ended February 28, 2000. We continued to
generate losses for the three months ended May 31, 2000 and will continue to
incur losses for the forseeable future. We also expect our auditors report for
the year ended May 31, 2000 to include an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern.
If our products and services do not achieve market acceptance, our business
will be harmed.
In marketing our products and services, we are attempting to change the
traditional methods by which people obtain financial services and access the
Internet. Accordingly, the demand for these services is subject to a high level
of uncertainty. If we do not realize market acceptance of these products,
our business will be seriously harmed. The results of the use of EMMA when
deployed may not be well-received and prior results of use may not be indicative
of future market acceptance of our 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 EMMA. Achieving
market acceptance for EMMA will require substantial marketing efforts and the
expenditure of a significant amount of funds to inform various targeted customer
groups of the perceived benefits and cost advantages of EMMA. To date we have
installed only a limited number of EMMA driven terminals.
Similarly, the demand for and market acceptance of our coin and currency
processing services are also subject to a high level of uncertainty. If we do
not realize market acceptance of these products, our business will be seriously
harmed. Commercial establishments and individuals may elect to utilize other
methods which they believe to be less costly or possess other advantages over
our cash processing services, including establishing their own cash counting and
processing operations, or otherwise refraining from seeking to dispose of excess
cash.
Our limited marketing capabilities may hinder our growth.
Since inception, we have conducted only limited marketing activities and
currently have limited marketing and technical experience and limited financial,
personnel and other resources to independently undertake extensive marketing
activities. Accordingly, our marketing efforts may not result in significant
initial or continued market acceptance, may not develop a market for our EMMA
system, CoinBank(R) machines and coin and currency processing services and may
not
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succeed in positioning EMMA as a preferred method of processing "advanced
function" transactions. Further, our current marketing plans are subject to
change as a result of a number of factors, including changes in market
conditions, the nature of the marketing requested or provided by prospective
users of EMMA.
We face substantial security risks in our business for which we may not be
fully insured.
Our cash processing operations are substantially dependent upon maintaining
the security of the inventories of coin and currency transported to our cash
processing facility and held on our premises. We have obtained insurance for
on-site and off-site theft of cash from our facilities and machines, and we
maintain insurance against losses, including those due to theft or embezzlement
by independent contractors or our employees. This insurance, however, may not
provide us with an adequate level of coverage in the event of any loss and it
may not be renewed or increased in the future as needed, on commercially
reasonable terms or at all. Moreover, we 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 our business and
results of operations. Although we believe that we have in place adequate
security systems and procedures to safeguard the coin and currency processed at
our cash processing facility, our systems and procedures may not be sufficient
to ensure against theft, embezzlement or other losses.
Our products may not perform reliably in extensive applications.
As of June 1, 2000, we had installed a limited number of EMMA-driven ATM-X
machines at locations in Nevada and a limited number of CoinBank(R) machines at
locations in California, New England and Europe. Although such systems and
machines have performed reliably to date at their current installations, upon
widespread commercial use they may not satisfactorily perform all of their
intended functions or may not prove reliable in extensive utilization. Software
and other technologies that are incorporated into our products are complex and
may contain errors which will only become apparent subsequent to widespread
commercial use. Remedying such errors could require the expenditure of a
substantial amount of money and could also result in significant delays in
installing or selling our products which could have a material adverse effect on
us. We anticipate that we will continue to seek to upgrade and enhance both the
hardware and software components of our products. Such upgrading and enhancement
efforts remain subject to the risks inherent in new product development,
including unanticipated technical or other problems which could result in
material delays in product commercialization or significantly increased costs.
Further, our EMMA systems may not satisfactorily perform all of its intended
functions or will prove not to be reliable in extensive utilization.
10
<PAGE>
We are dependent on independent contractors, whose nonperformance could
harm our business.
We are substantially dependent on the ability of the independent
contractors we hire to dedicate sufficient personnel to service us. Any
contractor that we utilize or may utilize may not have sufficient capacity to
satisfy our needs during any period of sustained demand. The loss of services of
independent contractors could disrupt our business. Furthermore, the EMMA
system accesses networks which are owned and operated by third parties. The
failure or unavailability of these networks could have a material adverse effect
on us.
We are dependent on third-party manufacturers.
The EMMA system is designed to be distributed through equipment, such as
ATMs manufactured and distributed by third parties. Although we believe that a
number of sources for this equipment is available, failure or delay by any
manufacturer in providing such equipment to location operators could result in
interruptions in our ability to deploy EMMA-based transactions and could have a
material adverse effect on our operations.
We are in litigation with a supplier of technology.
We have commenced a lawsuit against Geld Bearbeitungs Systeme GES.M.B.H.,
an Austrian entity which had been manufacturing certain of our CoinBank(R)
machines. Pursuant to licensing and manufacturing services and distribution
agreements with Geld, we have the exclusive world-wide right, except for sales
to certain Austrian financial institutions, to use the technology which is
incorporated in the equipment manufactured by this supplier. We had previously
entered into a letter of intent to acquire Geld to secure our access to the
exclusive technology 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. The termination of our agreement with Geld would likely lead
to the termination of our exclusivity with respect to such technology.
We have a limited customer base and the loss of any present customers would
have an adverse effect on our operations.
We continue to sell most of the coin and currency that we process to a
limited number of entities. We generally do not enter into long-term written
agreements with any customers with respect to the processing, acquisition or
sale of coin and currency and do not anticipate entering into written contracts
for coin purchases or sales with future customers. The loss of present or any
future significant customers, for any reason, in the absence of significant
additional customers or contracts, could have a material adverse effect on our
financial condition and results of operations. We may not be able to lessen our
dependence on a limited number of customers for a substantial portion of our
revenue.
11
<PAGE>
The expansion of our business is uncertain.
To date, we have generally been dependent on processing coins and currency
purchased directly from third parties (other than through CoinBank(R) machines)
to generate substantially all of our revenues. We intend to increase our
current level of operations, with an emphasis on marketing EMMA services. We
have achieved limited growth to date and we may not be able to successfully
expand our operations. Expansion of our operations will be largely dependent
upon our ability to successfully market and distribute EMMA-driven transaction
processing services; 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
advanced function services. We may not be able to successfully implement our
business plan and unanticipated expenses, problems or technical difficulties may
occur which would result in material delays in its implementation. Our 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 coin processing
services or the use of EMMA services by prospective customers. We may not be
able to achieve significant market acceptance of advanced function transactions,
achieve significant penetration in new geographic markets or successfully expand
our operations.
We may not successfully compete with our competitors.
The cash processing industry is characterized by intense competition and we
compete primarily with banks, most of which possess substantially greater
financial, personnel, marketing and other resources than us. With respect to
CoinBank(R) machines, we are aware of one other company that offers self-service
coin counting and processing services through the use of coin counting machines.
To our knowledge, unlike us, having recently focused our efforts on selling
CoinBank(R) 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 we have installed or may seek to install and/or
sell CoinBank(R) machines. There can be no assurance that potential customers of
CoinBank(R) machines will not prefer to utilize this competitor's machines, or
that this competitor will not seek to sell its machines.
Competition could render our technologies obsolete.
Our competitors may be developing or may seek to develop functionally
equivalent products or services for the disposal of large amounts of cash in
the future. In addition, our EMMA platform will compete with existing automated
teller machines and services offered by financial institutions and other
companies that may provide services similar to those offered by EMMA.
Competitive technologies may render our products and services obsolete or less
marketable.
12
<PAGE>
Changing industry trends may adversely effect our operations.
Alternatives to the use of cash and checks, such as credit cards and wire
transfer, debit cards and other forms of electronic currency are increasing.
Increasing use of these alternative forms of payment could reduce the frequency
of circulation of cash and checks resulting in decreased need for some EMMA
applications. 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 which may make
certain EMMA applications unattractive compared to other alternatives.
The geographic concentration of our business exposes us to risks due to
changes in the regional economy.
To date, our operations have been concentrated primarily in the Southern
California area. Our growth prospects will be largely dependent on its ability
to achieve greater penetration in this market as well as significant penetration
in new geographic markets. Although we intend to focus our efforts on expanding
its operations for the foreseeable future, a substantial portion of our revenues
will be derived from its Southern California operations. Such geographic
concentration increases the potential impact on our results of operations of any
regional economic downturn or catastrophic events. Our 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 cash, including
creating in-house processing facilities.
We are subject to risks relating to our international installations and
sales.
We are seeking to deploy the EMMA system outside of the United States. To
the extent that we are able to expand our operations and sales outside of the
United States, we will be 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 our ability to operate effectively outside of the
United States or to deliver EMMA services overseas to customers on a competitive
and timely basis.
Uncertainty of patent and trademark protection.
Although we have filed applications with the U.S. Patent Office to obtain a
patent on our EMMA platform and our CoinBank(R) coin counting machine, these
patents may not be granted, or that if granted, they may not afford us any
meaningful protection. We do not currently
13
<PAGE>
hold any patents with respect to any software or hardware used in its
operations. We intend 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
software developed by it and used primarily in its coin processing operations.
Such methods may not afford complete protection, and there can be no assurance
that third parties will not independently develop such technology or obtain
access to the software we have developed. Although we believe that our use of
the software we developed and other software used in its operations does not
infringe upon the rights of others, our use of the software we developed or such
other software may infringe upon the patents or intellectual property rights of
others. In the event of infringement, we could, under certain circumstances, be
required to obtain a license or modify aspects of the software we developed or
such other software or refrain from using such software. We may not have the
necessary financial resources to defend any infringement claim made against us
or be able to successfully terminate any infringement in a timely manner, upon
acceptable terms and conditions or at all. Failure to do any of the foregoing
could have a material adverse effect on us. Moreover, if the software we
developed or any other software or hardware used in our business is deemed to
infringe upon the rights of others, we could, under certain circumstances,
become liable for damages, which could have a material adverse effect on us. We
received United States trademark registration for the ''CoinBank(R)'' name in
September 1997. Although we are not aware of any claims of infringement or other
challenges to our rights to use this trademark, there can be no assurance that
our marks do not or will not infringe upon the proprietary rights of others or
that our marks would be upheld if challenged.
We are dependent on key personnel.
Our success is dependent on the efforts of our key personnel, including Mr.
Korman, our President and Chief Executive Officer. We have entered into a three-
year employment agreement with Mr. Korman which expires in July, 2001, which
requires Mr. Korman to devote not less than 40 hours per week of his business
time to our business 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 our business and prospects. Mr. Korman also participates in
other business endeavors which require a portion of his business time. Although
Mr. Korman has advised us that his participation in outside business matters
should not interfere with his performance of his duties as our President and
Chief Executive Officer, 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 our favor.
The success of our business also requires that we retain other qualified
management personnel.
Our success is also dependent upon our ability to hire and retain
additional qualified management, marketing, technical, financial and other
personnel. Competition for qualified personnel is intense, and there can be no
assurance that we will be able to hire or retain additional
14
<PAGE>
qualified personnel. Any inability to attract and retain qualified management
and other personnel would have a material adverse effect on us.
We are controlled by our management.
Mr. Korman and Mr. Miller, and their respective affiliates, beneficially
own, in the aggregate, approximately 29.6% of our outstanding common stock. As
a result, they are and will be in a position to act together to effectively
control us, elect our directors, cause an increase in the authorized capital or
the dissolution, merger or sale of our assets, and generally direct our affairs.
Our directors and officers have limited personal liability.
Our Certificate of Incorporation includes provisions to limit, to the full
extent permitted by Delaware law, the personal liability of our directors for
monetary damages arising from a breach of their fiduciary duties as directors.
In addition, our By-Laws require us to indemnify any of our directors, officers,
employees or agents to the full extent permitted by Delaware law. As a result of
such provisions in our Certificate of Incorporation and the By-Laws,
stockholders may be unable to recover damages against our directors and officers
for actions taken by them which constitute negligence, gross negligence or a
violation of their fiduciary duties, which may reduce the likelihood of
stockholders instituting derivative litigation against directors and officers
and may discourage or deter stockholders from suing our directors, officers,
employees and agents for breaches of their duty of care, even though such an
action, if successful, might otherwise benefit us and our stockholders.
The future sale of our currently outstanding restricted stock may depress
our stock price.
As of June 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. In the event that all of the warrants and other convertible
securities for which shares are registered under this Prospectus are exercised,
an additional 1,830,592 shares will be outstanding. 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 delisting of securities from American Stock Exchange and risks
relating to Penny Stocks.
Our 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
15
<PAGE>
stockholders' equity of at least $4,000,000 and market capitalization of at
least $1,000,000. AMEX also receives the right to delist an entity in its
discretion. Among other criteria, AMEX will consider the 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 delisting of our common stock from AMEX, and trading,
if any, in our securities would thereafter be conducted in the non-Nasdaq over-
the-counter market. As a result of such delisting, 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 delisted from trading on
Nasdaq and the trading price of the common stock were to fall below $5.00 per
share on the date the common stock was delisted, 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.
We have the discretion to issue additional shares of preferred stock.
Our Certificate of Incorporation authorizes our Board of Directors to issue
up to 1,000,000 shares of preferred stock, from time to time, in one or more
series. Our Board of Directors is authorized, without further approval of the
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 establishment of a class of preferred stock other than
the Series A Preferred Stock may adversely impact the rights of holders of the
Series A Preferred Stock. The issuance of such stock could adversely affect the
voting power of the holders of common stock and, under certain circumstances,
make it more difficult for a third party to gain control of us, discourage bids
for our common stock at a premium, or otherwise adversely affect the market
price of our common stock. To date we have issued an aggregate of 118,125
shares of Series A Preferred Stock.
16
<PAGE>
We may not fully recover the carrying value of our CoinBank machines held
for sale.
We currently are holding for sale approximately 212 CoinBank machines which
have a carrying value of approximately $1,350,000. During the year ended May 31,
2000 we sold 65 of these machines and we are currently attempting to identify
parties interested in acquiring the remaining units. Although we have been in
discussions with several parties pertaining to the sale of these machines, to
date we have not received any acceptable offers. We are currently reviewing the
carrying value of these machines to determine if an accounting impairment
exists. If we conclude that such an impairment exists, this could give rise to a
substantial expense which would increase our reported losses.
17
<PAGE>
SELLING SECURITY HOLDERS
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Shares of Shares
Owned Prior Owned Owned
Name and Address of to Offering Shares After After
Security Holder (1)(2) Offered Offering Offering
Shares Underlying Series A Preferred Stock and Series A Warrants
<S> <C> <C> <C> <C>
Gerard Renik(3) 3,938 3,938 - -
Lloyd Ettinger(3) 3,938 3,938 - -
Watershed Partners LP(3)(4) 15,750 15,750 - -
Diane Gross(3) 7,875 7,875 - -
Bernard Goldberg(3) 7,875 7,875 - -
Wesley Neal(3) 7,875 7,875 - -
Charles Weingarten(3) 3,938 3,938 - -
Daniel Martin(3) 23,625 23,625 - -
Marc Derendinger 401 Profit 7,825 7,825 - -
Sharing Plan(3)
Milan Glumidge(3) 7,825 7,825 - -
Jesselson Gimel Charitable 15,750 15,750 - -
Trust(3)
Irwin Tenenbaum(3) 3,938 3,938 - -
Menachem Rosensaft(3) 3,938 3,938 - -
Fagenson & Co, Inc. Employee 3,938 3,938 - -
Pension Plan & Trust(3)
Starr Securities Target Benefit 3,938 3,938 - -
Plan(3)
Ronald Drazin(3) 7,875 7,875 - -
Alf Aid Trust 47,250 47,250 - -
-----------------------------------------------------------------
Sub-Total 177,188 177,188 - -
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Shares of Shares
Owned Prior Owned Owned
Name and Address of to Offering Shares After After
Security Holder (1)(2) Offered Offering Offering
Shares Underlying Convertible Notes and Series B Warrants
<S> <C> <C> <C> <C>
Robert Albonico(5) 10,263 10,263 - -
Donald Baker(5) 10,263 10,263 - -
Howard and Joy Brand(5)(6) 135,131 135,131 - -
Steven Brownstein(5) 7,697 7,697 - -
Eric Butlein(5) 102,631 102,631 - -
Felix Campos(5) 20,526 20,526 - -
John Chwalinski(5) 20,526 20,526 - -
Charlie Coombes(5) 10,263 10,263 - -
Paul Creamer(5) 20,526 20,526 - -
Glenn Davis(5) 17,960 17,960 - -
William Donnelly(5) 10,263 10,263 - -
Alan Droz(5) 5,131 5,131 - -
Richard Fried(5) 10,263 10,263 - -
Jerry Friedman(5) 46,184 46,184 - -
Robert Fullerton(5) 5,131 5,131 - -
Andes Garganta(5) 5,131 5,131 - -
Robert Gilman(5) 20,256 20,256 - -
Ken Goldman(5) 5,131 5,131 - -
Stuart and Paula Graff(5) 20,526 20,526 - -
Tony Heinrich(5) 5,131 5,131 - -
International Power Machinery 10,263 10,263 - -
Company Pension Trust(5)
Robert Jackson(5) 10,263 10,263 - -
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Shares of Shares
Owned Prior Owned Owned
Name and Address of to Offering Shares After After
Security Holder (1)(2) Offered Offering Offering
<S> <C> <C> <C> <C>
Marc Jacobson(5) 5,131 5,131 - -
Warren Johnson(5) 10,263 10,263 - -
Dennis Lapidus(5) 10,263 10,263 - -
Pierce Liberman(5) 20,526 20,526 - -
Ron Likas(5) 20,526 20,526 - -
Andrew Lippa(5) 5,131 5,131 - -
Ted Luntz(5) 10,263 10,263 - -
Jim Lyons(5) 20,526 20,526 - -
Ben Mast(5) 61,578 61,578 - -
Gerald Miller(5) 10,263 10,263 - -
Todd Nelson(5) 5,131 5,131 - -
Fred Oswald(5) 5,131 5,131 - -
Michael Polk(5) 5,131 5,131 - -
Paul Powers(5) 10,263 10,263 - -
Oswald Schindler(5) 5,131 5,131 - -
David Schlabach(5) 5,131 5,131 - -
Steven Shlemon(5) 20,526 20,526 - -
Steven Sieglaub(5) 10,263 10,263 - -
Richard Steuer(5) 5,131 5,131 - -
Kem Swarts(5) 10,263 10,263 - -
Francis and Joyce Villella(5) 20,526 20,526 - -
Larry Walshaw(5) 5,131 5,131 - -
Larry Wheeler(5) 5,131 5,131 - -
Jorge Zapata(5) 10,263 10,263 - -
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Shares of Shares
Owned Prior Owned Owned
Name and Address of to Offering Shares After After
Security Holder (1)(2) Offered Offering Offering
<S> <C> <C> <C> <C>
Andrew Zarnett(5) 5,131 5,131 - -
Joseph Zernic(5) 10,263 10,263 - -
--------------------------------------------------------------
Sub-Total 699,684 699,684 - -
<CAPTION>
Pre-IPO Placement Warrants
<S> <C> <C> <C> <C>
Vincent Carrino (7)(8) 48,125 48,125 - -
Daniel Coleman(8) 17,500 17,500 - -
Swift Barnes Cust. for Parker 4,375 4,375 - -
Barnes(8)
Mayer Laufer(8) 26,250 26,250 - -
Peter Wasserman(8) 8,750 8,750 - -
Bernard Goldberg(8) 8,750 8,750 - -
Richard Kandel(8) 8,750 8,750 - -
Bernie Fine(8) 4,375 4,375 - -
Dianne Gross(8) 17,500 17,500 - -
Transtech GBM, Inc.(8) 17,500 17,500 - -
Thomas Fuchs(8) 17,500 17,500 - -
Eugene Sudziarski(8) 2,188 2,188 - -
Archie Simmons(8) 2,188 2,188 - -
Cori Orr(8) 87,500 87,500 - -
Jeffery J. Posner(8) 8,750 8,750 - -
Thomas Dowling(8) 8,750 8,750 - -
Watermill Holdings(8) 4,375 4,375 - -
Gregory Perrotta(8) 8,750 8,750 - -
Alliance Capital Investments(8) 8,750 8,750 - -
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Shares of Shares
Owned Prior Owned Owned
Name and Address of to Offering Shares After After
Security Holder (1)(2) Offered Offering Offering
<S> <C> <C> <C> <C>
Evan Bower(8) 8,750 8,750 - --
Peter Montalbano(8) 26,250 26,250 - -
-----------------------------------------------------------------
Sub-Total 350,000 350,000
<CAPTION>
Shares Underlying Other Outstanding Warrants and Options
<S> <C> <C> <C> <C>
Gunn Allen Financial, Inc.(10) 223,000 223,000 - -
Starr Securities(11) 174,250 174,250 - -
United Nevada Discount, Inc. 4,113 4,113 - -
(12)
Kevin T. Barnes(13) 5,560 5,560 - -
William Berris(13) 21,448 21,448 - -
AR Brasch Marketing Employee 21,700 21,700 - -
Plan(13)
CFO Services Profit Sharing 1,192 1,192 - -
Plan(13)
Karleen Merry(13) 1,192 1,192 - -
Miles E Brasch(13) 5,705 5,705 - -
Michael and Greta Wirth(13) 3,336 3,336 - -
Richard Maize(13) 1,112 1,112 - -
Thomas Schiff(13) 1,112 1,112 - -
Erica Jesselson(14) 5,000 5,000 - -
Ejada Limited Partnership(15) 25,000 25,000 - -
Mark Scott(16) 40,000 40,000 - -
WAB Capital(17) 25,000 25,000 - -
Goldstein & DiGioia, LLP(18) 40,000 40,000 - -
-----------------------------------------------------------------
Sub-Total 598,720 598,720 - -
</TABLE>
22
<PAGE>
__________________________
1. Includes all shares as to which the individual has sole or shared voting
power or investment power and also any shares that the individual has the
right to acquire within 60 days of the date of this prospectus through the
exercise of any stock option or other right. Unless otherwise indicated in
the footnotes, each individual has sole voting and investment power (or
shares such powers with his or her spouse) with respect to the shares shown
as beneficially owned).
2. See "Plan of Distribution."
3. Listed shares will be issued by us upon the conversion of the Series A
Preferred Stock and the exercise of the Series A Warrants.
4. Mr. Vincent Carrino, one of our directors, is a partner of the listed
security holder. Listed shares include 15,750 shares underlying shares of
Series A Preferred Stock and Series A Warrants and 118,125 shares issuable
upon warrants held by Mr. Carrino, directly.
5. Listed shares are issuable by us upon the conversion of the convertible
promissory notes and the exercise of the Series B Warrants.
6. Mr. Howard Brand is our Secretary and Chief Financial Officer. Listed
shares include 5,131 shares issuable upon conversion of a convertible note
and exercise of Series B Warrants and 30,000 shares issuable upon exercise
of other privately issued warrants, exercisable at $6.125. Also includes
100,000 warrants exercisable at $5.875.
7. Mr. Carrino serves as a director of Cash Technologies. Does not include
20,000 options issued to Mr. Carrino pursuant to our Non-Director Option
Plan. Also does not include shares or warrants held by Watershed Partners
L.P. See Note 4 above.
8. Listed shares issuable upon exercise of warrants issued in private
placements completed prior to our initial public offering. The warrants
are exercisable at a price of $8.00 per share and are exercisable until
October 31, 2002.
9. Listed shares are underlying privately issued options and warrants.
10. GunnAllen Financial, Inc. was one of the underwriters of our initial public
offering. Listed shares include shares issuable upon exercise of
underwriters' warrants and placement agent warrants issued to GunnAllen in
connection with our recent private offering. Includes an aggregate of
175,000 warrants exercisable at $5.00 per share and 48,000 warrants
exercisable at $11.55 per share.
11. Starr Securities, Inc. was one of the underwriters of our initial public
offering. Listed shares include shares issuable upon exercise of
underwriters' warrants and other privately issued warrants.
12. Represents shares underlying warrants exercisable at $3.50 per share.
13. Represents shares underlying warrants exercisable at $8.00 per share.
14. Represents shares underlying warrants exercisable at $6.30 per share.
15. Represents shares underlying warrants exercisable at $7.00 per share.
16. Represents shares underlying warrants exercisable at $10.5625 per share.
23
<PAGE>
17. Represents shares underlying warrants exercisable at $12.9375 per share.
18. Goldstein & DiGioia, LLP holds 40,000 common stock purchase warrants
exercisable at $5.875 per share. Goldstein & DiGioia, LLP serves as
securities counsel to Cash Technologies, Inc.
PLAN OF DISTRIBUTION
The common stock covered by this prospectus, including the shares
underlying the warrants which be issued by Cash Technologies upon the exercise
by the holders of the warrants, may be offered and sold from time to time by the
selling stockholders, including in one or more of the following transactions:
- on the over the counter market;
- in transactions other than on the over the counter market;
- in connection with short sales;
- by pledge to secure debts and other obligations;
- in connection with the writing of options, in hedge transactions, and
in settlement of other transactions in standardized or over-the-
counter options;
- in a combination of any of the above transactions; or
- pursuant to Rule 144 under the Securities Act, assuming the
availability of an examination from registration.
The selling security holders may sell their shares at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
at negotiated prices, or at fixed prices.
Broker-dealers that are used to sell shares will either receive discounts
or commissions from the selling share holders, or will receive commissions from
the purchasers for whom they acted as agents.
The selling security holders and intermediaries through whom shares are
sold may be deemed underwriters within the meaning of the Securities Act with
respect to the shares offered.
There can be no assurance that the selling security holders will sell all
or any of the common stock.
24
<PAGE>
We have agreed to keep this prospectus effective for a period expiring on
the earlier of the date on which all of the selling security holders' shares
have been sold or the date on which all such shares are eligible for sale
pursuant to Rule 144 under the Securities Act.
The selling shareholders and us have agreed to customary indemnification
obligations with respect to the sale of common stock by use of this prospectus.
REPORTS TO SHAREHOLDERS
Our company distributes annual reports to its stockholders, including
financial statements examined and reported on by independent public accountants,
and will provide such other reports as management may deem necessary or
appropriate to keep stockholders informed of our company's operations.
LEGAL MATTERS
The legality of the offering of the shares will be passed upon for us by
Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New York l00l7.
Goldstein & DiGioia, LLP (or members thereof) hold warrants to purchase 40,000
shares of Common Stock, which underlying shares are included in this Prospectus
and Goldstein DiGioia is included as a selling security holder.
EXPERTS
The financial statements incorporated by reference in this Prospectus have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their report (which contained an
explanatory paragraph regarding the Company's ability to continue as a going
concern) incorporated herein by reference, and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed a Registration Statement under the Act with the Securities
and Exchange Commission, with respect to the securities offered by this
prospectus. This prospectus does not contain all of the information set forth
in the registration statement. For further information with respect to our
company and such securities, reference is made to the registration statement and
to the exhibits and schedules filed therewith. Each statement made in this
prospectus referring to a document filed as an exhibit to the registration
statement is qualified by reference to the exhibit for a complete statement of
its terms and conditions. The registration statement, including exhibits
thereto, may be inspected without charge to anyone at the office of the
Commission, and copies of all or any part thereof may be obtained from the
Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Expenses in connection with the issuance and distribution of the securities
being registered herein are estimated.
<TABLE>
<CAPTION>
Amount
-----------
<S> <C>
Securities and Exchange Commission Registration Fee.. $ 5,812
Printing and Engraving Expenses...................... $ 5,000*
Accounting Fees and Expenses......................... $15,000*
Legal Fees and Expenses.............................. $25,000
Blue Sky Fees and Expenses........................... $10,000*
Transfer Agent and Registrar Fees.................... $ 2,000*
Miscellaneous Fees and Expenses...................... $ 1,500*
Total................................. $64,312
=======
</TABLE>
* Estimated.
Item 15. Indemnification of Directors and Officers
The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative in nature
to procure a judgment in its favor, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, in a proceeding not by or in
the right of the corporation, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with such suit or
proceeding, if he acted in good faith and in a manner believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reason to believe
26
<PAGE>
his conduct was unlawful. Delaware law further provides that a corporation will
not indemnify any person against expenses incurred in connection with an action
by or in the right of the corporation if such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which such court shall deem
proper.
Our By-Laws provide for indemnification of our officers and directors
to the greatest extent permitted by Delaware law for any and all fees, costs and
expenses incurred in connection with any action or proceeding, civil or
criminal, commenced or threatened, arising out of services by or on behalf of
us, providing such officer's or director's acts were not committed in bad faith.
The By-Laws also provide for advancing funds to pay for anticipated costs and
authorizes the Board to enter into an indemnification agreement with each
officer or director.
In accordance with Delaware law, our Certificate of Incorporation
contains provisions eliminating the personal liability of directors, except for
breach of a director's fiduciary duty of loyalty to the us or to our
stockholders, acts or omission not in good faith or which involve intentional
misconduct or a knowing violation of the law, and in respect of any transaction
in which a director receives an improper personal benefit. These provisions only
pertain to breaches of duty by directors as such, and not in any other corporate
capacity, e.g., as an officer. As a result of the inclusion of such provisions,
neither the Company nor our stockholders may be able to recover monetary damages
against directors for actions taken by them which are ultimately found to have
constituted negligence or gross negligence, or which are ultimately found to
have been in violation of their fiduciary duties, although it may be possible to
obtain injunctive or equitable relief with respect to such actions. If equitable
remedies are found not to be available to stockholders in any particular case,
stockholders may not have an effective remedy against the challenged conduct.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and therefore is unenforceable.
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<PAGE>
Item 16. 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.
Exhibits designated by (**) are filed herewith.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- -----------
<S> <C>
*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)]
*3.1(a) Certificate of Designation of Series A 8% Cumulative Convertible
Preferred Stock [Exhibit 3.1(a) to the Company's Form 10-QSB for
the quarter ended August 31, 1999]
*3.2 Bylaws of the Company [Exhibit 3.2 to the Company's Registration
Statement on Form SB-2 (File No. 333-6436)]
*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)]
*4.3 Form of Series A Redeemable Warrant [Exhibit 4.3 to the
Company's Form 10-QSB for the quarter ended August 31, 1999]
*4.4 Form of Series B Redeemable Warrant [Exhibit 4.3 to the
Company's Form 10-QSB for the quarter ended November 30, 1999]
5.1 Opinion of Goldstein & DiGioia, LLP re: Legality of Shares (to
be filed upon amendment).
*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)]
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
*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 the Annual Meeting held on
June 21, 1999].
21. Subsidiaries: National Cash Processors, Inc; CoinBank Automated
Systems, Inc; and CoinBank Automation Handels GmbH, Salzburg,
Austria.
**23.1 Consent of BDO Seidman, LLP
23.2 Consent of Goldstein & DiGioia, LLP, contained in exhibit 5.1
(to be filed upon amendment)
</TABLE>
29
<PAGE>
Item 17. Undertakings
The undersigned registrant hereby undertakes:
A. (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereto) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) For purposes of determining any liability under the Securities Act of
1933, each filing of our company's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore,
30
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on the 14th day of
July, 2000.
CASH TECHNOLOGIES, INC.
By: /s/ Bruce Korman
------------------------------------------------
Bruce Korman
President, Chief Executive Officer and Chairman
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below substitutes and appoints Bruce Korman as his true and lawful
attorney-in-fact and agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be don in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Capacity Date
--------- -------- ----
/s/Bruce Korman President, Chief Executive July 14, 2000
-------------------------- Officer and Chairman
Bruce Korman
/s/Richard Miller Director July 14, 2000
--------------------------
Richard Miller
/s/Robert Fagenson Director July 14, 2000
--------------------------
Robert Fagenson
/s/Vincent Carrino Director July 14, 2000
--------------------------
Vincent Carrino
32
<PAGE>
/s/Edward G. Harshfield Director July 14, 2000
--------------------------
Edward G. Harshfield
/s/Robin Richards Director July 14, 2000
--------------------------
Robin Richards
/s/Howard Brand Chief Financial Officer, Secretary July 14, 2000
-------------------------- and Principal Accounting Officer
Howard Brand
33
