Cash Systems (CKNN) 10-Q 2005 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2005

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

Commission File Number: 1-31955

CASH SYSTEMS, INC.

(Name of small business issuer in its charter)

Delaware	87-0398535
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7350 Dean Martin Drive, Suite 309, Las Vegas, NV, 89139

(Address of principal executive offices, Zip code)

(702) 987-7169

(Issuer’s telephone number)

_________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes   x    No¨

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

As of November 10, 2005, there were 16,876,738 shares of the Registrant’s common stock, $0.001 par value per share, issued and outstanding.

CASH SYSTEMS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarter Ended September 30, 2005

		Page No.
PART I.	Financial Information
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of September 30, 2005 (Unaudited) and December 31, 2004	3
	Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, 2005 and 2004	4
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	Other Information
Item 1.	Legal Proceedings	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6.	Exhibits	25
SIGNATURES		25

PART I. Financial Information

Item 1. Unaudited Consolidated Financial Statements.

CASH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2005		December 31, 2004
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS
Cash	$	20,441,677	$	13,043,874
Due from related party		54,603		183,560
Current portion of prepaid commissions		450,685		348,601
Current portion of loans receivable		1,148,236		1,849,420
Other receivables		—		645,006
Deferred income taxes		1,789,000		336,000
Settlements due from credit card processors, net of allowance of $1,558,000 and $0, respectively		871,458		1,889,856
Other current assets		3,336,921		2,638,759
Total Current Assets		28,092,580		20,935,076
PROPERTY AND EQUIPMENT, NET		4,926,030		3,373,170
OTHER ASSETS
Long-term prepaid commissions, net of current portion		262,376		523,827
Long-term loans receivable, net of current portion		60,229		350,835
Total Other Assets		322,605		874,662
TOTAL ASSETS	$	33,341,215	$	25,182,908
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued in excess of cash in bank	$	9,771,303	$	3,331,381
Accounts payable - trade		889,431		436,322
Credit card cash advance fees payable		839,579		655,036
ATM commissions payable		1,019,951		629,328
Credit card chargebacks payable		231,914		80,000
Check cashing commissions payable		119,143		102,801
Due to related party		—		211,846
Other accrued expenses		286,032		197,869
Total Current Liabilities		13,157,353		5,644,583
LONG-TERM LIABILITIES
Deferred income taxes		1,012,000		797,000
Total Liabilities		14,169,353		6,441,583
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value of $0.001, 50,000,000 shares authorized, 16,876,738 and 16,173,445 shares issued and outstanding		16,877		16,173
Additional paid-in capital		18,770,081		16,838,356
Retained earnings		384,904		1,886,796
Total Stockholders' Equity		19,171,862		18,741,325
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	33,341,215	$	25,182,908

See accompanying notes to consolidated financial statements.

3

CASH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
Commissions on credit card cash advances, ATMs and check cashing services	$	17,050,788		$	12,773,387		$	46,737,656		$	35,620,314
Operating expenses
Commissions		8,365,053			6,388,588			22,909,965			17,201,364
Processing costs		3,412,956			2,143,906			10,540,434			6,378,394
Check cashing costs		1,042,135			745,022			3,698,742			2,018,186
Armored carrier services		93,499			148,507			337,637			348,717
Payroll, benefits and related taxes		2,273,642			1,342,571			5,776,805			3,872,833
Professional fees		613,440			151,817			1,649,255			517,497
Compensation expense related to warrants and options		—			23,197			—			91,377
Other		1,020,561			569,474			3,226,054			2,040,271
Depreciation and amortization		325,584			249,350			925,720			500,338
Total operating expenses		17,146,870			11,762,432			49,064,612			32,968,977
Income (loss) from operations		(96,082	)		1,010,955			(2,326,956	)		2,651,337
Other income (expense)
Interest expense		(122,635	)		(43,172	)		(346,869	)		(190,823	)
Interest income		99,609			3,457			228,333			4,713
Total other income (expense)		(23,026	)		(39,715	)		(118,536	)		(186,110	)
Income (loss) before income taxes		(119,108	)		971,240			(2,445,492	)		2,465,227
Provision for (benefit from) income taxes		(48,000	)		388,496			(943,600	)		986,496
Net income (loss)	$	(71,108	)	$	582,744		$	(1,501,892	)	$	1,478,731
Net income (loss) per common share:
Basic	$	(0.00	)	$	0.04		$	(0.09	)	$	0.10
Diluted	$	(0.00	)	$	0.04		$	(0.09	)	$	0.09
Weighted average common shares outstanding:
Basic		16,672,815			15,586,001			16,514,792			14,803,792
Diluted		16,672,815			16,509,087			16,514,792			15,918,983

See accompanying notes to consolidated financial statements.

4

CASH SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	September 30,
	2005			2004
Cash flows from operating activities:
Net income (loss)	$	(1,501,892	)	$	1,478,731
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization		925,720			497,753
Compensation expense related to non-employee stock options		—			91,377
Tax benefit associated with employee stock option exercises		390,000			—
Deferred income taxes		(1,238,000	)		289,000
Interest receivable on loans receivable		(153,548	)		(3,182	)
Changes in operating assets and liabilities:
Due from related party		128,957			25,000
Prepaid commissions		(102,084	)		(646,350	)
Other receivables		645,006			(22,817	)
Settlements due from credit card processors		1,018,398			—
Other current assets		(698,162	)		(452,784	)
Long-term prepaid commissions		261,451			(66,033	)
Long-term receivable		—			453,295
Accounts payable - trade		453,109			(1,224,676	)
Credit card cash advance fees payable		184,543			(119,738	)
ATM commissions payable		390,623			282,766
Credit card chargebacks payable		151,914			30,911
Check cashing commissions payable		16,342			14,657
Due to related party		(211,846	)		—
Other accrued expenses		88,163			507,682
Cash flows provided by operating activities		748,694			1,135,592
Cash flows from investing activities:
Purchases of property and equipment		(2,478,580	)		(1,592,816	)
Loans receivable, net		1,145,338			(375,000	)
Cash flows used in investing activities		(1,333,242	)		(1,967,816	)
Cash flows from financing activities:
Checks issued in excess of cash in bank		6,439,922			(686,118	)
Payments on long-term debt		—			(713,035	)
Issuance of common stock, net of expenses		—			11,309,156
Exercise of stock options		1,351,529			157,000
Exercise of warrants		190,900			214,750
Cash flows provided by financing activities		7,982,351			10,281,753
Increase in cash		7,397,803			9,449,529
Cash, beginning of period		13,043,874			3,035,747
Cash, end of period	$	20,441,677		$	12,485,276
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for financing costs and interest expense, net of amortization of original issue discount	$	315,827		$	180,927
Cash received (paid) from income taxes	$	609,322		$	(146,019	)
NONCASH INVESTING AND FINANCING ACTIVITIES:
Reclassification of other current assets to proceeds from issuance of common stock	$	—		$	11,604
Note receivable issued in connection with sale of ATMs		—		$	242,000

See accompanying notes to consolidated financial statements.

5

CASH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2005

1.BUSINESS AND BASIS OF PRESENTATION

Cash Systems Inc. (the “Company” or “CSI”) provides cash access products and services to the gaming industry. The Company’s cash access products and services allow gaming patrons to access funds through a variety of methods, including credit card cash advances, point-of-sale debit card cash advances, automated teller machine (“ATM”) withdrawals and check cashing transactions.

The accompanying unaudited consolidated financial statements include the accounts of CSI and its consolidated subsidiaries: Cash Systems of Canada, Inc.; Cash Systems Mexico I, LLC; Cash Systems Mexico II, LLC; and Cash Access México, S. de R.L. de C.V. None of the subsidiaries of the Company have current business activity, but have been established in anticipation of future business operations.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation— The consolidated balance sheet as of September 30, 2005, the consolidated statements of operations for the three and nine months ended September 30, 2005 and 2004, and the consolidated statements of cash flows for the nine months ended September 30, 2005 and 2004 have been prepared by the Company and are unaudited. All significant intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation— The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim period have been made. The results for the three and nine months ended September 30, 2005 are not necessarily indicative of results to be expected for the full fiscal year.

These unaudited consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto included within the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, previously filed with the Securities and Exchange Commission.

ATM Funding Agreement—The Company obtains some of the cash required to operate its ATMs through an ATM Funding Agreement described in Note 3. Under the terms of this agreement, neither the cash utilized within the ATMs nor the receivables generated for the amount of cash dispensed through transactions on the ATMs are owned or controlled by CSI. Therefore, these amounts have been excluded from the consolidated balance sheets.

Income Taxes— Differences between accounting rules and tax laws cause differences between the basis of certain assets and liabilities for financial reporting purposes and tax purposes. The tax effects of these differences, to the extent they are temporary, are recorded as deferred tax assets and liabilities under Statement of Financial Accounting Standards (SFAS) 109. Temporary differences relate primarily to depreciation and accrued expenses not currently deductible.

Internally Developed Software— Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" requires the capitalization of direct costs incurred in connection with developing or obtaining software for internal use, including external direct costs of materials and services and payroll and payroll related costs for employees who are directly associated with and devote time to an internal use software development project. During the three and nine months ended September 30, 2005 and 2004, the Company capitalized $15,678, $156,976, $764,331 and $553,051 of costs related to the implementation of SOP 98-1, respectively. These costs are amortized over the estimated useful lives of three to five years using the straight-line method upon being placed in service. Amortization expense related to software costs was $63,268 and $56,486 for the three months ended September 30, 2005 and 2004, respectively, and $187,749 and $83,930 for the nine months ended September 30, 2005 and 2004, respectively.

Cash Concentrations— Bank balances exceeded federally insured levels during the three months and nine months ended September 30, 2005 and 2004 and exceeded federally insured levels at September 30, 2005 and December 31, 2004. Generally, these balances may be redeemed upon demand and therefore bear minimal risk. There were no short-term investments as of September 30, 2005 and December 31, 2004.

6

Use of Estimates— The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Significant estimates incorporated in the unaudited consolidated financial statements include the estimated useful lives for depreciable and amortizable assets, estimated cash flows in assessing the recoverability of long-lived assets, and estimated liabilities for chargebacks, litigation, claims and assessments. Actual results could differ from these estimates.

Recently Issued Accounting Standards— In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payments (FAS 123(R)), which is a revision of SFAS No.123 and supersedes Opinion 25. FAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. FAS 123(R) is effective at the beginning of the first annual period beginning after December 15, 2005. We expect to adopt FAS 123 (R) on January 1, 2006. Although the Company is currently assessing the application of SFAS No. 123 (R), the Company believes that the adoption of this statement will not have a material impact on its financial position, results of operations and cash flows.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”, a replacement of APB Opinion No. 20 and FASB Statement No. 3. The statement applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Earlier application is permitted for changes and corrections of errors made occurring in fiscal years beginning after June 1, 2005. The statement does not change the transition provisions of any existing accounting statement. The Company does not expect the adoption of SFAS No. 154 to have a material effect on its consolidated financial statements.

Loans Receivable—The Company has advanced funds relating to strategic investments or advances of funds relating to service contracts. Some of the advances were reviewed with and approved by the Company’s board of directors, while other transactions were initiated and authorized by management. The loans bear interest at negotiated rates with negotiated terms. The collectibility of individual loans is reviewed throughout the life of the loan and a reserve, if required, would be recorded for the loan. Management believes that the loans receivable recorded on the consolidated financial statements as presented are properly stated.

Prepaid Commissions—The Company has advanced commissions relating to service contracts. The advances were initiated and authorized by management. The prepaid commissions are tied to the service contracts and are amortized or deducted against commissions earned pursuant to those contracts over the term of the contracts. In the event that the contracts are terminated early, which is not anticipated, the prepaid commission would be returned to the Company. The collectibility of individual prepaid commissions is reviewed throughout the life of the contract and a reserve, if required, would be recorded for the commission. Management believes that the prepaid commissions recorded on the consolidated financial statements as presented are properly stated.

Settlements due from credit card processors—In the credit/debit card cash advance transactions provided by CSI, the gaming establishment is reimbursed for the cash disbursed to gaming patrons through a check issued by the Company. CSI receives reimbursement from the patron’s credit/debit card issuer for the transaction in an amount equal to the check issued to the patron plus the cash advance fee charged to the patron. Any reimbursements not received in the normal course of business and requiring additional administrative follow-up are included within the settlements due from credit card processors receivable balance on the unaudited consolidated balance sheets. The Company believes that it is at least possible that certain balances due from credit card processors may become uncollectible in the normal course of business. In June 2005, the Company wrote off $1,558,000 for uncollectible settlements due from credit card processors which was reflected as a reduction in the balance due from credit card processors on the financial statements. No expense recorded in prior periods, although a portion of the write off could relate to current and previously reported accounting periods.

7

Revenue Recognition—The Company's revenue recognition policy is significant because the amount and timing of revenue is a key component of the Company's results of operations. The Company follows the guidance of Staff Accounting Bulletin No. 104 ("SAB 104"), which requires that a strict series of criteria are met in order to recognize revenue related to services provided. If these criteria are not met, the associated revenue is deferred until the criteria are met. Credit card cash advance fees, ATM fees and check cashing commissions are reported as commission income on the statement of operations. We recognize commission revenue when evidence of a transaction exists, services have been rendered, our price is fixed or determinable and collectibility is reasonably assured. We evaluate our commissions revenue streams for proper timing of revenue recognition.

Cash advance revenue is comprised of upfront patron transaction fees assessed at the time the transaction is initiated and a percentage of the face amount of the cash advance. Cash advance revenue is recognized at the point that a negotiable check instrument is generated by the casino cashier or cash cage operation.

ATM fees are comprised of upfront patron transaction fees or surcharges assessed at the time the transactions are initiated. Upfront patron transaction fees are recognized when a transaction is authorized. The Company provides cash through wire transfers to certain casinos for ATMs and records a receivable from the casinos.

Check services revenue is generally contractually based upon a percentage of the face amount of total checks warranted. Check services revenue is recognized on a monthly basis. The Company records a receivable for all guaranteed checks returned for insufficient funds.

The Company has determined that the accounting policies for income recognition described above are in accordance with the Financial Accounting Standards Board Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent”.

Segment Reporting—A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. Revenues from customers are from a similar customer base, mainly at casinos. Management believes that the Company meets the criteria for aggregating its operating segments into a single reporting segment.

Reclassifications—Certain reclassifications have been made in the prior period consolidated financial statements to conform to the presentation used at and for the three and nine months ended September 30, 2005 and 2004. These reclassifications had no effect on the Company’s consolidated net income (loss).

Stock-Based Compensation—SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), provides for the use of a fair value based method of accounting for employee stock compensation. However, SFAS 123 also allows an entity to continue to measure compensation cost for stock options granted to employees using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), which only requires charges to compensation expense for the excess, if any, of the fair value of the underlying stock at the date a stock option is granted (or at an appropriate subsequent measurement date) over the amount the employee must pay to acquire the stock, if such amounts differ materially from historical amounts. The Company has elected to continue to account for employee stock options using the intrinsic value method under APB 25. By making that election, it is required by SFAS 123 and SFAS 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” to provide pro forma disclosures of net income and earnings per share as if a fair value based method of accounting had been applied.

Had compensation costs been determined in accordance with the fair value method prescribed by SFAS No. 123 for all options issued to employees and amortized over the vesting period, the Company’s net income (loss) applicable to common shares and net income (loss) per common share (basic and diluted) for plan options would have been decreased to the pro forma amounts indicated below.

8

	Three Months Ended September 30,		Nine Months Ended September 30,
	2005	2004	2005	2004
Net income (loss):
As reported	($71,108)	$582,744	($1,501,892)	$1,478,731
Pro forma	($577,272)	$266,456	($2,746,546)	$411,459
Basic earnings (loss) per common share:
As reported	($0.00)	$0.04	($0.09)	$0.10
Pro forma	($0.03)	$0.02	($0.17)	$0.03
Diluted earnings (loss) per common share:
As reported	($0.00)	$0.04	($0.09)	$0.09
Pro forma	($0.03)	$0.02	($0.17)	$0.03
Stock based compensation:
As reported	$0	$0	$0	$0
Pro forma	$506,164	$316,288	$1,244,654	$1,067,272

In determining the compensation cost of the options granted during the three and nine months ended September 30, 2005 and 2004, as specified by SFAS No. 123, the fair value of each option grant has been estimated on the date of grant using the Black Scholes pricing model and the weighted average assumptions used in these calculations are summarized as follows:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2005	2004	2005	2004
Risk-fee interest rate	4.25%	N/A	4.14%	4.0%
Expected life of options granted	6.5 years	N/A	6.5 years	10 years
Expected volatility	57.63%	N/A	61.29%	103.6%
Expected dividend yield	0%	N/A	0%	0%

Net Income (Loss) Per Common Share—Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed using the treasury stock method to compute the weighted average common stock outstanding assuming the conversion of potential dilutive common shares.

The following table presents a reconciliation of the denominators used in the computation of net income (loss) per common share - basic, and net income (loss) per common share - diluted, for the three and nine month periods ended September 30, 2005 and 2004:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2005	2004	2005	2004
Weighted shares of common stock outstanding - basic	16,672,815	15,586,001	16,514,792	14,803,792
Weighted shares of common stock assumed upon exercise of stock options and warrants	—	923,086	—	1,115,191
Weighted shares of common stock outstanding - diluted	16,672,815	16,509,087	16,514,792	15,918,983

9

3.ATM FUNDING AGREEMENT

Fidelity Bank Agreement—In February 2000, the Company entered into an agreement with Fidelity Bank to provide the funding for cash inside its ATMs. The agreement requires the Company to pay fees, on the balance of the funds provided, equal to the bank's prime rate of interest plus 2% (8.75% at September 30, 2005) or 10%, whichever is greater. At September 30, 2005 and December 31, 2004, the rate was 10%. The Company at no time has access to the funds provided and the financial institution is the sole owner of the funds prior to the withdrawal by cardholders from the ATMs. No such amounts are recorded as liabilities on the consolidated financial statements of the Company. However, the Company does assume the risk of loss and agrees to reimburse the financial institution for any loss occurring from the point in time at which the funds leave the bank. The Company must provide armored carrier services and bear the cost of such services. The Company obtains insurance coverage for the funds provided. The armored carrier company carries the usual bond insurance coverage on its employees. Employees of the Company do not have access to the funds in the cash machines.

Site Funded ATMs��� The Company operates ATMs at certain customer locations where the Company provides the cash required for ATM operational needs. As of September 30, 2005 and December 31, 2004, the Company operated 65 and 55 ATMs, respectively, that were site funded.

4.OTHER CURRENT ASSETS

Other current assets consisted of the following at September 30, 2005 and December 31, 2004:

	September 30, 2005		December 31, 2004
Receivable from casinos	$	1,680,826	$	521,048
Income taxes receivable		365,585		862,937
Prepaid expenses		81,090		161,636
Receivable for check guarantees		333,115		695,229
Holdback reserve from credit card processor		—		255,778
Other receivables		95,380		142,131
Due from Processor		780,925		—
Total other current assets	$	3,336,921	$	2,638,759

Receivable from casinos—At two casinos, the Company purchases funds used in the replenishment of its cage operations and ATMs. Timing differences between payment for funds and receipt of funds has resulted in a receivable from casinos. In addition, at one casino, the Company funds the ATMs for the casino and has established a receivable from the casino for advanced funds.

Receivable for check guarantees—The Company has an agreement with a vendor for the guarantee of approximately 95% of the funds to be paid on personal checks cashed at the various casino locations. The Company records a receivable for all guaranteed checks returned for insufficient funds and recognizes the revenue associated with these checks as there is no further obligation from the Company. The Company first attempts to collect on these checks internally before transferring the collection efforts over to the same third party guarantor for collection. In addition to the third party guaranteed transactions, the Company was self-guaranteeing the remaining 5% of funds paid on personal checks cashed at various casino locations. At December 31, 2004, the Company established an allowance for uncollectible accounts relating to the self-guaranteed checks in the amount of $70,000. No reserve is required as of September 30, 2005.

Holdback reserve from credit card processor—The Company recorded a receivable for money due from one of its former credit card processors that the processor had held in reserve for final processing of transactions for the Company. The Company received payment for the holdback reserve during the three months ended March 31, 2005.

5.LOANS RECEIVABLE

During September 2004, the Company advanced $375,000 and an additional $200,000 in March 2005 to a possible acquisition candidate. In addition, the parent of the acquisition candidate is a co-maker of the loan receivable. This loan receivable bears interest at 6% and is collateralized by substantially all of the assets of the acquisition candidate and 51% of the stock of that company. The loan receivable had an original maturity date of February 15, 2005, which was extended by the Company under written agreement to September 30, 2005. The loan is currently in default. The balance outstanding as of September 30, 2005 was $606,217 including interest.

During August 2004, the Company sold ATMs to a customer and entered into a loan receivable with the customer for $242,000. This loan receivable bears interest at 8%, is collateralized by the ATMs and is due May 2006. The balance outstanding as of September 30, 2005 was $37,699.

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During December 2004, the Company entered into an unsecured loan receivable with a casino operator in advance of a service contract in the amount of $232,000. This loan receivable bears interest at 5% with monthly payments beginning April 2005 with a maturity of September 2007. The advance was originally a prepaid commission until the underlying contract was cancelled and the prepaid commission was then converted to a note receivable. At the end of March 2005, the note was assumed by a former executive of the Company in exchange for an outstanding commitment by the Company relating to the overpayment for stock options exercised by the former executive during 2004. As of March 31, 2005, the loan receivable was no longer outstanding.

During December 2004, the Company advanced $1,000,000 to a casino developer on a collateralized basis under a loan receivable. This loan receivable bears interest at 8% and is collateralized by substantially all of the assets of the developer. The loan receivable had an original maturity date of March 1, 2005 which was extended by the Company under written agreement to April 30, 2005 and subsequently to May 31, 2005. The casino developer is in default under the advance and the Company has made demand for repayment. As a result of the default, the loan receivable bears interest at 16% back to the date of origination. In August 2005, the Company received a $900,000 payment from the developer which was applied to the outstanding balance. The loan is currently in default. The balance outstanding as of September 30, 2005 and December 31, 2004 was $234,869 and $1,005,479, respectively, including interest.

During the first quarter of 2005, the Company entered into an unsecured, non-interest bearing loan for approximately $403,000 with a customer for the purchase and installation of ATMs. Twenty five percent of the loan was re-paid (approximately $101,000 in April 2005) upon placement of the order for the ATM’s, an additional twenty five percent of the loan is due upon installation of the last ATM at the ATM sites, and the remaining balance is due during the 36 month period following the final installation. The balance outstanding as of September 30, 2005 was $179,667.

During 2004, the Company advanced approximately $390,000 to sales agents in the form of unsecured loans receivable bearing interest ranging from 5% to 10% due through December 2006. At September 30, 2005 and December 31, 2004, the remaining balance was $150,013 and $334,961, respectively, including interest.

Total outstanding loans receivable at September 30, 2005 and December 31, 2004 was $1,208,465 and $2,200,255, respectively, which includes interest receivable of $169,842 and $16,294, respectively.

6.CHECKS ISSUED IN EXCESS OF CASH IN BANK

The Company’s credit card cash advance and check cashing business results in timing differences between funds availability and funding commitments. These timing differences result in operating deficits in select bank accounts, which do not have a right of offset, which have been classified as a liability at the end of the reporting period.

7.COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal actions in the ordinary course of its business. Although the outcome of any such legal action cannot be predicted, management believes that there are no pending legal proceedings against or involving the Company for which the outcome is likely to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

Letter of Credit—The Company maintains a $250,000 letter of credit with a lending institution to secure performance under a regulatory application. To secure this letter of credit, the Company is required to maintain a cash position with the issuing lending institution in an amount equal to the letter of credit. The letter of credit was renewed in June 2005.

8.RELATED PARTY TRANSACTIONS

The Company established a liability in the amount of $211,846 at December 31, 2004 relating to an overpayment upon the exercise of stock options by the former Chief Executive Officer of the Company, net of the costs incurred by the Company in assisting him in a private sale of his equity position. At the end of March 2005, the former executive assumed a loan receivable of the Company (see note 5) which was offset against a portion of this obligation of the Company. As of September 30, 2005, the net balance due from this former executive was $39,450.

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Through December 31, 2004, the Company was party to an agreement with Progressive Management Solutions, Inc. ("Progressive"). Progressive is wholly-owned by Mr. Roscoe Holmes who, subsequent to the term of the agreement, resigned his position as Vice President and became a regional independent sales representative to the Company. Under the agreement, the Company granted Progressive the exclusive right to use equipment and services acquired from the Company, to provide cash advance services to the Caribbean, Bahamas, Puerto Rico and other countries and U.S. territories off the eastern U.S. seaboard. In exchange for these rights, the Company received a 0.5% fee for all transactions processed by Progressive. The Company paid Progressive $0, $12,865, $0 and $159,916 for the three and nine months ended September 30, 2005 and 2004, respectively, in connection with this agreement. These payments were net of the 0.5% fee received by the Company. As of March 31, 2005, Progressive owed the Company $183,560 for processing for services provided by the Company. Since March 31, 20005, the Company has offset the balance owed from Progressive by $168,447 related to commissions and chargebacks otherwise payable to Progressive. The outstanding balance owed as of September 30, 2005 amounted to $15,113. The Company believes the terms of its arrangement with Progressive were comparable to those that would be offered to an independent third party.

9.EQUITY TRANSACTIONS

During the nine months ended September 30, 2005, a total of 113,000 five-year warrants having an exercise price of $1.50 were exercised on a "cashless" or "net exercise" basis (based on the average market price of the Company's common stock prior to exercise) resulting in the issuance of 93,593 shares.

During the nine months ended September 30, 2005, 90,450 five-year warrants were exercised for cash of $190,900 at a weighted average exercise price of $2.11 per share.

During the nine months ended September 30, 2005, 519,250 options were exercised for cash of $1,351,529 a weighted average exercise price of $2.60.

In January 2005, the Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of our common stock. During the first nine months of 2005, the Company did not repurchase any equity securities.

10.   INCOME TAXES

At September 30, 2005, the Company’s federal and state net operating loss carryforwards were $4,700,000 and $1,200,000, respectively. The Company recorded a provision for (benefit from) income taxes of ($48,000), $388,496, ($943,600) and $986,496 for the three and nine months ended September 30, 2005 and 2004, respectively.

11.  DEFERRED INCOME TAXES

The Company's deferred income tax assets and liabilities are recognized for the difference between the financial statement and income tax reporting basis of the assets and liabilities based upon currently enacted rates and laws. These differences include depreciation, amortization and accrued liabilities. The Company's deferred tax asset as of September 30, 2005 and December 31, 2004 was $1,789,000 and $336,000, respectively. The deferred tax liability as of September 30, 2005 and December 31, 2004 was $1,012,000 and $797,000 respectively.

During the nine months ended September 30, 2005, the Company recorded a tax benefit of $390,000 which relates to compensation expense from the exercise of stock options for tax purposes in excess of amounts recognized for financial reporting purposes.

11.   SUBSEQUENT EVENTS

Bridge Loan - On October 12, 2005 the Company entered into a loan agreement with a financial institution for $3,000,000. Interest was at 6.5%. The loan is collateralized by substantially all of the assets of the Company. The loan was repaid in full on November 10, 2005.

Bank Line of Credit - On November 10, 2005 the Company entered into a secured line of credit arrangement which permits borrowing of up to $13,000,000 based upon a defined borrowing base and bearing interest at a rate equal to the Bank’s prime rate plus an applicable margin per annum. The arrangement contains several financial covenants. The line is collateralized by substantially all of the assets of the Company.

Acceleration of Consolidated Stock Options - On November 14, 2005 the Company accelerated the vesting on all outstanding stock options granted as of that date. There were 1,011,677 options which were not previously vested that were subject to the acceleration. As defined in Financial Accounting Standards Board Interpretations (FIN) No. 44 “Accounting for Certain Transactions Involving Stock Compensation” it was determined that the acceleration did not have a material effect on the financial statements.

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

This Quarterly Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this Quarterly Report, other than statements that are purely historical, are forward-looking statements. Words such as “anticipate,”“expect,”“intend,”“plan,”“believe,”“seek,”“estimate,” and similar expressions also identify forward-looking statements. Forward-looking statements in this Quarterly Report include, without limitation: our plans with respect to the development of products and services and our plans to obtain regulatory approvals with respect to such products and services; our estimates of the useful lives for depreciable and amortizable assets, our estimates of cash flows in assessing the recoverability of long-lived assets, and estimated liabilities for chargebacks, litigation, claims and assessments; our expectation that we will be able to pass increased interchange and processing costs on to our customers through increased surcharges or reduced commissions; our expected provision for taxes for future periods; our expectation that our cash advance business will grow; our belief that our cash flows from operations will be adequate to continue our operations and meet our working capital and capital expenditure needs for the next twelve months; the possibility of seeking additional financing through bank borrowings or debt or equity financings, if necessary; our anticipation that we will not sever relations with our technology partners; our belief that revenues from our top customers will continue to be a substantial percentage of our revenue in the future; our belief that we will face and resolve compliance issues with credit card associations without a material adverse effect on our operations; and our expectation of engaging in joint development projects in the future.

Our expectations, beliefs, objectives, anticipations, intentions and strategies regarding the future, including, without limitation, those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements including, but not limited to: the failure of the Company to develop products or services that achieve market acceptance or regulatory approval; our failure to accurately evaluate the assumptions underlying our estimates of the useful lives for depreciable and amortizable assets, our estimates of cash flows in assessing the recoverability of long-lived assets, and estimated liabilities for chargebacks, litigation, claims and assessments; competitive forces or unexpectedly high increases in interchange and processing costs that preclude us from passing such costs on to our customers through increased surcharges or reduced commissions; unanticipated changes to applicable tax rates or laws or changes in our tax position; regulatory forces, competitive forces or market contraction that affect our cash advance business; failure to accurately estimate our future cash flows from operations, our inability to satisfy conditions to borrower additional funds, if required or unanticipated operating capital needs that cause our cash flows from operations and possible borrowing facilities to be insufficient to provide sufficient capital to continue our operations; our failure to accurately estimate our operating cash flows and our failure to accurately predict our working capital and capital expenditure needs; our inability to obtain additional financing through bank borrowings or debt or equity financings at all or on terms that are favorable to us; competitive pressures that prevent us from commanding higher prices for our Cash Access Services than other providers; actions taken by our technology partners or the failure of our technology partners to service our needs, which result in our decision to sever our relationships them; our failure to renew our contracts with our top customers; changes in the rules and regulations of credit card associations that require the discontinuation of or material changes to our products or services; and our inability to identify or form joint ventures with partners that result in products that are commercially successful.

The forward-looking statements in this Quarterly Report on Form 10-Q are subject to additional risks and uncertainties set forth under the heading “Risk Factors” in this Item 2 of Part I, and are based on information available to us on the date hereof. We assume no obligation to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Readers should also consult the Company’s other filings with the Securities and Exchange Commission (SEC), including our Forms 10-KSB and Forms 8-K.

Overview

Cash Systems provides credit/debit card cash advance, ATM and check cashing solutions (collectively, "Cash Access Services") to the casino industry. These products are the primary means by which casinos make cash available to gaming customers. During the first three quarters of 2005, we processed approximately $1.5 billion in ATM, cash advance and check cashing transactions. Cash Systems also provides casino clients with ancillary services such as on-line reporting, which enhances their ability to monitor player activity and market to customers. Presently, our Cash Access Services are utilized at over 160 gaming and retail locations nationwide.

Cash Systems provides its customers with a wide array of ATM services. First, it offers a turn-key solution where we provide ATMs, cash necessary to operate the ATMs, transaction processing and ATM maintenance. In that case, Cash Systems' customers would have very little involvement with operation of the ATMs. Some of these turn-key functions, such as transaction processing and maintenance, are performed by third parties. The second option would include Cash Systems performing one or a combination of the above services. For example, it is common for a customer to provide its own ATMs and ATM cash, while Cash Systems provides transaction processing and maintenance. Cash Systems has developed an "All-In-1 ATM" which allows casino patrons to initiate a credit or debit card transaction at an ATM in addition to a traditional ATM transaction. This convenient feature provides casino patrons greater access to cash which leads to more cash in play at casinos.

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Our credit/debit card cash advance products allow casino patrons to obtain cash from their credit card or checking account (for debit transactions) through the use of our software and equipment. With the Company's traditional cash advance system, gaming patrons visit a Cash Systems kiosk located on the casino floor which houses a point-of-sale ("POS") terminal equipped with our software. The kiosk terminal will prompt the customer to swipe his/her credit or debit card and enter the dollar amount requested. The terminal will then dial the appropriate bank for an authorization or disapproval. If authorized, the terminal will direct the customer to a casino cage. Once at the cage, the customer will present his/her credit/debit card and driver's license. A cage cashier will swipe the credit/debit card and driver’s license in a Company terminal which communicates with the kiosk terminals. After finding the kiosk-approved transaction, the cage terminal will provide the cashier with two options in order to obtain the customer's address, driver's license and telephone number, which must be imprinted on each check. The first option is to swipe the customer's driver's license if it contains a magnetic strip. The second option is to manually enter the information into the terminal. After one of these options is selected, a printer attached to the cage terminal will generate a Cash Systems' check payable to the customer. The cashier will give the customer cash in the amount requested, less fees, after he/she endorses the Cash Systems' check. Our check is then deposited by the casino into its account for payment from a Company account and our processor debits the customer's credit card. This transaction can be accomplished without the gaming customer using a personal identification number ("PIN"). For credit card advances, customers pay a service charge typically between 6%-7%.

We also offer two check cashing solutions to the gaming industry. First, we provide casinos with full service check cashing. With full service check cashing, we are given space within a casino to operate a check cashing business. Our employees manage the booth, our cash is used to cash checks, and we retain customer fees from check cashing. There are approximately 60 casinos utilizing the services of a full service check cashing vendor. Under the second option, we provide check guarantee services with the assistance of third party providers.

Cash Systems continually seeks to develop new technology that will make cash advance transactions more convenient for customers. For example, the Company has created a wireless cash advance system that allows casino patrons to complete a transaction from remote areas of the casino, such as a slot machine or gaming table.

During 2004, the Company entered into several strategic alliances which include Certegy, TDN Money Systems and Progressive Gaming International. These alliances have allowed the Company to expand its product offerings and enter into markets not previously serviced by the Company. During 2005, the Company, under the direction of the new Chief Executive Officer, continued to look for additional partnerships and alliances as we move ahead as part of our overall growth strategy.

Effective January 1, 2005, the Company hired Michael Rumbolz as its new Chief Executive Officer and Chairman of the Board and David Clifford as its new Chief Financial Officer. Christopher Larson, one of our original founders, became the Company’s Chief Operating Officer. The Company believes that this reorganization has better positioned the Company to build on its previous success.

Three months ended September 30, 2005 compared to September 30, 2004

Revenues for the quarter ended September 30, 2005 were $17,050,788 compared to $12,773,387 for the same period in 2004. The $4,277,401 increase represents a 33% increase in 2005 revenues over 2004 revenues and is due to the continued expansion of products and services to additional gaming operations. Our ability to expand and win business relationships is based on the Company’s focus on technology and superior service. The Company expects to be successful in its bids to win new contracts and to expand offerings under existing contracts.

Operating expenses for the quarter ended September 30, 2005 were $17,146,870 compared to $11,762,432 for 2004. The $5,384,438 increase represents a 46% increase in operating expenses and was due in part to the expenditure of nearly $460,000 in professional fees relating to the Sarbanes Oxley 404 compliance efforts, the expansion of contract information technology management and the build out of the accounting and finance infrastructure. The use of outside consultants has resulted in the development of a stronger internal control environment and has enabled the Company to develop more comprehensive accounting and finance procedures and financial reporting. Commissions, processing costs and check cashing costs increased by approximately $3,543,000 which was directly related to the Company’s revenue growth from the increased amount of transactions between the periods. Payroll and related costs were also increased by nearly $931,000 resulting from the expansion of booth operations and the expansion of executive and administrative staff to support the expanded business operations. The Company believes that as the infrastructure is fully developed to support the Company, that there will be less reliance on outside professional services, including expenditures for Sarbanes Oxley compliance work. Interest expense increased by approximately $79,000 due to the increased amount of vault cash required to fund our ATMs.  The Company expects to be able to leverage its operating costs in the future through the expansion of product offerings and technology applications which will make the overall operations more cost effective.

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On a fully diluted basis, after-tax net loss of ($71,108) for third quarter of 2005 was (0.4%) of sales or ($0.00) per diluted common share, as compared to net income of $582,744 which was 4.6% of sales or $0.04 per diluted common share for the same prior year period.

Nine months ended September 30, 2005 compared to September 30, 2004

Revenues for the nine months ended September 30, 2005 were $46,737,656 compared to $35,620,314 for the same period in 2004. The $11,117,342 increase was a 31% increase in 2005 revenues compared to 2004 revenues. As noted for the current quarter results, this increase is due to the continued expansion of products and services to additional gaming operations.

Operating expenses for the nine months ended September 30, 2005 were $49,064,612 compared to $32,968,977 for 2004. The $16,095,635 increase is a 49% increase in operating expenses and was primarily due to adjustments reflected in current quarter operating results as described above along with the cumulative year to date impact of these expenditures and allowances. Most notable was the impact of the expenditure of over $1,100,000 in professional fees relating to the Sarbanes Oxley 404 compliance efforts, the expansion of contract information technology management and the build out of the accounting and finance infrastructure. Commissions, processing costs and check cashing costs increased by approximately $11,551,000 which was directly related to the Company’s revenue growth from the increased amount of transactions between the periods. In June 2005, the Company wrote off $1,558,000 for uncollectible settlements due from credit card processors which was reflected as a reduction in the balance due from credit card processors on the financial statements. No expense recorded in prior periods, although a portion of the write off could relate to current and previously reported accounting periods. The year to date increase in payroll and related costs was nearly $1,904,000 resulting from the expansion of booth operations and the expansion of executive and administrative staff to support the expanded business operations. The Company believes that as the infrastructure is fully developed to support the Company, that there will be a lesser reliance on outside professional services, including expenditures for Sarbanes Oxley compliance work. Interest expense increased by approximately $156,000 due to the increased amount of vault cash required to fund our ATMs. The Company expects to be able to leverage its operating costs in the future through the expansion of product offerings and technology applications which will make the overall operations more cost effective.

On a fully diluted basis, year to date after-tax net loss of ($1,501,892) for the first nine months of 2005 was (3.0%) of sales or ($0.09) per diluted common share, as compared to net income of $1,478,731 which was 4.2% of sales or $0.09 per diluted common share for the same prior year period.

Liquidity and Capital Resources

Cash was $20,441,677 at September 30, 2005, representing an increase of 57% from the cash of $13,043,874 at December 31, 2004. Although we have no material commitments for capital expenditures, we anticipate continued expenditures for software development and capital expenditures to be consistent with fiscal year 2004 and expect to spend for fiscal year 2005 approximately $3,278,000, which is consistent with our anticipated growth in operations, infrastructure and personnel. As of September 30, 2005, we have funded our operations and satisfied capital expenditure requirements primarily through the use of operating revenues and private placements proceeds.

The Company anticipates that the cost of compliance with Sarbanes-Oxley sections 302 and 404 will be a material use of operating funds during the coming year. The cost of compliance is estimated to be $2,000,000. These expenditures will be recorded as period expenses as incurred. In addition, the Company has upgraded its accounting system, with a cost of $150,000, during 2005 to provide for expanded management reporting and to accommodate the anticipated growth in operations over the coming years.

We anticipate that we will continue to experience growth in our income and expenses for the foreseeable future and that our operating expenses will be a material use of cash resources. We believe that the existing sources of liquidity and the results of our operations will provide cash to fund operations for at least the next 12 months.

The Company may consider the using debt or additional equity funding for strategic acquisitions. However, there can be no assurance that debt or additional equity funding will be available on terms acceptable to us or on any terms whatsoever.

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Off-Balance Sheet Arrangements

We obtain currency to meet the normal operating requirements of our ATMs pursuant to various funding arrangements.

Fidelity Bank Agreement—In February 2000, the Company entered into an agreement with Fidelity Bank to provide the funding for cash inside the Company’s ATMs. The agreement requires the Company to pay fees, on the balance of the funds provided, equal to the bank's prime rate of interest plus 2% (8.75% at September 30, 2005) or 10%, whichever is greater. At both September 30, 2005 and December 31, 2004, the rate was 10%. The Company at no time has access to the funds provided and the financial institution is the sole owner of the funds prior to the withdrawal by cardholders from the ATMs. No such amounts are recorded as liabilities on the consolidated financial statements of the Company. However, the Company does assume the risk of loss and agrees to reimburse the financial institution for any loss occurring from the point in time at which the funds leave the bank. The Company must provide armored carrier services and bear the cost of such services. The Company obtains insurance coverage for the funds provided. The armored carrier company carries the usual bond insurance coverage on its employees. Employees of the Company do not have access to the funds in the ATMs.

As a result of a cash shortage in our ATMs that we discovered in 2001 the Company issued a note payable to Fidelity Bank in the approximate amount of $412,000 to reimburse Fidelity Bank for the shortage. The note was paid in full April 2004.

Site Funded ATMs— The Company operates ATMs at certain customer locations where the Company provides the cash required for ATM operational needs. As of September 30, 2005 and December 31, 2004, the Company operated 65 and 55 ATMs, respectively, that were site funded.

Critical Accounting Policies and Estimates

Our discussion and analysis is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting period, and related disclosures of contingent assets and liabilities for the periods indicated.  The notes to the consolidated financial statements contained herein describe our significant accounting policies used in the preparation of the consolidated financial statements.  On an on-going basis, we evaluate our estimates, including, but not limited to collectibility of loans receivable, the lives and continued usefulness of property and equipment and software and contingencies.  Due to uncertainties, however, it is at least reasonably possible that management’s estimates will change during the next year, which cannot be estimated.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results could differ from these estimates under different assumptions or conditions.

Risk Factors

Set forth below and elsewhere in this Quarterly Report on Form 10-Q, are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Quarterly Report.

Competition in the market for cash access products and services is intense, and if we are unable to compete effectively, we could face price reductions and decreased demand for our services.

Some of our current and potential competitors have a number of significant advantages over us, including:

 •  commission structures that are more beneficial to gaming establishments than ours;

 •  longer operating histories;

 •  pre-existing relationships with potential customers; and

 •  significantly greater financial, marketing and other resources, which allow them to respond more quickly to new or changing opportunities.

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In addition, some of our potential competitors have greater name recognition and marketing power.

Furthermore, some of our current competitors have established, and in the future potential competitors may establish, cooperative relationships with each other or with third parties or adopt aggressive pricing policies to gain market share.

As a result of the intense competition in this industry, we could encounter significant pricing pressures and lose customers. These pricing pressures could result in significantly lower average service charges for our Cash Access Services or higher commissions payable to gaming establishments. We may not be able to offset the effects of any service charge reductions with an increase in the number of customers, cost reductions or otherwise. In addition, the gaming industry is always subject to market consolidation, which could result in increased pricing pressure and additional competition. We believe that the breadth of our offerings, our differentiating technology and the ease of use of our services allow us to provide greater overall value to our customers and therefore to command competitive prices for our Cash Access Services. To the extent that competitive pressures in the future force us to reduce our pricing to establish or maintain relationships with gaming establishments, our revenues could decline.

The cash access industry is subject to change, and we must keep pace with the changes to successfully compete.

The demand for our products and services is affected by changing technology, evolving industry standards and the introduction of new products and services. Cash Access Services are based on existing financial services and payment methods, which are also continually evolving. Our future success will depend, in part, upon our ability to successfully develop and introduce new Cash Access Services based on emerging financial services and payment methods, which may, for example, be based on stored value cards, Internet-based payment methods or the use of portable consumer devices such as personal digital assistants and cellular telephones, and to enhance our existing products and services on a timely basis to respond to changes in patron preferences and industry standards. We cannot be sure that the products, services or technologies that we choose to develop will achieve market acceptance or obtain any necessary regulatory approval or that products, services or technologies that we choose not to develop will not threaten our market position. If we are unable, for technological or other reasons, to develop new products or services, enhance or sell existing products or services in a timely and cost-effective manner in response to technological or market changes, our business, financial condition and results of operations may be materially adversely affected.

If we are unable to protect our intellectual property, we may lose a valuable competitive advantage or be forced to incur costly litigation to protect our rights.

We utilize technology in operating our business, and our success depends on developing and protecting our intellectual property. We rely on copyright, patent, trademark and trade secret laws, as well as the terms of license agreements with third parties, to protect our intellectual property. We also rely on other confidentiality and contractual agreements and arrangements with our employees, affiliates, business partners and customers to establish and protect our intellectual property and similar proprietary rights. We do not hold any issued patents, but we have six patent applications pending. At the same time, our products may not be patentable in their entirety or at all. For example, although we currently have six inventions that are the subject of patent applications pending in the United States Patent and Trademark Office, we can provide no assurance that these applications will become issued patents. If they do not become issued patents, our competitors would not be prevented from using these inventions.

We also license various technology and intellectual property rights from third parties. We rely heavily on the maintenance and protection of these technology and intellectual property rights. If our licensors or business partners fail to protect their intellectual property rights in technology that we license, the value of our licenses may diminish significantly. It is possible that third parties may copy or otherwise obtain and use our information and proprietary technology without authorization or otherwise infringe on our intellectual property rights. In addition, we may not be able to deter current and former employees, consultants, and other parties from breaching confidentiality agreements and misappropriating proprietary information. If we are unable to adequately protect our technology or our exclusively licensed rights, or if we are unable to continue to obtain or maintain licenses for technology from third parties, it could have a material adverse effect on the value of our intellectual property, similar proprietary rights, our reputation, or our results of operations.

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In the future, we may have to rely on litigation to enforce our intellectual property rights and contractual rights. In addition, although we do not believe that our products or services infringe upon the intellectual property rights of third parties, we may face claims of infringement that could interfere with our ability to use technology or other intellectual property rights that are material to our business operations. If litigation that we initiate is unsuccessful, we may not be able to protect the value of some of our intellectual property. In the event a claim of infringement against us is successful, we may be required to pay royalties or license fees to continue to use technology or other intellectual property rights that we had been using or we may be unable to obtain necessary licenses from third parties at a reasonable cost or within a reasonable time. Any litigation of this type, whether successful or unsuccessful, could result in substantial costs to us and diversions of our resources. Although we believe that our intellectual property rights are sufficient to allow us to conduct our business without incurring liability to third parties, our products and services may infringe on the intellectual property rights of third parties and our intellectual property rights may not have the value we believe them to have.

We have formed relationships with and rely heavily on the services and technology of a number of third-party and affiliated companies and consultants to operate our systems and ensure the integrity of our technology. Although we do not anticipate severing relations with any of these parties, any of these providers may cease providing these services or technology in an efficient, cost-effective manner, or altogether, or be unable to adequately expand their services to meet our needs. In the event of an interruption in, or the cessation of, services or technology by an existing third-party or affiliated provider, we may not be able to make alternative arrangements for the supply of the services or technology that are critical to the operation of our business and this could have a material adverse effect on our business.

Our products and services are complex, depend on a myriad of complex networks and technologies and may be subject to software or hardware errors or failures that could lead to an increase in our costs, reduce our net revenues and/ or damage our reputation.

Our products and services, and the networks and third-party services upon which our products and services are based, are complex and may contain undetected errors or may suffer unexpected failures. The computer networks that we rely upon in providing our products and services are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays, loss of data, public release of confidential data and the inability to complete patron transactions. The occurrence of these errors or failures, disruptions or unauthorized access could adversely affect our sales to customers, diminish the use of our cash access products and services by patrons, cause us to incur significant repair costs, result in our liability, divert the attention of our development personnel from product development efforts, and cause us to lose credibility with current or prospective customers or patrons.

Because of our dependence on a few providers, or in some cases one provider, for some of the financial services we offer to patrons, the loss of a provider could have a material adverse effect on our business or our financial performance.

The loss of our sponsorship by Harris Bank (Cornerstone) into the Visa U.S.A. and MasterCard International card associations could have a material adverse effect on our business. We cannot provide Cash Access Services involving Visa cards and MasterCard cards without sponsorship into the Visa U.S.A. and MasterCard International card associations.

Because of our dependence on certain customers, the loss of a top customer could have a material adverse effect on our revenues and profitability.

The loss or financial hardship experienced by, or a substantial decrease in revenues from, any one of our top customers could have a material adverse effect on our business, financial condition and results of operations. Consolidation among operators of gaming establishments may also result in the loss of a top customer to the extent that customers of ours are acquired by our competitors’ customers. In addition, our contracts are generally exclusive contracts with three to five year terms. Any failure to renew our significant contracts, or a large number of our contracts, could have a material adverse effect on our business, financial condition and results of operations.

Economic downturns, a decline in the popularity of gaming or changes in the demographic profile of gaming patrons could reduce the number of patrons that use our services or the amounts of cash that they access using our services.

The strength and profitability of our business depends on consumer demand for gaming. During periods of economic contraction, our revenues may decrease while some of our costs remain fixed, resulting in decreased earnings. This is because the gaming activities in connection with which we provide our Cash Access Services are discretionary leisure activity expenditures and participation in leisure activities may decline during economic downturns because consumers have less disposable income. Even an uncertain economic outlook may adversely affect consumer spending in gaming operations, as consumers spend less in anticipation of a potential economic downturn. Reductions in tourism could also have a material adverse effect on our business, financial condition and results of operations.

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Changes in consumer preferences or discretionary consumer spending could harm our business. Gaming competes with other leisure activities as a form of consumer entertainment, and may lose relative popularity as new leisure activities arise or as other existing leisure activities become more popular. The popularity of gaming is also influenced by the social acceptance of gaming, which is dictated by prevailing social mores. To the extent that the popularity of gaming declines as a result of either of these factors, the demand for our Cash Access Services may decline and our business may be harmed.

Aside from the general popularity of gaming, the demographic profile of gaming patrons changes over time. The gaming habits and use of Cash Access Services varies with the demographic profile of gaming patrons. To the extent that the demographic profile of gaming patrons either narrows or migrates towards patrons who use Cash Access Services less frequently or for lesser amounts of cash, the demand for our Cash Access Services may decline and our business may be harmed.

An unexpectedly high level of chargebacks could adversely affect our business.

When patrons use our Cash Access Services, we either dispense cash or produce a negotiable instrument that can be endorsed and exchanged for cash. If a completed cash access transaction is subsequently disputed by a cardholder or accountholder and if we are unsuccessful in establishing the validity of the transaction, the transaction becomes a chargeback and we may not be able to collect payment for such transaction. We are always subject to the risk of chargebacks, which we manage by employing detailed transaction completion procedures designed to detect and prevent fraudulent transactions. If, in the future, we incur an unexpectedly high level of chargebacks, we may suffer a material adverse effect to our business, financial condition or results of operations.

We are subject to extensive rules and regulations of MasterCard International and Visa U.S.A., which may harm our business.

A significant portion of our Cash Access Services are processed as transactions subject to the extensive rules and regulations of the two leading card associations, MasterCard International and Visa U.S.A. From time to time, we receive correspondence from the card associations regarding our compliance with their rules and regulations. In the ordinary course of our business, we engage in discussions with our sponsoring bank and/or the card associations regarding our compliance with their rules and regulations. The rules and regulations do not expressly address some of the contexts and settings in which we process cash access transactions, or do so in a manner subject to varying interpretations. From time to time we also face technical compliance issues, e.g. the format of data submission files. We expect to continue to face and resolve issues such as these in the ordinary course of business, which we do not believe will result in a material adverse impact on our operations. The card associations modify their rules and regulations from time to time. In the event that the card associations or our sponsoring bank determine that the manner in which we process certain card transactions is not in compliance with existing rules and regulations, or if the card associations adopt new rules or regulations that prohibit or restrict the manner in which we process certain card transactions, we may be forced to modify the manner in which we operate which may increase our costs, or cease processing certain types of cash access transactions altogether, either of which could have a material negative impact on our business.

Changes in interchange rates may affect our costs of revenues.

We pay credit card associations interchange fees for services they provide in settling transactions routed through their networks. In addition, we pay fees to participate in various ATM or debit networks. The amounts of these interchange fees are fixed by the card associations and networks in their sole discretion, and are subject to increase in their discretion from time to time. Many of our contracts enable us to pass through to our customers the amount of any increase in interchange or processing fees, but competitive pressures might prevent us from doing so. To the extent that we are unable to pass through to our customers the amount of any increase in interchange or processing fees, our costs of revenues would increase and our net income would decrease, assuming no change in transaction volumes. Any such decrease in net income could have a material adverse effect on our financial condition and results of operations.

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We are subject to extensive governmental gaming regulation, which may harm our business.

We are subject to a variety of regulations in the jurisdictions in which we operate. Regulatory authorities at the federal, state and local levels have broad powers with respect to the licensing of gaming-related activities and may revoke, suspend, condition or limit our licenses, impose substantial fines and take other actions, any one of which could have a material adverse effect on our business, financial condition and results of operations. We cannot assure you that any new gaming license or related approval that may be required in the future will be granted, or that our existing licenses will not be revoked, suspended or limited or will be renewed. If additional gaming-related regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a material adverse effect on our business. From time to time, various proposals are introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and our company. Legislation of this type may be enacted in the future.

Members of our management team and the beneficial owners of five percent or more of our outstanding equity interests must also be approved by certain state regulatory authorities. If state regulatory authorities were to find a person occupying any such position unsuitable, we would be required to sever our relationship with that person. Certain public issuances of securities and certain other transactions by us also require the approval of certain regulatory authorities.

In addition, certain new products and services that we may develop cannot be offered in the absence of regulatory approval of the product or licensing of us, or both. For example, our cashless gaming product must have approval and cannot be used at any location until we receive approval from the appropriate authority in such location. These approvals could require that we and our officers, directors or beneficial owners obtain a license or be found suitable and that the product be approved after testing and review. We cannot assure you that we will obtain any such approvals in the future.

In most jurisdictions in which we do business, we must obtain a non-gaming supplier’s or vendor’s license, qualification or approval. The obtaining of these licenses, qualifications or approvals and the regulations imposed on non-gaming suppliers and vendors are typically less stringent than for gaming-related suppliers and vendors. In some jurisdictions in which we do business, we must obtain a gaming-related supplier’s or vendor’s license, qualification or approval. If we must obtain a gaming-related supplier’s or vendor’s license, qualification or approval because of the introduction of new products (such as products related to cashless gaming) or because of a change in the laws or regulations, or interpretation thereof, our business could be materially adversely affected. This increased regulation of business could include, but is not limited to: requiring the licensure or finding of suitability of any equity owner, officer, director or key employee of the Company; the termination or disassociation with any equity owner, officer, director or key employee that fails to file an application or to obtain a license or finding of suitability; the submission of detailed financial and operating reports; submission of reports of material loans, leases and financing; and, requiring regulatory approval of certain commercial transactions such as the transfer or pledge of equity interests in the Company.

Many of the financial services that we provide are subject to extensive rules and regulations, which may harm our business.

All of our Cash Access Services and customer relationship marketing products and services are subject to the privacy provisions of state and federal law, including the Gramm-Leach-Bliley Act. Our POS debit card transactions and ATM withdrawal services are subject to the Electronic Fund Transfer Act. Our ATM services are subject to the applicable state banking regulations in each jurisdiction in which we operate ATMs. The Cash Access Services we provide are subject to certain recordkeeping and reporting obligations under the Bank Secrecy Act. In jurisdictions in which we serve as a check casher, we are subject to the applicable state licensing requirements and regulations governing check cashing activities and deferred deposit service providers.

If any regulatory authority determines that the manner in which we provide certain Cash Access Services is not in compliance with existing rules and regulations, or the regulatory authorities adopt new rules or regulations that prohibit or restrict the manner in which we provide Cash Access Services, we may be forced to modify the manner in which we operate, or cease processing certain types of cash access transactions altogether or pay substantial penalties and fines. In addition, we could be subject to private litigation as a result of these circumstances. Any such actions could have a material adverse effect on our business, financial condition and results of operations.

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If consumer privacy laws change, or if we are required to change our business practices, the value of our customer relationship marketing products and services may be hampered.

Our cash access business depends on our ability to collect and use certain non-public personal information relating to patrons who use our products and services and the transactions they consummate using our products and services. We are required by applicable privacy legislation to safeguard and protect the privacy of such information, to make certain disclosures to patrons regarding our privacy and information sharing policies and, in some cases, to provide patrons an opportunity to “opt out” of the use of their information for certain purposes. We cannot assure you that regulators reviewing our policies and practices would not require us to modify our practices in a material or immaterial manner or impose fines or other penalties if they believe that our policies and practices do not meet the necessary standard. To the extent that our cash access products and services have in the past failed or now or in the future fail to comply with applicable law, our privacy policies or the notices that we provide to patrons, we may become subject to actions by a regulatory authority or patrons which cause us to pay monetary penalties or require us to modify the manner in which we provide customer relationship marketing services, Historically, the vast majority of patrons do not exercise their right to “opt out”. To the extent that patrons exercise this right, our ability to leverage existing and future databases of information would be curtailed. Consumer and data privacy laws are evolving, and to the extent that such laws are broadened in their application or narrow the types of information that may be collected or used for marketing or certain other purposes or require patrons to “opt-in” to the use of their information for certain purposes, the value of our customer relationship marketing products and services may be diminished.

Our joint development activities may result in products that are not commercially successful or that are not available in a timely fashion.

We have engaged in joint development projects with third parties in the past and we expect to continue doing so in the future. Joint development can magnify several risks for us, including the loss of control over development of aspects of the jointly developed products and over the timing of product availability. Accordingly, we face increased risk that joint development activities will result in products that are not commercially successful or that are not available in a timely fashion.

In addition to joint development activities, from time to time we consider acquiring additional technologies, products and intellectual property. We periodically enter into discussions with third parties regarding such potential acquisitions. We cannot assure you that we will enter into any such acquisition agreements in the near future or at all. We have no present understanding or agreements with respect to any acquisitions.

We depend on our key personnel.

We are highly dependent on the involvement of Michael Rumbolz, our Chief Executive Officer, David Clifford, our Chief Financial Officer, Christopher Larson, our Chief Operating Officer, and other members of our senior management team. All of our executive officers have separate employment and non-compete agreements with us. The loss of Mr. Rumbolz or other members of our senior management team would have a material adverse effect on our business.

Our success depends to a significant degree upon the performance and continued service of key managers involved in the development and marketing of our products and services to gaming establishments. Our future success depends upon our ability to attract, train and retain such personnel. We may need to increase the number of key managers as we further develop our products and services and as we penetrate other geographic markets. Our ability to enter into contracts with gaming establishments depends in large part on the relationships that our key managers have formed with management-level personnel of gaming establishments. Competition for individuals with such relationships is intense, and we cannot be certain that we will be successful in recruiting and retaining such personnel. In addition, employees may leave our company and subsequently compete with us. Our sales efforts are particularly hampered by the defection of personnel with long-standing relationships with management-level personnel of gaming establishments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have assessed our vulnerability to certain market risks, including interest rate risk associated with financial instruments included in cash and cash equivalents. Due to the short-term nature of these investments, we have determined that the risks associated with interest rate fluctuations related to these financial instruments do not pose a material risk to us.

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ITEM 4. CONTROLS AND PROCEDURES

During the course of their audit of our consolidated financial statements for 2004, and during their review of our unaudited quarterly consolidated financial statements for the quarters ended March 31, 2005, June 30, 2005, and September 30, 2005, our independent registered public accounting firm, Virchow, Krause & Company, LLP (“Virchow Krause”), advised management and the Audit Committee of our Board of Directors that they had identified deficiencies in internal controls. The deficiencies are considered to be a “material weakness” as defined under standards established by the American Institute of Certified Public Accountants. The material weaknesses relate to the lack of segregation of duties and financial oversight controls, which in aggregate created an ineffective control environment. On March 23, 2005, Virchow Krause also communicated to our Audit Committee reportable conditions related to (A) the lack of a formal journal entry approval process, and (B) the lack of access controls to our accounting system.

During the performance of the review for the quarter ended March 31, 2005, Virchow Krause and the Company identified additional cut-off and control weaknesses relating to timely processing and collection of settlements due from credit card processors. The deficiencies are considered to be a “material weakness”. If not corrected, these cut-off and control weaknesses could result in a material adjustment to future consolidated financial statements of the Company. At the quarter end, the Company has established an allowance for uncollectible settlements due from credit card processors in the amount of $1,600,000. Prior to the identification of the deficiencies indicated at year end, we had already undertaken, or are in the process of undertaking, a number of steps to establish a proper control environment, including:

·   contracting with outside SEC consultants to assist in the preparation of year-end and quarter-end analysis and financial statement preparation oversight;

·   hiring a new Chief Financial Officer effective January 1, 2005;

·   investing in internal reporting systems;

·   investing in accounting and reporting systems;

·   implementing plans to hire additional accounting staff; and

·   in the process of formalizing our internal controls and procedures in accordance with the Securities and Exchange Commission’s rules on implementing the internal controls reporting requirements included in Section 404 of the Sarbanes-Oxley Act of 2002.

As a result of the deficiencies identified during the quarterly review, we are in the process of developing operating procedures to reduce the likelihood of a recurrence of the situation, and we are establishing additional internal review procedures to validate prior transactions and to determine the impact, if any, on the consolidated financial statements of the Company as result of any findings. Based on its past experience, the Company has been able to fully collect all prior balances due from credit card processors through the cooperation of those processors. The Company expects to receive full cooperation from the credit card processors to collect the currently identified prior balances due. In June 2005, the Company wrote off $1,558,000 for uncollectible settlements due from credit card processors which was reflected as a reduction in the balance due from credit card processors on the financial statements. No expense recorded in prior periods, although a portion of the write off could relate to current and previously reported accounting periods. No allowances have been recorded in prior periods, although a portion of the allowance could relate to current and previously reported accounting periods.

We have discussed our corrective actions and future plans with our Audit Committee and Virchow Krause and, as of the date of this Quarterly Report on Form 10-Q, we believe the actions outlined above will correct the deficiencies in internal controls that are considered to be a material weakness. Further, our management, including our Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures did not provide reasonable assurance of effectiveness as of the quarter ended September 30, 2005 because of the material weaknesses identified above.

We are currently in the process of reviewing and formalizing our internal controls and procedures for financial reporting in accordance with the Securities and Exchange Commission’s rules implementing the internal control reporting requirements included in Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Changes have been and will be made to our internal controls over financial reporting as a result of these efforts. We are dedicating significant resources, including senior management time and effort, and incurring substantial costs in connection with our ongoing Section 404 assessment. The evaluation of our internal controls will be conducted under the direction of our senior management in consultation with an independent third party consulting firm. We expect to assess our controls and procedures on a regular basis. We will continue to work to improve our controls and procedures and to educate and train our employees on our existing controls and procedures in connection with our efforts to maintain an effective controls infrastructure at our Company. Despite our efforts related to our Section 404 assessment, we cannot provide any assurance that we will timely complete the evaluation of our internal controls or that, even if we do complete the evaluation of our internal controls, we will do so in time to permit our independent registered public accounting firm to test our controls and timely complete their attestation procedures of our controls in a manner that will allow us to comply with applicable Securities and Exchange Commission rules and regulations by the filing deadline for our Annual Report on Form 10-K for 2005.

In addition, there can be no assurances that our disclosure controls and procedures will detect or uncover all failure of persons with the Company to report material information otherwise required to be set forth in the reports that we file with the Securities and Exchange Commission.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various legal actions in the ordinary course of its business. Although the outcome of any such legal action cannot be predicted, management believes that there are no pending legal proceedings against or involving the Company for which the outcome is likely to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

During the nine months ended September 30, 2005, a total of 113,000 five-year warrants having an exercise price of $1.50 were exercised on a "cashless" or "net exercise" basis (based on the average market price of the Company's common stock prior to exercise) resulting in the issuance of 93,593 shares. The Company relied upon Section 4(2) of the Securities Act for an exemption for transactions not involving a public offering.

During the nine months ended September 30, 2005, 90,450 five-year warrants were exercised for cash of $190,900 at a weighted average exercise price of $2.11 per share. The Company relied upon Section 4(2) of the Securities Act for an exemption for transactions not involving a public offering.

Issuer Repurchases of Equity Securities

We did not repurchase any equity securities of Cash Systems, Inc. during the nine months ended September 30, 2005. In January 2005, our Board of Directors authorized the repurchase of up to 1,000,000 shares of our common stock as part of the Company’s overall strategy to prudently allocate resources to enhance shareholder value.

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ITEM 6. EXHIBITS

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of the Registrants—incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form 8-A filed on January 6, 2004
3.2	Amended and Restated Bylaws of the Registrant—incorporated by reference to Exhibit 3 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002
10.1	Executive Employment Agreement, dated June 6, 2005, with John Glaser**
10.2	Form of Nonqualified Stock Option Agreement under 2005 Equity Incentive Plan**
10.3	Form of Incentive Stock Option Agreement under 2005 Equity Incentive Plan**
10.4	Form of Nonqualified Stock Option Agreement under 2001 Stock Option Plan**
31.1*	Principal Executive Officer Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Principal Financial Officer Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

=============

* filed herewith

** management contract or compensatory plan

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CASH SYSTEMS, INC.
DATE: November 14, 2005	By:	/s/ Michael D. Rumbolz
		Michael D. Rumbolz
		Chief Executive Officer (principal executive officer)

DATE: November 14, 2005	By:	/s/ David S. Clifford
		David S. Clifford
		Chief Financial Officer (principal financial officer)

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EXHIBIT INDEX

CASH SYSTEMS, INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2005

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of the Registrants—incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form 8-A filed on January 6, 2004
3.2	Amended and Restated Bylaws of the Registrant—incorporated by reference to Exhibit 3 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002
10.1	Executive Employment Agreement, dated June 6, 2005, with John Glaser**
10.2	Form of Nonqualified Stock Option Agreement under 2005 Equity Incentive Plan**
10.3	Form of Incentive Stock Option Agreement under 2005 Equity Incentive Plan**
10.4	Form of Nonqualified Stock Option Agreement under 2001 Stock Option Plan**
31.1*	Principal Executive Officer Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Principal Financial Officer Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

=============

* filed herewith

** management contract or compensatory plan

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