SEC Filing | Cantaloupe, Inc.

View:

As filed with the Securities and Exchange Commission on August 2, 1996

Registration No. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SB-2

Registration Statement
Under

The Securities Act of 1933

USA TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)

Pennsylvania 7359 23-2679963

(State or other (Primary Standard Industrial (I.R.S. employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)

1265 Drummers Lane, Suite 306
Wayne, Pennsylvania 19087
(Address of principal executive offices and zip code)

George R. Jensen, Jr.
Chief Executive Officer
USA Technologies, Inc.
1265 Drummers Lane, Suite 306
Wayne, Pennsylvania 19087
(610) 989-0340
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Douglas M. Lurio, Esquire
1760 Market Street, Suite 1300
Philadelphia, PA 19103-4132
(215) 665-9300
-----------------------------------
Approximate date of proposed sale to the public: From time to time
after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the
following box: [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]

======================================================================================
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------
Title of each
class of Proposed Proposed
Securities Amount Maximum Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered Registered Per unit Offering Price Fee
- ------------- ---------- -------------- -------------- ------------

Common Stock,
no par value 5,200,000 shares $.50 $ 2,600,000 $ 896.55

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

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.

PROSPECTUS

USA TECHNOLOGIES, INC.

COMMON STOCK

This Prospectus relates to up to 5,200,000 shares of Common Stock, no
par value (the "Common Stock"), of USA Technologies, Inc. (the "Company") which
may be sold from time to time by the shareholders of the Company (the "Selling
Shareholders") who purchased 1996 Common Stock Purchase Warrants (the "1996
Warrants") from the Company. The 1996 Warrants were issued pursuant to a warrant
agreement dated as of May 1, 1996, by and between the Company and American Stock
Transfer & Trust Company, the warrant agent (the "1996 Warrant Agreement").

The Common Stock which may be sold by the Selling Shareholders pursuant
to this Prospectus will be purchased from the Company by the Selling
Shareholders pursuant to the exercise of the 1996 Warrants. The Company issued
5,200,000 1996 Warrants to the Selling Shareholders in May 1996 pursuant to the
1996 Warrant Agreement in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), and
applicable state securities law. Each 1996 Warrant entitles the holder thereof
to purchase one share of Common Stock for $.40 through December 31, 1996, and
for $.50 at any time thereafter through May 31, 2001. The exercise price of the
1996 Warrants may be reduced by the Company at any time, or from time to time.
The 1996 Warrants are exercisable at any time through May 31, 2001, or such
later date as the Company may determine. The Company agreed, at its cost and
expense, to register under the Act the Common Stock underlying the 1996 Warrants
for resale by the Selling Shareholders, and to register or qualify such Common
Stock under applicable state securities laws. See "Description of Securities -
1996 Common Stock Purchase Warrants." The Common Stock may be sold from time to
time by the Selling Shareholders named herein pursuant to this Prospectus. See
"Selling Shareholders".

As a condition to obtaining the Common Stock being offered hereby, the
Selling Shareholders must exercise the 1996 Warrants by tendering the per share
exercise price required under the 1996 Warrant Agreement. In the event all
5,200,000 1996 Warrants are exercised at $.50, the Company would receive gross
proceeds of $2,600,000. In the event all 5,200,000 1996 Warrants are exercised
at $.40, the Company would receive gross proceeds of $2,080,000. There is no
assurance that any or all of the 1996 Warrants will be exercised by the Selling
Shareholders, and if none of the 1996 Warrants are exercised, the Company would
not receive any gross proceeds. The Company is responsible for all of the costs
and expenses incident to the offer and sale of the Common Stock by the Selling
Shareholders pursuant to this Prospectus other than any brokerage fees or
commissions incurred by the Selling Shareholders

in connection therewith.

The Common Stock offered by the Selling Shareholders pursuant to this
Prospectus may be sold from time to time by the Selling Shareholders. The sale
of the Common Stock offered hereby by the Selling Shareholders may be effected
in one or more transactions that may take place on the over-the-counter market,
including ordinary brokers' transactions, privately negotiated transactions or
through sales to one or more dealers for resale of such securities as
principals. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Shareholders.

The Company will not receive any of the proceeds from the sale of the
Common Stock by the Selling Shareholders. The Selling Shareholders will receive
all of the net proceeds from the sale of the Common Stock and will pay all
selling commissions, if any, applicable to the sale of the Common Stock.

See "Risk Factors" on page 3 of this Prospectus for a discussion of
certain factors that should be considered by prospective investors in the Common
Stock offered hereby.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

--------------------------------------

The date of this Prospectus is August __ , 1996.

AVAILABLE INFORMATION

The Company has filed a registration statement on Form SB-2 (together
with any amendments thereto, the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") under the Act with respect to the
Common Stock. This Prospectus, which constitutes a part of the Registration
Statement, omits certain information contained in the Registration Statement and
reference is made to the Registration Statement and the exhibits and schedules
thereto for further information with respect to the Company and the Common
Stock. Statements contained in this Prospectus as to the contents of certain
documents filed with, or incorporated by reference in the Registration Statement
are not necessarily complete, and in each instance reference is made to such
document, each such statement being qualified in all respects by such reference.

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports, and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Commission,
Washington, D.C. 20549.

The Company will provide a copy of any or all documents incorporated by
reference herein (exclusive of exhibits unless such exhibits are specifically
incorporated by reference therein), without charge, to each person to whom this
Prospectus is delivered, upon written or oral request to USA Technologies, Inc.,
3 Glenhardie Corporate Center, 1265 Drummers Lane, Suite 306, Wayne,
Pennsylvania 19087, Attn: Edward J. Sullivan, Chief Financial Officer (telephone
(610) 989-0340).

The Company will furnish record holders of its securities with annual
reports containing financial statements audited and reported upon by its
independent auditors, quarterly reports containing unaudited interim financial
information, and such other periodic reports as the Company may determine to be
appropriate or as may be required by law.

PROSPECTUS SUMMARY

The following information does not purport to be complete and is
qualified in its entirety by and should be read in conjunction with the more
detailed information and Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus. Prospective investors should consider
carefully the factors discussed below under "Risk Factors".

The Company

USA Technologies, Inc., a Pennsylvania corporation (the "Company"), was
founded in January 1992. The Company is in the development stage and intends to
become the leading owner and licensor of unattended, credit card activated
control systems for the vending, copying, debit card and personal computer
industries. The Company's devices make available credit card payment technology
in connection with the sale of a variety of products and services. The Company
anticipates generating its revenues primarily from retaining a portion of the
revenues generated from all credit card transactions conducted through its
devices.

The Company has developed a credit card activated control system for
vending machines known as the Credit Card Vending ExpressTM, a credit card
activated control system to be utilized with photocopying machines and computer
printers known as the Credit Card Copy ExpressTM, and a credit card activated
control system to be utilized with debit card purchase/revalue stations known as
the Credit Card Debit ExpressTM. The devices allow consumers to use credit cards
to pay for these products and services.

The Company has also developed the Credit Card Computer ExpressTM which
is an unattended, credit card activated control system to be used in connection
with general use of a personal computer, as well as for the use of on-line
services, including the Internet, and for the use of a laser printer. This
product enables locations such as public libraries to offer the use of personal
computers to the public on an "as needed" basis utilizing credit cards as a
method of payment. The Company has entered into a strategic alliance with Dell
Computer Corporation in connection with the Credit Card Computer ExpressTM. See
"Business - Credit Card Computer ExpressTM."

As of June 30, 1996, the Company has installed at commercial locations
a total of 130 devices and revenues have been nominal. See "Business".
Substantially all of these customers are university or public libraries.

The Company's executive offices are located at 3 Glenhardie Corporate
Center, Suite 306, 1265 Drummers Lane, Wayne, Pennsylvania 19087, and its
telephone number is (610) 989-0340.

Description Of The Securities

Issuer . . . . . . . . . . . . . USA Technologies, Inc.

Securities Offered . . . . . . . Up to 5,200,000 shares of
Common Stock by the Selling
Shareholders. See "Selling
Shareholders."

Common Stock Outstanding
as of June 30, 1996 . . . . 23,023,976 shares. On a fully
converted basis, there would
be 42,949,016 shares
outstanding consisting of
3,592,300 shares issuable upon
exercise of outstanding
options and purchase rights,
5,200,000 shares issuable upon
exercise of the 1996 Warrants,
1,414,000 shares issuable
upon the exercise of the
outstanding 1995 Warrants,
7,960,250 shares issuable
upon conversion of the
Preferred Stock, and
1,758,490 shares issuable upon
conversion of accrued and
unpaid dividends on the
Preferred Stock. An additional
$597,019 of dividends will
accrue on August 1, 1996 which
would be convertible into
597,019 shares of Common
Stock.

Preferred Stock Outstanding
as of June 30, 1996 . . . . 796,025 shares. Each share of
Series A Convertible Preferred
Stock, no par value, of the
Company ("Preferred Stock") is
convertible by the holder
thereof at any time into 10
shares of Common Stock.
The outstanding shares
of Preferred Stock are
convertible into 7,960,250
shares of Common Stock. At the
time of conversion, all
accrued and unpaid dividends
are converted into Common
Stock at the rate of $1.00 per
share of Common Stock. See

"Description of Securities -
Series A Convertible Preferred
Stock."

Common Stock OTC Bulletin
Board Symbol . . . . . . . USTX

Use of Proceeds. . . . . . . . . The Company will receive no
cash proceeds from the
sale of the Common Stock
being offered by the Selling
Shareholders hereby. The
Company would, however,
receive $.40 per 1996 Warrant
exercised by the Selling
Shareholders on or before
December 31, 1996, and $.50
per 1996 Warrant exercised by
the Selling Shareholders
thereafter (or such lower
exercise price as the Company
may determine). There is no
assurance that any or all of
the 1996 Warrants will be
exercised by the Selling
Shareholders, and if none of
the 1996 Warrants are
exercised, the Company
would not receive any gross
proceeds. The Selling
Shareholders will receive all
of the net proceeds from the
sale of the Common Stock. The
Company expects to incur
expenses of approximately
$40,000 in connection with
the registration of the 1996
Warrants. See "Description of
Securities - 1996 Common Stock
Purchase Warrants."

RISK FACTORS

The securities described herein are speculative and involve a high
degree of risk. Each prospective investor in the Common Stock should carefully
consider the following risk factors inherent in and affecting the business of
the Company and the Common Stock before investing in the Common Stock.

1. Development Stage Company; Limited Operating History; Significant
Cumulative Operating Losses. Since its founding in January 1992, the Company has
been in the development stage and has been engaged almost exclusively in
research and development activities focused on designing, developing, and
marketing its credit card activated control systems. From inception through June
30, 1996 the Company has generated funds primarily through the sales of its
securities and unless and until the Company generates sufficient revenues from
operations, its existence may be dependent on the ability to continue to raise
capital. See "Financial Statements." The Company installed its first product,
the Golfer's OasisTM in June 1994. This product line did not achieve the
anticipated market acceptance and was also very capital intensive. There are
currently only 2 units in operation and net revenues through June 30, 1996 were
nominal. The Credit Card Copy ExpressTM was first installed in January 1995, and
as of June 1996, there were only 77 units in operation and net revenues
therefrom were nominal. The Credit Card Vending ExpressTM was first installed in
March 1995, and as of June 30, 1996 there were only 6 units in operation and net
revenues were nominal. The Company's Credit Card Debit ExpressTM was first
installed in April 1995, and as of June 30, 1996, there were only 24 units in
operation and net revenues were nominal. The Credit Card Computer ExpressTM was
first installed in April 1996, and as of June 30, 1996, there were only 21 units
in operation and net revenues were nominal.

For its fiscal years ended June 30, 1994, and June 30, 1995, the
Company incurred operating losses of $1,244,117 and $1,645,750, respectively.
For the nine months ended March 31, 1996, the Company incurred an operating loss
of $1,696,410. From its inception on January 16, 1992 through March 31, 1996,
the Company has incurred operating losses of $5,487,672. The Company anticipates
that for the three months ended June 30, 1996, it will incur an operating loss
of approximately $600,000. Such operating losses are anticipated to continue
into fiscal 1997. See "Management's Discussion And Analysis of Financial
Condition And Results of Operations."

As of June 30, 1996, the Company's products have been installed at
only 130 locations and net revenues have been nominal. Accordingly, the Company
has an extremely limited operating history upon which an evaluation of the
Company's prospects can be made. Such prospects must be considered in light of
the risks, expenses and difficulties frequently encountered in the establishment
of a new business as well as the risks, expenses and difficulties encountered by
a development stage company. There is currently no basis upon which to assume
that the Company's business will prove financially profitable or generate more
than nominal operating revenues, and if not, investors may lose all or a
substantial portion of their investment.

2. Dependence Upon Key Personnel. The Company is dependent on certain
key management personnel, particularly its President and Chief Executive
Officer, George R. Jensen, Jr. The loss of services of Mr. Jensen or other
executive officers would have a material adverse effect upon the Company's
business. The Company has entered into an employment agreement with Mr. Jensen
that expires in June 1997 and one-year employment agreements with the other
executive officers each of which contain non-compete agreements. The Company has
obtained a key man life insurance policy in the amount of $2,000,000 on Mr.
Jensen, and a key man life insurance policy in the amount of $1,000,000 on its
Vice President-Research and Development, Haven Brock Kolls, Jr. The Company does
not have and does not presently intend to obtain key man life insurance coverage
on any of its other executive officers.

3. Uncertainty of New Product Development; Unproven Commercial
Viability. While a number of products or services such as gasoline,
prepaid telephone cards, public telephones, vending machines, tickets and
facsimile machines, are currently provided through unattended, credit card
activated terminals, the commercial viability of the use of an unattended,
credit card activated control system in connection with the use of copiers and
personal computers has not been established. Although commercial production and
installation of the Company's products has commenced on a very limited basis,
there can be no assurance that the Company's products will be successful or
become profitable. Likewise, there can be no assurance that the demand for the
Company's products will be sufficient to enable the Company to become
profitable. In any such event, investors may lose all or substantially all of
their investment in the Company.

4. Dependence on Proprietary Technology; Patent Issues. The Company's
success is dependent in part on its ability to obtain patent protection for its
products, maintain trade secret protection and operate without infringing the
proprietary rights of others. To date, the Company has filed seven patent
applications, and intends to file applications for additional patents covering
its future products. There can be no assurance that any of the patent
applications will be granted, that the Company will develop additional products
that are patentable or do not infringe the patents of others, or that any
patents issued to the Company will provide the Company with any competitive
advantages or adequate protection for its products. In addition, there can be no
assurance that any patents issued to the Company will not be challenged,
invalidated or circumvented by others. If any of the Company's products is found
to have infringed any patent, there can be no assurance that the Company will be
able to obtain licenses to continue to manufacture and license such product or
that the Company will not have to pay damages as a result of such infringement.
Even if a patent application is granted for any of the Company's products, there
can be no assurance that the patented technology will be a commercial success or
result in any profits to the Company.

5. Competition. The Company is not aware of any other business
competing in the areas of unattended, credit card activated control systems for
use in connection with copiers or personal computers. However, the businesses
which have developed unattended, credit card activated control systems currently
used in connection with gasoline dispensing, public telephones, ticket
dispensing machines, prepaid telephone cards, vending machines, or facsimile
machines are capable of developing products or utilizing their existing products
in direct competition with the Company. Many of these businesses are well
established, have substantially greater resources than the Company and have
established reputations for success in the development, sale and service of high
quality products. The Company is aware of one business which has developed an
unattended, credit card activated device for vending machines. Any such
increased competition may result in lower percentages of gross revenues being
retained by the Company in connection with its devices, or otherwise may reduce
potential profits or result in a loss of some or all of its customer base.

6. Dependence on Third-Party Suppliers. The Company is dependent on
third-party suppliers for the various component parts of its products. Although
the Company believes there are alternative sources for these component parts,
the failure of such suppliers to supply such component parts or the absence of
readily available alternative sources could have a material adverse effect on
the Company, including delaying the implementation of the Company's business
plan to achieve profitability. The Company does not have supply contracts with
any of such third-party suppliers and intends to purchase components pursuant to
purchase orders placed from time to time. See "Business-Procurement".

7. Cash Dividends Not Likely. There can be no assurance that the
proposed operations of the Company will result in significant revenues or any
level of profitability. Any earnings which may be generated by the Company would
be used, for the foreseeable future, to finance the growth of the Company's
business. Accordingly, while payment of dividends rests within the discretion of
the Board of Directors, no cash dividends on the Common Stock have been declared
or paid by the Company to date, and the Company does not presently intend to pay
cash dividends on the Common Stock for the foreseeable future. Although the
Company paid a special stock dividend in August 1995 consisting of 3 shares of
Common Stock for each share of outstanding Preferred Stock, there can be no
assurance that cash dividends will ever be paid on the Common Stock. See
"Description of Securities-Series A Convertible Preferred Stock." The Articles
of Incorporation of the Company prohibit the declaration of any dividends on the
Common Stock unless and until all unpaid and accumulated dividends on the
Preferred Stock have been declared and paid. Through June 30, 1996, the unpaid
and cumulative dividends on the Preferred Stock equal $1,758,490.
On August 1, 1996 this amount will increase by $597,019. See "Description of
Securities- Series A Convertible Preferred Stock."

8. Need For Market Acceptance; Location Risk. There can be no assurance
that demand for the Company's products will be sufficient to enable the Company
to become profitable. Likewise, no assurance can be given that the Company will
be able to install the credit card activated control systems at enough locations
to achieve significant revenues or that its operations can be conducted
profitably. As of June 30, 1996, the Company's products have been installed at
only 130 locations and revenues have been nominal. Alternatively, the locations
which would utilize the control systems may not be successful locations. In
such event, the revenues of the Company would be adversely affected. The
Company may in the future lose locations utilizing its products to competitors,
or may not be able to install its products at its competitor's locations.

9. No Assurance of Active Public Market. The Common Stock is currently
traded on the OTC Electronic Bulletin Board. Although there is limited trading
in the Common Stock, there is no established trading market therefore. Unless
and until there is an established trading market for the Common Stock, holders
of the Common Stock could find it difficult to dispose of, or to obtain accurate
quotations as to the price of, the Common Stock. See "Description of Securities
- - Shares Eligible For Future Sale" and "Market For Common Stock."

10. Risks of Low-Priced Stocks. The Common Stock is subject to the
so-called penny stock rules that impose additional sales practice requirements
on broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally defined as an investor with a net
worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with a spouse). For transactions covered by this rule, the
broker-dealer must make a special suitability determination for the purchaser
and must have received the purchaser's written consent to the transaction prior
to sale. These regulations may adversely affect the ability of broker-dealers to
sell the Common Stock.

The Commission has adopted regulations that define a penny stock to be
any equity security that has a market price (as defined) of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a disclosure schedule
relating to the penny stock market. The broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer's

presumed control over the market.

As of the date hereof, the Common Stock qualifies as a penny stock and
is subject to the above regulations. The above regulations could adversely
affect the market liquidity for the Common Stock and could limit the ability of
broker-dealers to sell the Common Stock as well as the ability of holders of the
Common Stock to sell the Common Stock in the secondary market.

11. Charge to Income in the Event of Release of Escrow Shares. If the
Company attains certain earning thresholds or the Company's Common Stock attains
certain prices required for the release of certain shares of Common Stock
currently held in escrow and which are subject to cancellation, such release
will require the Company to recognize additional compensation expense. In the
event such shares are released, they will be considered outstanding for purposes
of calculating per share information concerning the Company. Accordingly, the
Company will, in the event of the release of such Common Stock, recognize during
the period in which the earning thresholds are met or such per share prices
obtained, what could be a substantial charge that would have the effect of
substantially increasing the Company's loss or reducing or eliminating earnings,
if any, at such time. Such charge will not be deductible for income tax
purposes. Although the amount of compensation expense recognized by the Company
will not affect the Company's total Shareholders' equity or cash flow, it may
have a depressive effect on the market price of the Company's securities. If the
required earnings threshold was achieved at March 31, 1996, or the Company's
Common Stock attained certain prices required for the release of the escrowed
shares for a 30-day period during the nine months ended March 31, 1996, the
compensatory charge to the Company's operations during the nine months ended
March 31, 1996 would have been $2,837,250 (assuming the fair market value
approximated $.65 per share on March 31, 1996). This charge would not have
affected the Company's cash flow or total Shareholders' equity. The net loss per
share of Common Stock would have been ($.37). See "Principal Shareholders -
Escrow and Cancellation Arrangements."

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sales of the
Common Stock by the Selling Shareholders. See "Selling Shareholders" for a list
of those Shareholders entitled to receive proceeds from the sales of the Common
Stock. The Company would, however, receive $.40 through December 31, 1996 and
$.50 thereafter (or such lower exercise price as the Company may determine) upon
the exercise of each 1996 Warrant by a Selling Shareholder. There is no
assurance that any or all of the 1996 Warrants will be exercised by the Selling
Shareholders. The Selling Shareholders will receive all of the net proceeds from
the sale of the Common Stock pursuant to this Prospectus. The Company expects to
incur costs of approximately $40,000 in connection with the registration of the
1996 warrants. See "Description of Securities - 1996 Common Stock Purchase
Warrants."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Since January 1992, the Company, a development stage corporation, has
been engaged almost exclusively in research and development activities focused
on designing, developing, and marketing its unattended, credit card activated
control systems. From inception through March 31, 1996, the Company has had
nominal operating revenues and has generated funds primarily through the sale of
its securities. The Company has incurred operating losses since its inception,
resulting in an accumulated deficit of $6,499,230 at March 31, 1996 and such
losses are expected to continue into fiscal 1997.

Results of Operations

Fiscal Year Ended June 30, 1995. For the fiscal year ended June 30,
1995, the Company had a net loss of $1,645,750. Overall this loss reflects the
continuing development stage activities of the Company including the costs
associated with the de-emphasis of the Golfer's OasisTM product line. The
Company's Preferred Stock provides for an annual cumulative dividend of $1.50
per share payable to the shareholders of record on February 1 and August 1 each
year as declared by the Company's Board of Directors. In addition, in August
1995 the Company paid a special stock dividend of 3 shares of Common Stock for
each share of Preferred Stock issued and outstanding on August 1, 1995,
consisting of an aggregate of 1,908,600 shares of Common Stock. The $2,149,624
loss applicable to common shares or $.19 loss per common share was derived by
adding the $1,645,750 net loss and the $503,784 of cumulative preferred
dividends for the year ending June 30, 1995 and dividing by the weighted average
shares outstanding.

Revenues for the fiscal year ended June 30, 1995 remained at a nominal
level reflecting the disappointing performance of the Golfer's OasisTM and the
slower than anticipated introduction of the Credit Card Copy ExpressTM product
line. Expenses for the fiscal year ended June 30,1995 were $1,667,998,
representing a $413,914 or 33% increase over the prior year. The primary
contributors to this increase were general and administrative expense and a
provision for loss on obsolete equipment.

General and administrative expense of $653,693 increased sharply by
$314,689 which reflects both a general increase in spending to support the
expansion of operations as well as several non-operational factors.
Specifically, the major contributors to this increase were (a) $120,000 increase
in consulting fees which includes a non-recurring charge of $99,750 for the
non-cash compensation expense associated with the 150,000 shares of Common Stock
issued to an outside consultant, (b) $47,000 increase in rent, which includes a
non-recurring charge of $44,000 for the planned lease termination for the
Jacksonville facility, (c) 25,000 increase in equipment rental expense
associated with the Jacksonville location, (d) $69,000 increase in professional
fees due to legal, accounting, and public relations activities, (e) increase
of $12,000 in telephone expense, and (f) an increase of $12,000 in postage.

Compensation expense remained level with the prior year. At year end
the Company had thirteen full time employees representing a net addition of only
one. However the composition of the staff has shifted in support of the new
product development.

A provision for losses on obsolete equipment of $148,615 was recorded
to reflect the Company's decision to deemphasize the Golfer's OasisTM product
line. It is management's opinion that the new products already developed
represent a better utilization of the Company's resources and will yield returns
higher than the capital intensive Golfer's OasisTM. All of the software and
technology related to this control system has been incorporated into and will be
marketed under the Credit Card Vending ExpressTM line. This charge to expense
represents the cost of liquidating the machines, parts, and components in excess
of the Company's current requirements.

Advertising and interest expense were both level with the prior year.
The majority of the interest expense, however, is related to the Company's
initial public offering which closed in February 1995 and therefore will not
continue. Research and development expense decreased significantly in 1995 by
$73,125 primarily due to the transition of projects from outside contracts to
in-house personnel which is accounted for under Compensation. Depreciation
increased by $7,410 as a function of the increased asset base.

Fiscal Quarter And Nine Months Ended March 31, 1996. The fiscal quarter
ended March 31, 1996 resulted in a net loss of $627,376 or $.07 loss per common
share. This contrasts to a net loss of $299,546 or $.05 loss per common share
for the comparable fiscal quarter ended March 31, 1995. A significant portion of
this increased loss is due to a $183,000 charge to expense to reflect the
issuance of 300,000 shares of Common Stock, at market value, to an outside
consultant for services performed. Overall these continuing losses reflect the
development stage nature of the Company. Losses are projected to continue until
sufficient revenue is generated from various applications of the Company's
proprietary technology.

Revenue from operations was $13,419, compared to $2,036 from the
previous year's fiscal quarter and remains level with the immediately preceding
quarter ended December 31, 1995. However revenue is still well below the level
required to be profitable.

Expenses for the period were $646,004 which represents an increase
over the prior year of $343,146 or 113%, and is due primarily to the change
noted above for consulting services.

Compensation increased by $30,280 or 18% over the prior year which is
attributable to increased staffing primarily in the marketing function as the
Company prepares for the introduction of its credit card activated personal
computer.

General and administration expenses also increased by $291,674 or 250%.
The major contributors to this increase were in the areas of professional fees
($30,707), and travel expense ($27,238).

Research and development expense was also up by $29,709 due to the
increased number and pace of application projects.

For the nine month period ended March 31, 1996, the net operating loss
was $1,696,410 compared to last years quarter of $1,005,654, representing a 69%
increase and reflecting the accelerated level of operations. Revenue from
operations of $61,565 for the period compared to last years $7,383, while a
significant increase, remains well below breakdown requirements. Compensation
increased 30% and general and administrative expense was up 159% while interest
expense was favorably impacted by the elimination of the interest paid the
previous period to investors in the Company's initial public offering.

Preliminary Results for the Quarter Ended June 30, 1996

The Company continued to incur losses during the quarter ended June 30,
1996 of approximately $600,000 and generated nominal revenues.

Plan of Operations

As of March 31, 1996 the Company's installation base consisted of the
following: Credit Card Copy ExpressTM 84, Credit Card Debit ExpressTM 19,
Credit Card Vending ExpressTM 11, and the Credit Card Computer ExpressTM 9
(all of which are test sites) for a total of 123 control system units. It is
the Company's intention to build the installation base to the break even level
as quickly as possible.

The Credit Card Computer ExpressTM or C3XTM, will enable libraries and
service establishments to offer state of the art computer technology, such as
access to the Internet, as well as the capability of charging users via credit
card for usage of the equipment.

The Credit Card Debit ExpressTM will enable consumers to transfer value
from their credit card to their stored value debit card. This stored value card
is typically used in connection with copy machines in university libraries.
The Company generally retains 15% of the gross revenues from these devices.
See "Business - Credit Card Debit Express."

In spite of the de-emphasis of the Golfer's OasisTM product line, the
control technology developed can be utilized in other areas of the vending
industry. It is the Company's intention to pursue these alternatives under the
Credit Card Vending ExpressTM trademark.

The Company is utilizing its direct sales force to market the control
systems to university and public libraries.

Liquidity and Capital Resources

The Company commenced a private placement offering on June 21, 1995
which was closed on a fully subscribed basis on July 31, 1995 and generated net
proceeds of $1,647,567. On March 31, 1996 the Company had cash on hand of
$414,551. Management believes that such cash balance together with the net
proceeds of the private placement offering which closed in May 1996 of
$1,249,264, and the gross proceeds of $1,105,800 obtained by the Company from
the exercise of the 1995 Warrants through June 30, 1996, will enable the Company
to be sufficiently capitalized through June 30, 1997.

During the fiscal year ended June 30, 1995, net cash of $1,353,741 was
used by operating activities (primarily compensation and general and
administrative expense). Net cash used by investing activities resulted from the
purchase of property and equipment of $213,370. The net cash provided by
financing activities of $1,499,091 was principally due to the net proceeds
generated from the issuance of Common Stock and Preferred Stock of $1,512,183.

During the nine months ended March 31, 1996, net cash of $1,323,607 was
used by operating activities (principally compensation and general and
administrative expenses). Net investing activities of $394,511 were principally
due to the purchase of equipment of $445,511, net of proceeds from the sale of
equipment of $51,000. The net cash provided by financing activities of
$1,756,478 was principally due to the net proceeds generated from the issuance
of Common Stock and Preferred Stock of $1,763,585.

BUSINESS

The Company's devices make available credit card payment technology in
connection with the sale of a variety of products and services. The Company
anticipates generating its revenues primarily from retaining a portion of the
revenues generated from all credit card transactions conducted through its
devices.

The Company has developed an unattended, credit card activated control
system for vending machines known as the Credit Card Vending ExpressTM, an
unattended, credit card activated control system to be utilized with
photocopying machines and computer printers known as the Credit Card Copy
ExpressTM, and an unattended, credit card activated control system to be used
in connection with debit card purchase/revalue stations known as the Credit Card
Debit ExpressTM. The devices allow consumers to use credit cards to pay for
those products and services.

The Company has also developed the Credit Card Computer ExpressTM which
is an unattended, credit card activated control system to be used in
connection with general use of a personal computer, as well as for the use of
on-line services, including the Internet, and for the use of a laser printer.
This product enables locations such as public libraries to offer the use of
personal computers to the public on an "as needed" basis utilizing credit cards
as a method of payment.

In February 1996, the Company entered into an agreement with Dell
Marketing, L.P., a subsidiary of Dell Computer Corporation ("Dell"), pursuant to
which the Company was appointed as a Dell authorized "Remarketer/Integrator".
Dell is one of the leading manufacturers of personal computers and other related
computer products in the world. Pursuant to the agreement, Dell will manufacture
Dell computers containing the Company's C3XTM credit card activated control
system. These products will be sold to the Company by Dell either for resale by
the Company to its customers or for licensing by the Company to its customers.
The Company is entitled to a discount off of the list price of the Dell products
being purchased from Dell. Dell may ship the complete computer system (including
the integrated C3XTM control system) directly to the Company's customer on a COD
basis and remit the applicable discount to the Company. The agreement has an
initial term of one year and is cancelable by either party upon thirty days
notice. Through June 30, 1996, the Company ordered 25 computer systems from
Dell.

For the year ended June 30, 1994 and 1995, the Company has spent
approximately $163,000 and $130,000, respectively for the development of its
proprietary technology. In the year ended June 30, 1995, these amounts include
the expense of outside consultants and contractors (approximately $45,000) as
well as compensation paid to the Company's employees (approximately $85,000) and
included in Compensation in the accompanying financial statements.

The Company has been certified by First Data Corp., the leading credit
card processor in the United States. First Data has extended to the Company a
fixed rate percentage processing charge in connection with the credit card
transactions conducted through the Company's products. This charge is paid by
the Company out of its share of the gross proceeds. See "Business-Credit Card
Processing." Each credit card activated control device records and transmits all
transaction data to the Company, and the Company then forwards such data to the
credit card processor. After receiving transaction information from the Company,
the credit card processor electronically transfers the funds to the Company's
bank account. The Company then forwards to the location utilizing the Company's
control system its share of the funds.

As of June 30, 1996, the Company had 77 Credit Card Copy ExpressTM
control systems, 24 Credit Card Debit ExpressTM control systems, and 21 Credit
Card Computer ExpressTM control systems at the following commercial locations:
Adams State College, Anaheim Public Library, Boston College, Boston Law School,
Bradley University Library, Bucks County Community College, Central Arkansas
Library System, Clarkson University, Cleveland State University, Colgate
University, Denver Public Library, Drexel University, Georgetown University Law
Library, Library of Congress, Loyola University Medical School, Michigan State
University, Nanuet Public Library, New England Law Library, Nova Southeastern
University, Ohio University, Penn State University, Philadelphia College of
Pharmacy & Science, Princeton University, San Francisco Public Library, Temple
Law Library, University of Arkansas Law Library, University of Chicago,
University of the District of Columbia, University of Georgia, University of
Houston, University of Maine, University of Maryland, University of Pittsburgh,
University of Tennessee, University of Texas, University of Wisconsin, Upper
Merion Public Library, Villanova University, and William Jeanes Memorial
Library. Through June 30, 1996 the total gross revenues received by the Company
from these systems has been nominal.

The Company has licensed its Credit Card Vending ExpressTM technology
to an apparel manufacturer to be used in connection with the sale from vending
machines of T-shirts, windbreakers, and tote bags, and has also licensed this
technology to two golf courses. In July 1996, the licensing arrangement with the
apparel manufacturer was terminated by the apparel manufacturer effective
September 30, 1996. At June 30, 1996, there were 8 Credit Card Vending ExpressTM
control systems in operation and the gross revenues to the Company from those
machines has been nominal.

Credit Card Processing

Each of the Company's credit card activated control devices records and
transmits all transaction data to the Company, and the Company then forwards
such data to the credit card processor. After receiving transaction information
from the Company, the credit card processor electronically transfers the funds
(less the credit card processor's charge) to the Company. The Company then
forwards to the location its share of the funds.

The Company and each location have agreed on a percentage split of the
gross proceeds from the Company's device. The credit card processor's fees and
cost to forward the location's share of the gross proceeds are all paid for out
of the Company's portion of the gross revenue.

In connection with its Credit Card Copy ExpressTM, the Company is
currently retaining 15 to 30% of the gross revenues from each device. The
Company anticipates retaining approximately 90% of the gross revenues where it
licenses the Credit Card Computer ExpressTM complete system to a location and
20% of the gross revenues where the Company sells a complete system to a
location or where the Company licenses only the C3XTM control system to a
location for use in connection with existing computer equipment.

Industry Trends

With trends over the last twenty years indicating an ever increasing
customer reliance on the use of credit cards as a method of payment, the Company
believes the future of purchasing products and services is in credit cards
rather than cash. There are approximately eight hundred million credit cards
issued in the United States. The Company has focused its efforts towards
developing unattended, credit card activated control systems for use in the
vending, copier, debit card and personal computer industries.

The Credit Card Vending ExpressTM

According to the Vending Times, Census of the Industry, vending sales
in the United States have increased from approximately $14.8 billion in 1983 to
approximately $29.3 billion in 1994.

The Company believes that operators have become increasingly aware of
the economic gains to be realized by selling higher priced items from a vending
machine. Selling higher priced products from a vending machine is difficult
using a coin and dollar bill based system. These difficulties include handling
increased amounts of cash as well as collecting, counting, changing and
depositing the cash.

The Company has developed a credit card activated control system to be
used in connection with vending machines known as the Credit Card Vending
ExpressTM. This product allows owner/operators of vending machines to sell
higher priced items from one or more vending machines. Using a valid credit
card, the customer swipes his or her credit card to activate the equipment which
could offer items without limitation as to price. The Company's device makes the
vending machines operable 24 hour per day, 365 days per year and eliminates the
need for cash.

The Credit Card Copy ExpressTM

Traditionally, customers wishing to use a photocopying machine have
either used a prepaid, stored value card or cash. In most circumstances, this
places a burden on employees of the facility to provide a number of services
unrelated to their primary jobs, such as providing change, coin collecting, coin
counting and coin reloading. With the Credit Card Copy ExpressTM, the attendant
no longer needs to interact with the customers for these purposes.

The Credit Card Copy ExpressTM provides a cashless method to pay for
the use of photocopying machines. The device is attached to the photocopying
machine, computer printer, or microfilm/fiche printer in a similar manner as
attaching a standard coin acceptor. The device can be attached to either
existing or new equipment. The control system enables customers to photocopy
documents with the use of a credit card.

The Credit Card Debit ExpressTM

Many "closed" environments such as universities utilize a private card
system to store cash value known as a debit or "stored value" card. The system
works by encouraging customers to transfer lump sum cash values onto a magnetic
stripe or imbedded chip card that can be used to activate equipment within the
closed environment. As the cardholder uses the card to purchase products or
services the cash value is deducted from the total value on the card.

The Company's Credit Card Debit ExpressTM enables customers to purchase
or revalue their debit cards with a credit card and eliminates the need for cash
or for an attendant to handle cash, provide change or process credit card
transactions. The Credit Card Debit ExpressTM eliminates any reliance on cash by
allowing customers to use a credit card to purchase or place additional value on
a debit card.

The Company's product is presently being used with debit card machines
in university libraries. Such debit cards are used for the copy machines located
in the library. The Company generally retains 15% of the gross revenues from the
devices.

The Credit Card Computer ExpressTM

The Company believes that the growing dependence on personal computers
has created an environment where there is a need for access to personal
computers by the general public on an "as needed" basis. To meet this need, the
Company has developed the Credit Card Computer ExpressTM. Through June 30, 1996,
the Company's system is in commercial use at 21 locations, substantially all of
which are public libraries. The device enables the public to utilize personal
computers and/or the services they offer on an "as-needed" basis. The system is
designed so that the computer could not be used until a valid credit card is
swiped through the control system. Once the user is authorized to proceed, the
system would charge for time in use, printed output, and any modem activity.

The Company could either sell the C3XTM control device to locations
which already have personal computers, or alternatively, either license or sell
to the location a Credit Card Computer ExpressTM complete system. If the
complete system is purchased by the location from the Company, the Company
anticipates retaining 20% of the gross revenues, or if the complete system is
purchased by the Company and licensed to the location, the Company anticipates
retaining approximately 90% of the gross revenues.

During February 1996, the Company entered into an agreement with Dell
Marketing, L.P., a subsidiary of Dell Computer Corporation ("Dell"), pursuant to
which the Company was appointed as a Dell authorized "Remarketer/Integrator."
Dell is one of the leading manufacturers of personal computers and other related
computer products in the world. Pursuant to the agreement, Dell will manufacture
Dell computers containing the Company's C3XTM credit card activated control
system. See "Business Procurement." These products will be sold to the Company
by Dell either for resale by the Company to its customers or for licensing by
the Company to its customers. The Company is entitled to a discount off of the
list price of the Dell products being purchased from Dell. Dell may ship the
complete computer system (including the integrated C3XTM control device)
directly to the Company's customer on a COD basis and remit the applicable
discount to the Company. The agreement has initial term of one year and is
cancelable by either party upon thirty days notice. Through June 30, 1996, the
Company ordered 25 computer systems from Dell.

The initial customer base to be targeted by the Company for the Credit
Card Computer ExpressTM is public and university libraries. The Company believes
that the personal computer is becoming an integral part of how library patrons
access and utilize the information available to them. The Company also believes
that the majority of these libraries do not currently offer general use personal
computers to their patrons. The Company will also pursue print shops, cyber
cafes, hotels, airports, convention and conference centers, and various retail
outlets as potential customers.

Marketing

The Company is currently marketing its products through its full-time
sales staff consisting of six persons to university and public libraries, either
directly or through facility management companies servicing these locations.

Procurement

The Company's control system devices consist of a card reader, printer,
amplifier, circuit board and micro chip in a specially designed housing. The
devices are currently manufactured to the Company's design specification by an
independent contractor, LMC - Autotech Technologies, LP. The Company has
recently contracted for the purchase of 250 control devices, for a total
purchase price of $143,000. Through June 30, 1996, 148 units have been delivered
and $85,000 has been included in acounts payable. The Company anticipates
obtaining its complete computer systems (other than the C3XTM control system)
from Dell pursuant to the agreement entered into with Dell.

Competition

The Company believes that there are currently no other businesses
competing in the areas of unattended, credit card activated control systems for
use in connection with copiers or personal computers. However, the businesses
which have developed unattended, credit card activated control systems currently
in use in connection with gasoline dispensing, public telephones, prepaid
telephone cards, ticket dispensing machines, vending machines, or facsimile
machines, are capable of developing products or utilizing their existing
products in direct competition with the Company. Many of these businesses are
well established, have substantially greater resources than the Company and have
established reputations for success in the development, sale and service of high
quality products. The Company is aware of one business which has developed an
unattended, credit card activated control system to be used in connection with
vending machines. Any such increased competition may result in lower percentages
of gross revenues being retained by the Company in connection with its licensing
arrangements, or otherwise may reduce potential profits or result in a loss of
some or all of its customer base. See "Risk Factors - Competition".

Patents, Trademarks and Proprietary Information

The Company has applied for federal registration of its trademarks
Credit Card Printer ExpressTM, Credit Card Copy ExpressTM, Credit Card Debit
ExpressTM, Credit Card Computer ExpressTM, and C3XTM.

Much of the technology developed or to be developed by the Company is
subject to trade secret protection. To reduce the risk of loss of trade secret
protection through disclosure, the Company has entered into confidentiality
agreements with its key employees.

There can be no assurance that the Company will be successful in maintaining
such trade secret protection or that others will not capitalize on certain of
the Company's technology.

The Company has applied for seven United States letters patent and has
applied for foreign letters patent in connection therewith. See "Risk Factors -
Dependence on Proprietary Technology; Patent Issues."

Employees

The Company has sixteen full-time employees and two part-time
employees.

Properties

The Company leases its principal executive offices, consisting of
approximately 3400 square feet, at 3 Glenhardie Corporate Center, 1265 Drummers
Lane, Suite 306, Wayne, Pennsylvania for a monthly rental of $3,300. The lease
expires on August 31, 1997. The Company also leases approximately 5,000 square
feet of warehouse space in Jacksonville, Florida, for $2,300 per month. The
lease expires on April 30, 1997. It is the Company's intention to vacate or
sublease this facility prior to the expiration date, and accordingly the Company
has reserved an appropriate amount for the continuing expense.

Legal Proceedings

In January 1995, Norman H. Greenspun, a former officer and Director,
commenced litigation against the Company and its Chief Executive Officer, in the
Court of Common Pleas of Montgomery County, Pennsylvania. The complaint alleges
that the plaintiff was subject to age discrimination in conjunction with the
termination of his employment in violation of the Pennsylvania Human Relations
Act. The complaint seeks unspecified damages in excess of $100,000. In May 1996,
the Court granted preliminary objections to the complaint, and dismissed the
action against the Company's Chief Executive Officer and struck plaintiff's
request for punitive damages and a jury trial against the Company. The Company
believes that the action has no merit and intends to vigorously defend the
action.

MANAGEMENT

Directors and Executive Officers

The Directors and executive officers of the Company, together with
their ages and business backgrounds are as follows.

Name Age Position(s) Held
---- --- ----------------

George R. Jensen, Jr. 47 President, Chief Executive
Officer, Chairman of the
Board of Directors
Stephen P. Herbert 34 Executive Vice President - Sales
and Marketing, Director
Haven Brock Kolls, Jr. 30 Vice President - Research and
Development
Keith L. Sterling 44 Executive Vice President -
Operations, Secretary, Director
Edward J. Sullivan 46 Senior Vice President, Chief
Financial Officer, Treasurer
Peter G. Kapourelos 75 Director
William W. Sellers 75 Director
Henry B. duPont Smith 35 Director
William L. Van Alen, Jr. 61 Director

Each Director holds office until the next Annual Meeting of
Shareholders and until his successor has been elected and qualified.

George R. Jensen, Jr., has been the President, Chief Executive Officer,
and Director of the Company since January 1992. Mr. Jensen is the founder, and
was Chairman, Director, and Chief Executive Officer of American Film
Technologies, Inc. ("AFT") from 1985 until 1992. AFT was in the business of
creating color imaged versions of black-and-white films. From 1979 to 1985, Mr.
Jensen was Chief Executive Officer and President of International Film
Productions, Inc. Mr. Jensen was the Executive Producer of the twelve hour
miniseries, "A.D.", a $33 million dollar production filmed in Tunisia. Procter
and Gamble, Inc., the primary source of funds, co-produced and sponsored the
epic, which aired in March 1985 for five consecutive nights on the NBC network.
Mr. Jensen was also the Executive Producer for the 1983 special for public
television, " A Tribute to Princess Grace". From 1971 to 1978, Mr. Jensen was a
securities broker, primarily for the firm of Smith Barney, Harris Upham. Mr.
Jensen was chosen 1989 Entrepreneur of the Year in the high technology category
for the Philadelphia, Pennsylvania area by Ernst & Young LLP and Inc. Magazine.
Mr. Jensen received his Bachelor of Science Degree from the University

of Tennessee and is a graduate of the Advanced Management Program at the
Wharton School of the University of Pennsylvania.

Stephen P. Herbert was elected a Director of the Company in April 1996,
and joined the Company full-time on May 6, 1996. Prior to joining the Company
and since 1986, Mr. Herbert had been employed by Pepsi-Cola, the beverage
division of PepsiCo. From 1994 to April 1996, Mr. Herbert was a Manager of
Market Strategy. In such position he was responsible for directing development
of market strategy for the vending channel and subsequently the supermarket
channel for Pepsi-Cola in North America. Prior thereto, Mr. Herbert held various
sales and management positions with Pepsi-Cola. Mr. Herbert graduated with a
Bachelor of Science degree from Louisiana State University.

Haven Brock Kolls, Jr., joined the Company on a full-time basis in May
1994 and was elected an executive officer in August 1994. From January 1992 to
April 1994, Mr. Kolls was Director of Engineering for International Trade
Agency, Inc., an engineering firm specializing in the development of control
systems and management software packages for use in the vending machine
industry. Mr. Kolls was an electrical engineer for Plateau Inc. from 1988 to
December 1992. His responsibilities included mechanical and electrical
computer-aided engineering, digital electronic hardware design, circuit board
design and layout, fabrication of system prototypes and software development.
From 1984 to 1988, Mr. Kolls was employed as an electrical engineer. Mr. Kolls
is a graduate of the University of Tennessee with a Bachelor of Science Degree
in Engineering.

Keith L. Sterling joined the Company on a full-time basis as Executive
Vice President-Operations and Secretary on July 1, 1993 and was elected to the
Board of Directors on May 12, 1995. Mr. Sterling is part owner, and from October
1987 to July 1, 1993, was the Chief Executive Officer of Radnor Commonwealth
Equities, Inc., a Washington, D.C. asset-based investment/consulting firm. He
co-founded that firm in 1987. From 1980 to 1987, Mr Sterling held various
positions with MHB Companies, Inc., a national investment-development company
headquartered in Houston, Texas, including Executive Vice President. Mr.
Sterling graduated with a Bachelor of Science degree in Economics from
Susquehanna University.

Edward J. Sullivan joined the Company on a full-time basis as Senior
Vice President, Chief Financial Officer and Treasurer on July 1, 1993. Prior
thereto, and since 1990, he was President of Brian Edwards & Co., a consulting
firm specializing in controllership services, cost containment, and expense
reduction programs. From 1987 to 1990, Mr. Sullivan was Vice President, Group
Controller of Pony Industries, Inc., a manufacturer supplying

the building products industry. Mr. Sullivan is a Certified Public Accountant
and received a Bachelor of Science degree in Accounting from Villanova
University.

Peter G. Kapourelos joined the Board of Directors of the Company in May
1993. Mr. Kapourelos has been a branch manager of Advantage Capital Corporation,
a subsidiary of Primerica Corporation, since 1972. He has been a member of the
Millionaire Production Club since 1972. Mr. Kapourelos is currently the Vice
President for American Capital High Yield Bond Fund and of the American Capital
Equity Income Fund, which are publicly traded mutual funds.

William W. Sellers joined the Board of Directors of the Company in May
1993. Mr. Sellers founded The Sellers Company in 1949 which has been nationally
recognized as the leader in the design and manufacture of state-of-the-art
equipment for the paving industry. Mr. Sellers has been awarded five United
States patents and several Canadian patents pertaining to this equipment. The
Sellers Company was sold to Mechtron International in 1985. Mr. Sellers is
Chairman of the Board of Sellers Process Equipment Company which sells
products and systems to the food and other industries. Mr. Sellers is actively
involved in his community. Mr. Sellers received his undergraduate degree from
the University of Pennsylvania.

Henry B. duPont Smith joined the Board of Directors of the Company in
May 1994. Since January 1992, Mr. Smith has been a Vice President of The
Rittenhouse Trust Company and since September 1991 has been a Vice President of
Rittenhouse Financial Services, Inc. From September 1991 to December 1992, he
was a registered representative of Rittenhouse Financial Securities, Inc. Mr.
Smith was an Assistant Vice President of Mellon Bank, N.A. from March 1988 to
July 1991, and an investment officer of Provident National Bank from March 1985
to March 1988. Mr. Smith received a Bachelor of Arts degree in Accounting in
1984 from Franklin & Marshall College.

William L. Van Alen, Jr., joined the Board of Directors of the Company
in May 1993. Mr. Van Alen is President of Cornerstone Entertainment, Inc., an
organization engaged in the production of feature films of which he was a
founder in 1985. Prior thereto, Mr. Van Alen practiced law in Pennsylvania for
twenty-two years. Mr. Van Alen received his undergraduate degree in Economics
from the University of Pennsylvania and his law degree from Villanova Law
School.

Executive Compensation

The following table sets forth certain information with respect to
compensation paid or accrued by the Company during the fiscal years ended June
30, 1994, June 30, 1995 and June 30, 1996 to the individual acting in the
capacity of Chief Executive Officer of the Company. No individual who was
serving as an executive officer of the Company at the end of the fiscal years
ended June 30, 1994, June 30, 1995 or June 30, 1996 received salary and bonus in
excess of $100,000 in any such fiscal year.

Summary Compensation Table

Fiscal
Name and Principal Position Year Annual Compensation
- --------------------------- ------ -------------------------
Salary Bonus
------ -----
George R. Jensen, Jr., 1996 $90,000 $0
Chief Executive Officer, 1995 $90,000 $0
President 1994 $90,000(1) $0

(1) During the 1994 fiscal year, Mr. Jensen actually received, in addition to
his salary for the 1994 fiscal year, the amount of $50,000 for accrued but
unpaid salary attributable to the 1993 fiscal year.

Executive Employment Agreements

The Company has entered into a one year employment agreement with Mr.
Jensen which expires June 30, 1997. The Agreement is automatically renewed from
year to year unless canceled by Mr. Jensen or the Company. The agreement
provides for an annual base salary of $100,000 per year. Mr. Jensen is entitled
to receive such bonus or bonuses as may be awarded to him by the Board of
Directors. In determining whether to pay such a bonus, the Board would use its
subjective discretion. The Agreement requires Mr. Jensen to devote his full time
and attention to the business and affairs of the Company, and obligates him not
to engage in any investments or activities which would compete with the Company
during the term of the Agreement and for a period of one year thereafter.

The Company has entered into a one-year employment agreement with Mr.
Herbert which expires on April 30, 1997. The agreement is automatically renewed
from year to year thereafter unless canceled by Mr. Herbert or the Company. The
Agreement provides for an annual base salary of $90,000 per year, provided, that
Mr. Herbert's base salary shall never be less than ninety percent of that of the
Chief Executive Officer of the Company. Mr. Herbert is entitled to receive such
bonus or bonuses as the Board of Directors

may award to him. The Agreement requires Mr. Herbert to devote his full time and
attention to the business and affairs of the Company and obligates him not to
engage in any investments or activities which would compete with the Company
during the term of the agreement and for a period of one year thereafter.

Mr. Sterling has entered into a one-year employment agreement with the
Company which expires on June 30, 1997. The agreement is automatically renewed
from year to year thereafter unless cancelled by Mr. Sterling or the Company.
The Agreement provides for an annual base salary of $90,000 per year and
provides that Mr Sterling is entitled to receive such bonus or bonuses as the
Board of Directors may award to him. The agreement requires Mr. Sterling to
devote his full time and attention to the business and affairs of the Company,
and obligates him not to engage in any investments or activities which would
compete with the Company during the term of the agreement and for a period of
one year thereafter.

Mr. Sullivan has entered into a one-year employment agreement with the
Company which expires on June 30, 1997. The agreement automatically renews from
year to year unless canceled by the Company or Mr. Sullivan. The agreement
provides for an annual base salary of $80,000 and provides that Mr. Sullivan is
entitled to receive such bonus or bonuses as may be awarded by the Board of
Directors. The agreement requires Mr. Sullivan to devote his full-time and
attention to the business and affairs of the Company, and obligates him not to
engage in any investments or activities which would compete with the Company
during the term of the agreement and for a period of one year thereafter.

Mr. Kolls has entered into a one-year employment agreement with the
Company which expires on April 30, 1997, and is automatically renewed from year
to year thereafter unless canceled by Mr. Kolls or the Company. The agreement
provides for an annual base salary of $90,000 per year. Mr. Kolls is also
entitled to receive such bonus or bonuses as may be awarded to him by the Board
of Directors. The Agreement requires Mr. Kolls to devote his full time and
attention to the business and affairs of the Company, and obligates him not to
engage in any investments or activities which would compete with the Company
during the term of his agreement and for a period of one year thereafter.

Director Compensation and Stock Options

Members of the Board of Directors do not currently receive any cash
compensation for serving on the Board of Directors.

In April 1993, Messrs. Kapourelos and Sellers each purchased 100,000
shares of Common Stock from the Company at a purchase price of $.001 per share.
In June 1993, Mr. Van Alen purchased 100,000 shares of Common Stock from the
Company at a purchase price of $.001 per share.

In July 1993, the Company issued to each of Messrs. Kapourelos,
Sellers, and Van Alen fully vested options to purchase 100,000 shares of Common
Stock at an exercise price of $.25 per share. The options must be exercised on
or before June 30, 1998.

In March 1995, the Company issued to Mr. Smith fully vested options to
purchase 100,000 shares of Common Stock, to Mr. Sellers fully vested options to
purchase 55,000 shares of Common Stock, to Mr. Kapourelos fully vested options
to purchase 70,000 shares of Common Stock, and to Mr. Van Alen fully vested
options to purchase 25,000 shares of Common Stock. The exercise price of these
options is $.25 per share and they must be exercised on or before February 29,
2000.

Pursuant to the request of the Pennsylvania Securities Commission, each
of the Directors have placed all of the shares of Common Stock owned
beneficially by them in escrow. See "Principal Shareholders - Escrow And
Cancellation Arrangements."

The Company paid to William W. Sellers the amount of $80,000 for
consulting services rendered by Mr. Sellers to the Company during the fiscal
year ended June 30, 1996.

The Company paid to Peter G. Kapourelos the amount of $24,000 for
consulting services rendered by Mr. Kapourelos to the Company during the fiscal
year ended June 30, 1996.

Executive Stock Options

In July 1993, the Company issued to Messrs. Sullivan and Sterling,
options to purchase shares of Common Stock at an exercise price of $.25 per
share. The options must be exercised within five years of the vesting thereof.
Mr. Sterling received options to acquire 200,000 shares of Common Stock, 100,000
of which vested on June 30, 1994, and 100,000 of which vested on June 30, 1995.
Mr. Sullivan was granted options to acquire 100,000 shares of Common Stock,
50,000 of which vested on June 30, 1994, and 50,000 of which vested on June 30,
1995.

In August 1994, the Company issued to Mr. Kolls options to acquire
50,000 shares of Common Stock at an exercise price of $.25 per share, 25,000 of
which vested on April 30, 1995, and 25,000 of which vested on April 30, 1996.

In August 1994, the Company issued to Mr. Barry Slawter, a former
officer of the Company, options to acquire 200,000 shares of Common Stock at an
exercise price of $.25 per share, 50,000 of which vested on February 1, 1995,
50,000 of which vested on May 1, 1995, 50,000 of which vested on August 1, 1995,
and 50,000 of which vested on November 1, 1995. The options must be exercised
within five years after vesting.

In March 1995, the Company issued to Mr. Sterling fully vested
options to acquire 100,000 shares of Common Stock at $.25 per share exercisable
on or before February 29, 2000.

In March 1995, the Company issued to Mr. Kolls options to acquire
150,000 shares of Common Stock, at an exercise price of $.25 per share, 75,000
of which vested on April 30, 1995, and 75,000 of which vested on April 30, 1996.
These options must be exercised within five years after vesting.

In June 1995, the Company issued to Mr. Slawter fully vested options to
acquire 10,000 shares of Common Stock at an exercise price of $.25 per share.
Such options must be exercised within five years.

In March 1996, the Company issued to Mr. Kolls options to acquire up to
50,000 shares of Common Stock at an exercise price of $.65 per share, all of
which will vest if he is employed on April 30, 1997. The options must be
exercised within five years of vesting.

In April 1996, the Company issued to Mr. Herbert options to acquire up
to 400,000 shares of Common Stock at an exercise price of $.65 per share.
Subject to Mr. Herbert's continued employment with the Company, the options will
become vested over a three year period, 200,000 during the first year, and
100,000 during each year thereafter, in quarterly intervals. The options must be
exercised within five years of vesting.

In May 1996, the Company issued to Mr. Sterling options to acquire up
to 50,000 shares of Common Stock at an exercise price of $.65 per share, all of
which will vest if he is employed by the Company on April 30, 1997. The options
must be exercised within five years of vesting.

In May 1996, the Company issued to Mr. Sullivan options to acquire up
to 50,000 shares of Common Stock at an exercise price of $.65 per share, all of
which will vest if he is employed by the Company on April 30, 1997. The options
must be exercised within five years of vesting.

Pursuant to the request of the Pennsylvania Securities Commission, each
of the executive officers have placed all of the shares of Common Stock
beneficially owned by them in escrow. See "Principal Shareholders--Escrow And
Cancellation Arrangements.

The Board of Directors is responsible for awarding stock options. Such
awards are made in the subjective discretion of the Board. The exercise price of
all the above options represents on the date of issuance of such options an
amount equal to or in excess of the market value of the Common Stock issuable
upon the exercise of the options. All of the foregoing options are non-qualified
stock options and not part of a qualified stock option plan.

Officer Termination

The employment agreement of Barry Slawter, a former officer of the
Company, expired on June 30, 1996, and Mr. Slawter is no longer an employee or
officer of the Company.

PRINCIPAL SHAREHOLDERS

Common Stock

The following table sets forth, as of June 30, 1996, the
beneficial ownership of the Common Stock of each of the Company's directors and
executive officers, as well as by the Company's directors and executive officers
as a group. Except as set forth below, the Company is not aware of any
beneficial owner of more than five percent of the Common Stock. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.

Number of Shares
Name and Address of Common Stock Percent
of Beneficial Owner Beneficially Owned(1) of Class(2)
------------------- --------------------- -----------
George R. Jensen, Jr. 7,753,000 shares(3) 18.3%
10 Fox Chase Road
Malvern, Pennsylvania 19355

Stephen P. Herbert 50,000 shares (4) *
536 West Beach Tree Lane
Strafford, Pennsylvania 19087

Haven Brock Kolls, Jr. 221,500 shares(5) *
150 Westridge Gardens
Phoenixville, Pennsylvania 19460

Keith L. Sterling 400,000 shares(6) 1.0%
114 South Valley Road
Paoli, Pennsylvania 19033

Edward J. Sullivan 200,000 shares(7) *
3 Pickwick Lane
Malvern, Pennsylvania 19355

Peter G. Kapourelos 313,000 shares(8) *
1515 Richard Drive
West Chester, Pennsylvania 19380

William W. Sellers 911,000 shares(9) 2.2%
394 East Church Road
King of Prussia, Pennsylvania 19406

Henry B. duPont Smith 400,000 shares(10) 1.0%
350 Mill Bank Road
Bryn Mawr, Pennsylvania 19010

William L. Van Alen, Jr. 225,000 shares(11) *
Cornerstone Entertainment, Inc.
P.O. Box 727
Edgemont, Pennsylvania 19028

All Directors and Executive Officers
As a Group (9 persons) 10,249,675 shares(12) 24.2%

- ---------
*Less than one percent (1%)

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and derives from either voting or
investment power with respect to securities. Shares of Common Stock issuable
upon conversion of the Preferred Stock, or shares of Common Stock issuable
upon exercise of options currently exercisable, or exercisable within 60 days
of the date

hereof, are deemed to be beneficially owned for purposes hereof.

(2) For purposes of computing the percentages under this table, it is assumed
that all shares of issued and outstanding Preferred Stock have been converted
into 7,960,250 shares of Common Stock, that all of the options or purchase
rights to acquire Common Stock which have been issued and are fully vested as
of the date hereof (or within 60-days of the date hereof) have been converted
into 3,042,300 shares of Common Stock. Of the 3,435,000 options to acquire
Common Stock issued as of June 30, 1996, only 550,000 of such options do not
become vested within 60-days thereof, and such options are excluded from this
table. For purposes of computing such percentages it has also been assumed
that all of the remaining 1995 Warrants have been exercised for 1,414,000
shares of Common Stock, all of the 1996 Warrants have been exercised for
5,200,000 shares of Common Stock, and all of the accrued and unpaid dividends
on the Preferred Stock as of June 30, 1996 have been converted into 1,758,490
shares of Common Stock. Therefore, for purposes of computing the percentages
under this table, there are 42,399,016 shares of Common Stock issued and
outstanding.

(3) Includes 6,000,000 shares of Common Stock held by Mr. Jensen with his
minor children as joint tenants with right of survivorship. Includes 160,000
shares of Common Stock issuable upon conversion of the 16,000 shares of
Preferred Stock owned by him. An aggregate of 4,365,000 shares of Common Stock
(or under certain circumstances 1,030,000 shares of Common Stock) beneficially
owned by Mr. Jensen are subject to cancellation and are included in this
table. See "Escrow and Cancellation Arrangements."

(4) Includes 50,000 shares of Common Stock issuable upon the exercise of
options. Does not include 350,000 shares of Common Stock issuable pursuant to
options not presently exercisable and not exercisable within 60 days of June
30, 1996.

(5) Includes 5,000 shares of Common Stock issuable upon the conversion of 500
shares of Preferred Stock beneficially owned by Mr. Kolls. Includes 200,000
shares of Common Stock issuable upon exercise of options. Does not include
50,000 shares of Common Stock issuable pursuant to options not presently
exercisable and not exercisable within 60-days of June 30, 1996.

(6) All shares of Common Stock held by Mr. Sterling on the date hereof are
held with his spouse as joint tenants with right of survivorship. Includes
300,000 shares of Common Stock issuable upon exercise of options. Does not
include 50,000 shares of Common Stock issuable pursuant to options not
presently exercisable and not exercisable within 60-days of June 30, 1996.

(7) All shares of Common Stock held by Mr. Sullivan on the date hereof are
held with his spouse as joint tenants with right of survivorship. Includes
100,000 shares of Common Stock issuable

upon exercise of options. Excludes 50,000 shares of Common Stock issuable
pursuant to options not presently exercisable and not exercisable within
60-days of June 30, 1996.

(8) Includes 10,000 shares of Common Stock issuable upon the conversion of
1,000 shares of Preferred Stock beneficially owned by Mr. Kapourelos. Includes
30,000 shares of Common Stock held on the date hereof by Mr. Kapourelos with
his spouse as joint tenants with right of survivorship. Includes 170,000
shares of Common Stock issuable upon exercise of options.

(9) Includes 147,250 shares of Common Stock issuable upon the conversion of
14,725 shares of Preferred Stock beneficially owned by Mr. Sellers. Includes
an aggregate of 126,750 shares of Common Stock issuable upon exercise of the
1995 Warrants beneficially owned by him. Of such 1995 Warrants, 60,000 are
owned by the Sellers Pension Plan of which Mr. Sellers is a trustee and 30,000
are owned by Sellers Process Equipment Company of which he is a Director.
Includes an aggregate of 280,000 1996 Warrants beneficially owned by him, of
which 80,000 are owned by the Sellers Pension Plan and 40,000 are owned by his
wife. Includes 6,000 shares of Common Stock owned by Sellers Pension Plan,
3,000 shares of Common Stock owned by Sellers Process Equipment Company, and
18,000 shares of Common Stock owned by Mr. Seller's wife. Includes 155,000
shares of Common Stock issuable upon exercise of options.

(10) Includes 120,000 shares of Common Stock issuable upon conversion of the
12,000 shares of Preferred Stock beneficially owned by Mr. Smith. Includes
100,000 shares of Common Stock issuable upon exercise of options. Includes
80,000 shares of Common Stock issuable upon conversion of the 1996 Warrants
held by trusts for the benefit of Mr. Smith's children of which he is a
trustee.

(11) Includes 125,000 shares of Common Stock issuable upon exercise of
options.

(12) Includes all shares of Common Stock described in footnotes (2) through
(11) above.

Preferred Stock

The following table sets forth, as of June 30, 1996 the beneficial
ownership of the Preferred Stock by the Company's directors and executive
officers, as well as by the Company's directors and executive officers as a
group. Except as set forth below, the Company is not aware of any beneficial
owner of more than five percent of the Preferred Stock. Except as otherwise
indicated, the Company believes that the beneficial owners of the Preferred
Stock listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.

Number of Shares
Name and Address of of Preferred Stock Percent
Beneficial Owner Beneficially Owned of Class(l)
- ------------------- ------------------ -----------

George R. Jensen, Jr.
10 Fox Chase Road
Malvern, Pennsylvania 19355 16,000 2.0%

Haven Brock Kolls, Jr.
150 West Ridge Gardens
Phoenixville, Pennsylvania 19460 500 *

Peter G. Kapourelos
1515 Richard Drive
West Chester, Pennsylvania 19380 1,000 *

William W. Sellers
394 East Church Road
King Of Prussia, Pennsylvania 19406 14,725(2) 1.0%

Henry B. duPont Smith
350 Mill Bank Road
Bryn Mawr, Pennsylvania 19010 12,000(3) 1.5%

All Directors and
Executive Officers
As a Group (9 persons) (4) 37,225 4.7%
- --------------
*Less than one percent (1%)

(1) There were 796,025 shares of Preferred Stock issued and outstanding as of
June 30, 1996.

(2) Includes 4,000 shares of Preferred Stock owned by Sellers Pension Plan of
which Mr. Seller is a trustee, 1,000 shares of Preferred Stock owned by Sellers
Process Equipment Company of which Mr. Sellers is a Director, and 2,000 shares
of Preferred Stock of which is owned by his wife.

(3) Includes 2,000 shares of Preferred Stock held by trusts for the benefit of
Mr. Smith's children of which he is a trustee.

(4) As of the date hereof, Messrs. Van Alen, Herbert, Sterling and Sullivan do
not beneficially own any shares of Preferred Stock.

Escrow And Cancellation Arrangements

At the request of the Pennsylvania Securities Commission, all of the
executive officers and directors of the Company have placed in escrow with
Meridian Bank, as escrow agent, all of the 8,511,500 shares of Common Stock
beneficially owned by them. Any additional shares of Common Stock beneficially
acquired by them will also be held in escrow. Until December 29, 1996, and
subject to the

provisions of the escrow agreement, the executive officers and directors have
agreed not to sell, pledge, or transfer, directly or indirectly, any of the
Common Stock held in escrow or any options to acquire Common Stock which they
may own. As set forth below, under certain circumstances, Mr. Jensen's shares of
Common Stock may be held in escrow for an additional period of time but not
later than June 30, 1998.

Pursuant to the request of the Pennsylvania Securities Commission, Mr.
Jensen has agreed that 4,365,000 shares of his escrowed Common Stock would be
canceled by the Company and would no longer be issued and outstanding unless one
of the following occurs (i) the bid price of the Common Stock equals or exceeds
$1.75 for 30 consecutive trading days at any time during the period of July 1,
1996 through June 30, 1998; or (ii) the Company's cumulative operating income
(before taxes, dividends, or extraordinary items) per share of Common Stock (on
a fully diluted basis) at any time after July 1, 1994, through June 30, 1998,
equals or exceeds $.18. Mr. Jensen has agreed that an amount equal to 1,030,000
shares of his escrowed Common Stock (rather than 4,365,000 shares) would be
canceled if (i) at any time after July 1, 1994 and prior to June 30, 1998, the
Company's cumulative operating income per share of Common Stock is at least $.12
but less than $.18 and Mr. Jensen affirmatively elects to have this provision
apply, or (ii) on June 30, 1998, the Company's cumulative operating income per
share of Common Stock since July 1, 1994 is at least $.12 but less than $.18.
See "Risk Factors - Charge to Income in the Event of Release of Escrow Shares."

For purposes of computing the Company's cumulative operating income, all
operating results prior to July 1, 1994 are ignored, and the cumulative
operating income is deemed to be zero on and as of such date. Subject to the
minimum escrow period for all executive officers and directors (until December
29, 1996), Mr. Jensen's Common Stock will be held in escrow until the earlier of
the satisfaction of any of the above conditions (in which event no shares, or
only 1,030,000 shares, would be canceled), or June 30, 1998. Unless and until
any such shares would be canceled, and subject to the restrictions on sale or
transfer pursuant to the escrow arrangement, Mr. Jensen has retained all rights
pertaining to such shares, including voting rights.

Prior to the date hereof, Mr. Jensen cancelled an aggregate of 2,305,000
shares of Common Stock which had been owned by him and which has been held in
escrow pursuant to the above arrangements. See "Certain Transactions." Prior to
such cancellation, a maximum of 6,670,000 shares (rather than 4,365,000 shares
as currently provided) were subject to cancellation.

CERTAIN TRANSACTIONS

In August 1994, the Company issued to Haven Brock Kolls, Jr.,

options to purchase 50,000 shares of Common Stock and issued to Barry Slawter, a
former officer of the Company, options to purchase 200,000 shares of Common
Stock. See "Management-Executive Stock Options."

In October 1994, Mr. Jensen cancelled 900,000 shares of Common Stock owned
by him and which had been held in escrow. See "Principal Shareholders-Escrow And
Cancellation Arrangements."

During October 1994, Mr. Jensen resigned as custodian under the Uniform
Gifts to Minors Act for his three minor children over 15,000 shares of Preferred
Stock and is no longer the beneficial owner of those shares.

In March 1995, Mr. Jensen cancelled 1,100,000 shares of Common Stock owned
by him and which had been held in escrow. See "Principal Shareholders - Escrow
And Cancellation Arrangements."

In March 1995, the Company issued to Keith L. Sterling options to
purchase up to 100,000 shares of Common Stock, to Henry B. duPont Smith options
to purchase up to 100,000 shares of Common Stock, to William W. Sellers options
to purchase up to 55,000 shares of Common Stock, to Peter G. Kapourelos options
to purchase up to 70,000 shares of Common Stock, and to Mr. Van Alen options to
purchase up to 25,000 shares of Common Stock. See "Management- Executive Stock
Options" and "Management-Director Compensation and Stock Options."

In March 1995, the Company issued to Haven Brock Kolls, Jr., options to
purchase up to 150,000 shares of Common Stock. See "Management-Executive Stock
Options."

In June 1995, the Company issued to Barry Slawter, a former officer of the
Company, options to purchase up to 10,000 shares of Common Stock. See
"Management-Executive Stock Options."

In August 1995, pursuant to the special stock dividend paid by the Company
to holders of Preferred Stock, the Company issued 48,000 shares of Common Stock
to Mr. Jensen, 1,500 shares of Common Stock to Mr. Kolls, 3,000 shares of Common
Stock to Mr. Kapourelos, 11,175 shares of Common Stock to Mr. Sellers, and
30,000 shares of Common Stock to Mr. Smith. See "Description of Securities -
Series A Convertible Preferred Stock."

In March 1996, the Company issued to Mr. Kolls options to acquire up to
50,000 shares of Common Stock. See Management-Executive Stock Options."

In March 1996, Mr. Jensen cancelled 305,000 shares of Common Stock owned
by him and which had been held in escrow. See "Principal Shareholders - Escrow
And Cancellation Arrangements".

In April 1996, the Company issued to Mr. Herbert options to

acquire up to 400,000 shares of Common Stock. In May 1996, the Company issued to
Mr. Sterling options to acquire up to 50,000 shares of Common Stock and issued
to Mr. Sullivan options to acquire up to 50,000 shares of Common Stock. See
"Management- Executive Stock Options."

In June 1996, the Company refunded a total of $87,200 to the holders of
the 1995 Warrants who had exercised the 1995 Warrants at $.40 per share. See
"Description of Securities - General." Of such refunded amount, $4,500 was
refunded to William W. Sellers.

Mr. Jensen may be deemed a "promoter" of the Company as such
term is defined under the Federal securities laws.

SELLING SHAREHOLDERS

Each of the Selling Shareholders listed below is, as of the date hereof,
the holder of 1996 Warrants to acquire the number of shares of Common Stock set
forth opposite such Selling Stockholder's name. The 1996 Warrants were issued by
the Company to the Selling Shareholders in May 1996 pursuant to a transaction
exempt from the registration requirements of the Act and various state
securities laws. The 1996 Warrants are exercisable at any time through May 31,
2001, unless such period is extended by the Company.

As of the date of this Prospectus, the Selling Shareholders have not
exercised any of the 1996 Warrants. The issuance by the Company of the Common
Stock to the Selling Shareholders upon exercise of the 1996 Warrants would be
pursuant to the 1996 Warrant Agreement in a transaction exempt from the
registration requirements of the Act and various state securities laws. The
Company has agreed, at its expense, to register the Common Stock for resale by
the Selling Shareholders under the Act and various state securities laws. The
Company expects to incur expenses of approximately $40,000 in connection with
the registration. The Common Stock may be sold from time to time by the Selling
Shareholders pursuant to this Prospectus. See "Plan of Distribution".

The following table sets forth information with respect to each Selling
Shareholder and the respective amounts of Common Stock that may be offered
pursuant to this Prospectus. None of the Selling Shareholders has, or within the
past three years has had, any position, office or other material relationship
with the Company, except as noted below. Except as specifically set forth below,
following the offering, and assuming all of the Common Stock offered hereby has
been sold, none of the Selling Shareholders will beneficially own one percent
(1%) or more of the Common Stock.

Common Stock Offered Beneficial Ownership
Selling Shareholder Hereby After Offering (1)
- ------------------- -------------------- --------------------
Number Percent
------- --------

Gilbert Abramson 20,000
Vanda Adams 40,000

Common Stock Offered Beneficial Ownership
Selling Shareholder Hereby After Offering (1)
- ------------------- -------------------- --------------------
Number Percent
------- --------

Ann M. Allegrini 12,000
Eleanor S. Allshouse 20,000
John and Celia Alvanos 4,000
Costa and Michelle Alvanos 4,000
John P. Ayers 40,000
J. Stone Bagby 40,000
Alan and Judith Ballard 80,000
Thomas Basile 20,000
Thomas B. Basile 40,000
William Bauder 40,000
Robert E. Beck 12,000
Stephen A. Bell 40,000
John Berukoff 20,000
Benjamin and Diana Bird 40,000
Alexandra O. Bjorkland 40,000
Donald F. Blackburn 40,000
Clyde and Charlotte Blount 8,000
Frederick L. Bowden 10,000
Edwin R. Boynton 20,000
Edward S. Brockie 40,000
Kathleen D. Buffum 4,000
William P. and Judith Burks 40,000
Paul and Gwen Canavarro 20,000
Peter and Lisa Canavarro 20,000
Herminio and Maria Canavarro 20,000
Candace S. Carey 20,000
Jerrold Carl 40,000
Jeffrey C. Carlson 4,000
D. Zeke Carlson 4,000
L.E. Carlson 4,000
Henry and Jean Carlson 28,000
Charles Abbott Carter III 40,000
Marc A. Cohen 160,000
Craig and Deanne Cook 32,000
William R. Crothers 40,000
Gary L. Cunha 40,000
Marie Bradlyn Currin 12,000
Clifton B. Currin, Trustee 40,000
Nancy B. Davis 20,000
Jack and Helen Davis 50,000
Benjamin Deacon 10,000
Sheri Lynn DeMaris 80,000
Jill Smith cust. for Ron Jensen 136,000
Sheri Demaris cust. for Burt Jensen 100,000
Sheri Demaris cust.
for Andrew David Jensen 100,000
Desert Investment Grp.-D Crockett 40,000
William P. Dunham 4,000

Common Stock Offered Beneficial Ownership
Selling Shareholder Hereby After Offering (1)
- ------------------- -------------------- --------------------
Number Percent
------- --------

Jean W. Eason 60,000
Dr. Mallory Eisenman 4,000
John Faust 20,000
Richard and Isabel Fradkin 40,000
Harriet and Cary Glickstein 80,000
E.J. and M.K. Golightly 40,000
Harold N. Gray 40,000
Wendel C. and Roma Roy Lynch Green 10,000
Loring S. Grove 10,000
Ruth Hall 4,000
Thomas F. Hall 80,000
S. Hansen and K. Heiuschel 40,000
Armason Harrison 8,000
William F. Harrity, Jr. 80,000
Robert Hauptfuhrer Family Partnership 100,000
Austin B. Hepburn 80,000 1,109,900(2) 2.6%
Adele H. Hepburn 80,000 1,109,900(2) 2.6%
A.D. Hodges 40,000
R. Holland, D. Holland and K. Duffy 40,000
David W. Hubbert 20,000
Wilbur E. Hudson 20,000
Robert M. Ihrig 20,000
Bernard Millis 40,000
Fred Karagosian 40,000
Harold and Lois Kauffman 40,000
George H. Kilmarx 40,000
Rocco and Sandra La Penta 160,000
Fred Languth 40,000
Robert E. Leiser 20,000
Peggy Longstreth Bayer 12,000
Nicholas S. Ludington 40,000
Douglas M. Lurio 40,000
Robert M. Madonna 40,000
Alberta and J. Grant McCabe 4,000
Philip S. Meckley 40,000
James F. Merriman 40,000
Richard D. Mierley 40,000
Richard Moffitt 20,000
Robert H. and Rosemary Montgomery 40,000
Thomas Motl 40,000
Eunice Carter Nute 20,000
Harry Ohannesian 80,000
Janet and Sudhir Patel 40,000
George M. Pflaumer 80,000
Bernard Pincus 10,000
Genevieve Pondo 12,000
J. Steve and Carol Powell 20,000
Ashok and Swaran Rajpal 10,000

Common Stock Offered Beneficial Ownership
Selling Shareholder Hereby After Offering (1)
- ------------------- -------------------- --------------------
Number Percent
------- --------

Keith J. Raphael 40,000
John B. Rettew III 40,000
Melissa C. Rike 12,000
Eric J. Robbins 20,000
Noma Ann Roberts 20,000
Dorothy S. Rodgers 20,000
Edmund H. Rogers, Jr. Trust UA 06-21-88 120,000
Gardiner Rogers 8,000
Rodney Rohrer 12,000
Joel M. Rubins 40,000
Scott W. Ryan 40,000
Joseph P. Sawka 40,000
Virginia Schaun and Martha Eischen 20,000
Richard S. Schonwald 20,000
William W. Sellers(3) 160,000 631,000 1.5%
Nancy F. Sellers(3) 40,000
Sellers Pension Plan(3) 80,000
Helen E. Seltzer 4,000
Robert Silverman 10,000
Horace and Elizabeth B. Spackman 40,000
Clarence E. Sterling 40,000
Dorothy A. Stone 40,000
Ben Wallace and J.A. Hatcherson 80,000
Howard Waxman 40,000
Peter S. Whitney 40,000
Peter S. Whitney SEP/IRA 40,000
Wilmington Trust Company, Trustee for
Allison Eleuthera Smith 40,000
Wilmington Trust Company, Trustee
for Isabelle duPont Smith 40,000
Wilmer H. Wood 4,000
Dr. David W. Wood 40,000
Joni Carley Yamaguchi 80,000
Keiji Yamaguchi 40,000
Thomas J. Zaucha 40,000
V. Scott Zelov 40,000
Peter Zelov 40,000
Un Jin Zimmerman 8,000
Patricia and Robert Zimmerman 10,000
-------
Total.................... 5,200,000

- ---------------

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and derives from

either voting or investment power with respect to the securities, and includes
any shares of Common Stock which a person has the right to acquire within
60-days of the date hereof.

(2) Adele and Austin Hepburn are husband and wife, and together would
beneficially own an aggregate of 1,109,900 shares of Common Stock following the
sale of their 1996 Warrants pursuant hereto.

(3) William W. Sellers is a Director of the Company. Mr. Sellers
is a trustee of the Sellers Pension Plan and a Director of Sellers
Process Equipment Company. Nancy F. Sellers is the spouse of
William W. Sellers.

MARKET FOR COMMON STOCK

The Common Stock and Preferred Stock are currently traded on the OTC
Electronic Bulletin Board under the symbols USTX and USTXP, respectively. Such
trading began on March 8, 1995. As of the date hereof, there is no established
trading market for the Common Stock or Preferred Stock. See "Risk Factors - No
Assurance of Active Public Market".

The high and low bid prices on the OTC Electronic Bulletin Board for the
Common Stock were as follows:

Fiscal High Low
- ------ ---- ---
1995
Third Quarter (March 8, 1995 to March 31, 1995) $ .75 $.50
Fourth Quarter (through June 30, 1995) $1.25 $.25

1996

First Quarter (through September 30, 1995) $ .55 $.25
Second Quarter (through December 31, 1995) $1.00 $.40
Third Quarter (through March 31, 1996) $1.40 $.37
Fourth Quarter (through June 30, 1996) $1.68 $.50

1997

First Quarter (through July 30, 1996) $ .62 $.43

Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.

On the date hereof, there are 3,435,000 shares of Common Stock issuable
upon exercise of outstanding options, and 157,300 shares of Common Stock
issuable upon exercise of outstanding purchase rights. All of these shares of
Common Stock, if issued on the date hereof, would be "restricted securities" as
defined under Rule 144 under the Act. See "Description of Securities-Shares
Eligible for Future Sale." Of the 3,435,000 options, 650,000 are exercisable at
$.65 per share, 2,565,000 are exercisable at $.25 per share, and 220,000 are
exercisable at $.05 per share. In connection with the options exercisable at
$.25 and $.65 per share, the Company has

agreed, at its cost and expense, to file a registration statement under the Act
and applicable state securities laws covering all of the Common Stock underlying
the options before the end of calendar year 1996. All of the aforesaid options
have been issued by the Company to employees, Directors, officers, and
consultants.

As of June 30, 1996, they were 1,414,000 shares of Common Stock
issuable upon exercise of the outstanding 1995 Warrants, which when
and if issued would be freely tradeable under the Act. See
"Description of Securities."

The holders of the Common Stock are entitled to receive such dividends
as the Board of Directors of the Company may from time to time declare out of
funds legally available for payment of dividends. Through December 31, 1995, no
cash dividends have been declared on the Company's securities. No dividend may
be paid on the Common Stock until all accumulated and unpaid dividends on the
Preferred Stock have been paid. As of June 30, 1996, such accumulated unpaid
dividends amounted to $1,758,490.

DESCRIPTION OF SECURITIES

General

The Company is authorized to issue up to 45,000,000 shares of Common
Stock, no par value ("Common Stock"), and 1,000,000 shares of undesignated
Preferred Stock all of which have been designated as Series A Convertible
Preferred Stock, no par value ("Preferred Stock").

On June 30, 1996, there were 23,023,976 shares of Common Stock issued
and outstanding and 796,025 shares of Preferred Stock issued and outstanding
which are convertible into 7,960,250 shares of Common Stock. As of June 30,
1996, a total of 21,175 shares of Preferred Stock have been converted into
211,750 shares of Common Stock and accrued and unpaid dividends thereon have
been converted into 41,626 shares of Common Stock. As of June 30, 1996, there
were 1,019 record owners of the Common Stock and 985 record owners of the
Preferred Stock.

As of June 30, 1996, the Company has issued to its directors, executive
officers, consultants, and employees options to acquire up to 650,000 shares of
Common Stock at $.65 per share, options to acquire up to 2,565,000 shares of
Common Stock at $.25 per share, and options to acquire up to 220,000 shares of
Common Stock at $.05 per share. See "Management--Executive Stock Options" and
Management -- Director Compensation and Stock Options." The Company has also
issued purchase rights to acquire up to 157,300 shares of Common Stock at $1.00
per share. All options to purchase Common Stock were granted at prices at or
above the market value on the date of the grant.

In June and July 1995, the Company issued an aggregate of 5,100,000 1995
Common Stock Purchase Warrants ("1995 Warrants") pursuant to a private placement
under Regulation D of the Act and various state securities laws. The Company has
registered the Common Stock underlying the 1995 Warrants under the Act and
appropriate state securities laws, and such Common Stock when and if issued will
be freely tradeable thereunder. The 1995 Warrants entitle the holder hereof to
purchase one share of Common Stock for $.50. The exercise price of the 1995
Warrants had been reduced by the Company to $.40 during the period of time from
February 12, 1996 through April 30, 1996. Subsequent to April 30, 1996, the
exercise price of the 1995 Warrants was further reduced to $.30 until June 30,
1996, and such further reduction was made retroactive to those holders who had
already exercised the 1995 Warrants at $.40. As a result thereof, the Company
returned the sum of $87,200 to such holders. At June 30, 1996, a total of
3,686,000 1995 Warrants had been exercised for a total exercise price to the
Company of $1,105,800. There are 1,414,000 unexercised 1995 Warrants as of June
30, 1996. The 1995 Warrants are exercisable on or before January 31, 2001.

During calendar year 1995, the Company issued an aggregate of 280,000
shares of Common Stock to Jerome Wenger, a consultant to the Company, in
exchange for consulting services. These shares were registered under the Act and
freely tradeable thereunder.

In February 1996, the Company issued 50,000 shares of Preferred Stock at
a purchase price of $4.00 per share to Samuel Investors International LDC, a
Cayman Island Company. Such shares were issued pursuant to Regulation S
promulgated under the Act, and such issuance was exempt from registration under
the Act.

In March 1996, the Company issued 300,000 shares of Common Stock to
Diversified Corporate Consulting Group, L.C., a consultant to the Company, in
exchange for consulting services. These shares were registered under the Act and
are freely tradeable.

Pursuant to the request of the Pennsylvania Securities Commission, Mr.
Jensen has agreed that unless certain conditions are satisfied, either 4,365,000
or, alternatively, 1,030,000 shares of the Common Stock beneficially owned by
him would be cancelled by the Company. In the event that any of Mr. Jensen's
shares of Common Stock are cancelled, such cancelled shares would no longer be
issued and outstanding shares of Common Stock. Unless and until any such shares
would be cancelled, and subject to the restrictions on sale or transfer pursuant
to the escrow arrangement, Mr. Jensen has retained all rights pertaining to such
shares, including voting rights. See "Principal Shareholders-Escrow and
Cancellation Arrangements."

Common Stock

The holder of each share of Common Stock is entitled to one vote on all
matters submitted to a vote of the shareholders of the Company, including the
election of directors. There is no cumulative voting for directors.

The holders of Common Stock are entitled to receive such dividends as
the Board of Directors may from time to time declare out of funds legally
available for payment of dividends. No dividend may be paid on the Common Stock
until all accumulated and unpaid dividends on the Preferred Stock have been
paid.

Upon any liquidation, dissolution or winding up of the Company, holders
of shares of Common Stock are entitled to receive pro rata all of the assets of
the Company available for distribution, subject to the liquidation preference of
the Preferred Stock of $10.00 per share and any unpaid and accumulated dividends
on the Preferred Stock. The holders of the Common Stock do not have any
preemptive rights to subscribe for or purchase shares, obligations, 1996
Warrants, or other securities of the Company.

Series A Convertible Preferred Stock

The holders of shares of Preferred Stock have the number of votes per
share equal to the number of shares of Common Stock into which each such share
is convertible (i.e., 1 share of Preferred Stock equals 10 votes). The shares of
Preferred Stock are entitled to vote on all matters submitted to the vote of the
shareholders of the Company, including the election of directors.

The holders of Preferred Stock are entitled to an annual cumulative cash
dividend of $1.50 per annum, payable when, as and if declared by the Board of
Directors. Any and all accumulated and unpaid cash dividends on the Preferred
Stock must be declared and paid prior to the declaration and payment of any
dividends on the Common Stock. Any unpaid and accumulated dividends will not
bear interest. As of June 30, 1996 the accumulated and unpaid dividends on the
Preferred Stock were $1,758,490. An additional $597,019 of dividends will accrue
on August 1, 1996. Any unpaid and accumulated dividends will not bear interest.

Each share of Preferred Stock is convertible at any time into 10 shares
of fully issued and non-assessable Common Stock. Accrued and unpaid dividends
earned on shares of Preferred Stock being converted into Common Stock are also
convertible into Common Stock at the rate $1.00 per share of Common Stock at the
time of conversion and whether or not such dividends have then been declared by
the Company. As of June 30, 1996, a total of 21,175 shares of Preferred Stock
have been converted into Common Stock and accrued and unpaid dividends therein
have been converted into 41,626 shares of Common Stock. The conversion rate of
the

Preferred Stock (and any accrued and unpaid dividends thereon) will be equitably
adjusted for stock splits, stock combinations, recapitalizations, and in
connection with certain other issuances of Common Stock by the Company. Upon any
liquidation, dissolution, or winding-up of the Company, the holders of Preferred
Stock are entitled to receive a distribution in preference to the Common Stock
in the amount of $10.00 per share plus any accumulated and unpaid dividends.

The Company has the right, at any time on or after January 1, 1998, to
redeem all or any part of the issued and outstanding Preferred Stock for the sum
of $11.00 per share plus any and all unpaid and accumulated dividends thereon.
Upon notice by the Company of such call, the holders of the Preferred Stock so
called will have the opportunity to convert their shares of Preferred Stock and
any unpaid and accumulated dividends thereon (whether or not such dividends have
been declared by the Company as of such date) into shares of Common Stock.

The Company paid a special stock dividend consisting of 3 shares of
Common Stock for each share of Preferred Stock issued and outstanding on August
1, 1995. The stock dividend consisted of an aggregate of 1,908,600 shares of
Common Stock.

1996 Common Stock Purchase Warrants

Each 1996 Warrant entitles its holder to purchase one share of Common
Stock at an exercise price of $.40 per share through December 31, 1996, and at
an exercise price of $.50 thereafter. The 1996 Warrants are exercisable at any
time through May 31, 2001, or such later date as may be determined by the
Company ("1996 Warrant Termination Date"). As of the date hereof, no 1996
Warrants have been exercised.

The 1996 Warrants have been issued pursuant to a 1996 Warrant Agreement
dated as of May 1, 1996, by and between the Company and American Stock Transfer
& Trust Company, the 1996 warrant agent (the "1996 Warrant Agreement").

As a condition to obtaining their Common Stock, the Selling Shareholders
must exercise the 1996 Warrants by tendering the per share exercise price
required under the 1996 Warrant Agreement. In the event all 5,200,000 1996
Warrants are exercised at $.40, the Company would receive gross proceeds of
$2,080,000. There is no assurance that any or all of the 1996 Warrants will be
exercised by the Selling Shareholders, and if none of the 1996 Warrants are
exercised, the Company would not receive any gross proceeds. Any such exercise
may occur through the 1996 Warrant Termination Date.

The Company has agreed, at its expense, to register for resale by the
Selling Shareholders the Common Stock underlying the 1996 Warrants under the
Act, and to register or qualify the Common Stock

in those states in which the Selling Shareholders are located.

The exercise price of the 1996 Warrants and the number of shares of
Common Stock issuable upon exercise of the 1996 Warrants are subject to
adjustment in certain circumstances, including a stock split of, stock dividend
on, or a subdivision, combination or recapitalization of the Common Stock. Upon
the merger, consolidation, sale of substantially all the assets of the Company,
or other similar transaction, the 1996 Warrant holders shall, at the option of
the Company, be required to exercise the 1996 Warrants immediately prior to the
closing of the transaction, or such 1996 Warrants shall automatically expire.
Upon such exercise, the 1996 Warrant holders shall participate on the same basis
as the holders of Common Stock in connection with the transaction.

The 1996 Warrants do not confer upon the holder any voting or any other
rights of a shareholder of the Company. Upon notice to the 1996 Warrant holders,
the Company has the right, at any time and from time to time, to reduce the
exercise price or to extend the Warrant Termination Date of the Warrants.

Shares Eligible for Future Sale

Of the 23,023,976 shares of Common Stock issued and outstanding on June
30, 1996, 10,204,376 are freely transferable without restriction or further
registration under the Act (other than shares held by "affiliates" of the
Company), and the remaining 12,819,600 are "restricted securities". As of June
30, 1996, there are 796,025 shares of Preferred Stock issued and outstanding,
293,075 of which are freely transferable without further registration or
restriction under the Act (other than shares held by "affiliates" of the
Company), and the remaining 502,950 are "restricted securities". The 796,025
shares of Preferred Stock issued and outstanding on the date hereof are
convertible into 7,960,250 shares of Common Stock. Of such shares of Common
Stock, 2,930,750 would be fully transferable without registration or regulation
under the Act and 5,029,500 would be "restricted securities" within the meaning
of Rule 144.

As set forth in the prior paragraph, there are 12,819,600 shares of
Common Stock and 502,950 shares of Preferred Stock which are "restricted
securities" and cannot be resold without registration, except in reliance upon
Rule 144 or another applicable exemption from registration. Of such Common
Stock, an aggregate of 8,511,500 shares may not be sold or transferred until
December 29,1996. See "Principal Shareholders-Escrow And Cancellation
Arrangements." Subject to such prohibition, during calendar year 1996,
12,539,600 shares of such Common Stock and 152,950 shares of such Preferred
Stock are eligible for sale pursuant to Rule 144. During calendar year 1997,
180,000 shares of Common Stock and 152,950 of Preferred Stock would become
eligible for sale pursuant to Rule 144. During calendar year 1998, the

remaining 100,000 shares of Common Stock and 180,000 shares of Preferred Stock
would become eligible for sale pursuant to Rule 144. The Company is unable to
predict the effect that sales made under Rule 144 or otherwise may have on the
market price of the Common Stock or Preferred Stock prevailing at the time of
any such sales.

As of June 30, 1996, there are outstanding options to acquire 3,435,000
shares of Common Stock, 220,000 of which are exercisable at $.05 per share,
2,565,000 of which are exercisable at $.25 per share, and 650,000 of which are
exercisable at $.65 per share. There are also outstanding purchase rights to
acquire 157,300 shares of Common Stock at $1.00 per share. All of such Common
Stock, if issued on the date hereof, would be "restricted securities" as defined
in Rule 144 promulgated under the Act. In connection with the options
exercisable at $.25 and $.65 per share, the Company has agreed, at its cost and
expense, to file a registration statement under the Act and applicable state
securities laws covering all of the Common Stock underlying the options before
the end of calendar year 1996. As of June 30, 1996, there are also 1,414,000
shares of Common Stock issuable by the Company to the holders of the outstanding
1995 Warrants. Such Common Stock, if issued, will be freely tradeable under the
Act. See "Description of Securities."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including any affiliate of the
Company, who beneficially owns "restricted securities" for a period of at least
two years is entitled to sell within any three-month period, shares equal in
number to the greater of (i) 1% of the then outstanding shares of the same class
of shares, or (ii) the average weekly trading volume of the same class of shares
during the four calendar weeks preceding the filing of the required notice of
sale with the Securities and Exchange Commission.The seller must also comply
with the notice and manner of sale requirements of Rule 144, and there must be
current public information available about the Company. In addition, any person
(or persons whose shares must be aggregated) who is not, at the time of sale,
nor during the preceding three months, an affiliate of the Company, and who has
beneficially owned restricted shares for at least three years, can sell such
shares under Rule 144 without regard to the notice, manner of sale, public
information or the volume limitations described above.

Limitation of Liability; Indemnification

As permitted by the Pennsylvania Business Corporation Law of 1988
("BCL"), the Company's By-laws provide that Directors of the Company will not be
personally liable, as such, for monetary damages for any action taken unless the
Director has breached or failed to perform the duties of a Director under the
BCL and the breach or failure to perform constitutes self-dealing, willful

misconduct or recklessness. This limitation of personal liability does not apply
to any responsibility or liability pursuant to any criminal statute, or any
liability for the payment of taxes pursuant to Federal, State or local law. The
By-laws also include provisions for indemnification of the Company's Directors
and officers to the fullest extent permitted by the BCL. Insofar as
indemnification for liabilities arising under the Act may be permitted to
Directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.

Transfer Agent and Registrar

The Transfer Agent and Registrar for the Common Stock, Preferred Stock
and 1996 Warrants is American Stock Transfer & Trust Company, 40 Wall Street,
New York, New York 10005.

PLAN OF DISTRIBUTION

The Common Stock is being registered to permit public secondary trading
of the Common Stock by the Selling Shareholders from time to time after the date
of this Prospectus. The Company has agreed to bear all the expenses (other than
selling commissions) in connection with the registration and sale of the Common
Stock covered by this Prospectus.

In order to comply with the securities laws of certain states,
if applicable, the Common Stock will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In

addition, in certain states, the Common Stock may not be sold unless it has been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and complied with.

LEGAL MATTERS

The validity of the Common Stock has been passed upon for the Company by
Lurio & Associates, Philadelphia, Pennsylvania.

EXPERTS

The financial statements of USA Technologies, Inc. at June 30, 1995 and
1994, and for the years then ended, and for the period January 16, 1992
(inception) through June 30, 1995, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which the Prospectus relates or an offer to sell or the solicitation of an offer
to buy such securities in any circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is current as of any time subsequent to its date.

TABLE OF CONTENTS

Available Information. . . . . . . . . . . . . . . . . . i

Prospectus Summary . . . . . . . . . . . . . . . . . . . 1

Risk Factors . . . . . . . . . . . . . . . . . . . . . . 4

Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 8

Management Discussion And Analysis of
Financial Condition And Results
of Operations. . . . . . . . . . . . . . . . . . . 8

Business . . . . . . . . . . . . . . . . . . . . . . . . 12

Management . . . . . . . . . . . . . . . . . . . . . . . 20

Principal Shareholders . . . . . . . . . . . . . . . . . 27

Certain Transactions . . . . . . . . . . . . . . . . . . 32

Selling Shareholders . . . . . . . . . . . . . . . . . . 34

Market for Common Stock. . . . . . . . . . . . . . . . . 38

Description of Securities. . . . . . . . . . . . . . . . 39

Plan of Distribution . . . . . . . . . . . . . . . . . . 45

Legal Matters . . . . . . . . . . . . . . . . . . . . . 45

Experts. . . . . . . . . . . . . . . . . . . . . . . . . 46

Financial Statements . . . . . . . . . . . . . . . . . . F-1

INDEX TO FINANCIAL STATEMENTS

USA TECHNOLOGIES, INC.
(A Development Stage Corporation)

Report of Independent Auditors F-2

Balance Sheets F-3

Statements of Operations F-4

Statement of Shareholders' Equity F-5

Statements of Cash Flows F-8

Notes to Financial Statements F-10

F-1

Report of Independent Auditors

To the Board of Directors and Shareholders
USA Technologies, Inc.

We have audited the accompanying balance sheets of USA Technologies, Inc. (A
Development Stage Corporation) as of June 30, 1995 and 1994, and the related
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period ended June 30, 1995 and the period January 16, 1992
(inception) through June 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USA Technologies, Inc. at June
30, 1995 and 1994, and the results of its operations and its cash flows for each
of the two years in the period ended June 30, 1995 and for the period January
16, 1992 (inception) through June 30, 1995, in conformity with generally
accepted accounting principles.

Ernst & Young LLP
Philadelphia, Pennsylvania
August 21, 1995

F-2

USA Technologies, Inc.
(A Development Stage Corporation)

Balance Sheets

June 30 March 31
1995 1994 1996
---------------- ----------------- -----------------
(Unaudited)

Assets
Current assets:
Cash $ 376,191 $ 444,212 $ 414,551
Stock subscriptions receivable 50,000 - -
Prepaid expenses and deposits 3,137 4,436 14,574
---------------- ----------------- -----------------
Total current assets 429,328 448,648 429,125

Property and equipment, at cost, net 207,383 208,496 587,027
Other assets 4,832 6,033 4,182
---------------- ----------------- -----------------
Total assets $ 641,543 $ 663,177 $ 1,020,334
================ ================= =================

Liabilities and shareholders' equity
Current liabilities:

Accounts payable $ 193,815 $ 180,939 $ 260,083
Accrued expenses 19,352 93,080 39,002
Capital lease obligation 4,777 7,075 -
Note payable 4,166 6,433 1,836
---------------- ----------------- -----------------
Total current liabilities 222,110 287,527 300,921

Accrued rent 25,000 - 10,600
---------------- ----------------- -----------------
Total liabilities 247,110 287,527 311,521

Shareholders' equity:
Preferred Stock, no par value:
Authorized shares -- 1,000,000
Series A Convertible issued and outstanding shares
-- 491,100; 297,622 and 686,200 at June 30, 1995
and 1994, and March 31, 1996, respectively
(liquidation preference of $5,756,816 at
June 30, 1995 and $8,662,116 at March 31, 1996) 4,057,372 2,504,400 5,698,557

Common Stock, no par value:
Authorized shares -- 34,000,000
Issued and outstanding shares -- 18,254,300;
17,433,954 and 19,365,600 at June 30, 1995 and
1994, and March 31, 1996, respectively 909,172 16,762 1,509,486

Deficit accumulated during the development
stage (4,572,111) (2,145,512) (6,499,230)
---------------- ----------------- -----------------
Total shareholders' equity 394,433 375,650 708,813
---------------- ----------------- -----------------
Total liabilities and shareholders' equity $ 641,543 $ 663,177 $ 1,020,334
================ ================= =================

See accompanying notes

F-3

USA Technologies, Inc.

(A Development Stage Corporation)

Statements of Operations

January 16, 1992
(Date of Inception)
Nine months ended Through
Year ended June 30 March 31 June 30 March 31
1995 1994 1996 1995 1995 1996
-------------- ------------- -------------- -------------- --------------- ----------------
(Unaudited) (Unaudited) (Unaudited)

Revenue:
License fee income $ 10,679 $ $ 36,302 $ 2,829 $ 10,679 $ 46,981
Interest income 11,569 9,967 25,263 4,554 21,536 46,799
-------------- ------------- -------------- -------------- --------------- ----------------
Total revenue 22,248 9,967 61,565 7,383 32,215 93,780

Costs and expenses:

Compensation 688,385 673,409 649,699 498,237 1,562,378 2,212,077
General and administrative 653,693 339,004 960,882 370,451 1,172,695 2,133,577
Provision for losses on obsolete
equipment 148,615 - - - 356,615 356,615
Advertising 67,740 71,301 45,115 48,648 291,610 336,725
Interest 49,190 44,280 4,240 49,602 120,862 125,102
Research and development 44,907 118,032 82,721 32,483 242,939 325,660
Depreciation and amortization 15,468 8,058 15,318 13,616 26,378 41,696
Costs incurred in connection
with abandoned private
placement offering - - - - 50,000 50,000
-------------- ------------- -------------- -------------- --------------- ----------------
Total costs and expenses 1,667,998 1,254,084 1,757,975 1,013,037 3,823,477 5,581,452
-------------- ------------- -------------- -------------- --------------- ----------------
Net loss (1,645,750) (1,244,117) (1,696,410) (1,005,654) $(3,791,262) $(5,487,672)
=============== ================
Cumulative preferred dividends (503,874) (187,542) (954,300) (500,056)
-------------- ------------- -------------- --------------
Loss applicable to common shares $ (2,149,624) $ (1,431,659) $ (2,650,710) $ (1,505,710)
============== ============= ============== ==============
Loss per common share $ (.19) $ (.13) $ (.18) $ (.13)
============== ============= ============== ==============

Weighted average number of shares
outstanding 11,428,486 11,058,813 14,760,322 11,450,468
============== ============= ============== ==============

F-4

USA Technologies, Inc.

(A Development Stage Corporation)

Statements of Shareholders' Equity

Deficit
Accumulated
Series A During the
Convertible Development
Preferred Stock Common Stock Stage Total
---------------- ----------------- ----------------- ----------------

Balance, January 16, 1992, inception $ - $ - $ - $ -
Issuance of stock:
April 1992--10,500,000 shares of Common Stock
at $.001 per share - 10,500 - 10,500
May 1992--10,000 shares of Convertible
Preferred Stock at $9.98 per share 99,800 - - 99,800
June 1992--100,000 shares of Common Stock at
$.001 per share 100 100
Net loss - - (1,848) (1,848)
---------------- ----------------- ----------------- ----------------
Balance, June 30, 1992 99,800 10,600 (1,848) 108,552
Issuance of stock:
September 1992--15,000 shares of Convertible
Preferred Stock at $9.97 per share 149,550 - - 149,550
September 1992--450,000 shares of Common
Stock at $.001 per share - 450 - 450
April 1993--400,000 shares of Common Stock at
$.001 per share - 400 - 400
June 1993--695,000 shares of Common Stock at
$.001 per share - 695 - 695
June 1993--142.2 units (142,200 shares, net
of offering costs, of Convertible Preferred
Stock at $9.97 per share and 4,266,000
shares of Common Stock at $.001 per share) 1,266,439 3,815 - 1,270,254
Net loss (899,547) (899,547)
---------------- ----------------- ----------------- ----------------
Balance, June 30, 1993 1,515,789 15,960 (901,395) 630,354
September 1993--110,000 shares of Common Stock
at $.001 per share - 110 - 110
February 1994--79,522 units (79,522 shares, net
of offering costs, of Convertible Preferred
Stock at $9.99 per share and 556,654 shares of
Common Stock at $.001 per share) 624,824 438 - 625,262
March 1994--34,960 units (34,960 shares, net of
offering costs, of Convertible Preferred Stock
at $9.99 per share and 244,720 shares of
Common Stock at $.001 per share) 288,591 202 - 288,793
June 1994--15,940 units (15,940 shares, net of
offering costs, of Convertible Preferred Stock
at $9. 99 per share and 111,580 shares of
Common Stock at $.001 per share) 75,196 52 75,248
Net loss (1,244,117) (1,244,117)
---------------- ----------------- ----------------- ----------------
Balance, June 30, 1994 2,504,400 16,762 (2,145,512) 375,650

F-5

USA Technologies, Inc.
(A Development Stage Corporation)

Statements of Shareholders' Equity (continued)

Deficit
Series A Accumulated
Convertible During the
Preferred Common Stock Development
Stock Stage Total
--------------- --------------- ----------------- ----------------

July 1994--5,092 Units (5,092 shares, net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 35,644 of Common Stock at
$.001 per share) $ 37,248 $ 26 $ - $ 37,274

August 1994--9,132 Units (9,132 shares net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 63,924 of Common Stock at
$.001 per share) 66,801 47 - 66,848

September 1994--4,935 Units (4,935 shares, net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 34,545 of Common Stock at
$.001 per share) 36,098 25 - 36,123

October 1994--12,205 Units (12,205 shares, net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 85,435 of Common Stock at
$.001 per share) 88,895 62 - 88,957

October 1994--Cancellation of 900,000 shares of
Common Stock - - - -

November 1994--11,478 Units (11,478 shares, net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 80,346 of Common Stock at
$.001 per share) 83,600 59 - 83,659

December 1994--16,430 Units (16,430 shares, net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 115,010 of Common Stock at
$.001 per share) 119,668 84 - 119,752

January 1995--12,225 Units (12,225 shares, net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 85,575 of Common Stock at
$.001 per share) 102,244 71 - 102,315

February 1995--98,081 Units (98,081 shares, net of
offering costs, of Convertible Preferred Stock at
$9.99 per share and 686,567 of Common Stock at
$.001 per share) 820,298 575 - 820,873

March 1995--Cancellation of 1,100,000 shares of
Common Stock - - - -

April 1995--June 1995--issuance of 150,000 common
shares in exchange for consulting services - 99,750 - 99,750

June 1995--24.9 Units (24,900 shares, net of
offering costs, of Convertible Preferred Stock at
$10 per share) of which 5 units were subscribed 206,382 - - 206,382

F-6

USA Technologies, Inc.
(A Development Stage Corporation)

Statements of Shareholders' Equity (continued)

Deficit
Series A Accumulated
Convertible During the
Preferred Stock Common Stock Development
Stage Total
---------------- ----------------- ----------------- ----------------

June 1995--issuance of options to purchase
10,000 shares of Common Stock at $.25 per
share in exchange for services $ - $ 2,600 $ - $ 2,600
June 1995--conversion of 1,000 shares of
Convertible Preferred Stock to 10,000 shares
of Common Stock (8,262) 8,262 - -
Net loss - - (1,645,750) (1,645,750)
Common stock dividend to be distributed--3
shares of Common Stock for each outstanding
share of Convertible Preferred Stock on August
1, 1995 (1,473,300 shares as of June 30, 1995) - 780,849 (780,849) -
---------------- ----------------- ----------------- ----------------
Balance, June 30, 1995 4,057,372 909,172 (4,572,111) 394,433
July 1995--145.1 Units (145,100 shares, net of
offering costs, of Convertible Preferred
Stock at $10 per share) (Unaudited) 1,441,185 - - 1,441,185
July 1995--September 1995--issuance of 100,000
common shares in exchange for
consulting services (Unaudited) - 50,000 - 50,000
July 1995--Common Stock options
exercised--80,000 shares at $.05 per share
(Unaudited) - 9,000 - 9,000
August 1995--Common stock dividend
distributed 3 shares of Common Stock for
each outstanding share of Preferred Stock on
August 1, 1995 (435,300 shares) (Unaudited) - 230,709 (230,709) -
October 1995--Common Stock options
exercised--100,000 shares at $.05 per
share (Unaudited) - 5,000 - 5,000
January 1996--Issuance of 30,000 shares
in exchange for consulting services
(Unaudited) - 14,205 - 14,205
February 1996--Common Stock warrants
exercised--145,500 shares at $.40 per
share (Unaudited) - 58,200 - 58,200

F-7

USA Technologies, Inc.
(A Development Stage Corporation)

Statements of Shareholders' Equity (continued)

Deficit
Series A Accumulated
Convertible During the
Preferred Stock Common Stock Development
Stage Total
---------------- ----------------- ----------------- ----------------

February 1996--Issuance of 50,000 preferred
shares at $4.00 per share (Unaudited) 200,000 - - 200,000
March 1996-Common stock warrants
exercised--125,500 shares at $.40
per share (Unaudited) - 50,200 - 50,200
March 1996--issuance of 300,000 shares
in exchange for consulting services
(Unaudited) - 183,000 - 183,000
March 1996--cancellation of 305,000 shares
of Common Stock (Unaudited)
Net loss (Unaudited) - (1,696,410) (1,696,410)
---------------- ----------------- ----------------- ----------------
Balance, March 31, 1996 (Unaudited) $ 5,698,557 $ 1,509,486 $ (6,499,230) $ 708,813
================ ================= ================= ================

F-8

USA Technologies, Inc.

(A Development Stage Corporation)

Statements of Cash Flows

January 16, 1992
(Date of Inception) Through
Nine months ended
Year ended June 30 March 31 June 30 March 31
1995 1994 1996 1995 1995 1996
------------ -------------- ------------- ------------- --------------- --------------
(Unaudited) (Unaudited) (Unaudited)

Operating activities
Net loss $(1,645,750) $(1,244,117) $(1,696,410) $(1,005,654) $(3,791,262) $(5,487,672)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 15,468 8,058 15,318 13,616 26,378 41,696
Provision for losses on obsolete
equipment 148,615 - - - 339,656 339,656
Compensation charges incurred in connection
with the issuance of Common Stock and
Common Stock options 102,350 - 247,205 - 102,350 349,555
Changes in operating assets and liabilities:
Prepaid expenses, deposits, and other
assets 1,900 (3,572) 38,763 (1,584) (14,649) 24,114
Accounts payable 72,404 29,504 66,268 (20,547) 152,939 219,207
Accrued expenses (48,728) (154,824) 5,249 (64,041) (9,773) (4,524)
------------ -------------- ------------- ------------- --------------- --------------
Net cash used by operating activities (1,353,741) (1,364,951) (1,323,607) (1,078,210) (3,194,361) (4,517,968)

Investing activities
Purchase of property and equipment (213,370) (184,099) (445,511) (91,359) (610,662) (1,056,173)
Proceeds from sale of property and - - 51,000 - - 51,000
equipment
------------ -------------- ------------- ------------- --------------- --------------
Net cash used by investing activities (213,370) (184,099) (394,511) (91,359) (610,662) (1,005,173)

Financing activities
Change in accounts payable relating to the
initial public offering - 50,746 - - 50,746 50,746
Change in accounts payable and accrued
expenses relating to the private
placement offering (8,528) - - - 95,255 95,255
Repayment of capital lease obligation - - (4,777) (1,881) - (4,777)
Repayment of note payable shareholder - (40,000) - - - -
(Repayment of) proceeds from note payable-
other (4,565) (2,317) (2,330) (1,338) 1,868 (462)
Net proceeds from issuance of Common Stock 949 802 122,400 949 17,711 140,111
Net proceeds from issuance of Convertible
Preferred Stock 1,511,234 1,172,111 1,641,185 1,354,852 4,015,634 5,656,819
------------ -------------- ------------- ------------- --------------- --------------
Net cash provided by financing activities 1,499,090 1,181,342 1,756,478 1,352,582 4,181,214 5,937,692
------------ -------------- ------------- ------------- --------------- --------------
Net (decrease) increase in cash (68,021) (367,708) 38,360 183,013 376,191 414,551
Cash at beginning of period 444,212 811,920 376,191 444,212 - -
------------ -------------- ------------- ------------- --------------- --------------
Cash at end of period $ 376,191 $ 444,212 $ 414,551 $ 627,225 $ 376,191 $ 414,551
============ ============== ============= ============= =============== ==============

F-9

USA Technologies, Inc.
(A Development Stage Corporation)

Statements of Cash Flows (continued)

Year ended June 30 Nine months ended March 31
1995 1994 1996 1995

--------------- -------------- ----------------- -----------------
(Unaudited) (Unaudited)

Supplemental disclosure of cash flow
information

Cash paid during the period for interest $ 92,483 $ 28,380 $ 4,240 $ 91,140
=============== ============== ================= =================

Stock subscription receivable $ 50,000 $ - $ - $ -
=============== ============== ================= =================

Conversion of Convertible Preferred Stock to
Common Stock $ 8,262 $ - $ - $ -
=============== ============== ================= =================

Acquisition of equipment through assumption of
capital lease obligations $ - $ 7,075 $ - $ -
=============== ============== ================= =================

See accompanying notes.

F-10

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements

1. Business

USA Technologies, Inc. a Pennsylvania corporation (the "Company"), was
incorporated on January 16, 1992. In May 1995, the Company changed its name from
USA Entertainment Center, Inc. to USA Technologies, Inc. to more accurately
reflect its business. Substantially all of the Company's activities to date have
been devoted to raising capital, developing markets, and starting up operations
which commenced during July 1994. The Company intends to become the leading
owner and licenser of credit card activated control systems for the vending,
copying, debit card, and personal computer industries. The Company's products
make available credit card payment technology in connection with the sale of
various products and services.

Through June 30, 1995 and March 31, 1996, the Company has installed 42 and 84
Credit Card Copy ExpressTM control systems, 9 and 19 Credit Card Debit ExpressTM
control systems, and at March 31, 1996 9 Credit Card Computer ExpressTM control
systems at various colleges, universities and public libraries. The Company
generally retains twenty to thirty percent of the gross revenues in connection
with the machines. To date the total gross revenues received by the Company from
these systems has been nominal.

The Company has also licensed and installed refreshments centers which utilize
the Credit Card Vending ExpressTM control system. The total gross revenues
received to date by the Company have been nominal. The Company has also recently
licensed its Credit Card Vending ExpressTM technology to an apparel manufacturer
to be used in connection with the sale from a vending machine of T-shirts,
windbreakers, and tote bags. The Company generally retains 20% of the gross
revenues from the machines. Through June 30, 1995 and March 31, 1996 11 of the
Credit Card Vending ExpressTM control systems are in operation and the total
gross revenues to the Company from these machines have been nominal.

2. Accounting Policies

Interim Financial Information

The financial statements and disclosures included herein for the nine months
ended March 31, 1996 and 1995, and for the date of inception through March 31,
1996 are unaudited. These financial statements and disclosures have been
prepared by the

F-11

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

2. Accounting Policies (continued)

Interim Financial Information (continued)

Company in accordance with generally accepted accounting principles and reflect
all adjustments, consisting of adjustments of a normal and recurring nature,
which, in the opinion of management, are necessary for a fair presentation of
the Company's financial position and the results of its operations and cash
flows.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the
straight-line method over five to seven years for financial statement purposes
and accelerated methods for income tax reporting purposes.

Revenue Recognition

Licensing revenues are recognized upon the usage of the Company's credit card
activated control systems.

Research and Development

Research and development costs are charged to operations as incurred.

Income Taxes

The Company provides for income taxes using the asset and liability approach
whereby deferred tax assets and liabilities are recorded based on the difference
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.

F-12

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

2. Accounting Policies (continued)

Income Taxes (continued)

Such differences result from differences in the timing of recognition by the
Company of certain accrued expenses, and the periods of amortization and
depreciation of certain assets.

Loss Per Common Share

Loss per common share is based on the weighted average number of common shares
outstanding during the year. No exercise of stock options, purchase rights,
stock purchase warrants, or the conversion of preferred stock and cumulative
preferred dividends was assumed because the exercise of these securities would
be antidilutive. Additionally, the effect of the stock dividend as discussed in
Note 9 has not been considered at June 30, 1995 in the loss per common share
calculation as it would be antidilutive. The 4,365,000 common shares held in
escrow (Note 11) are not considered outstanding for purposes of calculating the
loss per common share for all periods presented.

3. Property and Equipment

Property and equipment consist of the following:

June 30 March 31
1995 1994 1996
------------ ------------- -------------
(Unaudited)

Equipment components $ 41,719 $ 118,657 $ 375,575
Equipment installed 119,604 36,199 177,599
Furniture and equipment 52,919 45,631 55,580
Vehicles 17,333 17,333 17,333
------------ ------------- -------------
231,575 217,820 626,087
Less accumulated depreciation 24,192 9,324 39,060
------------ ------------- -------------
$ 207,383 $ 208,496 $ 587,027
============ ============= =============

F-13

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

3. Property and Equipment (continued)

The Company discontinued the Golf Oasis(TM) vending machines and an agreement
was entered into with the manufacturer of the machines to repurchase certain of
the machines at an amount significantly below the purchase amount. Accordingly,
the Company has recorded a charge for the permanent impairment to the carrying
value of the related assets of $149,000 during the year ended June 30, 1995.

4. Accrued Expenses

June 30 March 31
1995 1994 1996
------------- -------------- --------------
(Unaudited)

Accrued rent $ 19,000 $ - $ 18,865
Accrued interest--shareholders - 43,293 4,853
Accrued payroll 352 49,787 15,284
------------- -------------- --------------
$ 19,352 $ 93,080 $ 39,002
============= ============== ==============

5. Related Party Transactions

At June 30, 1995 and 1994 and March 31, 1996, approximately $19,000, $15,000,
and $14,000, respectively, of the Company's accounts payable are due to several
shareholders for various legal and technical services performed.

The Company borrowed $40,000 from its President and shareholder of the Company
during September 1992 in the form of a 5% demand note payable. The note was
repaid to the President and shareholder during August 1993.

6. Commitments

The Company conducts its operations from various facilities under leases. Rental
expense under such arrangements was approximately $72,000 and $69,000,
respectively, during the fiscal years ended June 30, 1995 and 1994, $57,000 and
$72,000 during the nine months ended March 31, 1996 and 1995, and $222,000 for
the period January 16, 1992 (date of inception) to March 31, 1996. Future

F-14

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

6. Commitments (continued)

minimum lease payments under noncancelable operating leases subsequent to June
30, 1995 are approximately $76,000 in 1996, $78,000 in 1997, and $9,000 in 1998.
The Company closed its storage facility in Jacksonville, Florida during the year
ended June 30, 1995. Accordingly, a $44,000 charge to operations was recorded
during 1995 representing the future minimum lease payments due under the related
leases net of anticipated sub-lease payments.

The Company entered into a commitment to acquire certain control system units.
As of June 30, 1995, $100,000 was included in accounts payable (and subsequently
paid in August 1995). An additional $150,000 was paid on March 31, 1996.

The Company has several employment agreements with its officers, none of which
extend beyond two years.

7. Income Taxes

At June 30, 1995 and 1994, the Company had a net tax operating loss carryforward
of approximately $2,565,000 and $1,016,000, respectively, to offset future
taxable income expiring through 2010. At June 30, 1995 and 1994, the Company
recorded a deferred tax asset of $1,564,000 and $894,000, respectively, which
were reduced by a valuation allowance of same amounts. The deferred tax assets
arose primarily from the use of different accounting methods for financial
statement and income tax reporting purposes principally related to the
accounting for preoperating costs and research and development and net operating
loss carryforwards.

As of June 30, 1993, the timing and manner in which the Company can utilize
operating loss carryforwards and future tax deductions for capitalized items in
any year was limited by provisions of the Internal Revenue Code regarding
changes in ownership of corporations. The Company believes that such limitation
will have an impact on the ultimate realization of its carryforwards and future
tax deductions (generated through June 30, 1993). Losses generated for income
tax purposes for the years ended June 30, 1995 and 1994 are not expected to be
subject to the limitation.

F-15

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

8. Preferred Stock

The Preferred Stock authorized may be issued from time to time in one or more
series, each series with such rights, preferences or restrictions as determined
by the Board of Directors. Each share of Series A Preferred Stock shall have the
right to ten votes and is convertible at any time into ten shares of Common
Stock. Series A Convertible Preferred Stock provides for an annual cumulative
dividend of $1.50 per share payable to the shareholders of record on February 1
and August 1 of each year. Cumulative unpaid dividends at June 30, 1995 and 1994
and at March 31, 1996 amounted to $845,816, $341,942, and $1,800,116,
respectively. Cumulative unpaid dividends are convertible into common shares at
$1.00 per common share at the option of the shareholder. Series A Preferred
Stock may be called for redemption at the option of the Board of Directors at
any time on and after January 1, 1998 for a price of $11.00 per share plus
payment of all accrued and unpaid dividends. In the event of any liquidation,
the holders of shares of Series A Preferred Stock issued shall be entitled to
receive $10.00 for each outstanding share plus all cumulative unpaid dividends.
If funds are insufficient for this distribution, the assets available will be
distributed ratably among the preferred shareholders.

9. Stock Transactions

During June 1995, the Company's Board of Directors authorized a $1,500,000
private placement offering of 150 units at a unit price of $10,000 and each unit
included 30,000 Common Stock purchase warrants and 1,000 shares of Series A
Convertible Preferred Stock. Subsequent to June 30, 1995, the Company obtained
approval to extend the private placement offering to $1,700,000 and 170 units.
As of June 30, 1995, 24.9 units were sold generating net proceeds of $206,382.
This private placement offering closed on July 31, 1995 and a total of 170 units
were sold generating net proceeds of $1,647,567 ($1,700,000 less offering costs
of $52,433). The subscriptions receivable at June 30, 1995 recorded in
connection with this offering were received in July 1995. In connection with
this offering, 5,100,000 of 1995 Common Stock purchase warrants (1995 warrants)
were issued. The 1995 warrants are exercisable at any time on or before January
31, 2001, unless such date is extended by the Company. Each warrant entitled the
holder to purchase one share of Common Stock for $.50.

F-16

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

9. Stock Transactions (continued)

On May 12, 1995, the Company's shareholders approved the payment of a stock
dividend of 3 shares of Common Stock, for each outstanding share of Series A
Convertible Preferred Stock at the close of business on August 1, 1995. The
effects of this stock dividend have been reflected in shareholders' equity in
the accompanying financial statements as if the stock dividend had occurred on
June 30, 1995 for the 636,200 Series A Convertible shares issued and outstanding
on June 30, 1995. Additionally, on May 12, 1995 the Company's shareholders
approved an amendment to the Articles of Incorporation of the Company to
authorize the issuance of up to a maximum of 34,000,000 shares of Common Stock,
without par value, and 1,000,000 shares of Series A Preferred Stock, without par
value.

On May 6, 1995, the Company filed a registration statement on Form S-8, pursuant
to which 250,000 (subsequently amended to 280,000) shares of Common Stock will
be issued to a consultant in consideration for services rendered for the period
April 1, 1995 through August 31, 1995. Through June 30, 1995, the Company issued
150,000 shares under this agreement. Professional fees of $99,750 were charged
to operations during the year ended June 30, 1995 representing the estimated
fair value of the shares issued.

On December 29, 1993, the Company commenced an offering of public securities in
an effort to raise, before offering costs, a minimum of $500,000 and a maximum
of $3,000,000. The offering permitted a minimum of 50,000 units or a maximum of
300,000 units at $10.00 per unit. Each unit consisted of 1 share of Series A
Convertible Preferred Stock and 7 shares of Common Stock. The offering
terminated on February 28, 1995 and a total of 300,000 units were sold
generating net proceeds of $ 2,345,104 ($3,000,000 less offering costs of
$654,896).

F-17

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

9. Stock Transactions (continued)

During October 1992, the Company's Board of Directors authorized private
offering of $2,000,000 for up to 200 units at a unit price of $10,000 which
includes 30,000 shares of Common Stock and 1,000 shares of Series A Convertible
Preferred Stock. The Company allocated $9.97 per share to the Series A
Convertible Preferred Stock due to the Preferred Stock's senior position. The
private offering closed on June 30, 1993 from which the Company issued 142.2
units and raised $1,270,254 of net proceeds ($1,422,000 less offering costs of
$151,746).

On July 1, 1993, the Company granted 157,300 Common Stock purchase rights at
$1.00 per share to certain consultants and to a broker dealer in connection with
this private placement offering. These rights were immediately vested and are
exercisable for a period of five years.

During July 1992, the Company's Board of Directors authorized a $1,500,000
private placement offering of 150 units of Common and Preferred Stock. The
offering was canceled effective September 1992. Approximately $50,000 of costs
incurred in connection with the canceled offering were charged to operations
during the year ended June 30, 1993.

10. Stock Options

Except as noted below, the Company's Board of Directors has granted options to
employees and consultants to purchase common shares at or above fair market
value. During June 1995, the Company issued 10,000 options at $.25 per share
which was below fair market value and, accordingly, recorded a $2,600 charge to
compensation expense in conjunction with the issuance.

F-18

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

10. Stock Options (continued)

The following table summarizes all stock option activity:

Common
Shares Under Price
Options Granted Per Share
----------------------- ------------------

Balance at June 30, 1993 $ - $ -
Granted 875,000 .25
-----------------------
Balance at June 30, 1994 875,000
Canceled (100,000) .25
Granted 2,290,000 .05 - .25
-----------------------
Balance at June 30, 1995 3,065,000
Exercised (Unaudited) (280,000) .05
=======================
Balance at March 31, 1996
(Unaudited) $ 2,785,000 $ .05 - .25
=======================

At June 30, 1995 and March 31, 1996, respectively, 2,890,000 and 2,760,000 of
these options were exercisable.

11. Escrow and Cancellation Arrangements

At the request of the Pennsylvania Securities Commission, all of the executive
officers and directors of the Company serving at the commencement of the initial
public offering of the Company agreed to place in escrow 10,700,000 shares of
Common Stock (subsequently amended to 8,395,000 by the cancellation of 2,000,000
shares during June 1995 and 305,000 shares during February 1996 by the President
of the Company) beneficially owned by them until December 29, 1996. Under
certain circumstances as outlined by the Pennsylvania Securities Commission, the
President's shares may be held in escrow for an additional period of time, but
not later than June 30, 1998. Any additional shares acquired by the executive
officers and directors will also be held in escrow. The executive officers and
directors have agreed not to sell, pledge, or transfer, directly or indirectly,
any of the Common Stock held in escrow or any options to acquire stock they may

F-19

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

11. Escrow and Cancellation Arrangements (continued)

own. Additionally, the President of the Company has agreed that his 4,365,000
escrowed common shares would be canceled by the Company and would no longer be
issued and outstanding unless certain performance measures as specified by the
Commission are achieved. If the performance measures are achieved, the common
shares released from escrow will result in a compensatory charge to the
Company's operations. The charge will be based on the fair value of the
Company's common shares on the date the shares are released from escrow. During
the year ended June 30, 1995 and the nine months ended March 31, 1996, there was
no such charge to operations. The 4,365,000 common shares are not considered
outstanding for purposes of calculating the loss per common share for all
periods presented.

12. Events Subsequent to the Date of the Report of Independent Auditors
(Unaudited)

During February 1996, the Company filed a registration statement on Form S-8 in
connection with an agreement with a consulting company whereby the Company
issued and registered for sale 300,000 shares of its common stock in exchange
for consulting and advisory services to be rendered to the Company. Consulting
costs of $183,000 were charged to operations in connection with this
agreement.

During February 1996, the Company sold 50,000 shares of its Series A Convertible
Preferred Stock for $200,000 to a private investment company pursuant to
Regulation S under the Securities Act of 1933.

During February 1996, the Company entered into an agreement with a vendor
whereby it committed to acquire 250 control system units for approximately
$143,000. Based on deliveries through June 30, 1996, approximately $85,000 was
included in accounts payable in connection with this obligation. An additional
$58,000 is payable upon the delivery of all units.

During April 1996, the Company's Board of Directors authorized a $1,300,000
private placement offering of 130 units at a unit price of $10,000 and each unit
includes 40,000 1996 common stock purchase warrants and 1,000 shares of Series A
convertible Preferred Stock. All 130 units were sold, generating net proceeds of
$1,249,264. Each 1996 warrant is exercisable at any time prior to June 1, 2001
for one share of common stock at $.50 per share, provided that the exercise
price is $.40 per share through December 31, 1996.

F-20

USA Technologies, Inc.

(A Development Stage Corporation)

Notes to Financial Statements (continued)

12. Events Subsequent to the Date of the Report of Independent Auditors
(Unaudited) (continued)

During the period February 12, 1996 through April 30, 1996, the exercise price
of the 1995 warrants (Note 9) was reduced to $.40 per warrant. (The original
warrant exercise price was $.50.) Subsequent to April 30, 1996, the exercise
price of the 1995 warrants was further reduced to $.30 until June 30, 1996, and
such further reduction was made retroactive to those holders who had already
exercised the 1995 warrants at $.40. Accordingly, the Company returned $87,200
to such holders. Through June 30, 1996, a total of 3,686,000 1995 warrants had
been exercised generating gross proceeds to the Company of $1,105,800.

During April 1996, the Company's shareholders approved the increase in the
number of the Company's authorized common stock to 45,000,000 and to increase
the number of designated shares of Series A Convertible Preferred Stock from
700,000 to 1,000,000.

During March, April, and May 1996, the Company issued options to acquire up to
650,000 shares of its common stock to certain employees of the Company at $.65
per share, which was determined to be at or above the fair market value on the
date of grant. These options principally vest in quarterly intervals over a
five year period.

During July 1996, the Company formalized certain agreements with two Directors
of the Company to perform consulting services during fiscal year 1996. Through
June 30, 1996, $104,000 was incurred for services performed.

F-21

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 24. Indemnification of Officers and Directors.

Section 1746 of the Pennsylvania Business Corporation Law of 1988, as
amended ("BCL"), authorizes a Pennsylvania corporation to indemnify its
officers, directors, employees and agents under certain circumstances against
expenses and liabilities incurred in legal proceedings involving such persons
because of their holding or having held such positions with the corporation and
to purchase and maintain insurance of such indemnification. The Company's Bylaws
substantively provide that the Company will indemnify its officers, directors,
employees and agents to the fullest extent provided by Section 1746 of the BCL.

Section 1713 of the BCL permits a Pennsylvania corporation, by so
providing in its By-laws, to eliminate the personal liability of a director for
monetary damages for any action taken unless the director has breached or failed
to perform the duties of his office and the breach or failure constitutes
self-dealing, willful misconduct or recklessness. In addition, no such
limitation of liability is available with respect to the responsibility or
liability of a director pursuant to any criminal statute or for the payment of
taxes pursuant to Federal, state or local law. The Company's By-laws eliminate
the personal liability of the directors to the fullest extent permitted by
Section 1713 of the BCL.

Item 25. Other Expenses of Issuance and Distribution.

The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock, other than underwriting discounts and commissions.

Securities and Exchange Commission - Registration Fee . $ 896.56
Blue Sky fees and expenses. . . . . . . . . . . . . . . $ 3,000.00
Printing and Engraving Expenses . . . . . . . . . . . . $10,000.00
Accounting Fees and Expenses. . . . . . . . . . . . . . $12,000.00
Legal Fees and Expenses . . . . . . . . . . . . . . . . $12,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . $ 2,103.44
----------

Total . . . . . . . . . . . . . . . . . . $40,000.00
----------

Item 26. Recent Sales of Unregistered Securities.

During the three years immediately preceding the date of the filing of
this Registration Statement, the following securities were issued by the Company
without registration under the Securities Act of 1993, as amended ("Act"):

II-1

I. Private Placements.

During June and July 1995, the Company sold 170 Units at $10,000 each
pursuant to a private placement under Rule 506 of Regulation D promulgated under
the Act. Each Unit consisted of 1,000 shares of Preferred Stock and 30,000 1995
Common Stock Purchase Warrants. An aggregate of 170,000 shares of Preferred
Stock and 5,100,000 1995 Common Stock Purchase Warrants were sold to 226
accredited investors. In connection therewith, William W. Sellers, a Director of
the Company, purchased an aggregate of 2,225 shares of Preferred Stock and
66,750 1995 Common Stock Purchase Warrants.

During May 1996, the Company sold 130 units at $10,000 each pursuant to
a private placement under Rule 506 of Regulation D promulgated under the Act.
Each unit consisted of 1,000 shares of Preferred Stock and 40,000 1996 Common
Stock Purchase Warrants. An aggregate of 130,000 shares of Preferred Stock and
5,200,000 1996 Common Stock Purchase Warrants were issued to 100 accredited
investors and 33 non-accredited investors. In connection therewith, William W.
Sellers, a Director of the Company, purchased 4,000 shares of Preferred Stock
and 160,000 1996 Common Stock Purchase Warrants.

II. Stock Options

In July, 1993, the Company issued options to purchase an aggregate of
750,000 shares of Common Stock for $.25 per share, to the following officers,
directors, or employees, in the amounts across from their respective names:

II-2

Number of Shares of Common
Stock Purchasable Under
Grantee the Options Granted
------- --------------------------
Robert L. Bartlett 100,000
Keith L. Sterling 200,000
Edward J. Sullivan 100,000
Adele Hepburn 50,000
William W. Sellers 100,000
William L. Van Alen, Jr. 100,000
Peter G. Kapourelos 100,000

In September, 1993, the Company issued to Gregory C. Rollins options to
purchase an aggregate of 100,000 shares of Common Stock for $.25 per share.

In August, 1994, the Company approved the issuance to Megan N. Cherney
options to purchase an aggregate of 100,000 shares of Common stock for $.25 per
share.

In August, 1994, the Company issued to Haven Brock Kolls, Jr., options
to purchase an aggregate of 50,000 shares of Common Stock for $.25 per share.

In August, 1994, the Company issued to Barry Slawter options to purchase
an aggregate of 200,000 shares of Common Stock for $.25 per share.

In March 1995, the Company issued to the following officers, directors,
consultants and employees, options to acquire an aggregate of 1,305,000 shares
of Common Stock at $.25 per share:

Number of shares of
Common Stock purchasable
Grantee Under the Options Granted
------- -------------------------
Henry B. duPont Smith 100,000
Keith L. Sterling 100,000
William W. Sellers 55,000
Peter G. Kapourelos 70,000
William L. Van Alen, Jr. 25,000
Adele Hepburn 500,000
Austin Hepburn 390,000
Robert Leiser 40,000
Doug Anette 25,000

In March 1995, the Company issued to two consultants options to acquire
an aggregate of 500,000 shares of Common Stock at $.05 per share.

In April 1995, the Company issued to H. Brock Kolls options to
purchase up to 150,000 shares of Common Stock at $.25 per share.

II-3

In June 1995, the Company issued to Barry Slawter options to purchase
up to 10,000 shares of Common Stock at $.25 per share.

In March 1996, the Company issued to Haven Brock Kolls options to
purchase up to 50,000 shares of Common Stock at $.65 per share.

In April 1996, the Company issued to Stephen Herbert options to
purchase up to 400,000 shares of Common Stock at $.65 per share.

In May 1996, the Company issued to Keith Sterling options to purchase
up to 50,000 shares of Common Stock at $.65 per share.

In May 1996, the Company issued to Edward Sullivan options to purchase
up to 50,000 shares of Common Stock at $.65 per share.

In June 1996, the Company issued to Michael Lawlor options to purchase
up to 100,000 shares of Common Stock at $.65 per share.

The issuance of all of the foregoing options was made in reliance upon
the exemption provided by Section 4(2) of the Act.

III. Common Stock-For Cash.

On and after July 1, 1993, shares of Common Stock were issued by the
Company to the following persons at $.001 per share. All of such shares were
issued by the Company in reliance upon the exemption provided by Section 4(2) of
the Act, as follows:

Number of Shares
Date Name of Common Stock
---- ---- -----------------
September 1993 Gregory C. Rollins 100,000
September 1993 James Czekner 10,000

In July 1995, options to purchase 180,000 shares of Common Stock at $.05
per share were exercised by the holders thereof. All of such shares were issued
by the Company in reliance on Section 4(2) of the Act.

In February 1996, options to purchase 100,000 shares of Common Stock at
$.05 per share were exercised by the holders thereof. All of such shares were
issued by the Company in reliance on Section 4(2) of the Act.

IV. Stock Dividend.

The Company issued a stock dividend consisting of 3 shares of Common
Stock for each share of Preferred Stock issued and outstanding on August 1,
1995. Based on the 636,200 shares of Preferred

II-4

Stock issued and outstanding on such date, an aggregate of 1,908,600 shares of
Common Stock were distributed to the holders of the Preferred Stock. Pursuant
thereto, 48,000 shares were issued to Mr. Jensen, 1,500 shares were issued to
Mr. Kolls, 3,000 shares were issued to Mr. Kapourelos, 11,175 shares were issued
to Mr. Sellers, and 30,000 shares were issued to Mr. Smith. The issuance of this
Common Stock was made in reliance on the exemption provided by Section 4(2) of
the Act.

Item 27. Exhibits.

Exhibit
Number Description
- ------- -----------
3.1 Articles of Incorporation of Company filed
on January 16, 1992 (Incorporated by reference
to Exhibit 3.1 to Form SB-2 Registration
Statement No. 33-70992)

3.1.1 First Amendment to Articles of Incorporation
of the Company filed on July 17, 1992
(Incorporated by reference to Exhibit 3.1.1
to Form SB-2 Registration Statement No. 33-70992)

3.1.2 Second Amendment to Articles of Incorporation
of the Company filed on July 27, 1992
(Incorporated by reference to Exhibit 3.1.2
to Form SB-2 Registration Statement No. 33-70992)

3.1.3 Third Amendment to Articles of Incorporation
of the Company filed on October 5, 1992
(Incorporated by reference to Exhibit 3.1.3
to Form SB-2 Registration Statement No. 33-70992)

3.1.4 Fourth Amendment to Articles of Incorporation
of the Company filed on October 18, 1993
(Incorporated by reference to Exhibit 3.1.4
to Form SB-2 Registration Statement No. 33-70992)

3.1.5 Fifth Amendment to Articles of Incorporation
of the Company filed on June 7, 1995
(incorporated by reference to Exhibit 3.1 to
Form 5.3 Registration Statement No. 33-98808,
filed October 31, 1995)

**3.1.6 Sixth Amendment to Articles of Incorporation of the
Company filed on May 1, 1996

3.2 By-Laws of the Company (Incorporated by
reference to Exhibit 3.2 to Form SB-2
Registration Statement No. 33-70992)

II-5

Exhibit
Number Description
- ------- -----------
**4.1 1996 Warrant Agreement dated as of May 1, 1996
between the Company and American Stock Transfer
and Trust Company

**4.2 Form of 1996 Warrant Certificate

**5.1 Opinion of Lurio & Associates

10.1 Amended and Restated Employment and Non-
Competition Agreement between the Company and
George R. Jensen, Jr., dated as of July 1, 1992
(Incorporated by reference to Exhibit 10.3 to
Form SB-2 Registration Statement No. 33-70992)

**10.1.2 First Amendment to Amended and Restated Employment and
Non-Competition Agreement between the Company and George
R. Jensen, Jr., dated as of April 29, 1996

10.2 Employment and Non-Competition Agreement between
the Company and Keith L. Sterling dated as of
July 1, 1993 (Incorporated by reference to
Exhibit 10.4 to Form SB-2 Registration
Statement No. 33-70992)

**10.2.1 First Amendment to Employment and Non-
Competition Agreement between the Company and
Keith L. Sterling dated as of April 29, 1996

10.3 Employment and Non-Competition Agreement between
the Company and Edward J. Sullivan dated as of
July 1, 1993 (Incorporated by reference to
Exhibit 10.5 to Form SB-2 Registration
Statement No. 33-70992)

**10.3.1 First Amendment to Employment and Non-
Competition Agreement between the Company
and Edward J. Sullivan dated as of April 29, 1996

10.4 Employment and Non-Competition Agreement between
the Company and Adele Hepburn dated as of
January 1,1993 (Incorporated by reference to
Exhibit 10.7 to Form SB-2 Registration Statement
No. 33-70992)

10.5 Robert L. Bartlett Common Stock Options dated
as of July 1, 1993 (Incorporated by reference
to Exhibit 10.9 to Form SB-2 Registration
Statement No. 33-70992)

II-6

Exhibit
Number Description
- ------- -----------
10.6 Edward J. Sullivan Common Stock Options dated
as of July 1, 1993 (Incorporated by reference
to Exhibit 10.10 to Form SB-2 Registration
Statement No. 33-70992)

**10.6.1 Edward J. Sullivan Common Stock Options dated
as of April 29, 1996

10.7 Keith L. Sterling Common Stock Options dated
July 1, 1993 (Incorporated by reference to
Exhibit 10.11 to Form SB-2 Registration
Statement No. 33-70992)

**10.7.1 Keith L. Sterling Common Stock Options dated
as of April 29, 1996

10.8 Adele Hepburn Common Stock Options dated
as of July 1, 1993 (Incorporated by reference
to Exhibit 10.12 to Form SB-2 Registration
Statement No. 33-70992)

10.9 Gregory C. Rollins Common Stock Options dated
as of August 23, 1993 (Incorporated by reference
to Exhibit 10.13 to Form SB-2 Registration
Statement No. 33-70992)

10.10 Lease Agreement for Principal Executive Office
dated October 1, 1992 (Incorporated by reference
to Exhibit 10.14 to Form SB-2 Registration
Statement No. 33-70992)

10.10.1 First Amendment to Lease for Principal Executive
Office dated July 13, 1993 (Incorporated by
reference to Exhibit 10.14.1 to Form SB-2
Registration Statement No. 33-70992)

10.11 Application Sales Agreement of the Company to
Card Establishment Services, Inc. and letter
of acceptance thereof (Incorporated by
reference to Exhibit 10.15 to Form SB-2
Registration Statement No. 33-70992)

10.12 Non-Disclosure Agreement between USA
Entertainment Center, Inc. and Card
Establishment Services, Inc. (Incorporated
by reference to Exhibit 10.16 to Form SB-2
Registration Statement No. 33-70992)

II-7

Exhibit
Number Description
- ------- -----------

10.13 Certificate of Appointment of American Stock
Transfer & Trust Company as Transfer Agent and
Registrar dated October 8, 1993 (Incorporated
by reference to Exhibit 10.23 to Form SB-2
Registration Statement No. 33-70992)

10.14 Form of Escrow Agreement between the Company,
Meridian Trust Company and various shareholders
dated as of December 28, 1993 (Incorporated by
reference to Exhibit 10.31 to Form SB-2
Registration Statement No. 33-70992)

10.14.1 Modification to Escrow Agreement dated as of
October 6, 1994 between the Company, Meridian
Trust Company and George R. Jensen, Jr.
(Incorporated by reference to Exhibit 10.31.1
to Form SB-2 Registration Statement No. 33-70992)

**10.14.2 Joinder to Escrow Agreement dated as of
February 14, 1996 by each of Haven Brock Kolls,
Barry Slawter, and Henry B. duPont Smith

10.15 Employment and Non-Competition Agreement between
the Company and H. Brock Kolls dated as of
May 1, 1994 (Incorporated by reference to
Exhibit 10.32 to Form SB-2 Registration
Statement No. 33-70992)

**10.15.1 First Amendment to Employment and Non-
Competition Agreement between the Company
and H. Brock Kolls dated as of March 20, 1996

10.16 Agreement of Lease dated March 16, 1994, by and
between the Company and G.F. Florida Operating
Alpha, Inc. (Incorporated by reference to
Exhibit 10.33 to Form SB-2 Registration
Statement No. 33-70992)

10.17 Megan N. Cherney Common Stock Options dated as
of April 1, 1994 (Incorporated by reference to
Exhibit 10.41 to Form SB-2 Registration
Statement No. 33-70992)

10.18 H. Brock Kolls Common Stock Options dated as
of May 1, 1994 (Incorporated by reference to
Exhibit 10.42 to Form SB-2 Registration
Statement No. 33-70992)

II-8

Exhibit
Number Description
- ------- -----------
**10.18.1 H. Brock Kolls Common Stock Options dated
as of March 20, 1996

10.19 Barry Slawter Common Stock Options dated as
of August 25, 1994 (Incorporated by reference
to Exhibit 10.43 to Form SB-2 Registration
Statement No. 33-70992)

10.20 Employment and Non-Competition Agreement
between the Company and Barry Slawter dated
as of July 12, 1994 (Incorporated by
reference to Exhibit 10.44 to Form SB-2
Registration Statement No. 33-70992)

10.21 Employment Agreement dated June 30, 1994 between
the Company and Megan N. Cherney (Incorporated
by reference to Exhibit 10.45 to Form SB-2
Registration Statement No. 33-70992)

10.22 First Amendment to Employment and Non-
Competition Agreement dated September 2, 1994
between Barry Slawter and the Company
(Incorporated by reference to Exhibit 10.46
to Form SB-2 Registration Statement No. 33-70992)

10.23 Consulting Agreement between Jerome M. Wenger
and the Company dated March 24, 1995
(incorporated by reference to Exhibit 28 to
the Form S-8 Registration Statement No. 33-92038
filed on May 6, 1995)

10.24 Amendment to Consulting Agreement between
Jerome M. Wenger and the Company dated May 19,
1995 (incorporated by reference to Exhibit
28.2 to Form S-8 filed on November 1, 1995)

10.25 First Amendment to Employment And Non-
Competition Agreement between the Company
and Barry Slawter dated September 28, 1995
(incorporated by reference to Exhibit 10.31
to Form SB-2 Registration Statement No. 33-98808)

**10.26 Remarketer/Integrator Agreement between
the Company and Dell Computer Corporation
dated February 8, 1996

II-9

Exhibit
Number Description
- ------- -----------

10.27 Letter Agreement between the Company and
Diversified Corporate Consulting Group, L.P.,
dated February 7, 1996 (incorporated by
reference to Exhibit 28.2 to Form S-8
Registration Statement No. 33-2614)

**10.28 Employment And Non-Competition Agreement
between the Company and Michael Lawlor
dated June 7, 1996

**10.29 Michael Lawlor Common Stock Option
Certificate dated as of June 7, 1996

**10.30 Employment And Non-Competition Agreement
between the Company and Stephen P. Herbert
dated April 4, 1996

**10.31 Stephen P. Herbert Common Stock Option
Certificate dated April 4, 1996

**10.32 Letter between the Company and William W.
Sellers dated July 17, 1996

**10.33 Letter between the Company and Peter G.
Kapourelos dated July 17, 1996

**23.1 Consent of Ernst & Young LLP, Independent
Auditors

23.2 Consent of Lurio & Associates (included
in Exhibit 5.1)

- --------------
** Filed herewith

II-10

Item 28. Undertakings.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.

Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in

II-11

the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

II-12

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing Form SB-2 and has duly caused this
Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in Wayne, Pennsylvania, on July 31,
1996.

USA TECHNOLOGIES, INC.

By: /s/ George R. Jensen, Jr.
------------------------------------
George R. Jensen, Jr.,
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been duly signed below by the following persons
in the capacities and dates indicated.

Signatures Title Date
---------- ----- ----

/s/ George R. Jensen, Jr. Chairman of the Board, July 31, 1996
- -------------------------- President and Chief
George R. Jensen, Jr. Executive Officer
(Principal and Chief
Executive Officer)

/s/ Edward J. Sullivan Vice President and Chief July 31, 1996
- -------------------------- Financial Officer (Principal
Edward J. Sullivan Accounting Officer)

/s/ Stephen P. Herbert Vice President, July 31, 1996
- -------------------------- Director
Stephen P. Herbert

/s/ Keith L. Sterling Vice President, July 31, 1996
- -------------------------- Director
Keith L. Sterling

Director July , 1996
- --------------------------
William W. Sellers

/S/ Peter G. Kapourelos Director July 31, 1996
- --------------------------
Peter G. Kapourelos

Director July , 1996
- --------------------------
Henry B. duPont Smith

/s/ William L. Van Alen, Jr. Director July 31, 1996
- --------------------------
William L. Van Alen, Jr.

II-13

EXHIBIT INDEX

Exhibit
Number Description
- ------- -----------

3.1.6 Sixth Amendment to Articles of
Incorporation of the Company filed
on May 1, 1996

4.1 1996 Warrant Agreement dated as of
May 1, 1996 between the Company and
American Stock Transfer and Trust Company

4.2 Form of 1996 Warrant Certificate

5.1 Opinion of Lurio & Associates

10.1.2 First Amendment to Amended and Restated
Employment and Non-Competition Agreement
between the Company and George R. Jensen, Jr.,
dated as of April 29, 1996

10.2.1 First Amendment to Employment and Non-
Competition Agreement between the Company and
Keith L. Sterling dated as of April 29, 1996

10.3.1 First Amendment to Employment and Non-
Competition Agreement between the Company
and Edward J. Sullivan dated as of
April 29, 1996

10.6.1 Edward J. Sullivan Common Stock Options
dated as of April 29, 1996

10.7.1 Keith L. Sterling Common Stock Options
dated as of April 29, 1996

10.14.2 Joinder to Escrow Agreement dated as of
February 14, 1996 by each of Haven Brock Kolls,
Barry Slawter, and Henry B. duPont Smith

10.15.1 First Amendment to Employment and Non-
Competition Agreement between the Company
and H. Brock Kolls dated as of March 20, 1996

10.18.1 H. Brock Kolls Common Stock Options
dated as of March 20, 1996

II-14

Exhibit
Number Description
- ------- -----------

10.26 Remarketer/Integrator Agreement between
the Company and Dell Computer Corporation
dated February 8, 1996

10.28 Employment And Non-Competition Agreement
between the Company and Michael Lawlor
dated June 7, 1996

10.29 Michael Lawlor Common Stock Option
Certificate dated as of June 7, 1996

10.30 Employment And Non-Competition Agreement
between the Company and Stephen P. Herbert
dated April 4, 1996

10.31 Stephen P. Herbert Common Stock Option
Certificate dated April 4, 1996

10.32 Letter between the Company and William W.
Sellers dated July 17, 1996

10.33 Letter between the Company and Peter G.
Kapourelos dated July 17, 1996

23.1 Consent of Ernst & Young LLP, Independent
Auditors

- --------------
**Filed herewith

II-15



                                                                   Exhibit 3.1.6

Microfilm Number 9631-1599    Filed with the Department of State on May 1, 1996
                 ---------                                          -----------


Entity Number 2072587                              /s/ JEANETTE KANDER
              -------                        ----------------------------------
                                               Secretary of the Commonwealth


               ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
                              DSCB:15-1915 (Rev 90)

     In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:

1. The name of the corporation is: USA Technologies, Inc.
                                   -------------------------------------------

   ---------------------------------------------------------------------------

2.   The (a) address of this corporation's current registered office in this
     Commonwealth or (b) name of its commercial registered office provider and
     the county of venue is (the Department is hereby authorized to correct the
     following information to conform to the records of the Department):

     (a) ______________________________________________________________________
         Number and Street          City       State      Zip          County

     (b) c/o: Corporation Service Company
         ----------------------------------------------------------------------
         Name of Commercial Registered Office Provider                County

For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.

3. The statute by or under which it was incorporated is: Business Corporation
   Law of 1988                                           --------------------
   -----------
4. The date of its incorporation is: January 16, 1992
                                    -----------------------------------------

5. (Check, and if appropriate complete, one of the following):

     _X_ The amendment shall be effective upon filing these Articles of
         Amendment in the Department of State.

     ___ The amendment shall be effective on:____________ at ________________
                                                Date                Hour

6. (Check one of the following):

     _X_ The amendment was adopted by the shareholders (or members) pursuant to
         15 Pa.C.S. Section 1914(a) and (b).

     ___ The amendment was adopted by the board of directors pursuant to
         15 Pa.C.S. Section 1914(c).

7. (Check, and if appropriate complete, one of the following):

     ___ The amendment adopted by the corporation, set forth in full, is as
         follows:
     _______________________________________________________________________

     _______________________________________________________________________

     _______________________________________________________________________
     
     _X_ The amendment adopted by the corporation is set forth in full in
         Exhibit A attached hereto and made a part hereof.

8. (Check if the amendment restates the Articles):

   ___ The restated Articles of Incoporation supersede the original Articles and
       all amendments thereto.


     IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 30th day of
April, 1996.

                                                  USA TECHNOLOGIES, INC.
                                              ----------------------------
                                                  (Name of Corporation)

                                              BY: /s/ George R. Jensen, Jr.
                                                 --------------------------
                                                         (Signature)


                                              TITLE: President
                                                     -----------------------  


 


                                   EXHIBIT "A"



1.   Paragraph (A) Classes of Stock of Article 4 of the Articles of
     Incorporation of the Company shall be amended and restated to read in full
     as follows:

                    (A) Classes of Stock. The aggregate number of
                    shares  which  the  corporation   shall  have
                    authority  to  issue  is  46,000,000  shares,
                    divided  into  45,000,000  shares  of  Common
                    Stock,   without  par  value,  and  1,000,000
                    shares of Series Preferred Stock, without par
                    value.

2.   The first sentence of Paragraph (C) Designation of Series A Convertible
     Preferred Stock of Article 4 of the Articles of Incorporation of the
     Company shall be amended and restated to read in full as follows:

                    (C)   Designation  of  Series  A  Convertible
                    Preferred Stock.  There is hereby established
                    a  series  of  the  Series   Preferred  Stock
                    designated  "Series A  Convertible  Preferred
                    Stock"  (herein  referred  to  as  "Series  A
                    Preferred  Stock"),  consisting  of 1,000,000
                    shares,    having   the   relative    rights,
                    designations,  preferences,   qualifications,
                    privileges,   limitations,  and  restrictions
                    applicable thereto as follows:



                                                                     Exhibit 4.1

                             USA TECHNOLOGIES, INC.
                       1996 COMMON STOCK PURCHASE WARRANTS

                                WARRANT AGREEMENT

                  1996 Warrant AGREEMENT dated as of the 1st day of May, 1996,
by and between USA TECHNOLOGIES, INC., a Pennsylvania corporation (hereinafter
called the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, as warrant
agent (hereinafter called the "1996 Warrant Agent").

                  WHEREAS, the Company at or about the same time that it is
entering into this Agreement, is issuing 1996 Common Stock Purchase Warrants
("1996 Warrants") to purchase up to 5,200,000 shares of Common Stock, no par
value of the Company ("Common Stock"). Each 1996 Warrant represents the right to
purchase from the Company one (1) share of Common Stock at the purchase price
("Purchase Price") of $.40 per share for a period commencing on June 1, 1996 and
ending at 5:00 p.m., December 31, 1996, and $.50 per share commencing on January
1, 1997 and ending on 5:00 p.m., May 31, 2001, subject to the terms and
conditions hereinafter set forth; and

                  WHEREAS, the Company desires the 1996 Warrant Agent to act on
behalf of the Company, and the 1996 Warrant Agent is willing so to act, in
connection with the issuance, registration, transfer, exchange and replacement
of the certificates evidencing the 1996 Warrants (the " 1996 Warrant
Certificate") and the exercise of the 1996 Warrants, and to act as depository
for the 1996 Warrant Certificates.

                                        1






                  NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:

                  Section 1. Appointment of 1996 Warrant Agent. The Company
hereby appoints the 1996 Warrant Agent to act as agent for the Company in
accordance with the terms and conditions hereinafter in this Agreement set
forth, and the 1996 Warrant Agent hereby accepts such appointment.

                  Section 2. Form of 1996 Warrant Certificates. The text of the
1996 Warrant Certificates (and the form of election to purchase shares to be
printed on the reverse thereof) shall be substantially as set forth in Exhibit
"A" attached hereto, and may have such letters, numbers,or other marks of
identification or designation and such legends, summaries, or endorsements
printed, lithographed, or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this 1996 Warrant Agreement,
or as may be required to comply with any law or with any rules or regulations of
any stock exchange. The 1996 Warrant Certificates may bear such notice of
restriction on transfer and/or exercise as the Company's counsel may deem
necessary or appropriate for the Company to comply with all federal or state
laws or regulations, including securities laws. The 1996 Warrant Certificates
shall be dated as of the date of issuance thereof by the 1996 Warrant Agent,
either upon initial issuance or upon transfer or exchange, and on their face
shall entitle the holders thereof to purchase such number of shares of Common
Stock

                                        2






at the Purchase Price, subject to all of the terms and conditions
hereof.  1996 Warrant Certificates shall be numbered serially with
the letter W for the 1996 Warrants.

                  Section 3. Countersignature and Registration. The 1996 Warrant
Agent shall keep, or cause to be kept, at its principal office, books for the
transfer and registration of the 1996 Warrant Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders of the
1996 Warrant Certificates, the number of 1996 Warrants evidenced on its face by
each of the 1996 Warrant Certificates, and the date of each of the 1996 Warrant
Certificates.

                  The 1996 Warrant Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its President, or any Vice President,
by facsimile signature, and have affixed thereto a facsimile of the Company's
seal which shall be attested by the Secretary or an Assistant Secretary of the
Company by facsimile signature. The 1996 Warrant Certificates shall be
countersigned manually or by facsimile by the 1996 Warrant Agent (or by any
successor to the 1996 Warrant Agent then acting as 1996 Warrant Agent under this
Agreement) and shall not be valid for any purpose unless so countersigned. 1996
Warrant Certificates may be so countersigned, however, by the 1996 Warrant Agent
(or by its successor as 1996 Warrant Agent) and be delivered by the 1996 Warrant
Agent, notwithstanding that the persons whose manual or facsimile signatures
appear thereon as proper officers of the Company shall have ceased to be such
officers at the time of such

                                        3






countersignature or delivery.

                  Section 4.  Transfers and Exchanges.

                  Subject to the provisions of Section 10 hereof, any 1996
Warrant Certificate, with or without other 1996 Warrant Certificates, may be
transferred, split up, combined, or exchanged for another 1996 Warrant
Certificate or 1996 Warrant Certificates, entitling the registered holder to
purchase a like number of shares of Common Stock as the 1996 Warrant Certificate
or 1996 Warrant Certificates surrendered then entitled such holder to purchase.
Any registered holder desiring to transfer, split up, combine, or exchange any
1996 Warrant Certificates shall make such request in writing delivered to 1996
Warrant Agent, and shall surrender the 1996 Warrant Certificate or 1996 Warrant
Certificates to be transferred, split up, combined,or exchanged at the principal
office of 1996 Warrant Agent. Subject to Section 4.B, 1996 Warrant Agent shall
countersign and deliver to the person entitled thereto a 1996 Warrant
Certificate, or 1996 Warrant Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover all taxes and other
governmental charges that may be imposed in connection with any transfers, split
up, combination, or exchange of 1996 Warrant Certificates.

                  As a condition to the transfer, split up, combination, or
exchange of any 1996 Warrant Certificate or 1996 Warrant Certificates, pursuant
to Section 4.A, the holder and/or proposed holder of such 1996 Warrant
Certificate or 1996 Warrant

                                        4






Certificates, shall execute and deliver such representations, 1996 Warranties,
and covenants, that may be required by applicable federal and state securities
law, or that the Company determines is reasonably necessary in connection with
the transfer, split up, combination or exchange of such 1996 Warrant Certificate
or 1996 Warrant Certificates, and the 1996 Warrant Certificate or 1996 Warrant
Certificates to be issued by the 1996 Warrant Agent shall contain such legends,
or restrictive legends, or stop transfer instructions, as shall be required by
applicable federal or state securities laws, or as shall be reasonably required
by the Company.

                  Section 5.  Exercise of the 1996 Warrants.

                  A. Subject to the provisions of this Agreement, each
registered holder of a 1996 Warrant Certificate shall have the right which may
be exercised commencing at the opening of business on June 1, 1996 (the "1996
Warrant Date"), and which shall terminate at 5:00 p.m. on May 31, 2001, or such
later date or dates as the Company may determine (the "1996 Warrant Termination
Date"), to purchase from the Company, and the Company shall issue and sell to
such registered holder of the 1996 Warrant Certificate, the number of fully paid
and non-assessable shares of Common Stock specified in such 1996 Warrant
Certificate, upon surrender to the Company at the office of the 1996 Warrant
Agent of such 1996 Warrant Certificate, with the form of election to purchase on
the reverse thereof duly filled in and signed and upon payment to the Company of
the Purchase Price, determined in accordance with the provisions of Sections 8
and 9 of this Agreement, for the number of

                                        5






Common Shares in respect of which such 1996 Warrants are then exercised. Payment
of such Purchase Price shall be made in cash or by certified check or bank draft
payable to the order of the Company. No adjustment shall be made for any
dividends on any Common Stock issuable upon exercise of a 1996 Warrant.

                  B. Upon the surrender of the 1996 Warrant Certificate, with
the form of election to purchase duly executed, and payment of the Purchase
Price as aforesaid, the 1996 Warrant Agent shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the registered
holder of such 1996 Warrant Certificate and in such name or names as such
registered holder may designate, a certificate or certificates for the number of
full shares of Common Stock so purchased upon the exercise of such 1996
Warrants. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Common Stock as of the date of the surrender of such
1996 Warrant Certificate and payment of the Purchase Price as aforesaid;
provided, however, that if, at the date of surrender of such 1996 Warrant
Certificate and payment of such Purchase Price, the transfer books for the
Common Stock purchasable upon the exercise of such 1996 Warrants shall be
closed, the certificates for the Common Stock in respect to which such 1996
Warrants are then exercised shall be issuable as of the next date on which such
books shall be opened, and until such date the Company shall be under no duty to
deliver any certificate for such Common Stock.

                                        6






                  C. The rights of purchase represented by the 1996 Warrant
Certificate shall be exercisable, at the election of the registered holders
thereof, either as an entirety or from time to time for part only of the Common
Stock specified therein and, in the event that any 1996 Warrant Certificate is
exercised in respect of less than all of the Common Stock specified therein at
any time prior to the 1996 Warrant Termination Date, a new 1996 Warrant
Certificate or 1996 Warrant Certificates will be issued to such registered
holder for the remaining number of shares of Common Stock specified in the 1996
Warrant Certificate so surrendered, and the 1996 Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new 1996
Warrant Certificate pursuant to the provisions of this Section and of Section 3
of this Agreement.

                  D. No 1996 Warrant is exercisable by a holder unless, at the
time of exercise by such holder, (1) there is either (a) a registration
statement or prospectus covering the shares of Common Stock underlying the 1996
Warrant that is effective under (I) the Securities Act of 1933, as amended, and
(ii) the securities laws of the state of the address of record of such holder,
or (b) an exemption is available from registration for the exercise of the 1996
Warrant and issuance of the shares of Common Stock in the opinion of counsel to
the Company; and (2) such exercise and issuance would otherwise be in compliance
with applicable law in the opinion of counsel to the Company. No 1996 Warrant
may be, directly or indirectly, transferred to, or exercised by, any person

                                        7






in any state where such transfer or exercise would violate any law, including
securities law, of such state in the opinion of counsel to the Company.

                  E. Prior to the exercise of the 1996 Warrants evidenced
thereby, the holder of a 1996 Warrant Certificate shall not be entitled to any
rights of a shareholder of the Company with respect to the shares for which the
1996 Warrants are exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.

                  F. To the extent that any 1996 Warrant Certificates remain
outstanding and unexercised at 5:00 p.m. on the 1996 Warrant Expiration Date,
such outstanding 1996 Warrant Certificates, and any and all rights to purchase
Common stock associated therewith, shall automatically become null and void and
shall have no further force or effect whatsoever.

                  Section 6. Mutilated or Missing 1996 Warrants. In case any of
the 1996 Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and the 1996 Warrant Agent shall countersign
and deliver in exchange and substitution for and upon cancellation of the
mutilated 1996 Warrant Certificate, or in lieu of and substitution for the 1996
Warrant Certificate lost, stolen or destroyed, a new 1996 Warrant Certificate of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the

                                        8






Company and the 1996 Warrant Agent of such loss, theft or destruction of such
1996 Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute 1996 Warrant Certificates shall also comply with
such other reasonable regulations and pay such reasonable charges as the Company
or the 1996 Warrant Agent may prescribe.

                  Section 7.  Reservation of Common Stock.

                  A. There have been reserved, and the Company shall at all
times keep reserved out of the authorized and unissued Common Stock, a number of
shares of Common Stock sufficient to provide for the exercise of the rights of
purchase represented by the 1996 Warrants. The Company agrees that all Common
Stock issued upon exercise of the 1996 Warrants shall be, at the time of
delivery of the certificates for such Common Stock, validly issued and
outstanding, fully paid and non-assessable.

                  B. The Company will keep a copy of this Agreement on file with
the transfer agent for the Common Stock and with every subsequent transfer agent
for any Common Stock or of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the 1996 Warrants. The 1996
Warrant Agent is hereby irrevocably authorized to requisition from such transfer
agent stock certificates required to honor outstanding 1996 Warrants. The
Company will supply such transfer agent with duly executed stock certificates
for such purpose and will itself provide or otherwise make available any cash
which may be issuable only if so provided in Section 10 of this Agreement.

                                        9






                  C. All 1996 Warrant Certificates surrendered in the exercise
of the rights thereby evidenced shall be canceled by the 1996 Warrant Agent and
shall thereafter be delivered to the Company, and such canceled 1996 Warrant
Certificates shall constitute sufficient evidence of the number of shares of
Common Stock which have been issued upon the exercise of such 1996 Warrants.
Promptly after the 1996 Warrant Expiration Date, the 1996 Warrant Agent shall
certify to the Company the total aggregate amount of 1996 Warrant Certificates
then outstanding, and thereafter no Common Stock shall be subject to reservation
in respect to such 1996 Warrants which shall have expired.

                  Section 8. Purchase Price. The Purchase Price at which Common
Stock shall be purchasable pursuant to the 1996 Warrants shall be $.40 per share
at any time from the 1996 Warrant Date until 5:00 p.m. on December 31, 1996, and
$.50 per share at any time thereafter until the 1996 Warrant Expiration Date;
provided, such price shall be subject to adjustment as provided in Section 9
hereof. In addition to the adjustments required by Section 9, the Company may,
at any time or from time to time prior to the 1996 Warrant Termination Date,
reduce the Purchase Price for such period or periods of time as the Company
deems appropriate.

                  Section 9. Adjustments. Subject and pursuant to the provisions
of this Section 9, the Purchase Price, the number of shares of Common Stock
covered by each 1996 Warrant, and the number of 1996 Warrants outstanding, shall
be subject to adjustment from time to time only as set forth hereinafter:

                                       10






                  A. In case the Company shall declare a Common Stock dividend
on the Common Stock, then the Purchase Price shall be proportionately decreased
as of the close of business on the date of record of said Common Stock dividend
in proportion to such increase of outstanding shares of Common Stock.

                  B. If the Company shall at any time subdivide its outstanding
Common Stock by recapitalization, reclassification or split-up thereof, the
Purchase Price immediately prior to such subdivision shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock by recapitalization, reclassification, or combination thereof,
the Purchase Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Purchase Price shall
become effective at the close of business on the record date for such
subdivision or combination. The Purchase Price shall be proportionately
increased or decreased, as the case may be, in proportion to such increase or
decrease, as the case may be, of outstanding shares of Common Stock.

                  C. Upon any adjustment of the Purchase Price as hereinabove
provided, the number of shares of Common Stock issuable upon exercise of the
1996 Warrants remaining unexercised immediately prior to such adjustment, shall
be changed to the number of shares determined by dividing (I) the aggregate
Purchase Price payable for the purchase of all shares of Common Stock issuable
upon exercise of all the 1996 Warrants remaining unexercised immediately prior
to such adjustment, by (ii) the

                                       11






Purchase Price per share of Common Stock in effect immediately after such
adjustment. Pursuant to this formula, the total sum payable to the Company upon
the exercise of the 1996 Warrants remaining unexercised immediately prior to
such adjustment shall remain constant.

                  D. (I) If any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation, person, or entity, or the sale of all or substantially all
of its assets to another corporation, person, or entity, shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash, property, or assets with respect to or in exchange for Common
Stock, and provided no election is made by the Company pursuant to subsection
(ii) hereof, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, the Company or such successor or purchasing
corporation, person, or entity, as the case may be, shall execute with the 1996
Warrant Agent a supplemental 1996 Warrant Agreement providing that each
registered holder of a 1996 Warrant Certificate shall have the right thereafter
and until the 1996 Warrant Expiration Date to exercise such 1996 Warrants for
the kind and amount of stock, securities, cash, property, or assets receivable
upon such reorganization, reclassification, consolidation, merger, or sale by a
holder of the number of shares of Common Stock for the purchase of which such
1996 Warrant might have been exercised immediately prior to such reorganization,
reclassification, consolidation,

                                       12






merger or sale, subject to subsequent adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
9.

                           (ii)  Notwithstanding subsection (I) hereof and in
lieu thereof, the Company may elect by written notice to the registered holder
of the 1996 Warrant Certificates, to require such registered holder to exercise
all of the 1996 Warrants remaining unexercised prior to any such reorganization,
reclassification, consolidation, merger or sale. If the holder of any 1996
Warrant Certificate shall not exercise all or any part of the 1996 Warrants
remaining unexercised prior to such event, such unexercised 1996 Warrants shall
automatically become null and void upon the occurrence of any such event, and of
no further force and effect. The Common Stock issued pursuant to any such
exercise shall be deemed to be issued and outstanding immediately prior to any
such event, and shall be entitled to be treated as any other issued and
outstanding share of Common Stock in connection with such event.

                  E. The form of 1996 Warrant Certificate need not be changed
because of any change pursuant to this Section 9, and 1996 Warrant Certificates
issued after such change may state the same Purchase Price and the same number
of shares of Common Stock as is stated in the 1996 Warrant Certificates
initially issued pursuant to this 1996 Warrant Agreement. However, the Company
may at any time in its sole discretion (which shall be conclusive) make any
change in the form of 1996 Warrant Certificates that the Company may deem
appropriate and that does not affect the substance

                                       13






thereof; and any 1996 Warrant Certificates thereafter issued or countersigned,
whether in exchange or substitution for an outstanding 1996 Warrant Certificate
or otherwise, may be in the form as so changed.

                  Section 10.  Fractional Interest.

                  A. The Company shall not be required to issue fractions of
1996 Warrants or to distribute 1996 Warrant Certificates which evidence
fractional 1996 Warrants.

                  B. Upon the exercise of the 1996 Warrants, the Company shall
not be required to issue fractional shares of its Common Stock, or to distribute
certificates which evidence fractional shares. In lieu of the issuance of any
such fractional shares on the exercise of the 1996 Warrants, and provided that
the holder of the 1996 Warrant Certificates being exercised has exercised all of
the 1996 Warrants then held by such holder, the Company shall pay cash to the
registered holder of the 1996 Warrants in an amount equal to the value of such
fractional shares based on the market value of the Common Stock on the last
trading day prior to the exercise date. If the holder of such 1996 Warrant
Certificates has not exercised all of the 1996 Warrants then held by such
holder, the Company shall not be required to purchase any such fraction.

                  Section 11. Notices to 1996 Warrant Holders. Upon any
adjustment of the Purchase Price, the number of shares of Common Stock issuable
on exercise of each 1996 Warrant, or the number of 1996 Warrants are adjusted as
provided in Section or if the Purchase Price is reduced by the Company, or the
1996 Warrant Date

                                       14






or 1996 Warrant Expiration Date are adjusted by the Company, then and in each
such case the Company shall give written notice thereof to the 1996 Warrant
Agent, which notice shall state the Purchase Price resulting from such
adjustment, the increase or decrease, if any, in the number of shares of Common
Stock purchasable at such price upon the exercise of each 1996 Warrant, and the
increase or decrease, if any, in the number of 1996 Warrants, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

                  Section 12.  Disposition of Proceeds on Exercise of 1996
Warrants.

                  A. The 1996 Warrant Agent shall account promptly to the
Company with respect to 1996 Warrants exercised and shall forward to the Company
all monies received by the 1996 Warrant Agent for the purchase of shares of
Common Stock through the exercise of such 1996 Warrants.

                  B. The 1996 Warrant Agent shall keep copies of this Agreement
available for inspection by holders of 1996 Warrant Certificates during normal
business hours.

                  Section 13. Merger or Consolidation or Change of Name of 1996
Warrant Agent. Any corporation or company which may succeed to the business of
the 1996 Warrant Agent by any merger or consolidation or otherwise to which the
1996 Warrant Agent shall be a party, or any corporation or company succeeding to
the corporate trust business of the 1996 Warrant Agent, shall be the successor
1996 Warrant Agent hereunder without the execution or filing of any

                                                        15






paper or any further act on the part of any of the parties hereto. In case at
the time such successor to the 1996 Warrant Agent shall succeed to the agency
created by this 1996 Warrant Agreement, any of the 1996 Warrant Certificates
shall have been countersigned but not delivered, any such successor to the 1996
Warrant Agent may adopt the countersignature of the original 1996 Warrant Agent
and deliver such 1996 Warrant Certificates so countersigned; and in case at that
time any of the 1996 Warrant Certificates shall not have been countersigned, any
successor to the 1996 Warrant Agent may countersign such 1996 Warrant
Certificates either in the name of the predecessor 1996 Warrant Agent or in the
name of the successor 1996 Warrant Agent; and in all such cases such 1996
Warrant Certificates shall have the full force provided in the 1996 Warrant
Certificates and in this 1996 Warrant Agreement. In the event the name of the
1996 Warrant Agent shall be changed and at such time any of the 1996 Warrant
Certificates shall have been countersigned but not delivered, the 1996 Warrant
Agent may adopt the countersignature under its prior name and deliver 1996
Warrant Certificates so countersigned; and in case at that time any of the 1996
Warrant Certificates shall not have been countersigned, the 1996 Warrant Agent
may countersign such 1996 Warrant Certificates either in its prior name or in
its changed name; and in all such cases such 1996 Warrant Certificates shall
have the full force provided in the 1996 Warrant Certificates and in this 1996
Warrant Agreement.

 
                                       16





                  Section 14. Duties of 1996 Warrant Agent. The 1996 Warrant
Agent undertakes the duties and obligations imposed by this 1996 Warrant
Agreement upon the following terms and conditions, by all of which the Company
and the holders of 1996 Warrant Certificates, by their acceptance thereof, shall
be bound.

                  A. The statements of facts and recitals contained herein and
in the 1996 Warrant Certificates shall be taken as statements of the Company,
and the 1996 Warrant Agent assumes no responsibility for the correctness of any
of the same except such as describe the 1996 Warrant Agent or action taken or to
be taken by it. The 1996 Warrant Agent assumes no responsibility with respect to
the distribution of the 1996 Warrant Certificates except as herein expressly
provided.

                  B. The 1996 Warrant Agent shall not be responsible for any
failure of the Company to comply with any of the covenants contained in this
Agreement or in the 1996 Warrant Certificates to be complied with by the
Company.

                  C. The 1996 Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the 1996 Warrant
Agent shall incur no liability or responsibility to the Company or to any holder
of any 1996 Warrant Certificate in respect to any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion or the
advice of such counsel.

                  D.  The 1996 Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any 1996 Warrant
Certificate for any action taken in reliance on any notice,

                                       17






resolution, waiver, consent, order, certificate, or other paper, document or
instrument believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.

                  E. To the extent, and in the amounts agreed upon between the
Company and the 1996 Warrant Agent, the Company agrees to pay to the 1996
Warrant Agent reasonable compensation for all services rendered by the 1996
Warrant Agent in connection with this 1996 Warrant Agreement, to reimburse the
1996 Warrant Agent for all expenses, taxes and governmental charges and other
charges of any kind and nature incurred by the 1996 Warrant Agent in connection
with this 1996 Warrant Agreement. The Company also agrees to indemnify the 1996
Warrant Agent and save it harmless against any and all liabilities, including
judgments, costs and reasonable counsel fees, for anything done or omitted by
the 1996 Warrant Agent in connection with the 1996 Warrant Agreement except as a
result of the 1996 Warrant Agent's negligence, willful misconduct, or bad faith.

                  F. The 1996 Warrant Agent shall be under no obligation to
institute any action, suit or legal proceedings or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of 1996 Warrant Certificates shall furnish the 1996 Warrant Agent with
reasonable security and indemnity for any costs and expenses which may be
incurred, but this provision shall not affect the power of the 1996 Warrant
Agent to take such action as the 1996 Warrant Agent may consider proper, whether
with or without any security or indemnity. All rights of

                                       18






action under this 1996 Warrant Agreement or under any of the 1996 Warrants may
be enforced by the 1996 Warrant Agent without the possession of any of the 1996
Warrant Certificates or production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the 1996
Warrant Agent shall be brought in its name as 1996 Warrant Agent, and any
recovery or judgment shall be for the ratable benefit of the registered holders
of the 1996 Warrant Certificates, as their respective rights or interests may
appear.

                  G. The 1996 Warrant Agent shall act hereunder solely as agent
and not in a ministerial capacity, and its duties shall be determined solely by
the provisions hereof. The 1996 Warrant Agent shall not be liable for anything
which it may do or refrain from doing in connection with this 1996 Warrant
Agreement except for its own negligence, willful misconduct or bad faith.

                  H. The 1996 Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees, and the 1996 Warrant Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys, agents or employees or for any loss to the
Company resulting from such neglect or misconduct, provided reasonable care had
been exercised in the selection and continued employment thereof.

                  I.  Any request, direction, election, order or demand of
the Company shall be sufficiently evidenced by an instrument signed

                                       19






in the name of the Company by its President or Vice President or its Secretary
or an Assistant Secretary or its Treasurer or Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); any resolution
of the Board of Directors may be evidenced to the 1996 Warrant Agent by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company.

                  Section 15. Change of 1996 Warrant Agent. The 1996 Warrant
Agent may resign and be discharged from its duties under this 1996 Warrant
Agreement by giving to the Company notice in writing, and to the holders of the
1996 Warrant Certificates notice by mailing such notice to holders at their
addresses appearing on the 1996 Warrant register, of such resignation,
specifying a date when such resignation shall take effect. The 1996 Warrant
Agent may be removed by like notice to the 1996 Warrant Agent from the Company
and by like mailing of notice to the holders of the 1996 Warrant Certificates.
If the 1996 Warrant Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the 1996 Warrant
Agent. If the Company shall fail to make such appointment within a period of 30
days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated 1996 Warrant Agent
or by the registered holder of a 1996 Warrant Certificate (who shall, with such
notice, submit his 1996 Warrant Certificate for inspection by the Company), then
the registered holder of any 1996 Warrant Certificate may apply to any court of

                                       20






competent jurisdiction for the appointment of a successor to the 1996 Warrant
Agent. Any successor 1996 Warrant agent, whether appointed by the Company or by
such a court, shall be a bank or trust company, in good standing, incorporated
under the laws of the Commonwealth of Pennsylvania or any other state in the
United States of America. After appointment, the successor 1996 Warrant agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as 1996 Warrant Agent without further act or deed;
but the former 1996 Warrant Agent shall deliver and transfer to the successor
1996 Warrant agent all canceled 1996 Warrants, records and property at the time
held by it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Failure to file or mail any notice
provided for in this Section, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the 1996 Warrant Agent
or the appointment of the successor 1996 Warrant agent, as the case may be.

                  Section 16. Right of Action. All rights of action in respect
of this Agreement are vested in the respective registered holders of the 1996
Warrant Certificates; and any registered holder of any 1996 Warrant Certificate,
without the consent of 1996 Warrant Agent or of the holder of any other 1996
Warrant Certificate, may, in such holder's own behalf and for such holder's own
benefit, enforce, and may institute and maintain any suit, action, or proceeding
against the Company to enforce,or otherwise

                                       21






in respect of, such holder's right to exercise the 1996 Warrants evidenced by
such 1996 Warrant Certificate in the manner provided in such 1996 Warrant
Certificate and in this Agreement.

                  Section 17. Agreement of 1996 Warrant Certificate Holders.
Every holder of a 1996 Warrant Certificate, by accepting same, consents and
agrees with Company, 1996 Warrant Agent, and with every other holder of a 1996
Warrant Certificate that:

                  A.  The 1996 Warrants are transferable only on the
registry books of 1996 Warrant Agent upon surrender of the 1996
Warrant Certificates at the principal office of 1996 Warrant Agent
and only as provided in Section 4; and

                  B. The Company and 1996 Warrant Agent may deem and treat the
person in whose name the 1996 Warrant Certificate is registered as the absolute
owner thereof and of the 1996 Warrants evidenced thereby (notwithstanding any
notations of ownership or writing on the 1996 Warrant Certificates made by
anyone other than the Company or 1996 Warrant Agent) for all purposes
whatsoever, and neither the Company nor 1996 Warrant Agent shall be affected by
any notice to the contrary.

                  Section 18. Identity of Transfer Agent. Forthwith upon the
appointment of any transfer agent for the Common Stock (other than 1996 Warrant
Agent) or any subsequent transfer agent for Common Stock or other shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the 1996 Warrants, the Company will file with the 1996 Warrant
Agent a statement setting forth the name and address of such transfer agent.

                                       22








                  Section 19. Notices. Any notice pursuant to this 1996 Warrant
Agreement to be given or made by the 1996 Warrant Agent or by the registered
holder of any 1996 Warrant Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing by the Company with the
1996 Warrant Agent) as follows:

                                    USA Technologies, Inc.
                                    3 Glenhardie Corporate Center
                                    1265 Drummers Lane, Suite 306
                                    Wayne, Pennsylvania 19087
                                    Attn: George R. Jensen, Jr.,
                                          President

Any notice pursuant to this Agreement to be given or made by the Company or by
the registered holder of any 1996 Warrant Certificate to or on the 1996 Warrant
Agent shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the 1996
Warrant Agent with the Company) as follows:

                                    American Stock Transfer &
                                            Trust Company
                                    40 Wall Street
                                    New York, New York 10005

                  Section 20. Supplements and Amendments. The Company and the
1996 Warrant Agent may from time to time supplement or amend the 1996 Warrant
Agreement without the approval of any holders of 1996 Warrant Certificates in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to

                                       23






make any other provisions in regard to matters or questions arising hereunder
which the Company and the 1996 Warrant Agent may deem necessary or desirable and
which shall not be inconsistent with the provisions of the 1996 Warrant
Certificates and which shall not adversely affect the interests of the holders
of 1996 Warrant Certificates.

                  Section 21. Successors. All the covenants and provisions of
this 1996 Warrant Agreement by or for the benefit of the Company or the 1996
Warrant Agent shall bind and inure to the benefit of their respective successors
and assigns hereunder.

                  Section 22. Interpretation. This 1996 Warrant Agreement and
each 1996 Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the Commonwealth of Pennsylvania and for all purposes
shall be constructed in accordance with the laws of said Commonwealth.

                  Section 23. Benefits of this Agreement. Nothing in this 1996
Warrant Agreement shall be construed to give to any person or corporation other
than the Company, the 1996 Warrant Agent and the registered holders of the 1996
Warrant Certificates any legal or equitable right, remedy or claim under this
1996 Warrant Agreement; but this 1996 Warrant Agreement shall be for the sole
and exclusive benefit of the Company, the 1996 Warrant Agent and the registered
holders of the 1996 Warrant Certificates.

                  Section 24.  Counterparts. This Agreement may be executed
in any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original, and all such

                                       24





counterparts shall together constitute but one and the same
instrument.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Warrant Agreement to be duly executed as of the day and year first above
written.

                                       USA TECHNOLOGIES, INC.

Attest: /s/Keith Sterling              By: /s/George R.Jensen,Jr.
        ---------------------             ------------------------------
                                           George R. Jensen, Jr.,
                                              President

                                       AMERICAN STOCK TRANSFER &
                                              TRUST COMPANY

Attest: /s/Joe Alicia                  By: /s/Joe Wolf
        ---------------------             ------------------------------
                                           Authorized Officer

                                       25



                                                                     Exhibit 4.2

                             SEE LEGEND ON REVERSE

NUMBER                               LOGO                              Warrants
W96-
                                      USA
                                  TECHNOLOGIES

                             USA TECHNOLOGIES, INC.

        INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA

           Void After 5:00 p.m. Eastern Standard Time, on May 31, 2001
                       Warrants to Purchase Common Stock
                           of USA Technologies, Inc.

           THIS CERTIFIES, that for value received

or registered assigns, is the owner of the number of Common Stock Purchase
Warrants set forth above (subject to adjustment as referred to below), each of
which represents the right, at any time prior to the Expiration Date (as
hereinafter defined), to purchase one fully paid and nonassessable share of the
Common Stock, no par value ("Common Stock"), of USA Technologies, Inc., a
Pennsylvania corporation (the "Company"), at the price of $.50 per share
(subject to adjustment as referred to below)(as it may be adjusted from time to
time, the "Warrant Price), subject to the terms and conditions hereof and of the
Warrant Agreement (as hereinafter defined). Each such purchase to be made, and
to be deemed effective for the purpose of determining the date of exercise
hereof, only upon surrender of this Warrant Certificate to the Company at the
office in New York, New York, of the American Stock Transfer & Trust Company, as
Warrant Agent (the "Warrant Agent) (or any successor Warrant Agent), with the
form of Election to Exercise on the reverse hereof duly completed and executed
and upon simultaneous payment, to the Warrant Agent for the account of the
Company, in cash or by certified or bank cashier's check, of the exercise price
as provided in the Warrant Agreement and upon compliance with and subject to the
conditions set forth herein and in the Warrant Agreement. Each Warrant may be
exercised on any Business Day (as hereinafter defined) on or after June 1, 1996,
and on or before 5:00 p.m. Eastern Standard Time, on May 31, 2001 (the
"Expiration Date"). After the Expiration Date, any previously unexercised
Warrants shall be void, have no value, and be of no further effect.
         This Warrant Certificate is issued under and in accordance with the
Warrant Agreement, dated as of May 1, 1996 (herein called the "Warrant
Agreement"), between the Company and the Warrant Agent and is subject to the
terms of the Warrant Agreement, to all of which terms every holder of this
Warrant Certificate consents by acceptance hereof. Reference is hereby made to
the Warrant Agreement for a more complete statement of the rights and
limitations of rights of the registered holder hereof, the rights and duties of
the Warrant Agent and the rights and obligations of the Company thereunder.
Copies of the Warrant Agreement are on file at the office of the Warrant Agent.
The number of shares of Common Stock which may be purchased upon the exercise of
the Warrants represented hereby and the purchase price per share upon such
exercise shall be subject to adjustment from time to time as provided in Section
9 of the Warrant Agreement.
         The Company shall not be required upon the exercise of the Warrants
represented hereby to issue fractions of shares but in lieu thereof the Company
shall pay in cash an appropriate amount for any fraction of a share based upon
the last reported sales price of the Common Stock on the trading day immediately
preceding the date of exercise (all as computed in the Warrant Agreement). If
the Warrants represented hereby shall be exercised in part, the registered
holder hereof shall be entitled to receive, upon surrender hereof, a new Warrant
Certificate for the number of Warrants not exercised as provided in the Warrant
Agreement.
         This Warrant Certificate may be exchanged at the office in New York,
New York of the Warrant Agent (or at the office of its successor as Warrant
Agent), either separately or in combination with other Warrant Certificates, for
new Warrant Certificates representing the same aggregate number of Warrants as
were evidenced by the Warrant Certificate or Warrant Certificate
exchanged, upon compliance with and subject to the conditions set forth herein
and in the Warrant Agreement.



         This Warrant Certificate is transferable at the office in New York, New
York, of the Warrant Agent (or of its successor as Warrant Agent) by the
registered holder hereof in person or by attorney duly authorized in writing,
upon surrender of this Warrant Certificate and upon compliance with and subject
to the conditions set forth herein and in the Warrant Agreement. Upon any such
transfer, a new Warrant Certificate or new Warrant Certificates of different
denominations, representing in the aggregate a like number of Warrants, will be
issued to the transferee. Every holder of Warrants, by accepting this Warrant
Certificate, consents and agrees with the Company, the Warrant Agent and with
every subsequent holder of this Warrant Certificate that until the registration
of transfer of this Warrant Certificate is effected on the books of the Warrant
Agent, the Company and the Warrant Agent may deem and treat the person in whose
name this Warrant Certificate is registered as the absolute and lawful owner of
the Warrants represented hereby for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.

         This Warrant Certificate does not entitle the registered holder hereof
to any of the rights of a stockholder of the Company.

         IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed by its President, by manual or facsimile signature and a facsimile
of its corporate seal to be affixed or imprinted hereon, attested by its
Secretary, by manual or facsimile signature.

Dated:                                          USA TECHNOLOGIES, INC.


BY /s/ Keith L. Sterling                        BY /s/ George R. Jensen, Jr.
   ---------------------------                     ---------------------------
    Secretary                                       President
                             USA TECHNOLOGIES, INC.
                                 CORPORATE SEAL
                                     ------
                                      1992
                                     ------
                                  PENNSYLVANIA
                                       *





THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AS WELL AS THE COMMON STOCK
UNDERLYING THE WARRANTS, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES STATUTES AND REGULATIONS. SUCH
WARRANTS AND THE COMMON STOCK UNDERLYING THE WARRANTS HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES STATUTES AND
REGULATIONS, UNLESS, IN THE OPINION OF COUNSEL TO THE COMPANY, SUCH REGISTRATION
IS NOT REQUIRED.

                                SUBSCRIPTION FORM
                    (To Be Executed Upon Exercise of Warrant)

         The undersigned hereby irrevocably elects to exercise _______________
Warrants represented by this Warrant Certificate, and to purchase the securities
issuable upon the exercise of such Warrants, and requests that such securities
shall be issued in the name of

- --------------------------------------------------------------------------------
                                     (Name)

- --------------------------------------------------------------------------------
                                    (Address)

- --------------------------------------------------------------------------------
                  (Social Security or other identifying number)

and be delivered to

- --------------------------------------------------------------------------------
                                     (Name)

- --------------------------------------------------------------------------------
                                    (Address)

- --------------------------------------------------------------------------------
         Notice: The signature on this subscription form must correspond with
the name as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever and must be guaranteed by a bank, other
than a savings bank, or trust company having an office or correspondent in New
York, New York, or by a firm having membership on a registered national
securities exchange and an office in New York, New York.

Signature:
           ------------------------------------

                                              ----------------------------------
                                                      Signature Guarantee


                                   ASSIGNMENT

         For value received, __________________________________________________

________________________ hereby sells, assigns and transfers unto _____________

_______________________ Warrants represented by the within Warrant Certificate,
together with all right, title and interest herein, and does hereby irrevocably
constitute and appoint

_____________________________ attorney, to transfer this Warrant Certificate on
the books of the within-name company, with full power of substitution.


Dated: __________________________, 19______



                ------------------------------------------------
                           Signature of Warrant Holder

                ------------------------------------------------
                         Printed Name of Warrant Holder

                ------------------------------------------------
                             Social Security Number



                                         ---------------------------------------
                                                  Signature of Guarantee



- --------------------------------------------------------------------------------
         Notice: The signature on this subscription form must correspond with
the name as written upon the face of the within Warrant, or upon the assignment
form on the reverse thereof, in every particular, without alteration or
enlargement, or any change whatsoever and must be guaranteed by a bank, other
than a savings bank, or trust company having an office or correspondent in New
York, New York, or by a firm having membership on a registered national
securities exchange and an office in New York, New York.

IMPORTANT:  SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A
MEMBER OF A REGISTERED NATIONAL STOCK EXCHANGE, OR BY A COMMERCIAL
BANK OR A TRUST COMPANY.



                                                                     Exhibit 5.1
                               LURIO & ASSOCIATES

                                ATTORNEYS AT LAW
                                   SUITE 1300
                               1760 MARKET STREET
                           PHILADELPHIA, PA 19103-4132

                                ----------------
DOUGLAS M. LURIO**                                             NEW JERSEY OFFICE
MARGARET SHERRY LURIO*                                        
                                                               411 COOPER STREET
                                 215 / 665-9300         CAMDEN, NEW JERSEY 08102
                               FAX 215 / 665-8582         TEL. NO.: 609/225-9434
              
                                                        
                                                        
**MEMBER PENNSYLVANIA & FLORIDA BARS
*MEMBER PENNSYLVANIA & NEW JERSEY BARS

                                 August 1, 1996

USA Technologies, Inc.
Three Glenhardie Corporate Center
Suite 306
1265 Drummers Lane
Wayne, PA 19087

Attn: Mr. George R. Jensen, Jr., President

                   Re: USA Technologies, Inc. -
                       Registration Statement on Form SB-2
                       -----------------------------------

Dear Mr. Jensen:

         We have acted as counsel to USA Technologies, Inc., a Pennsylvania
corporation (the "Company"), in connection with a Registration Statement on Form
SB-2, filed with the Securities and Exchange Commission on the date hereof (the
"Registration Statement"). The Registration Statement covers 5,200,000 shares of
Common Stock ("Common Stock") issuable upon exercise of outstanding 1996 Common
Stock Purchase Warrants of the Company (the "1996 Warrants").

         In rendering this opinion, we have examined (i) the Articles of
Incorporation, as amended, and By-Laws of the Company; (ii) the resolutions of
the Board of Directors evidencing the corporate proceedings taken by the Company
to authorize the issuance of the Common Stock pursuant to the Registration
Statement; (iii) the Registration Statement (including all exhibits thereto);
and (iv) such other documents as we have deemed appropriate or necessary as a
basis for the opinion hereinafter expressed.

         In rendering the opinion expressed below, we assumed the authenticity
of all documents and records examined, the conformity with the original
documents of all documents submitted to us as copies and the genuineness of all
signatures.

         Based upon and subject to the foregoing, and such legal considerations
as we deem relevant, we are of the opinion that, when issued as contemplated by
the Registration Statement, the Common Stock will be legally issued, fully paid
and nonassessable.

         We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to references made to this firm under the heading
"Legal Matters" in the Prospectus contained in the Registration Statement and
all amendments thereto.

                                   Sincerely,



                                   /s/  LURIO & ASSOCIATES
                                   ---------------------------------
                                        LURIO & ASSOCIATES




                                                                  Exhibit 10.1.2

                     FIRST AMENDMENT TO AMENDED AND RESTATED
                         EMPLOYMENT AND NON-COMPETITION

                                    AGREEMENT

                  This First Amendment is made as of the 29th day of April 1996,
by and between GEORGE R. JENSEN, JR. ("Jensen"), and USA TECHNOLOGIES, INC., a
Pennsylvania corporation ("USA").

                                   Background

                  USA and Jensen entered into an Amended And Restated Employment
And Non-Competition Agreement dated as of July 1, 1992 (the "Agreement"). As
more fully set forth herein, the parties desire to amend the Agreement in
certain respects.

                                    Agreement

                  NOW, THEREFORE, in consideration of the covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:

                  1. Amendment. Subparagraph (a) of Section 2. Compensation and
Benefits of the Agreement is hereby deleted and the following new subparagraph
(a) is hereby substituted in its place:

                  (a) In consideration of his services rendered, USA shall pay
                  to Jensen a base salary at the rate of $90,000 per year
                  through June 30, 1996, and a base salary at the rate of
                  $100,000 per year from and after July 1, 1996.

                  2. Modification. Except as otherwise specifically set forth in
Paragraph 1, the Agreement shall not be amended or modified in any respect
whatsoever and shall continue in full force and effect.







                  3. Capitalized Terms. Except as specifically provided
otherwise herein, all capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.

                  4. Original Part. The amendment to the Agreement made in
Paragraph 1 hereof shall be deemed to have been an original part of the
Agreement and to have been effective from and after the date of the Agreement.

                  IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment as of the day and year first above written.

                                         USA TECHNOLOGIES, INC.

                                    By:  /s/  George R. Jensen, Jr.
                                         --------------------------------
                                         George R. Jensen, Jr.
                                         Chief Executive Officer

                                         George R. Jensen, Jr.
                                         --------------------------------
                                         George R. Jensen, Jr.


March 21, 1995


                                                        2


                                                                  Exhibit 10.2.1
                               FIRST AMENDMENT TO
                         EMPLOYMENT AND NON-COMPETITION

                                    AGREEMENT

                  This First Amendment is made as of the 29th day of April 1996,
by and between KEITH L. STERLING ("Sterling"), and USA TECHNOLOGIES, INC., a
Pennsylvania corporation ("USA").

                                   Background

                  USA and Sterling entered into an Employment And Non-
Competition Agreement dated as of July 1, 1993 (the "Agreement"). As more fully
set forth herein, the parties desire to amend the Agreement in certain respects.

                                    Agreement

                  NOW, THEREFORE, in consideration of the covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:

                  1. Amendment.  Subparagraph A. of Section 2. Compensation
and Benefits of the Agreement is hereby deleted and the following
new subparagraph A. is hereby substituted in its place:

                  A. In consideration of his services rendered, USA shall pay to
                  Sterling a base salary at the rate of $75,000 per year through
                  June 30, 1996, and a base salary at the rate of $90,000 per
                  year from and after July 1, 1996.

                  2. Modification. Except as otherwise specifically set forth in
Paragraph 1, the Agreement shall not be amended or modified in any respect
whatsoever and shall continue in full force and effect.





                  3. Capitalized Terms. Except as specifically provided
otherwise herein, all capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.

                  4. Original Part. The amendment to the Agreement made in
Paragraph 1 hereof shall be deemed to have been an original part of the
Agreement and to have been effective from and after the date of the Agreement.

                  IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment as of the day and year first above written.


                                         USA TECHNOLOGIES, INC.

                                    By:  /s/  George R. Jensen, Jr.
                                         --------------------------------
                                         George R. Jensen, Jr.
                                         Chief Executive Officer

                                         /s/ Keith L. Sterling
                                         --------------------------------
                                         Keith L. Sterling.







                                                              

                                                               

                                        2



                                                                  Exhibit 10.3.1


                               FIRST AMENDMENT TO
                         EMPLOYMENT AND NON-COMPETITION

                                    AGREEMENT

                  This First Amendment is made as of the 29th day of April 1996,
by and between EDWARD J. SULLIVAN ("Sullivan"), and USA TECHNOLOGIES, INC., a
Pennsylvania corporation ("USA").

                                   Background

                  USA and Sullivan entered into an Employment And Non-
Competition Agreement dated as of July 1, 1993 (the "Agreement"). As more fully
set forth herein, the parties desire to amend the Agreement in certain respects.

                                    Agreement

                  NOW, THEREFORE, in consideration of the covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:

                  1. Amendment. Subparagraph A. of Section 2. Compensation and
Benefits of the Agreement is hereby deleted and the following new subparagraph
A. is hereby substituted in its place:

                  A. In consideration of his services rendered, USA shall pay to
                  Sullivan a base salary at the rate of $75,000 per year through
                  June 30, 1996, and a base salary at the rate of $80,000 per
                  year from and after July 1, 1996.

                  2. Modification. Except as otherwise specifically set forth in
Paragraph 1, the Agreement shall not be amended or modified in any respect
whatsoever and shall continue in full force and effect.





                  3. Capitalized Terms. Except as specifically provided
otherwise herein, all capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.

                  4. Original Part. The amendment to the Agreement made in
Paragraph 1 hereof shall be deemed to have been an original part of the
Agreement and to have been effective from and after the date of the Agreement.

                  IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment as of the day and year first above written.



                                         USA TECHNOLOGIES, INC.

                                    By:  /s/  George R. Jensen, Jr.
                                         --------------------------------
                                         George R. Jensen, Jr.
                                         Chief Executive Officer

                                         /s/ Edward J. Sullivan
                                         --------------------------------
                                         Edward J. Sullivan








                                                              

                                        2




                                                                  Exhibit 10.6.1

THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT UNDER SUCH ACT AND SUCH LAWS WITH RESPECT
TO THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

OPTION CERTIFICATE                                  50,000 COMMON STOCK OPTIONS
NO. 143

                             USA TECHNOLOGIES, INC.

                              COMMON STOCK OPTIONS

                   (This Option will be void if not exercised
                          by the date provided below.)

                  1. Options. Subject to the terms and conditions hereof, this
certifies that EDWARD J. SULLIVAN, is the owner of 50,000 Options (the
"Options") of USA Technologies, Inc. (the "Company"), a Pennsylvania
corporation. Each Option, when vested in accordance with Section 3 hereof,
entitles the owner hereof to purchase from the Company at any time prior to 5:00
p.m. on the fifth annual anniversary of the vesting of such option (the
"Termination Date"), one fully paid and non-assessable share of the Company's
Common Stock, without par value (the "Common Stock"), subject to adjustment as
provided in Section 8 hereof.

                  2. Option Price. The Options, when vested, shall be exercised
by delivery to the Company of the option price for each share of Common Stock
being purchased hereunder (the "Option Price"), this Certificate, and the
completed Election To Purchase Form which is attached hereto. The Option Price
shall be $.65 per share of Common Stock to be purchased pursuant to each Option.
The Option Price shall be subject to adjustment as provided in Section 8 hereof.
The Option Price is payable either in cash or by certified check or bank draft
payable to the order of the Company.

                  3. Vesting of Options.

I.        Notwithstanding anything contained herein to the contrary, the Options
represented by this Certificate shall only become vested and exercisable by
SULLIVAN in accordance with the terms and conditions set forth in this Section
3. If SULLIVAN is employed by the Company as of June 30, 1997, the Options shall
on such date become irrevocably and absolutely vested and exercisable. If
SULLIVAN is not employed by the Company on such date, the Options shall not
become vested and shall be null and void.








                  a. The Employment And Non-Competition Agreement dated July 1,
1993 between SULLIVAN and the Company, and the First Amendment thereto dated as
of April 29, 1996, as well as any and all further supplements, amendments, or
modifications thereto (collectively, the "Employment Agreement"), are hereby
incorporated herein by reference. The terms and conditions thereof shall be used
to determine whether SULLIVAN is employed by the Company on the vesting date.
Therefore, and as set forth in the Employment Agreement, SULLIVAN's employment
would be considered terminated upon his death or disability under Section 4
thereof, or upon notice given to SULLIVAN by the Company under Section 3
thereof, or upon notice given by the Company or SULLIVAN under Section 1A.
thereof.

                  4. Exercise. Upon the surrender of this Certificate and
payment of the Option Price as aforesaid, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
registered holder of this Option and in such name or names as the registered
holder may designate, a certificate or certificates for the number of full
shares of Common Stock so purchased upon the exercise of any Option. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Common Stock on and as of the date of the delivery to the Company
of this Certificate and payment of the Option Price as aforesaid. If, however,
at the date of surrender of this Certificate and payment of such Option Price,
the transfer books for the Common Stock purchasable upon the exercise of any
Option shall be closed, the certificates for the Common Stock in respect to
which any such Option are then exercised shall be issued and the owner of such
Common Stock shall become a record owner of such Common Stock on and as of the
next date on which such books shall be opened, and until such date the Company
shall be under no duty to deliver any certificate for such Common Stock.

                  5. Partial Exercise. The rights of purchase represented by the
Options shall be exercisable, at the election of the registered holder hereof,
either as an entirety, or from time to time for any part of the Common Stock
specified herein and, in the event that the Options are exercised with respect
to less than all of the Common Stock specified herein at any time prior to the
Termination Date, a new Certificate will be issued to such registered holder for
the remaining number of Options not so exercised.

                  6. Termination Date. All of the Options must be exercised in
accordance with the terms hereof prior to the Termination Date. At and after the
Termination Date any and all unexercised rights hereunder shall become null and
void and the Options shall without any action on behalf of the Company become
null and void.


                                        2








                  7. Lost, Mutilated Certificate. In case this Common Stock
Option Certificate shall become mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation of
the mutilated certificate, or in lieu of and in substitution for the Certificate
lost, stolen, or destroyed, a new Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such certificate and
indemnity, if requested, also satisfactory to the Company.

                  8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Option Price and number of shares of Common Stock subject to the
Options shall be subject to adjustment from time to time only as set forth
hereinafter:

                           a. In case the Company shall declare a Common Stock
dividend on the Common Stock, then the Option Price shall be proportionately
decreased as of the close of business on the date of record of said Common Stock
dividend in proportion to such increase of outstanding shares of Common Stock.

                           b. If the Company shall at any time subdivide its
outstanding Common Stock by recapitalization, reclassification or split-up
thereof, the Option Price immediately prior to such subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification, or
combination thereof, the Option Price immediately prior to such combination
shall be proportionately increased. Any such adjustment to the Option Price
shall become effective at the close of business on the record date for such
subdivision or combination. The Option Price shall be proportionately increased
or decreased, as the case may be, in proportion to such increase or decrease, as
the case may be, of outstanding shares of Common Stock.

                           b. Upon any adjustment of the Option Price as
hereinabove provided, the number of shares of Common Stock issuable upon
exercise of the Options remaining unexercised immediately prior to any such
adjustment, shall be changed to the number of shares determined by dividing (I)
the appropriate Option Price payable for the purchase of all shares of Common
Stock issuable upon exercise of all of the Options remaining unexercised
immediately prior to such adjustment by (ii) the Option Price per share of
Common Stock in effect immediately after such adjustment. Pursuant to this
formula, the total sum payable to the Company upon the exercise of the Options
remaining unexercised immediately prior to such adjustment shall remain
constant.



                                        3





                           c. (I) If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, person, or entity, or the sale of all
or substantially all of its assets to another corporation, person, or entity,
shall be effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities, cash, property, or assets with respect to or in
exchange for Common Stock, and provided no election is made by the Company
pursuant to subsection (ii) hereof, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Company or such successor
or purchasing corporation, person, or entity, as the case may be, shall agree
that the registered holder of the Options shall have the right thereafter and
until the Termination Date to exercise such Options for the kind and amount of
stock, securities, cash, property, or assets receivable upon such
reorganization, reclassification, consolidation, merger, or sale by a holder of
the number of shares of Common Stock for the purchase of which such Options
might have been exercised immediately prior to such reorganization,
reclassification, consolidation, merger or sale, subject to such subsequent
adjustments which shall be equivalent or nearly equivalent as may be practicable
to the adjustments provided for in this Section 8.

                           (ii) Notwithstanding subsection (I) hereof and in
lieu thereof, the Company may elect by written notice to the registered holder
hereof, to require such registered holder to exercise all of the Options
remaining unexercised prior to any such reorganization, reclassification,
consolidation, merger or sale. If the holder of this Option shall not exercise
all or any part of the Options remaining unexercised prior to such event, such
unexercised Options shall automatically become null and void upon the occurrence
of any such event, and of no further force and effect. The Common Stock issued
pursuant to any such exercise shall be deemed to be issued and outstanding
immediately prior to any such event, and shall be entitled to be treated as any
other issued and outstanding share of Common Stock in connection with such
event. If an election is not made by the Company pursuant to this subsection
(ii) in connection with any such event, then the provisions of subsection (I)
hereof shall apply to such event.

                           d. Whenever the Option Price and number of shares of
Common Stock subject to this Option is adjusted as herein provided, the Company
shall promptly mail to the registered holder of this Option a statement signed
by an officer of the Company setting forth the adjusted Option Price and the
number of shares of Common Stock subject to this Option, determined as so
provided.

                           e. This form of Certificate need not be changed
because of any adjustment which is required pursuant to this Section 8. However,
the Company may at any time in its sole discretion (which shall be conclusive)
make any change in the form of this Certificate that the Company may deem
appropriate and that

                                        4






does not affect the substance hereof; and any Certificate thereafter issued,
whether in exchange or substitution for this Certificate or otherwise, may be in
the form as so changed.

                  9. Reservation. There has been reserved, and the Company shall
at all times keep reserved out of the authorized and unissued shares of Common
Stock, a number of shares of Common Stock sufficient to provide for the exercise
of the right of purchase represented by the Options. The Company agrees that all
shares of Common Stock issued upon exercise of the Options shall be, at the time
of delivery of the Certificates for such Common Stock, validly issued and
outstanding, fully paid and non-assessable.

                  10. Fractional Shares. The Company shall not issue any
fractional shares of Common Stock pursuant to any exercise of any Option and
shall pay cash to the holder of any Option in lieu of any such fractional
shares.

                  11. No Right. The holder of any Options shall not be entitled
to any of the rights of a shareholder of the Company prior to the date of
issuance of the Common Stock by the Company pursuant to an exercise of any
Option.

                  12. Securities Laws. As a condition to the issuance of any
Common Stock pursuant to the Options, the holder of such Common Stock shall
execute and deliver such representations, warranties, and covenants, that may be
required by applicable federal and state securities law, or that the Company
determines is reasonably necessary in connection with the issuance of such
Common Stock. In addition, the certificates representing the Common Stock shall
contain such legends, or restrictive legends, or stop transfer instructions, as
shall be required by applicable Federal or state securities laws, or as shall be
reasonably required by the Company.

                  13. Applicable Law. The Options and this Certificate shall be
deemed to be a contract made under the laws of the Commonwealth of Pennsylvania
and for all purposes shall be construed in accordance with the laws thereof
regardless of its choice of law rules.

                  IN WITNESS WHEREOF, USA TECHNOLOGIES, INC., has executed and
delivered this Certificate and caused its corporate seal to be affixed hereto.

                                                 USA TECHNOLOGIES, INC.

Corporate Seal                              By:  /s/ George R. Jensen, Jr.
                                                 ------------------------------
                                                 George R. Jensen, Jr.
                                                 Chief Executive Officer

                                            Attest: /s/ Keith L. Sterling
                                                 ------------------------------
                                                 Keith L. Sterling, Secretary

Dated: April 29, 1996

                                        5






USA TECHNOLOGIES, INC.
3 Glenhardie Corporate Center
1265 Drummers Lane, Suite 306
Wayne, Pennsylvania  19087
Attn:  George R. Jensen, Jr.,
       Chief Executive Officer

                              ELECTION TO PURCHASE

                  The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the attached Option Certificate No.____ of the
Company. The undersigned desires to purchase shares of Common Stock provided for
therein and tenders herewith full payment of the Option Price for the shares of
Common Stock being purchased, all in accordance with the Certificate. The
undersigned requests that a Certificate representing such shares of Common Stock
shall be issued in the name of _______________________________________________

______________________________ and be delivered to ___________________________

____________________________________.  If said number of shares of Common Stock
shall not be all the shares purchasable under the Certificate, then a new
Certificate for the balance remaining of the shares of Common Stock purchasable
shall be registered in the name of, and delivered, to the undersigned at the
following address:__________________________________________________________

____________________________________________________________________________

                                                    .





Dated: _________  , 19____             Signature: ___________________________


                                        6


                                                                  Exhibit 10.7.1


THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT UNDER SUCH ACT AND SUCH LAWS WITH RESPECT
TO THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

OPTION CERTIFICATE                                  50,000 COMMON STOCK OPTIONS
NO. 142

                             USA TECHNOLOGIES, INC.

                              COMMON STOCK OPTIONS

                   (This Option will be void if not exercised
                          by the date provided below.)

                  1. Options. Subject to the terms and conditions hereof, this
certifies that KEITH L. STERLING, is the owner of 50,000 Options (the "Options")
of USA Technologies, Inc. (the "Company"), a Pennsylvania corporation. Each
Option, when vested in accordance with Section 3 hereof, entitles the owner
hereof to purchase from the Company at any time prior to 5:00 p.m. on the fifth
annual anniversary of the vesting of such option (the "Termination Date"), one
fully paid and non-assessable share of the Company's Common Stock, without par
value (the "Common Stock"), subject to adjustment as provided in Section 8
hereof.

                  2. Option Price. The Options, when vested, shall be exercised
by delivery to the Company of the option price for each share of Common Stock
being purchased hereunder (the "Option Price"), this Certificate, and the
completed Election To Purchase Form which is attached hereto. The Option Price
shall be $.65 per share of Common Stock to be purchased pursuant to each Option.
The Option Price shall be subject to adjustment as provided in Section 8 hereof.
The Option Price is payable either in cash or by certified check or bank draft
payable to the order of the Company.

                  3. Vesting of Options.

I. Notwithstanding anything contained herein to the contrary, the Options
represented by this Certificate shall only become vested and exercisable by
STERLING in accordance with the terms and conditions set forth in this Section
3. If STERLING is employed by the Company as of June 30, 1997, the Options shall
on such date become irrevocably and absolutely vested and exercisable. If
STERLING is not employed by the Company on such date, the Options shall not
become vested and shall be null and void.








                  a. The Employment And Non-Competition Agreement dated July 1,
1993 between STERLING and the Company, and the First Amendment thereto dated as
of April 29, 1996, as well as any and all further supplements, amendments, or
modifications thereto (collectively, the "Employment Agreement"), are hereby
incorporated herein by reference. The terms and conditions thereof shall be used
to determine whether STERLING is employed by the Company on the vesting date.
Therefore, and as set forth in the Employment Agreement, STERLING's employment
would be considered terminated upon his death or disability under Section 4
thereof, or upon notice given to STERLING by the Company under Section 3
thereof, or upon notice given by the Company or STERLING under Section 1A.
thereof.

                  4. Exercise. Upon the surrender of this Certificate and
payment of the Option Price as aforesaid, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
registered holder of this Option and in such name or names as the registered
holder may designate, a certificate or certificates for the number of full
shares of Common Stock so purchased upon the exercise of any Option. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Common Stock on and as of the date of the delivery to the Company
of this Certificate and payment of the Option Price as aforesaid. If, however,
at the date of surrender of this Certificate and payment of such Option Price,
the transfer books for the Common Stock purchasable upon the exercise of any
Option shall be closed, the certificates for the Common Stock in respect to
which any such Option are then exercised shall be issued and the owner of such
Common Stock shall become a record owner of such Common Stock on and as of the
next date on which such books shall be opened, and until such date the Company
shall be under no duty to deliver any certificate for such Common Stock.

                  5. Partial Exercise. The rights of purchase represented by the
Options shall be exercisable, at the election of the registered holder hereof,
either as an entirety, or from time to time for any part of the Common Stock
specified herein and, in the event that the Options are exercised with respect
to less than all of the Common Stock specified herein at any time prior to the
Termination Date, a new Certificate will be issued to such registered holder for
the remaining number of Options not so exercised.

                  6. Termination Date. All of the Options must be exercised in
accordance with the terms hereof prior to the Termination Date. At and after the
Termination Date any and all unexercised rights hereunder shall become null and
void and the Options shall without any action on behalf of the Company become
null and void.

                                        2








                  7. Lost, Mutilated Certificate. In case this Common Stock
Option Certificate shall become mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation of
the mutilated certificate, or in lieu of and in substitution for the Certificate
lost, stolen, or destroyed, a new Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such certificate and
indemnity, if requested, also satisfactory to the Company.

                  8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Option Price and number of shares of Common Stock subject to the
Options shall be subject to adjustment from time to time only as set forth
hereinafter:

                  a. In case the Company shall declare a Common Stock dividend
on the Common Stock, then the Option Price shall be proportionately decreased as
of the close of business on the date of record of said Common Stock dividend in
proportion to such increase of outstanding shares of Common Stock.

                  b. If the Company shall at any time subdivide its outstanding
Common Stock by recapitalization, reclassification or split-up thereof, the
Option Price immediately prior to such subdivision shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock by recapitalization, reclassification, or combination thereof,
the Option Price immediately prior to such combination shall be proportionately
increased. Any such adjustment to the Option Price shall become effective at the
close of business on the record date for such subdivision or combination. The
Option Price shall be proportionately increased or decreased, as the case may
be, in proportion to such increase or decrease, as the case may be, of
outstanding shares of Common Stock.

                  b. Upon any adjustment of the Option Price as hereinabove
provided, the number of shares of Common Stock issuable upon exercise of the
Options remaining unexercised immediately prior to any such adjustment, shall be
changed to the number of shares determined by dividing (I) the appropriate
Option Price payable for the purchase of all shares of Common Stock issuable
upon exercise of all of the Options remaining unexercised immediately prior to
such adjustment by (ii) the Option Price per share of Common Stock in effect
immediately after such adjustment. Pursuant to this formula, the total sum
payable to the Company upon the exercise of the Options remaining unexercised
immediately prior to such adjustment shall remain constant.



                                        3





                  c. (I) If any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation, person, or entity, or the sale of all or substantially all
of its assets to another corporation, person, or entity, shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash, property, or assets with respect to or in exchange for Common
Stock, and provided no election is made by the Company pursuant to subsection
(ii) hereof, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, the Company or such successor or purchasing
corporation, person, or entity, as the case may be, shall agree that the
registered holder of the Options shall have the right thereafter and until the
Termination Date to exercise such Options for the kind and amount of stock,
securities, cash, property, or assets receivable upon such reorganization,
reclassification, consolidation, merger, or sale by a holder of the number of
shares of Common Stock for the purchase of which such Options might have been
exercised immediately prior to such reorganization, reclassification,
consolidation, merger or sale, subject to such subsequent adjustments which
shall be equivalent or nearly equivalent as may be practicable to the
adjustments provided for in this Section 8.

                  (ii) Notwithstanding subsection (I) hereof and in lieu
thereof, the Company may elect by written notice to the registered holder
hereof, to require such registered holder to exercise all of the Options
remaining unexercised prior to any such reorganization, reclassification,
consolidation, merger or sale. If the holder of this Option shall not exercise
all or any part of the Options remaining unexercised prior to such event, such
unexercised Options shall automatically become null and void upon the occurrence
of any such event, and of no further force and effect. The Common Stock issued
pursuant to any such exercise shall be deemed to be issued and outstanding
immediately prior to any such event, and shall be entitled to be treated as any
other issued and outstanding share of Common Stock in connection with such
event. If an election is not made by the Company pursuant to this subsection
(ii) in connection with any such event, then the provisions of subsection (I)
hereof shall apply to such event.

                  d. Whenever the Option Price and number of shares of Common
Stock subject to this Option is adjusted as herein provided, the Company shall
promptly mail to the registered holder of this Option a statement signed by an
officer of the Company setting forth the adjusted Option Price and the number of
shares of Common Stock subject to this Option, determined as so provided.

                  e. This form of Certificate need not be changed because of any
adjustment which is required pursuant to this Section 8. However, the Company
may at any time in its sole discretion (which shall be conclusive) make any
change in the form of this Certificate that the Company may deem appropriate and
that

                                        4






does not affect the substance hereof; and any Certificate thereafter issued,
whether in exchange or substitution for this Certificate or otherwise, may be in
the form as so changed.

                  9. Reservation. There has been reserved, and the Company shall
at all times keep reserved out of the authorized and unissued shares of Common
Stock, a number of shares of Common Stock sufficient to provide for the exercise
of the right of purchase represented by the Options. The Company agrees that all
shares of Common Stock issued upon exercise of the Options shall be, at the time
of delivery of the Certificates for such Common Stock, validly issued and
outstanding, fully paid and non-assessable.

                  10. Fractional Shares. The Company shall not issue any
fractional shares of Common Stock pursuant to any exercise of any Option and
shall pay cash to the holder of any Option in lieu of any such fractional
shares.

                  11. No Right. The holder of any Options shall not be entitled
to any of the rights of a shareholder of the Company prior to the date of
issuance of the Common Stock by the Company pursuant to an exercise of any
Option.

                  12. Securities Laws. As a condition to the issuance of any
Common Stock pursuant to the Options, the holder of such Common Stock shall
execute and deliver such representations, warranties, and covenants, that may be
required by applicable federal and state securities law, or that the Company
determines is reasonably necessary in connection with the issuance of such
Common Stock. In addition, the certificates representing the Common Stock shall
contain such legends, or restrictive legends, or stop transfer instructions, as
shall be required by applicable Federal or state securities laws, or as shall be
reasonably required by the Company.

                  13. Applicable Law. The Options and this Certificate shall be
deemed to be a contract made under the laws of the Commonwealth of Pennsylvania
and for all purposes shall be construed in accordance with the laws thereof
regardless of its choice of law rules.

                  IN WITNESS WHEREOF, USA TECHNOLOGIES, INC., has executed and
delivered this Certificate and caused its corporate seal to be affixed hereto.

                                                  USA TECHNOLOGIES, INC.

Corporate Seal                              By:  /s/ George R. Jensen, Jr.
                                                 ------------------------------
                                                 George R. Jensen, Jr.
                                                 Chief Executive Officer

                                            Attest: /s/ Keith L. Sterling
                                                 ------------------------------
                                                 Keith L. Sterling, Secretary

Dated: April 29, 1996

                                        5






USA TECHNOLOGIES, INC.
3 Glenhardie Corporate Center
1265 Drummers Lane, Suite 306
Wayne, Pennsylvania  19087
Attn:  George R. Jensen, Jr.,

           Chief Executive Officer

                              ELECTION TO PURCHASE

                  The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the attached Option Certificate No. ____ of the
Company. The undersigned desires to purchase shares of Common Stock provided for
therein and tenders herewith full payment of the Option Price for the shares of
Common Stock being purchased, all in accordance with the Certificate. The
undersigned requests that a Certificate representing such shares of Common Stock
shall be issued in the name of _______________________________________________

______________________________ and be delivered to ___________________________

____________________________________.  If said number of shares of Common Stock
shall not be all the shares purchasable under the Certificate, then a new
Certificate for the balance remaining of the shares of Common Stock purchasable
shall be registered in the name of, and delivered, to the undersigned at the
following address:__________________________________________________________

____________________________________________________________________________.





Dated: _________  , 19____             Signature: ___________________________











                                        6


                                                                 Exhibit 10.14.2

                           JOINDER TO ESCROW AGREEMENT

                  This Joinder To Escrow Agreement is made as of the 14th day of
February, 1996, by each of HAVEN BROCK KOLLS, JR., BARRY SLAWTER, and HENRY B.
duPONT SMITH ("Shareholders").

                                   Background

                  Each of the Shareholders is a Director or an executive officer
of USA Technologies, Inc., a Pennsylvania corporation (the "Company"). On
Decenmber 28, 1993, pursuant to the request of the Pennsylvania Securities
Commision, the Company, each of the then Directors and executive officers of the
Company, and Meridian Trust Company , as the escrow depository, entered into an
Escrow Agreement (the "Escrow Agreement"). A copy of the fully signed Escrow
Agreement is attached hereto as Exhibit"A". The Shareholders were not original
parties to the Escrow Agreement and the Pennsylvania Securities Commission has
requested that each of the Shareholders become a party to the Escrow Agreement
at this time.

                                    Agreement

                  NOW, THEREFORE, intending to be legally bound hereby, the
undersigned agree as follows:

                  1. Joinder. Each of the undersigned Shareholders hereby agree
to become a party to and to be fully bound by all the terms and conditions of
the Escrow Agreement as if the undersigned were an original signatory thereto.

                  2. Escrow Deposit. Simultaneously with the execution and
delivery of this Joinder To Escrow Agreement, each of the undersigned is
depositing with the Escrow Depostory all of the Common Stock beneficially owned
by each of them, as follows: 








             Haven Brock Kolls, Jr.              16,500 shares
             Barry Slawter                       0 shares
             Henry B. DuPont Smith               100,000 shares

The original share certificates representing the Escrow Securities have been
simultaneously delivered to the Escrow Depositary, with stock powers endorsed in
blank.The above Esrow Securities represent all of the shares of Common Stock
beneficially owned by each of the Shareholders as of the date hereof. As set
forth in the Escrow Agreement, during the Escrow Period, each of the
Shareholders shall deposit with the Escrow Depository all additional shares of
Common Stock to which they shall acquire beneficial and/ or record ownership,
whether by exercise of options, warrants, or otherwise (including a right of
conversion), and such shares shall also be deemed Escrow Securities.

                  3. Parties Bound. This Joinder To Escrow Agreement may be
executed in separate counterparts, by the several parties hereto, each of which
shall be an originsal but all of such counterparts shall together constitute one
and the same instrument. This JoinderTo Escrow Agreement shall extend to and be
binding upon the successors, representatives and assigns of each of the parties
hereto.

                  4. Capitalized Terms. All capitalized terms used herein shall
unless otherwise specifically defined herein, shall have the meanings ascribed
to such terms in the Escrow Agreement.

                                        2






                  IN WITNESS WHEREOF, and intending to be legally bound hereby,
each of the undersigned has exectuted and delivered this Joinder To Escrow
Agreement as of the date first above written.

                                     /s/ Haven Brock Kolls, Jr.
                                     -----------------------------
                                         HAVEN BROCK KOLLS, JR.

                                      /s/ Barry Slawter
                                     -----------------------------
                                          BARRY SLAWTER

                                     /s/ Henry duPont Smith
                                     -----------------------------
                                         HENRY B. duPONT SMITH

                                        3


                                                                 Exhibit 10.15.1

                               FIRST AMENDMENT TO
                         EMPLOYMENT AND NON-COMPETITION

                                    AGREEMENT

         This First Amendment is made as of this 20th day of March 1996, by and
between HAVEN BROCK KOLLS, JR. ("Kolls"), and USA TECHNOLOGIES, INC., a
Pennsylvania corporation ("USA").

                                   Background

         USA and Kolls entered into an Employment And Non-Competition Agreement
dated as of May 1, 1994 (the "Agreement"). As more fully set forth herein, the
parties desire to amend the Agreement in certain respects.

                                    Agreement

         NOW, THEREFORE, in consideration of the covenants set forth herein, and
intending to be legally bound hereby, the parties agree as follows:

         1. Amendment. Section 1.A of the Agreement is hereby deleted and the
following new subparagraph substituted in its place:

                           A. USA shall employ Kolls for a three year period
                  commencing on May 1, 1994 and continuing through April 30,
                  1997 (the "Employment Period") and Kolls hereby accepts such
                  employment. Unless terminated by either party hereto upon at
                  least 30- days notice prior to the end of the original
                  Employment Period ending April 30, 1997, or prior to the end
                  of any one year extension of the Employment Period, the
                  Employment Period shall not be terminated and shall continue
                  in full force and effect for consecutive one year periods.

    



                  2. Amendment. Section 2.A of the Agreement is hereby deleted
and the following new subparagraph is substituted in its place:

                           A. In consideration of his services rendered, USA
                  shall pay to Kolls a base salary of $65,000 per year during
                  the first six months of the Employment Period (i.e., until
                  November 1, 1994), subject to any withholding required by law;
                  provided however, that on and after November 1, 1994, Kolls
                  shall receive a base salary of $75,000 per year, and on and
                  after May 1, 1995, Kolls shall receive a base salary of
                  $85,000 per year, and on and after July 1, 1996, Kolls shall
                  receive a base salary of $90,000 per year.

                  3. Amendment. The following new Section 2.E is hereby added to
the Agreement:

                  E. Options. In addition to the options to acquire up to
                  200,000 shares of Common Stock, no par value, of USA ("Common
                  Stock") which have already been issued to Kolls by USA prior
                  to the date of this First Amendment (i.e., March 20, 1996),
                  USA is issuing to Kolls options to acquire up to an additional
                  50,000 shares of Common Stock for an exercise price of $.65
                  per share. The vesting schedule of such options as well as all
                  the other terms and conditions thereof are set forth in the
                  Option Certificate evidencing such options which is being
                  issued to Kolls at the time of the execution and delivery of
                  this First Amendment. The form of such Option Certificate is
                  attached hereto as Exhibit "A". Kolls acknowledges that such
                  options are not incentive stock options as such term is
                  defined in Section 422 of the Internal Revenue Code of 1986,
                  as amended, and such options, if and when vested, may
                  constitute taxable compensation to Kolls. Kolls also
                  acknowledges that neither the options nor the Common Stock
                  underlying the options have been registered under the
                  Securities Act of 1933, as amended (the "Act"), or under any
                  state securities laws, and neither the options nor the Common
                  Stock underlying the options can be sold or transferred unless
                  such options or Common Stock have been registered under the
                  Act or such state securities laws, or unless USA has received
                  an opinion of counsel that such registration is not required.

                  4. Modification. Except as otherwise specifically set forth in
Paragraphs 1, 2 and 3 above, the Agreement shall not be amended or modified in
any respect whatsoever and shall continue in full force and effect.







                  5. Capitalized Terms. Except as specifically provided
otherwise herein, all capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.

                  6. Original Part. The amendments to the Agreement made in
Paragraphs 1, 2 and 3 hereof shall be deemed to have been an original part of
the Agreement and to have been effective from and after such date.

                  IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment as of the day and year first above written.



                                  USA TECHNOLOGIES, INC.


                                  By: /s/ George R. Jensen, Jr.
                                     -----------------------------
                                       George R. Jensen, Jr.
                                       Chief Executive Officer

                                      /s/ Haven Brock Kolls, Jr.
                                     -----------------------------
                                       HAVEN BROCK KOLLS, JR.


                                                                 Exhibit 10.18.1

THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT UNDER SUCH ACT AND SUCH LAWS WITH RESPECT
TO THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

OPTION CERTIFICATE                                   50,000 COMMON STOCK OPTIONS
NO. 141

                             USA TECHNOLOGIES, INC.

                              COMMON STOCK OPTIONS

                   (This Option will be void if not exercised
                          by the date provided below.)

                           I. Options. Subject to the terms and conditions
hereof, this certifies that HAVEN BROCK KOLLS, JR., is the owner of 50,000
Options (the "Options") of USA Technologies, Inc. (the "Company"), a
Pennsylvania corporation. Each Option, when vested in accordance with Section 3
hereof, entitles the owner hereof to purchase from the Company at any time prior
to 5:00 p.m. on the fifth annual anniversary of the vesting of such option (the
"Termination Date"), one fully paid and non-assessable share of the Company's
Common Stock, without par value (the "Common Stock"), subject to adjustment as
provided in Section 8 hereof.

                           1. Option Price. The Options, when vested, shall be
exercised by delivery to the Company of the option price for each share of
Common Stock being purchased hereunder (the "Option Price"), this Certificate,
and the completed Election To Purchase Form which is attached hereto. The Option
Price shall be $.65 per share of Common Stock to be purchased pursuant to each
Option. The Option Price shall be subject to adjustment as provided in Section 8
hereof. The Option Price is payable either in cash or by certified check or bank
draft payable to the order of the Company.

                           2. Vesting of Options.

                           Notwithstanding anything contained herein to the
contrary, the Options represented by this Certificate shall only become vested
and exercisable by KOLLS in accordance with the terms and conditions set forth
in this Section 3. If KOLLS is employed by the Company as of April 30, 1997, the
Options shall on such date become irrevocably and absolutely vested and
exercisable. If KOLLS is not employed by the Company on such date, the Options
shall not become vested and shall be null and void.






                           The Employment And Non-Competition Agreement dated
May 1, 1994 between KOLLS and the Company, and the First Amendment thereto dated
as of March 20, 1996, as well as any and all further supplements, amendments, or
modifications thereto (collectively, the "Employment Agreement"), are hereby
incorporated herein by reference. The terms and conditions thereof shall be used
to determine whether KOLLS is employed by the Company on the vesting date.
Therefore, and as set forth in the Employment Agreement, KOLLS's employment
would be considered terminated upon his death or disability under Section 4
thereof, or upon notice given to KOLLS by the Company under Section 3 thereof,
or upon notice given by the Company or KOLLS under Section 1A. thereof.

                           3. Exercise. Upon the surrender of this Certificate
and payment of the Option Price as aforesaid, the Company shall issue and cause
to be delivered with all reasonable dispatch to or upon the written order of the
registered holder of this Option and in such name or names as the registered
holder may designate, a certificate or certificates for the number of full
shares of Common Stock so purchased upon the exercise of any Option. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Common Stock on and as of the date of the delivery to the Company
of this Certificate and payment of the Option Price as aforesaid. If, however,
at the date of surrender of this Certificate and payment of such Option Price,
the transfer books for the Common Stock purchasable upon the exercise of any
Option shall be closed, the certificates for the Common Stock in respect to
which any such Option are then exercised shall be issued and the owner of such
Common Stock shall become a record owner of such Common Stock on and as of the
next date on which such books shall be opened, and until such date the Company
shall be under no duty to deliver any certificate for such Common Stock.

                           4. Partial Exercise. The rights of purchase
represented by the Options shall be exercisable, at the election of the
registered holder hereof, either as an entirety, or from time to time for any
part of the Common Stock specified herein and, in the event that the Options are
exercised with respect to less than all of the Common Stock specified herein at
any time prior to the Termination Date, a new Certificate will be issued to such
registered holder for the remaining number of Options not so exercised.

                           5. Termination Date. All of the Options must be
exercised in accordance with the terms hereof prior to the Termination Date. At
and after the Termination Date any and all unexercised rights hereunder shall
become null and void and the Options shall without any action on behalf of the
Company become null and void.

                                        2






                           6. Lost, Mutilated Certificate. In case this Common
Stock Option Certificate shall become mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation of
the mutilated certificate, or in lieu of and in substitution for the Certificate
lost, stolen, or destroyed, a new Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such certificate and
indemnity, if requested, also satisfactory to the Company.

                           7. Adjustments. Subject and pursuant to the
provisions of this Section 8, the Option Price and number of shares of Common
Stock subject to the Options shall be subject to adjustment from time to time
only as set forth hereinafter:

                           A. In case the Company shall declare a Common Stock
dividend on the Common Stock, then the Option Price shall be proportionately
decreased as of the close of business on the date of record of said Common Stock
dividend in proportion to such increase of outstanding shares of Common Stock.

                           B. If the Company shall at any time subdivide its
outstanding Common Stock by recapitalization, reclassification or split-up
thereof, the Option Price immediately prior to such subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification, or
combination thereof, the Option Price immediately prior to such combination
shall be proportionately increased. Any such adjustment to the Option Price
shall become effective at the close of business on the record date for such
subdivision or combination. The Option Price shall be proportionately increased
or decreased, as the case may be, in proportion to such increase or decrease, as
the case may be, of outstanding shares of Common Stock.

                           C. Upon any adjustment of the Option Price as
hereinabove provided, the number of shares of Common Stock issuable upon
exercise of the Options remaining unexercised immediately prior to any such
adjustment, shall be changed to the number of shares determined by dividing (i)
the appropriate Option Price payable for the purchase of all shares of Common
Stock issuable upon exercise of all of the Options remaining unexercised
immediately prior to such adjustment by (ii) the Option Price per share of
Common Stock in effect immediately after such adjustment. Pursuant to this
formula, the total sum payable to the Company upon the exercise of the Options
remaining unexercised immediately prior to such adjustment shall remain
constant.

                           D. (i) If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation,

                                        3






person, or entity, or the sale of all or substantially all of its assets to
another corporation, person, or entity, shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock, securities, cash,
property, or assets with respect to or in exchange for Common Stock, and
provided no election is made by the Company pursuant to subsection (ii) hereof,
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, the Company or such successor or purchasing corporation, person,
or entity, as the case may be, shall agree that the registered holder of the
Options shall have the right thereafter and until the Termination Date to
exercise such Options for the kind and amount of stock, securities, cash,
property, or assets receivable upon such reorganization, reclassification,
consolidation, merger, or sale by a holder of the number of shares of Common
Stock for the purchase of which such Options might have been exercised
immediately prior to such reorganization, reclassification, consolidation,
merger or sale, subject to such subsequent adjustments which shall be equivalent
or nearly equivalent as may be practicable to the adjustments provided for in
this Section 8.

                           (ii) Notwithstanding subsection (i) hereof and in
lieu thereof, the Company may elect by written notice to the registered holder
hereof, to require such registered holder to exercise all of the Options
remaining unexercised prior to any such reorganization, reclassification,
consolidation, merger or sale. If the holder of this Option shall not exercise
all or any part of the Options remaining unexercised prior to such event, such
unexercised Options shall automatically become null and void upon the occurrence
of any such event, and of no further force and effect. The Common Stock issued
pursuant to any such exercise shall be deemed to be issued and outstanding
immediately prior to any such event, and shall be entitled to be treated as any
other issued and outstanding share of Common Stock in connection with such
event. If an election is not made by the Company pursuant to this subsection
(ii) in connection with any such event, then the provisions of subsection (i)
hereof shall apply to such event.

                           E. Whenever the Option Price and number of shares of
Common Stock subject to this Option is adjusted as herein provided, the Company
shall promptly mail to the registered holder of this Option a statement signed
by an officer of the Company setting forth the adjusted Option Price and the
number of shares of Common Stock subject to this Option, determined as so
provided.

                           F. This form of Certificate need not be changed
because of any adjustment which is required pursuant to this Section 8. However,
the Company may at any time in its sole discretion (which shall be conclusive)
make any change in the form of this Certificate that the Company may deem
appropriate and that does not affect the substance hereof; and any Certificate
thereafter issued, whether in exchange or substitution for this Certificate or
otherwise, may be in the form as so changed.


                                        4








                           8. Reservation. There has been reserved, and the
Company shall at all times keep reserved out of the authorized and unissued
shares of Common Stock, a number of shares of Common Stock sufficient to provide
for the exercise of the right of purchase represented by the Options. The
Company agrees that all shares of Common Stock issued upon exercise of the
Options shall be, at the time of delivery of the Certificates for such Common
Stock, validly issued and outstanding, fully paid and non-assessable.

                           9. Fractional Shares. The Company shall not issue any
fractional shares of Common Stock pursuant to any exercise of any Option and
shall pay cash to the holder of any Option in lieu of any such fractional
shares.

                           10. No Right. The holder of any Options shall not be
entitled to any of the rights of a shareholder of the Company prior to the date
of issuance of the Common Stock by the Company pursuant to an exercise of any
Option.

                           11. Securities Laws. As a condition to the issuance
of any Common Stock pursuant to the Options, the holder of such Common Stock
shall execute and deliver such representations, warranties, and covenants, that
may be required by applicable federal and state securities law, or that the
Company determines is reasonably necessary in connection with the issuance of
such Common Stock. In addition, the certificates representing the Common Stock
shall contain such legends, or restrictive legends, or stop transfer
instructions, as shall be required by applicable Federal or state securities
laws, or as shall be reasonably required by the Company.

                           12. Applicable Law. The Options and this Certificate
shall be deemed to be a contract made under the laws of the Commonwealth of
Pennsylvania and for all purposes shall be construed in accordance with the laws
thereof regardless of its choice of law rules.

                           IN WITNESS WHEREOF, USA TECHNOLOGIES, INC., has
executed and delivered this Certificate and caused its corporate seal to be
affixed hereto.

                                           USA TECHNOLOGIES, INC.

Corporate Seal                         By: /s/ George R. Jensen, Jr.
                                           -----------------------------------
                                            George R. Jensen, Jr.
                                            Chief Executive Officer

                                    Attest:  /s/ Keith L. Sterling, Secretary
                                            ----------------------------------
                                             Keith L. Sterling, Secretary

Dated:  March 20, 1996

                                        5






USA TECHNOLOGIES, INC.
3 Glenhardie Corporate Center
1265 Drummers Lane, Suite 306
Wayne, Pennsylvania  19087
Attn:  George R. Jensen, Jr.,
       Chief Executive Officer

                              ELECTION TO PURCHASE

                  The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the attached Option Certificate No. _____ of
the Company. The undersigned desires to purchase shares of Common Stock provided
for therein and tenders herewith full payment of the Option Price for the shares
of Common Stock being purchased, all in accordance with the Certificate. The
undersigned requests that a Certificate representing such shares of Common Stock
shall be issued in the name of _______________________________________________

______________________________ and be delivered to ___________________________

____________________________________.  If said number of shares of Common Stock
shall not be all the shares purchasable under the Certificate, then a new
Certificate for the balance remaining of the shares of Common Stock purchasable
shall be registered in the name of, and delivered, to the undersigned at the
following address:__________________________________________________________

____________________________________________________________________________.

                                                   





Dated: _________  , 19____             Signature: ___________________________


                                        6



                                                                   Exhibit 10.26
                        REMARKETING/INTEGRATOR AGREEMENT

Remarketer/Integrator Name:           USA Technologies, Inc.

Remarketer/Integrator Address:        1265 Drummer Lane, Ste. 306
                                      Wayne, PA 19087

Agreement Number: 960111              Customer Number: 2857385

Commencement Date:                    Date of Execution by Dell Marketing L.P.

Annual Commitment:                    Two Million Dollars and up to Five
                                      Millon Dollars (2M-5M)

Remarketer/Integrator Liaison:        George Jensen
Dell Liaison:                         Stan Slimp

Discounts:       Product Class           Commercial
                 -------------           ----------

                       A                     9%
                       B                    12%
                       C                    16%
                       N                     9%
                       O                    20%
                       Ltd:                  2%

Dell Marketing L.P. ("Dell"), located at 2214 W. Braker Ln., Suite D, Austin, TX
78758, and the entity named above ("Remarketer/Integrator") hereby agree on the
terms and conditions that apply to purchases by Remarketer/Integrator of
products from Dell and their remarketing. These terms and conditions are set
forth in the Remarketer/Integrator Agreement Terms and Conditions, attached
hereto as Schedule A, and Warranties, attached hereto as Schedule B. The
schedules and this page form the entire and only statement of the terms between
Remarketer/Integrator and Dell (the "Agreement").

THE PERSON SIGNING FOR THE REMARKETER/INTEGRATOR CERTIFIES AUTHORIZATION TO SIGN
THIS AGREEMENT, AND ACKNOWLEDGES THAT THIS AGREEMENT HAS BEEN READ AND
UNDERSTOOD.

DELL MARKETING L.P.                          USA TECHNOLOGIES, INC.

/s/ ROBERT A. KUSHWARA                       /s/ GEORGE R. JENSEN, JR.
- --------------------------                   ---------------------------------
Signature                                    Signature

Robert A. Kushwara                           George R. Jensen, Jr.
- --------------------------                   ---------------------------------
Manager, Contracts & Proposals               Name & Title

   February 8, 1996                                  January 31, 1996
- --------------------------                   ---------------------------------
Date                                         Date 






                                   SCHEDULE A

              REMARKETER/INTEGRATOR AGREEMENT TERMS AND CONDITIONS

Relationship: Dell Appoints Remarketer/Integrator as a "Dell Authorized
Remarketer/Integrator" for the products Dell sells to Remarketer/Integrator and
its customers hereunder ("Products"), and Remarketer/Integrator accepts the
appointment. All purchase and remarketing of Products by Remarketer/Integrator
will be in accordance with the terms and conditions of this Agreement.

Remarketer/Integrator certifies that the business it will derive from Products
will be based on either value added remarketing, or on integration, in
accordance with this section. Remarketer/Integrator may acquire Products under
this Agreement for internal use, but only in connection with permitted marketing
activities. Remarketer/Integrator may present other marketing opportunities to
Dell, and Dell may, but is in no way obligated to, consider waiving the
provisions of this section.

Value added remarketing is adding product content value to Products or
integrating them into or with other products or services, and then marketing the
resultant value added products or services. Except for additions to a customer's
installation, Remarketer/Integrator will not remarket Products by themselves, or
market Products when the only added value is installation of devices that Dell
markets as part of its systems, such as disk and tape drives, and monitors.
Remarketer/Integrator must remarket the resultant products and services directly
to end users and end users through third party financing. Remarketer/Integrator
may not use distributors, other remarketers, sales agents or others without
Dell's prior written consent.

The products the Remarketer/Integrator markets as an integrator must be
integrated and sold, licensed or leased in association with other products
and/or services.

Within the conditions established in this Agreement and Dell's warranty
statements, the prices, terms and conditions for the marketing by
Remarketer/Integrator of Products is at the discretion of Remarketer/Integrator.
Remarketer/Integrator may market products considered competitive to the
Products. Remarketer/Integrator may price Products as it sees fit.

Appointment of Remarketer/Integrator as a "Dell Authorized
Remarketer/Integrator" is not exclusive in any way. Dell retains the unfettered
right to change distribution channels, add and terminate other resellers, value
added resellers and distributors. Dell is free to sell to and accept orders from
anyone, including Remarketer/Integrator's customers.

Contract Term, Termination: This Agreement is in effect starting on the
Commencement Date and continues in effect for one (1) year. At the end of the
year, it will renew automatically for additional one year terms.

Either party may terminate this Agreement at any time on at least thirty (30)
days prior written notice to the other. Unless a payment is late or
Remarketer/Integrator is in breach of a material provision of this Agreement at
the time notice of termination is given, Dell will receive and accept orders in
accordance with this Agreement up to the date of termination. Termination of
this Agreement, regardless of the reason, will not affect the rights and
obligations of the parties with respect to orders accepted prior to termination
and the Products sold thereunder.

Dell and Remarketer/Integrator accept the risk of termination by the other. On
termination, neither party will have any claim against the other for the
investment it may have made in the relationship established hereunder or in
anticipation of the sales and other revenue to be gained because of it.

Remarketer/Integrator Responsibilities: Remarketer/Integrator will exert its
best efforts to market the Products.

Remarketer/Integrator will provide Dell with the information Dell requests
concerning the end users acquiring the Dell systems Remarketer/Integrator
remarkets. Remarketer/Integrator will provide this information for each Dell
system remarketed as soon as Remarketer/Integrator has identified the end user.
Remarketer/Integrator will maintain a list of end users that have Products sold


                                        2




by Dell to Remarketer/Integrator other than Dell systems, and will permit Dell
to use it to notify them concerning the Products if Dell needs to notify users
of such a Product generally. Remarketer/Integrator agrees that Dell may treat
Remarketer/Integrator's failure to comply with this paragraph as a material
breach of this Agreement. Remarketer/Integrator will provide its customers with
the Product warranty statements, registration cards, software license agreements
and other materials included with the Products at the time of delivery.

Remarketer/Integrator will provide Dell with written notice of any material
change in the information provided to Dell as part of applying for appointment
as a Dell Authorized Remarketer/Integrator, including Remarketer/Integrator's
plans for marketing Products as part of Remarketer/Integrator's value added
offerings. Material changes include any change in the ownership of
Remarketer/Integrator or a material change in any credit information and
references contained in the Application. This notice is to be provided as soon
as possible and must be provided within five (5) working days of any such
change.

On Dell's request, Remarketer/Integrator agrees to provide Dell with an accurate
and complete written list of liens, security interests and other encumbrances on
Remarketer/Integrator's assets which could affect Remarketer/Integrator's
compliance with this Agreement. After providing it, Remarketer/Integrator will
promptly notify Dell of any material change to this information in accordance
with the previous paragraph.

Remarketer/Integrator will conduct business in an ethical manner and will obey
all applicable laws and regulations. Remarketer/Integrator will factually
present the capabilities, function, and performance of Products.

Remarketer/Integrator may not export Products from the United States.

Remarketer/Integrator will maintain Comprehensive General Liability (including
Products Liability) insurance with at least $1 million in coverage and with an
insurance company acceptable to Dell. Remarketer/Integrator will obtain
certificates of such insurance and provide them to Dell, on request. If Dell
separately requests, Remarketer/Integrator will name Dell as an additional
insured, and ensure that Dell will be notified at least thirty (30) days prior
to cancellation or termination of any policy. Dell may hold up shipment of
Products pending compliance with such a request.

Liaison: Remarketer/Integrator will appoint one full time employee to be its
primary liaison with Dell concerning orders, shipments, invoices, payments and
other non-technical issues. This primary liaison may appoint other liaison
people, but Remarketer/Integrator will keep the number of liaisons to a minimum.
Remarketer/Integrator will authorize liasons to handle such issues on
Remarketer/Integrator's behalf.

Orders: Remarketer/Integrator may place orders by telephone or in writing;
written orders may be sent by facsimile. An order is accepted unless Dell
rejects it. An order is not binding on Dell until Dell accepts it, and Dell is
not obligated to accept an order. If Remarketer/Integrator requires confirmation
that Dell will accept an order before it places the order, it must request a
firm quotation in accordance with the section titled Quotations.

Remarketer/Integrator may change or cancel without liability an order or any
part of it at any time up until Dell begins manufacture of the affected
Products. Remarketer/Integrator may change or cancel an order or any part of it
after Dell begins manufacture of the affected Products, but
Remarketer/Integrator agrees to pay Dell 4.2% of the prices for the affected
Products as a fair estimate of Dell's costs of selling them to others.

Prices: Prices are not firm until Dell has accepted an order. However, Dell will
provide Remarketer/Integrator with two (2) weeks prior notice of price changes,
if Dell accepts orders for Products within the two week period, the Products
will be sold at the old prices.

A separate charge for shipping and handling will be shown on Dell's invoice.
Except for Dell's franchise taxes and taxes on Dell's net income, all sales and
other taxes, however designated, are payable by Remarketer/Integrator. Such
taxes, if due, will be shown separately. If Remarketer/Integrator provides Dell
with a correct and valid tax exemption certificate or equivalent documentation,
Dell will not invoice Remarketer/Integrator for the affected taxes.

                                       3





Quotations: Remarketer/Integrator may request from Dell a written quotation,
good for ten (10) calendar days from the date of the request, offering to accept
Remarketer/Integrator's firm order under this Agreement for certain Products in
specific quantities at set prices. Dell's policy is to issue such quotations in
response to requests that are in accord with Dell's then current product and
pricing policies and plans, but Dell may refuse to issue any specific quotation.
Dell will not quote specific delivery dates.

Discounts: Products are classified by Dell. The discounts that apply to
Remarketer/Integrator's purchases of Products are based on these
classifications. Classification of Products is subject to change by Dell at any
time. Dell will endeavor to provide Remarketer/Integrator with 30 days advance
notice of changes to Product classifications. However, if Dell makes a
reclassification effective sooner than 30 days from when Remarketer/Integrator
receives notice, Remarketer/Integrator may, during the 30 day notice period, 1)
consider affected Products as reclassified and apply any reduction that Dell may
announce to their list prices, or 2) consider affected Products as remaining in
their old classifications in which case Remarketer/Integrator forgoes the effect
of any reduction in list prices which may occur during the notice period.

The discounts that apply to Remarketer/Integrator's purchases of Products are
also based an the end users to which Products are remarketed. The end user
categories are set forth on the signature page of this Agreement.

During each annual term, Dell will review quarterly the total dollar volume of
orders, net of cancellations and returns, against the commitment stated. If the
cumulative net dollar volume ordered, as a percentage of the commitment, does
not equal or exceed the applicable value from the following table, Dell may, in
its discretion, reduce the discounts to levels (including no discount) in
accordance with its then current discount policy for the actual dollar volume of
orders.

                                                       Percentage
                        Three-Month Period            of Commitment
                        ------------------            -------------
                               1st                         2O%  
                               2nd                         45%
                               3rd                         70%
                               4th                         100%

Dell will discuss at any time with Remarketer/Integrator adjustment of the
commitment and applicable discounts, based on revision of
Remarketer/Integrator's forecasted purchases, but any adjustment requires Dell's
prior written consent. For contract terms after the first year, Dell and
Remarketer/Integrator will agree on the applicable discounts.
Remarketer/Integrator may not assume any discounts will be continued for a
subsequent term.

Payment: Dell's payment terms are Net 30 days from date of invoice. They are
subject to change at any time by Dell, and Dell may change them without prior
notice. Remarketer/Integrator agrees to confirm Dell's security interest in
Products delivered but not paid for, as Dell may request. Dell may invoice parts
of an order separately; Remarketer/Integrator will treat each invoice as a
separate transaction, and pay it accordingly. If a payment due from
Remarketer/Integrator is late and not because it is disputed in good faith, Dell
may, in its discretion, refuse to ship Products until the late payment is made.

At Remarketer/Integrator's request, Dell will ship COD directly to
Remarketer/Integrator's end user customer. The amount due will be the list
prices for the Products. If Dell receives payment in full, Dell will pay or
credit Remarketer/Integrator with the value of the applicable discount. If the
end user refuses delivery, Remarketer/Integrator will pay Dell 4.2% of the full
amount due for the Products, to cover Dell's cost of shipping the Products and
having them returned. If the Products are accepted by the end user but the
payment is not good, Remarketer/Integrator will pay for the Products, including
any COD charges.

Products: Dell's policy is one of on-going product update and revision. Dell may
revise and discontinue Products at any time. Dell will endeavor to provide
Remarketer/Integrator with advance notice of Product changes, but Dell makes no
commitment in this regard. While there may be differences in detail, Dell will
ship Products that have the functionality and performance of the products
ordered. Changes between what is shipped and what is described in a
specification sheet or catalog are possible. The parts and assemblies used in

                                       4


building the Products are selected from new and equivalent to new parts and
assemblies in accordance with industry practices. Spare parts are refurbished if
necessary, tested, and equivalent to new.

Delivery; Title and Risk of Loss: All ship dates are Dell's estimates. Many
factors, including supply of parts and assemblies, affect Dell's production
scheduling. Dell's normal policy is to schedule production based on when orders
arc accepted.

Dell will ship to Remarketer/Integrator or its end user customer as
Remarketer/Integrator may direct. Dell is responsible for loss or damage that
occurs during shipping. Title to Products passes from Dell to the recipient on
delivery to the carrier at Dell's facility.

"Total Satisfaction Return Policy": Remarketer/Integrator agrees that Dell's
policy of accepting Products for refund within the first 30 days of use is not
available to Remarketer/Integrator or its end users. Remarketer/Integrator will
inform its end users of this fact by the time they receive Products.

Limited Wamnties: Dell warrants that the hardware Products it sells will conform
to the specifications current when the Product is shipped.

Dell warrants that spare parts will be interchangeable with the parts they are
to replace, and will conform to the specifications current when they are
shipped. The warranty term for spare parts is ninety (90) days from the date of
delivery.

Dell warrants that its computers and peripherals will function as parts of an
IBM PC-AT or EISA architecture system. Dell warrants that its computers and
peripherals will run widely used application software written for equivalent
systems when the application software functions correctly on several widely
used, equivalent IBM PC-AT or EISA architecture systems.

The warranty term for each hardware Product is stated in Schedule B, Warranties,
attached hereto. Dell will issue revisions to this schedule as it revises its
standard warranties from time to time; a revision is effective on the date
stated thereon and applies to orders placed and accepted on or after that date.
If the manufacturer of an accessory offers a longer warranty than Dell's then
current term, Dell will cooperate with the user in connection with claims under
the manufacturer's warranty.

Dell's hardware warranties do not cover damage due to external causes, including
accident, problems with electrical power, servicing not authorized by Dell,
usage not in accordance with Product specifications and instructions, failure to
perform preventive maintenance, abuse and misuse.

Except for the compatibility warranty set forth above, Dell does not warrant
that Products, when used, will function in any specific configuration that
includes hardware or software not provided by Dell or will function to produce a
particular result, even if the specific configuration or the result has been
discussed with Dell people. Remarketer/Integrator will evaluate for itself that
the Products it remarkets will function properly as part of its value added
offerings.

The start of the one-year warranty period for each system remarketed by
Remarketer/Integrator is the date the system is placed in service with the end
user or 60 days from the date the system is shipped from Dell's facility,
whichever occurs first. Dell will handle warranty claims in accordance with the
applicable version of Schedule B. Dell owns all parts removed from repaired
Products and all returned spare parts. Dell uses new and reconditioned parts
made by various manufacturers in performing warranty repairs and building
replacement Products. The warranty term on repaired and replaced products is the
remainder of the original term or 60 days, whichever is longer.

DELL MAKES NO EXPRESS WARRANTIES EXCEPT THOSE STATED IN THIS SECTION AND THE
THEN CURRENT VERSION OF SCHEDULE B. DELL DISCLAIMS ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 
                                       5



DELL'S RESPONSIBILITY FOR WARRANTY CLAIMS IS LIMITED TO REPAIR AND REPLACEMENT
AS SET FORTH IN THIS SECTION AND THE THEN CURRENT VERSION OF SCHEDULE B.

On-site Service Contracts: Remarketer/Integrator may contract for on-site
service as Dell may market service contracts to its customers. Any on-site
service acquired by Remarketer/Integrator may be transferred to
Remarketer/Integrator's customers in accordance with the applicable service
contract. If such a transfer is accomplished within sixty (60) days of the date
the Products covered were shipped from Dell's facility, the transferee will have
a full twelve months of on-site service coverage.

Product and Technical Support: Remarketer/Integrator agrees that it will
establish and maintain support services for its customers. Dell will accept
requests for support from Remarketer/Integrator's customers when
Remarketer/Integrator is unable to handle them. Dell will accept from
Remarketer/Integrator requests for support that are unusual, new to
Remarketer/Integrator, and not of a general nature. Dell promises that its
support people will attempt to handle over the telephone any such request.
However, Dell's support people may not be able to understand or resolve a
particular problem.

Infringement of Third Party Rights: Dell will indemnify and hold
Remarketer/Integrator harmless from a claim that a hardware Product or
accessory, or its use, infringes on another person or company's patent,
copyright, trade secret or other intellectual property rights in the United
States. This indemnity is limited to use of hardware and accessories sold by
Dell by themselves or with operating system software provided by Dell only; use
with other products or software, including that which Remarketer/Integrator
incorporates in its offerings, is not covered. If a person or company makes such
a claim, Dell will resolve it in a way that permits continued ownership and use
of the Product, or Dell will provide a replacement at no cost, or Dell will
accept return of the Product, freight collect, and provide a full refund. This
section is the exclusive statement of Dell's liability and responsibility with
respect to infingement of intellectual property rights.

Software: All software, including MS-DOS and Microsoft Windows, is provided
subject to the license agreement that is part of the package.
Remarketer/Integrator agrees that it will be bound by the license agreement once
the package is opened or its seal is broken.

Dell does not warrant any software under this Agreement. All software is
warranted in accordance with the license agreement that governs its purchase and
use. Applications and other software packages that are purchased by Dell from
other companies for resale are warranted by the companies that publish them and
not by Dell.

Indemnification: If Dell is notified promptly in writing and given sole control
of the defense and all related settlement negotiations, it will take
responsibility for any claim based on an allegation that a Product did not meet
Dell's warranty when received by an end user, or that Dell failed on request to
provide warranty service in accordance with the applicable warranty statement,
or otherwise alleging Dell fault with respect to Products. Dell will pay any
resulting costs and damages finally awarded against Remarketer/Integrator with
regard to any such claim if and to the extent that they are grounded on Dell's
fault and do not exceed costs or damages that would have been finally awarded
against Dell had the claim been made directly against Dell.

Remarketer/Integrator agrees to indemnify and hold Dell harmless from any and
all damages, costs and expense in connection with any claim by anyone that
arises out of Remarketer/Integrator's acts (other than marketing Products in
compliance with this Agreement and all applicable instructions given by Dell),
omissions or misrepresentations, regardless of the form of action.

Limitation of Remedies and Liability: In the event of the failure or threatened
failure of either party to fulfill any obligation, the remedy of the other party
is to request that the obligation be fulfilled. If that does not occur promptly
and within thirty (30) days, the other party may terminate this Agreement and,
if appropriate, bring an action for moneys due or to seek enforcement of its
rights at law or in equity.

NEITHER PARTY HAS ANY LIABILITY TO THE OTHER FOR LOST PROFITS, LOSS OF BUSINESS
OR OTHER CONSEQUENTIAL, SPECIAL, INDIRECT OR PUNITIVE DAMAGES, EVEN IF ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY THIRD PARTY EXCEPT
AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT.

                                       6




 
However, this limitation does not apply to awards made on suits or proceedings
within the scope of the indemnity provided in the Infringement section, or to
claims within the scope of the Indemnification section, or to claims for bodily
injury or damage to real or tangible personal property caused by the negligence
of employees or representatives of Dell or Remarketer/Integrator.

Trademarks; Advertising: Remarketer/Integrator may refer to itself during the
term of this Agreement as a "Dell Authorized Remarketer/Integrator" but only in
connection with Products.

Remarketer/Integrator may use Dell's trademarks and trade names to market
Products. Remarketer/Integrator agrees to change or correct, at
Remarketer/Integrator's expense, any material or activity which Dell, in its
sole judgment, decides is inaccurate, objectionable, misleading or a misuse of
Dell trademarks or trade names.

Remarketer/Integrator will provide Dell with proof copies of all advertising and
other publicity that refers to Dell or uses Dell trademarks or trade names in
time for Dell to have at least five (5) business days to review the references
to Dell and use of Dell marks and names. Remarketer/Integrator agrees to change
or correct, at Remarketer/Integrator's expense, any advertising and other
publicity which Dell, in its sole judgment, decides is inaccurate,
objectionable, misleading or a misuse of Dell trademarks or trade names. Dell
will communicate any such changes and corrections to Remarketer/Integrator
within five (5) business days of receipt of the proof copies;
Remarketer/Integrator may accept Dell's failure to communicate as Dell's consent
for Remarketer/Integrator to use the advertising and publicity as submitted.

Remarketer/Integrator receives no rights to use Dell trademarks and trade names
except as provided in this section. The limited rights granted herein end with
termination of this Agreement.

Confidential Information: Confidential Information is all confidential and
proprietary information so designated in writing or verbally by the words
"Confidential", "Proprietary" or similar. A party receiving Confidential
Information will keep the information in confidence and not disclose it to
others, including, for Remarketer/Integrator, its customers, except as the
disclosing party may expressly authorize. For this paragraph, Dell includes Dell
Computer Corporation and its subsidiaries.

Miscellaneous: Remarketer/Integrator may not assign this Agreement without
Dell's prior written consent, which Dell will not unreasonably withhold or
delay. Dell may assign this Agreement, on notice to Remarketer/Integrator, to
any entity owned or controlled by Dell Computer Corporation, Dell's parent.

Dell and Remarketer/Integrator are independent contractors. Neither party will
state, imply or knowingly permit anyone, including Remarketer/Integrator's
customers, to infer that any other relationship exists between the parties
without the other party's prior written consent.

This Agreement shall be governed by Texas law.

Notices from one party to the other will be sent to the address shown on the
signature page. Notices to Dell will be directed to its Contracts Manager.
Notices to Remarketer/Integrator will be directed to its then current primary
liaison.

If any provision of this Agreement is void or unenforceable, the parties agree
to delete it and agree that the remainder of this Agreement will continue to be
in effect. Further, if either party believes this Agreement may be deemed a
franchise contract, or that the relationship established hereunder may be deemed
to be that of franchiser and franchisee, the parties agree to amend this
Agreement as necessary to avoid the possibility of such a construction.

This Agreement is the exclusive statement of the contract in effect between Dell
and Remarketer/Integrator. Preprinted terms and all other terms not requested
herein on any purchase order or other document submitted by
Remarketer/Integrator are of no force or effect unless expressly accepted by
Dell in writing.

                                        7


                             SCHEDULE B -- WARRANTS
                             ----------------------

 The Following One-Year Limited Warranty Is Applicable to Certain Dell Products
                             As Designated By Dell


Warranty Policy Effective Date:            November 1, 1990.

(U.S. Only)

Warranty Terms
         For Dell systems and peripherals, the warranty term is one (1) year.
         For accessories and spare parts, the warranty term is ninety (90) days.

Warranty Claims
         Dell will repair or replace products returned to Dell's facility. To
         request warranty service, Dell must be contacted within the warranty
         period. If Dell decides a product requires service, Dell will issue a
         Return Material Authorization Number. Products must be shipped back to
         Dell in their original packaging or equivalent, shipping charges
         prepaid. Risk of loss during shipping to Dell is the sender's
         responsibility. Dell will ship the repaired or replacement products
         freight prepaid.

Note
         This Schedule applies to Dell's return-to-factory warranty only. For
         the provisions relating to on-site service, see On-site Service
         Contracts in Schedule A and the terms of any applicable service
         contract.

The Following Three-Year Limited Warranty Is Applicable To Certain Dell Products
As Designated by Dell

Warranty Policy Effective Date: May 2, 1994

(U.S. Only)

Dell Computer Corporation ("Dell") manufactures its hardware products from parts
and components that are new or equivalent to new in accordance with
industry-standard practices. Dell warrants that the hardware products it sells
will be free from defects in materials and workmanship. The warranty term is
three years beginning on the date of delivery, as further described below.

Damage due to shipping the products to you is covered under this warranty.
Otherwise, this warranty does not cover damage due to external causes, including
accident, problems with electrical power, servicing not authorized by Dell,
usage not in accordance with product instructions, failure to perform required
preventive maintenance, abuse, and misuse.

Limited Warranty Coverage During Year 1
- ---------------------------------------

During the one year period beginning on the date of delivery, Dell will repair
or replace products returned to Dell's facility. To request warranty service,
you must call Dell within the warranty period. Refer to your user documentation
to find the appropriate telephone number for customer assistance. If warranty
service is required, Dell will issue a Return Material Authorization Number. You
must ship the products back to Dell in their original packaging or equivalent,
prepay shipping charges, and you must insure the shipment or accept the risk of
loss or damage during shipment. Dell will ship the repaired or replacement
products to you freight prepaid if you use an address in the United States
(excluding Puerto Rico and U.S. possessions). Shipments to other locations will
be made freight collect.

                                       8




NOTE: Before you ship the product to Dell, back up the data on the hard-disk
drive(s) and any other storage device(s) in the product. Remove any removable
media, such as diskettes or PC cards. If you have any questions, call Dell for
technical assistance.

Dell owns all parts removed from repaired products. Dell uses new and
reconditioned parts made by various manufacturers in performing warranty repairs
and building replacement products. If Dell repairs a product, its warranty term
is not extended; if Dell replaces a product, the replacement is warranted for
the remainder of the original term or 60 days, whichever is longer.

Limited Warranty Coverage During Years 2 and 3
- ----------------------------------------------
During the second and third years of this limited warranty, Dell will provide on
an exchange basis replacement parts for the Dell hardware product covered under
this limited warranty when a part requires replacement. You must report each
instance of hardware failure to Dell technical support in advance to obtain
Dell's concurrence that a part should be replaced and to have Dell ship the
replacement part. Dell will ship parts using next business day delivery,
shipping prepaid if you use an address in the United States (excluding Puerto
Rico and U.S. possessions). Shipments to other locations will be made freight
collect. Dell will include a prepaid shipping container with each part for your
use in returning the replaced part to Dell. Spare parts are new or
reconditioned. Dell may provide spare parts made by various manufacturers when
supplying parts to you. The warranty term for a replaced part is the remainder
of the limited warranty term.

You will pay Dell for replacement parts when the replaced part is not returned
to Dell within 30 days of the date the replacement was shipped by Dell, and for
parts used to repair systems not covered by this limited warranty. Parts will be
priced at Dell's then-current standard prices. Payment terms are net 30 days
from date of invoice. You accept full responsibility for your software and data.
Dell is not required to advise or remind you of appropriate backup and other
procedures.

General
- -------
DELL MAKES NO EXPRESS WARRANTIES BEYOND THOSE STATED HERE. DELL DISCLAIMS ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. SOME STATES
DO NOT ALLOW LIMITATIONS ON IMPLIED WARRANTIES, SO THIS LIMITATION MAY NOT APPLY
TO YOU.

DELL'S RESPONSIBILITY FOR MALFUNCTIONS AND DEFECTS IN HARDWARE IS LIMITED TO
REPAIR AND REPLACEMENT AS SET FORTH ABOVE. THESE WARRANTIES GIVE YOU SPECIFIC
LEGAL RIGHTS AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.

DELL DOES NOT ACCEPT LIABILITY BEYOND THE REMEDIES SET FORTH IN THIS WARRANTY
STATEMENT OR LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING
WITHOUT LIMITATION ANY LIABILITY FOR PRODUCTS NOT BEING AVAILABLE FOR USE OR FOR
LOST DATA OR SOFTWARE.

SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR
CONSEQUENTIAL DAMAGES, SO THE ABOVE EXCLUSION OR LIMITATION MAY NOT APPLY TO
YOU.

These provisions apply to Dell's return-to-factory warranty only. For provisions
of any on-site service contract covering your system, refer to the separate
on-site service contract that you will receive.

If you chose one of the available options instead of the basic Three Year
Limited Warranty described above, the option you chose will be listed on your 
invoice.

Note
- ----
         This Schedule applies to Dell's return-to-factory warranty only. For
         the provisions relating to on-site service, see the section titled
         On-site Service in Schedule A and the terms of any applicable service
         contract.

                                       9


                                                                   Exhibit 10.28

                    EMPLOYMENT AND NON-COMPETITION AGREEMENT

         Agreement made this 7th day of June, 1996, by and between MICHAEL
LAWLOR, an individual residing at 3447 Mimosa Way, Sugarland, Texas 77479
("Lawlor"), and USA TECHNOLOGIES, INC., a Pennsylvania corporation ("USA"), with
a place of business at 3 Glenhardie Corporate Center, 1265 Drummers Lane, Suite
306, Wayne, Pennsylvania 19087.

                                   BACKGROUND

         USA is in the principal business of owning and licensing credit card
activated control systems for the vending, copying, debit card and personal
computer industries. USA desires to engage Lawlor and Lawlor desires to be
engaged by USA as Director of Sales and Marketing of USA. Because of, among
other matters, the decreased value of the business of USA that will result if
Lawlor would compete with USA or use or divulge certain confidential
information, Lawlor has further agreed that he will be subject to certain
restrictions during and after his being an employee of USA.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the covenants set forth herein, and
intending to be legally bound hereby, the parties agree as follows:

         SECTION 1. Employment.

                  A. USA shall employ Lawlor for a one year period commencing on
July 8, 1996 and continuing through July 7, 1997 (the "Employment Period") and
Lawlor hereby accepts such employment.

                                        1






Unless terminated by either party hereto upon at least 30-days notice prior to
end of the original Employment Period ending July 7, 1997, or prior to the end
of any one year extension of the Employment Period, the Employment Period shall
not be terminated and shall automatically continue in full force and effect for
consecutive one year periods.

                  B. During the Employment Period, Lawlor shall devote his full
time, energy, skills, and attention to the business of USA, and shall not be
engaged or employed in any other business activity whatsoever, whether or not
such activity is pursued for gain, profit or other pecuniary advantage. During
the Employment Period, Lawlor shall perform and discharge well and faithfully
such executive management duties for USA as shall be necessary and as otherwise
may be directed by the executive officers of USA.

         SECTION 2. Compensation and Benefits

                  A.       In consideration of his services rendered, USA shall
pay to Lawlor a base salary of $60,000 per year during the Employment Period,
subject to any withholding required by law.

                  B. In addition to the base salary provided for in subparagraph
A., Lawlor shall be eligible to receive a 100% annual bonus, payable quarterly,
based on performance. Any such quarterly bonus would be based upon the
percentage of the placement target achieved by Lawlor in Lawlor's assigned sales
channel. The precise performance targets will be established by USA from time to
time as appropriate.

                  

                                        2





                  C. Lawlor shall be entitled to be reimbursed by USA for all
reasonable expenses reasonably incurred by Lawlor in connection with his
employment duties hereunder. Such expenses shall include but not be limited to
all reasonable business travel expenses such as tolls, gasoline and mileage.
Lawlor shall reasonably document all requests for expense reimbursements.

                  D. At the commencement of the Employment Period, USA will
issue to Lawlor nonvested options to acquire up to 100,000 shares of Common
Stock, no par value, of the Company ("Common Stock") for an exercise price of
$.65 per share. The vesting schedule of such options as well as all the other
terms and conditions thereof are set forth in the Option Certificate evidencing
such options which will be delivered to Lawlor by the Company at the
commencement of the Employment Period. The form of such Option Certificate is
attached hereto as Exhibit "A".

                    Lawlor acknowledges that such options are not incentive
stock options as such term is defined in Section 422 of the Internal Revenue
Code of 1986, as amended, and such options, if and when vested, may constitute
taxable compensation to Lawlor. Lawlor also acknowledges that neither the
options nor the Common Stock underlying the options have been registered under
the Securities Act of 1933, as amended (the "Act"), or under any state
securities laws, and neither the options nor the Common Stock underlying the
options can be sold or transferred unless such options or Common Stock have been
registered under the Act or such state securities laws, or unless the Company
has received an opinion of counsel that such registration is not required.

                                        3






         SECTION 3. Termination. Notwithstanding anything else contained herein,
USA may terminate the employment of Lawlor at any time upon notice delivered to
Lawlor in the event that (i) Lawlor commits any criminal or fraudulent act; or
(ii) Lawlor breaches any term or condition of this Agreement; or (iii) Lawlor
willfully abandons his duties hereunder. Upon such termination neither party
hereto shall have any further duties or obligations hereunder whatsoever;
provided, however, that Lawlor's obligations under Sections 5 and 6 hereof shall
survive any such termination.

         SECTION 4. Death and Disability.

                  A. If Lawlor shall die during the Employment Period, this
Agreement shall terminate as of the date of such death and except for any base
salary or bonuses accrued as of such date USA shall have no further duties or
obligations hereunder whatsoever.

                  B. If USA determines in good faith that Lawlor is
incapacitated by accident, sickness or otherwise so as to render him mentally or
physically incapable of performing the services required of him hereunder for an
aggregate of ninety (90) consecutive days, upon the expiration of such period or
at any time thereafter, by action of USA, Lawlor's employment hereunder may be
terminated immediately, upon giving him notice to that effect, and upon such
termination except for any base salary or bonuses accrued as of such date
neither party hereto shall have any further duties or obligations hereunder;
provided, however, that Lawlor's obligations under Sections 5 and 6 hereof shall
survive any such termination. USA shall be entitled to rely upon the advice and

                                        4






opinion of any physician of its choosing in making any determination with
respect to any such disability.

         SECTION 5. Business Secrets.

                  A. Except in connection with his duties hereunder, Lawlor
shall not, directly or indirectly, at any time from and after the date hereof,
and for a one (1) year period following the termination of the Employment
Period, or for a one (1) year period following the termination of Lawlor's
employment hereunder if earlier, make any use of, exploit, disclose, or divulge
to any other person, firm or corporation, any trade or business secret, customer
or supplier information, documents, know-how, data, marketing information,
method or means, or any other confidential (i.e. not already otherwise
disseminated to or available to the public) information concerning the business
or policies of USA, that Lawlor learned as a result of, in connection with,
through his employment with, or through his affiliation with USA, whether or not
pursuant to this Agreement.

                  B. From and after the date hereof, except in connection with
his duties hereunder, and for a one (1) year period following the termination of
the Employment Period, or for a one (1) year period following the termination of
Lawlor's employment hereunder if earlier, Lawlor shall not solicit, or divert
business from, or serve, or sell to, any customer or account of USA of which
Lawlor is or becomes aware, or with which Lawlor has had personal contact as a
result of, in connection with, through his employment with, or through his
affiliation with USA, whether or not pursuant to this Agreement.

                                        5








                  C. All documents, data, know-how, designs, inventions, names,
marketing information, method or means, materials, software programs, hardware,
configurations, information, data processing reports, lists and sales analyses,
price lists or information, or any other materials or data of any kind furnished
to Lawlor by USA, or developed by Lawlor on behalf of USA or at USA's direction
or for USA's use, or otherwise devised, developed, created, or invented in
connection with Lawlor's employment hereunder or his affiliation with USA, are
and shall remain the sole and exclusive property of USA, and Lawlor shall have
no right or interest whatsoever thereto, including but not limited to any
copyright or patent interest whatsoever. If USA requests the return of any such
items (including all copies) at any time whatsoever, Lawlor shall immediately
deliver the same to USA.

         SECTION 6. Restrictive Covenant. From and after the date hereof, and
for a one (1) year period following the termination of the Employment Period, or
for a one (1) year period following the termination of Lawlor's employment
hereunder if earlier, Lawlor shall be prohibited from competing in the United
States with the business of USA as presently or as hereinafter conducted,
including but not limited to the ownership and licensing of credit card
activated control systems in the vending, copying, debit card, or personal
computer industries. For the purposes hereof, the term "competing" shall mean
acting, directly or indirectly, as a partner, principal, stockholder, joint
venturer, associate,

                                        6






independent contractor, creditor of, consultant, trustee, lessor to, sublessor
to, employee or agent of, or to have any other involvement with, any person,
firm, corporation, or other business organization which is engaged in the
businesses described in this Section.

         SECTION 7. Remedies. Lawlor acknowledges that any breach by him of the
obligations set forth in Sections 5 or 6 hereof would substantially and
materially impair and irreparably harm USA's business and goodwill; that such
impairment and harm would be difficult to measure; and, therefore, total
compensation in solely monetary terms would be inadequate. Consequently, Lawlor
agrees that in the event of any breach or any threatened breach by Lawlor of any
of the provisions of Section 5 or 6 hereof, USA shall be entitled in addition to
monetary damages or other remedies, to equitable relief, including injunctive
relief, and to the payment by Lawlor of all costs and expenses incurred by USA
in enforcing the provisions thereof, including attorneys' fees. In connection
with any such injunctive relief, Lawlor agrees that USA shall not be required to
post a bond or any other security with the Court. The remedies granted to USA in
this Agreement are cumulative and are in addition to remedies otherwise
available to USA at law or in equity.

         SECTION 8. Waiver of Breach. The waiver by USA of a breach of any
provision of this Agreement by Lawlor shall not operate or be construed as a
waiver of any other or subsequent breach by Lawlor of such or any other
provision.

                                        7






         SECTION 9. Notices. All notices required or permitted hereunder shall
be in writing and shall be sent by certified or registered mail, return receipt
requested, postage prepaid, as follows:

                  To USA:

                           USA Technologies, Inc.
                           3 Glenhardie Corporate Center
                           1265 Drummers Lane, Suite 306
                           Wayne, Pennsylvania 19087
                           Attn: Mr. George R. Jensen, Jr., President

                  To Lawlor:

                           Mr. Michael Lawlor
                           3447 Mimosa Way
                           Sugarland, Texas 77479

or to such other address as either of them may designate in a written notice
served upon the other party in the manner provided herein. All notices required
or permitted hereunder shall be deemed duly given and received on the second day
next succeeding the date of mailing.

         SECTION 10. Severability. If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
any such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. If any of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
scope, activity or subject, it

                                        8






shall be construed by limiting and reducing it, so as to be valid and
enforceable to the extent compatible with the applicable law.

         SECTION 11. Governing Law. The implementation and interpretation of
this Agreement shall be governed by and enforced in accordance with the laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws rules.

         SECTION 12. Binding Effect and Assignability. The rights and
obligations of both parties under this Agreement shall inure to the benefit of
and shall be binding upon their personal representatives, heirs, successors and
assigns. This Agreement, or any part thereof, may not be assigned by Lawlor.

         SECTION 13.  Entire Agreement.  This Agreement constitutes the
entire agreement with respect to the subject matter hereof between
the parties hereto and except as provided herein there are no other
agreements between the parties relating to the subject matter

                                        9





 hereof. This Agreement completely replaces and supersedes the letter dated May
23, 1996, between Lawlor and USA, and such letter shall be void and of no
further force or effect. This Agreement may only be modified by an agreement in
writing executed by both USA and Lawlor.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                            USA TECHNOLOGIES, INC.

                                        By: /s/ George R. Jensen, Jr.
                                            --------------------------------
                                            George R. Jensen, Jr., Chairman
                                                    and Chief Executive Officer

                                            /s/ Michael Lawlor
                                            --------------------------------
                                            MICHAEL LAWLOR

                                       10



                                                                   Exhibit 10.29


THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT UNDER SUCH ACT AND SUCH LAWS WITH RESPECT
TO THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

OPTION CERTIFICATE                                 100,000 COMMON STOCK OPTIONS
NO. 144

                             USA TECHNOLOGIES, INC.

                              COMMON STOCK OPTIONS

                  (These Options will be void if not exercised
                   by the Termination Dates specified below.)

                  1. Options. Subject to the terms and conditions hereof, this
certifies that MICHAEL LAWLOR is the owner of 100,000 Options (the "Options") of
USA Technologies, Inc. (the "Company"), a Pennsylvania corporation. Each Option,
when vested in accordance with Section 3 hereof, entitles the owner hereof to
purchase from the Company at any time prior to 5:00 p.m. on the fifth annual
anniversary of the vesting of such Option (the "Termination Date"), one fully
paid and non-assessable share of the Company's Common Stock, without par value
(the "Common Stock"), subject to adjustment as provided in Section 8 hereof.

                  2. Option Price. The Options, when vested, shall be exercised
by delivery to the Company (prior to the Termination Date for such Options) of
the option price for each share of Common Stock being purchased hereunder (the
"Option Price"), this Certificate, and the completed Election To Purchase Form
which is attached hereto. The Option Price shall be $.65 per share of Common
Stock to be purchased pursuant to each Option issued pursuant hereto. The Option
Price shall be subject to adjustment as provided in Section 8 hereof. The Option
Price is payable either in cash or by certified check or bank draft payable to
the order of the Company.

                  3. Vesting of Options.

I. Notwithstanding anything contained herein to the contrary, the Options
represented by this Certificate shall only become vested and exercisable by
LAWLOR in accordance with the terms and conditions set forth in this Section 3.
If LAWLOR is employed by the Company as of the date set forth in Column "A"
below, the number of Options set forth in Column "B" below shall on such date
become irrevocably and absolutely vested and exercisable.







               Column "A"                                        Column "B"
               ----------                                        ----------
              Vesting Date                                     Options Vested
              ------------                                     --------------
              October 7, 1996                                      12,500
              January 7, 1997                                      12,500
              April 7, 1997                                        12,500
              July 7, 1997                                         12,500
              October 7, 1997                                      12,500
              January 7, 1998                                      12,500
              April 7, 1998                                        12,500
              July 7, 1998                                         12,500
                                                                   ------
                       Total . . . . . . . . . . . . . . . . . .  100,000

                  The Employment And Non-Competition Agreement dated June 7,
1996 between LAWLOR and the Company, including any and all supplements,
amendments, or modifications thereto (the "Employment Agreement"), is hereby
incorporated herein by reference. The terms and conditions thereof shall be used
to determine whether LAWLOR is employed by the Company on any particular vesting
date. Therefore, and as set forth in the Employment Agreement, LAWLOR's
employment would be considered terminated upon his death or disability under
Section 4 thereof, or upon notice given to LAWLOR by the Company under Section 3
thereof, or upon notice given by the Company or LAWLOR under Section 1(a)
thereof.

                  If pursuant hereto LAWLOR shall not become vested in any
particular Option or Options, he shall only forfeit the Option or Options not so
vested. Any Option or Options previously vested pursuant hereto shall
nevertheless remain fully vested and exercisable all in accordance with the
terms hereof.

                  4. Exercise. Upon the surrender of this Certificate and
payment of the Option Price as aforesaid, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
registered holder of this Option and in such name or names as the registered
holder may designate, a certificate or certificates for the number of full
shares of Common Stock so purchased upon the exercise of any Option. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Common Stock on and as of the date of the delivery to the Company
of this Certificate and payment of the Option Price as aforesaid. If, however,
at the date of surrender of this Certificate and payment of such Option Price,
the transfer books for the Common Stock purchasable upon the exercise of any
Option shall be closed, the certificates for the Common Stock in respect to
which any such Option are then exercised shall be issued and the owner of such
Common Stock shall become a record owner of such Common Stock on and as of the
next date on which such books shall be opened, and until such date the Company

                                        2






shall be under no duty to deliver any certificate for such Common Stock.

                  5. Partial Exercise. The rights of purchase represented by the
Options shall be exercisable, at the election of the registered holder hereof,
either as an entirety, or from time to time for any part of the Common Stock
specified herein and, in the event that the Options are exercised with respect
to less than all of the Common Stock specified herein at any time prior to the
Termination Date, a new Certificate will be issued to such registered holder for
the remaining number of Options not so exercised.

                  6. Termination Date. All of the Options must be exercised in
accordance with the terms hereof prior to the Termination Date relating to any
such Option. At and after the Termination Date relating to any such Option any
and all unexercised rights hereunder relating to such Option shall become null
and void and such Option shall without any action on behalf of the Company
become null and void.

                  7. Lost, Mutilated Certificate. In case this Common Stock
Option Certificate shall become mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation of
the mutilated certificate, or in lieu of and in substitution for the Certificate
lost, stolen, or destroyed, a new Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such certificate and
indemnity, if requested, also satisfactory to the Company.

                  8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Option Price and number of shares of Common Stock subject to the
Options shall be subject to adjustment from time to time only as set forth
hereinafter:

                           a. In case the Company shall declare a Common Stock
dividend on the Common Stock, then the Option Price shall be proportionately
decreased as of the close of business on the date of record of said Common Stock
dividend in proportion to such increase of outstanding shares of Common Stock.

                           b. If the Company shall at any time subdivide its
outstanding Common Stock by recapitalization, reclassification or split-up
thereof, the Option Price immediately prior to such subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification, or
combination thereof, the Option Price immediately prior to such combination
shall be proportionately increased. Any such adjustment to the Option Price
shall become effective at the close of business on the record date

                                        3






for such subdivision or combination. The Option Price shall be proportionately
increased or decreased, as the case may be, in proportion to such increase or
decrease, as the case may be, of outstanding shares of Common Stock.

                           c. Upon any adjustment of the Option Price as
hereinabove provided, the number of shares of Common Stock issuable upon
exercise of the Options remaining unexercised immediately prior to any such
adjustment, shall be changed to the number of shares determined by dividing (i)
the appropriate Option Price payable for the purchase of all shares of Common
Stock issuable upon exercise of all of the Options remaining unexercised
immediately prior to such adjustment by (ii) the Option Price per share of
Common Stock in effect immediately after such adjustment. Pursuant to this
formula, the total sum payable to the Company upon the exercise of the Options
remaining unexercised immediately prior to such adjustment shall remain
constant.

                                    (i) If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, person, or entity, or the sale of all
or substantially all of its assets to another corporation, person, or entity,
shall be effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities, cash, property, or assets with respect to or in
exchange for Common Stock, and provided no election is made by the Company
pursuant to subsection (ii) hereof, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Company or such successor
or purchasing corporation, person, or entity, as the case may be, shall agree
that the registered holder of the Options shall have the right thereafter and
until the Termination Date to exercise such Options for the kind and amount of
stock, securities, cash, property, or assets receivable upon such
reorganization, reclassification, consolidation, merger, or sale by a holder of
the number of shares of Common Stock for the purchase of which such Options
might have been exercised immediately prior to such reorganization,
reclassification, consolidation, merger or sale, subject to such subsequent
adjustments which shall be equivalent or nearly equivalent as may be practicable
to the adjustments provided for in this Section 8.

                                    (ii) Notwithstanding subsection (i) hereof
and in lieu thereof, the Company may elect by written notice to the registered
holder hereof, to require such registered holder to exercise all of the Options
remaining unexercised prior to any such reorganization, reclassification,
consolidation, merger or sale. If the holder of this Option shall not exercise
all or any part of the Options remaining unexercised prior to such event, such
unexercised Options shall automatically become null and void upon the occurrence
of any such event, and of no further force and effect. The Common Stock issued
pursuant to any such exercise

                                        4






shall be deemed to be issued and outstanding immediately prior to any such
event, and shall be entitled to be treated as any other issued and outstanding
share of Common Stock in connection with such event. If an election is not made
by the Company pursuant to this subsection (ii) in connection with any such
event, then the provisions of subsection (i) hereof shall apply to such event.

                  d. Whenever the Option Price and number of shares of Common
Stock subject to this Option is adjusted as herein provided, the Company shall
promptly mail to the registered holder of this Option a statement signed by an
officer of the Company setting forth the adjusted Option Price and the number of
shares of Common Stock subject to this Option, determined as so provided.

                  e. This form of Certificate need not be changed because of any
adjustment which is required pursuant to this Section 8. However, the Company
may at any time in its sole discretion (which shall be conclusive) make any
change in the form of this Certificate that the Company may deem appropriate and
that does not affect the substance hereof; and any Certificate thereafter
issued, whether in exchange or substitution for this Certificate or otherwise,
may be in the form as so changed.

                  9. Reservation. There has been reserved, and the Company shall
at all times keep reserved out of the authorized and unissued shares of Common
Stock, a number of shares of Common Stock sufficient to provide for the exercise
of the right of purchase represented by the Options. The Company agrees that all
shares of Common Stock issued upon exercise of the Options shall be, at the time
of delivery of the Certificates for such Common Stock, validly issued and
outstanding, fully paid and non-assessable.

                  10. Fractional Shares. The Company shall not issue any
fractional shares of Common Stock pursuant to any exercise of any Option and
shall pay cash to the holder of any Option in lieu of any such fractional
shares.

                  11. No Right. The holder of any Options shall not be entitled
to any of the rights of a shareholder of the Company prior to the date of
issuance of the Common Stock by the Company pursuant to an exercise of any
Option.

                  12. Securities Laws. As a condition to the issuance of any
Common Stock pursuant to the Options, the holder of such Common Stock shall
execute and deliver such representations, warranties, and covenants, that may be
required by applicable federal and state securities law, or that the Company
determines is reasonably necessary in connection with the issuance of such
Common Stock. In addition, the certificates representing the Common Stock shall
contain such legends, or restrictive legends, or stop transfer instructions, as
shall be required by applicable Federal or state securities laws, or as shall be
reasonably required by the Company.

                                        5







                  13. Applicable Law. The Options and this Certificate shall be
deemed to be a contract made under the laws of the Commonwealth of Pennsylvania
and for all purposes shall be construed in accordance with the laws thereof
regardless of its choice of law rules.

                  IN WITNESS WHEREOF, USA TECHNOLOGIES, INC., has executed and
delivered this Certificate and caused its corporate seal to be affixed hereto.

                                                     USA TECHNOLOGIES, INC.

Corporate Seal                              By: /s/ George R. Jensen, Jr.
                                               ---------------------------------
                                                George R. Jensen, Jr.
                                                Chief Executive Officer

                                       Attest:  /s/ Keith L. Sterling
                                               ---------------------------------
                                                Keith L. Sterling, Secretary

Dated: July 8, 1996

                                        6





USA TECHNOLOGIES, INC.
3 Glenhardie Corporate Center
1265 Drummers Lane, Suite 306
Wayne, Pennsylvania  19087
Attn:  George R. Jensen, Jr.,
       Chief Executive Officer

                              ELECTION TO PURCHASE

                  The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the attached Option Certificate No. _____ of
the Company. The undersigned desires to purchase _____ shares of Common Stock
provided for therein and tenders herewith full payment of the Option Price for
the shares of Common Stock being purchased, all in accordance with the
Certificate. The undersigned requests that a Certificate representing such
shares of Common Stock shall be issued to and registered in the name of, and
delivered to, the undersigned at the following
address:________________________________________

______________________________________________________________________________

_________________. If said number of shares of Common Stock shall not be all the
shares purchasable under the Certificate, then a new Common Stock Option
Certificate for the balance remaining of the shares of Common Stock purchasable
shall be issued to and registered in the name of, and delivered to, the
undersigned at the address set forth above.

Dated: _________ , 19___                  Signature:__________________________

                                        7



                                                                   Exhibit 10.30

                    EMPLOYMENT AND NON-COMPETITION AGREEMENT

         Agreement made this 4th day of April, 1996, by and between STEPHEN P.
HERBERT, an individual residing at 21 Creamery Lane, Ridgefield, Connecticut
06877 ("Herbert"), and USA TECHNOLOGIES, INC., a Pennsylvania corporation
("USA"), with a place of business at 3 Glenhardie Corporate Center, 1265
Drummers Lane, Suite 306, Wayne, Pennsylvania 19087.

                                   BACKGROUND

         USA is in the principal business of owning and licensing credit card
activated control systems for the vending, copying, debit card and personal
computer industries. USA desires to engage Herbert and Herbert desires to be
engaged by USA as Executive Vice President of Sales and Marketing of USA.
Because of, among other matters, the decreased value of the business of USA that
will result if Herbert would compete with USA or use or divulge certain
confidential information, Herbert has further agreed that he will be subject to
certain restrictions during and after his being an employee of USA.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the covenants set forth herein, and
intending to be legally bound hereby, the parties agree as follows:

         SECTION 1. Employment.

                  (a) USA shall employ Herbert for a one year period commencing
on April 15, 1996 and continuing through April 14, 1997

                                        1






(the "Employment Period") and Herbert hereby accepts such employment. Unless
terminated by either party hereto upon at least 60-days notice prior to end of
the original Employment Period ending April 14, 1997, or prior to the end of any
one year extension of the Employment Period, the Employment Period shall not be
terminated and shall automatically continue in full force and effect for
consecutive one year periods.

                  (b) During the Employment Period, Herbert shall devote his
full time, energy, skills, and attention to the business of USA, and shall not
be engaged or employed in any other business activity whatsoever, whether or not
such activity is pursued for gain, profit or other pecuniary advantage. During
the Employment Period, Herbert shall perform and discharge well and faithfully
such executive management duties for USA as shall be necessary and as otherwise
may be directed by the President or Board of Directors of USA.

                  (c) Nothing contained in subparagraph (b) hereof shall be
construed as preventing Herbert from investing his personal assets in businesses
which do not compete with USA, (i) where the form or manner of such investments
will not require any management duties or time, or any other substantial
services or time, on the part of Herbert in connection with the businesses in
which such investments are made, or (ii) in which his participation is solely
that of a passive investor.

                  (d) The Board of Directors of USA shall nominate and recommend
to its stockholders the election of Herbert to the Board

                                        2






of Directors of USA at USA's next Annual Meeting of Stockholders which is
presently scheduled for April 10, 1996.

         SECTION 2. Compensation and Benefits

                  (a) In consideration of his services rendered, USA shall pay
to Herbert a base salary of $81,000 per year during the Employment Period,
subject to any withholding required by law. Herbert's base salary may be
increased from time to time in the discretion of the Board of Directors, and in
any event, shall at all times during the Employment Period (or any extension
thereof) be no less than 90% of the base salary of the Chairman and Chief
Executive Officer of USA.

                  (b) In addition to the base salary provided for in
subparagraph (a), Herbert shall be eligible to receive such bonus or bonuses as
the Board of Directors of USA may, in their discretion, pay to Herbert from time
to time.

                  (c) Herbert shall be entitled to be reimbursed by USA for all
reasonable expenses reasonably incurred by Herbert in connection with his
employment duties hereunder. Such expenses shall include but not be limited to
all reasonable business travel expenses such as tolls, gasoline and mileage.
Herbert shall reasonably document all requests for expense reimbursements.

                  (d) At the commencement of the Employment Period, USA will
issue to Herbert nonvested options to acquire up to 400,000 shares of Common
Stock, no par value, of the Company ("Common Stock") for an exercise price of
$.65 per share. The vesting schedule of such options as well as all the other
terms and

                                        3






conditions thereof are set forth in the Option Certificate evidencing such
options which will be delivered to Herbert by the Company at the commencement of
the Employment Period. The form of such Option Certificate is attached hereto as
Exhibit "A". Herbert acknowledges that such options are not incentive stock
options as such term is defined in Section 422 of the Internal Revenue Code of
1986, as amended, and such options, if and when vested, may constitute taxable
compensation to Herbert. Herbert also acknowledges that neither the options nor
the Common Stock underlying the options have been registered under the
Securities Act of 1933, as amended (the "Act"), or under any state securities
laws, and neither the options nor the Common Stock underlying the options can be
sold or transferred unless such options or Common Stock have been registered
under the Act or such state securities laws, or unless the Company has received
an opinion of counsel that such registration is not required.

                  (e) USA shall pay Herbert's reasonable moving expenses up to
the amount of $5,000. The expenses to be paid by USA will be for the actual
charges of Herbert's moving company in connection with Herbert's move to the
Philadelphia, Pennsylvania area.

         SECTION 3. Termination. Notwithstanding anything else contained herein,
USA may terminate the employment of Herbert at any time upon notice delivered to
Herbert in the event that (i) Herbert commits any criminal or fraudulent act; or
(ii) Herbert breaches any term or condition of this Agreement; or (iii) Herbert
willfully abandons his duties hereunder. Upon such termination

                                        4






neither party hereto shall have any further duties or obligations hereunder
whatsoever; provided, however, that Herbert's obligations under Sections 5 and 6
hereof shall survive any such termination.

         SECTION 4. Death and Disability.

                  (a) If Herbert shall die during the Employment Period, this
Agreement shall terminate as of the date of such death and except for any base
salary or bonuses accrued as of such date USA shall have no further duties or
obligations hereunder whatsoever.

                  (b) If USA determines in good faith that Herbert is
incapacitated by accident, sickness or otherwise so as to render him mentally or
physically incapable of performing the services required of him hereunder for an
aggregate of ninety (90) consecutive days, upon the expiration of such period or
at any time thereafter, by action of USA, Herbert's employment hereunder may be
terminated immediately, upon giving him notice to that effect, and upon such
termination except for any base salary or bonuses accrued as of such date
neither party hereto shall have any further duties or obligations hereunder;
provided, however, that Herbert's obligations under Sections 5 and 6 hereof
shall survive any such termination. USA shall be entitled to rely upon the
advice and opinion of any physician of its choosing in making any determination
with respect to any such disability.

         SECTION 5. Business Secrets.

                  (a) Except in connection with his duties hereunder, Herbert
shall not, directly or indirectly, at any time from and after the date hereof,
and for a one (1) year period following the

                                        5






termination of the Employment Period, or for a one (1) year period following the
termination of Herbert's employment hereunder if earlier, make any use of,
exploit, disclose, or divulge to any other person, firm or corporation, any
trade or business secret, customer or supplier information, documents, know-how,
data, marketing information, method or means, or any other confidential (i.e.
not already otherwise disseminated to or available to the public) information
concerning the business or policies of USA, that Herbert learned as a result of,
in connection with, through his employment with, or through his affiliation with
USA, whether or not pursuant to this Agreement.

                  (b) From and after the date hereof, except in connection with
his duties hereunder, and for a one (1) year period following the termination of
the Employment Period, or for a one (1) year period following the termination of
Herbert's employment hereunder if earlier, Herbert shall not solicit, or divert
business from, or serve, or sell to, any customer or account of USA of which
Herbert is or becomes aware, or with which Herbert has had personal contact as a
result of, in connection with, through his employment with, or through his
affiliation with USA, whether or not pursuant to this Agreement. Notwithstanding
the prior sentence, following the termination of Herbert's employment with USA,
Herbert shall be permitted to sell products to customers or accounts of USA,
provided such products are not competitive with, or similar to, any products of
USA, whether such products are offered now or at any time in the future by USA.

                                        6






                  (c) All documents, data, know-how, designs, inventions, names,
marketing information, method or means, materials, software programs, hardware,
configurations, information, data processing reports, lists and sales analyses,
price lists or information, or any other materials or data of any kind furnished
to Herbert by USA, or developed by Herbert on behalf of USA or at USA's
direction or for USA's use, or otherwise devised, developed, created, or
invented in connection with Herbert's employment hereunder or his affiliation
with USA, are and shall remain the sole and exclusive property of USA, and
Herbert shall have no right or interest whatsoever thereto, including but not
limited to any copyright or patent interest whatsoever. If USA requests the
return of any such items (including all copies) at any time whatsoever, Herbert
shall immediately deliver the same to USA.

         SECTION 6. Restrictive Covenant. From and after the date hereof, and
for a one (1) year period following the termination of the Employment Period, or
for a one (1) year period following the termination of Herbert's employment
hereunder if earlier, Herbert shall be prohibited from competing in the United
States with the business of USA as presently or as hereinafter conducted,
including but not limited to the ownership and licensing of credit card
activated control systems in the vending, copying, debit card, or personal
computer industries. For the purposes hereof, the term "competing" shall mean
acting, directly or indirectly, as a partner, principal, stockholder, joint
venturer, associate, independent contractor, creditor of, consultant, trustee,
lessor

                                        7






to, sublessor to, employee or agent of, or to have any other involvement with,
any person, firm, corporation, or other business organization which is engaged
in the businesses described in this Section.

         SECTION 7. Remedies. Herbert acknowledges that any breach by him of the
obligations set forth in Sections 5 or 6 hereof would substantially and
materially impair and irreparably harm USA's business and goodwill; that such
impairment and harm would be difficult to measure; and, therefore, total
compensation in solely monetary terms would be inadequate. Consequently, Herbert
agrees that in the event of any breach or any threatened breach by Herbert of
any of the provisions of Section 5 or 6 hereof, USA shall be entitled in
addition to monetary damages or other remedies, to equitable relief, including
injunctive relief, and to the payment by Herbert of all costs and expenses
incurred by USA in enforcing the provisions thereof, including attorneys' fees.
The remedies granted to USA in this Agreement are cumulative and are in addition
to remedies otherwise available to USA at law or in equity.

         SECTION 8. Waiver of Breach. The waiver by USA of a breach of any
provision of this Agreement by Herbert shall not operate or be construed as a
waiver of any other or subsequent breach by Herbert of such or any other
provision.

         SECTION 9. Notices. All notices required or permitted hereunder shall
be in writing and shall be sent by certified or registered mail, return receipt
requested, postage prepaid, as follows:

                                        8






                  To USA:

                           USA Technologies, Inc.
                           3 Glenhardie Corporate Center
                           1265 Drummers Lane, Suite 306
                           Wayne, Pennsylvania 19087
                           Attn: George R. Jensen, Jr., President

                  To Herbert:

                           Mr. Stephen P. Herbert
                           21 Creamery Lane
                           Ridgefield, Connecticut 06877

or to such other address as either of them may designate in a written notice
served upon the other party in the manner provided herein. All notices required
or permitted hereunder shall be deemed duly given and received on the second day
next succeeding the date of mailing.

         SECTION 10. Severability. If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
any such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. If any of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
scope, activity or subject, it shall be construed by limiting and reducing it,
so as to be valid and enforceable to the extent compatible with the applicable
law.

         SECTION 11. Governing Law. The implementation and interpretation of
this Agreement shall be governed by and enforced

                                        9





in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of laws rules.

         SECTION 12. Binding Effect and Assignability. The rights and
obligations of both parties under this Agreement shall inure to the benefit of
and shall be binding upon their personal representatives, heirs, successors and
assigns. This Agreement, or any part thereof, may not be assigned by Herbert.

         SECTION 13. Entire Agreement. This Agreement constitutes the entire
agreement with respect to the subject matter hereof between the parties hereto
and except as provided herein there are no other agreements between the parties
relating to the subject matter hereof. This Agreement completely replaces and
supersedes the letter dated March 1, 1996, between Herbert and USA, and such
letter shall be void and of no further force or effect. This Agreement may only
be modified by an agreement in writing executed by both USA and Herbert.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                  USA TECHNOLOGIES, INC.

                                  By: /s/ George R. Jensen, Jr.
                                      -------------------------------
                                       George R. Jensen, Jr., Chairman
                                       and Chief Executive Officer


                                      /s/ Stephen P. Herbert
                                      -------------------------------
                                          STEPHEN P. HERBERT

                                       10


                                                                   Exhibit 10.31


THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT UNDER SUCH ACT AND SUCH LAWS WITH RESPECT
TO THESE OPTIONS AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

OPTION CERTIFICATE                                 400,000 COMMON STOCK OPTIONS
NO. 140

                             USA TECHNOLOGIES, INC.

                              COMMON STOCK OPTIONS

                   (This Option will be void if not exercised
                          by the date provided below.)

1. Options. Subject to the terms and conditions hereof, this certifies that
STEPHEN P. HERBERT is the owner of 400,000 Options (the "Options") of USA
Technologies, Inc. (the "Company"), a Pennsylvania corporation. Each Option,
when vested in accordance with Section 3 hereof, entitles the owner hereof to
purchase from the Company at any time prior to 5:00 p.m. on the fifth annual
anniversary of the vesting of such option (the "Termination Date"), one fully
paid and non-assessable share of the Company's Common Stock, without par value
(the "Common Stock"), subject to adjustment as provided in Section 8 hereof.

                         1. Option Price.  The Options, when vested, shall be
exercised by delivery to the Company of the option price for each share of
Common Stock being purchased hereunder (the "Option Price"), this Certificate,
and the completed Election To Purchase Form which is attached hereto. The Option
Price shall be $.75 per share of Common Stock to be purchased pursuant to each
Option. The Option Price shall be subject to adjustment as provided in Section 8
hereof. The Option Price is payable either in cash or by certified check or bank
draft payable to the order of the Company.

                         2. Vesting of Options.

                a. Notwithstanding anything contained herein to
the contrary, the Options represented by this Certificate shall only become
vested and exercisable by HERBERT in accordance with the terms and conditions
set forth in this Section 3. If HERBERT is employed by the Company as of the
date set forth in Column "A" below, the number of Options set forth in Column
"B" below shall on such date become irrevocably and absolutely vested and
exercisable.






               Column "A"                                        Column "B"
               ----------                                        ----------

              Vesting Date                                     Options Vested
              ------------                                     --------------

             July 14, 1996                                        50,000
             October 14, 1996                                     50,000
             January 14, 1997                                     50,000
             April 14, 1997                                       50,000
             July 14, 1997                                        25,000
             October 14, 1997                                     25,000
             January 14, 1998                                     25,000
             April 14, 1998                                       25,000
             July 14, 1998                                        25,000
             October 14, 1998                                     25,000
             January 14, 1999                                     25,000
             April 14, 1999                                       25,000
                                                                 -------
                                         Total . . . . . . . . . 400,000

                b. The Employment And Non-Competition Agreement dated March 8,
1996 between HERBERT and the Company, including any and all supplements,
amendments, or modifications thereto (the "Employment Agreement"), is hereby
incorporated herein by reference. The terms and conditions thereof shall be used
to determine whether HERBERT is employed by the Company on any particular
vesting date. Therefore, and as set forth in the Employment Agreement, HERBERT's
employment would be considered terminated upon his death or disability under
Section 4 thereof, or upon notice given to HERBERT by the Company under Section
3 thereof, or upon notice given by the Company or HERBERT under Section 1(a)
thereof.

                c. If pursuant hereto HERBERT shall not become vested in any
Option or Options, he shall only forfeit the Option or Options not so vested.
Any Option or Options previously vested pursuant hereto shall nevertheless
remain fully vested and exercisable all in accordance with the terms hereof.

            3. Exercise. Upon the surrender of this Certificate and payment of
the Option Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the registered
holder of this Option and in such name or names as the registered holder may
designate, a certificate or certificates for the number of full shares of Common
Stock so purchased upon the exercise of any Option. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Common Stock on and as of the date of the delivery to the Company of this
Certificate and payment of the Option Price as aforesaid. If, however, at the
date of surrender of this Certificate and payment of such Option Price, the
transfer books for the Common Stock purchasable upon the

                                        2






exercise of any Option shall be closed, the certificates for the Common Stock in
respect to which any such Option are then exercised shall be issued and the
owner of such Common Stock shall become a record owner of such Common Stock on
and as of the next date on which such books shall be opened, and until such date
the Company shall be under no duty to deliver any certificate for such Common
Stock.

            4. Partial Exercise. The rights of purchase represented by the
Options shall be exercisable, at the election of the registered holder hereof,
either as an entirety, or from time to time for any part of the Common Stock
specified herein and, in the event that the Options are exercised with respect
to less than all of the Common Stock specified herein at any time prior to the
Termination Date, a new Certificate will be issued to such registered holder for
the remaining number of Options not so exercised.

            5. Termination Date. All of the Options must be exercised in
accordance with the terms hereof prior to the Termination Date. At and after the
Termination Date any and all unexercised rights hereunder shall become null and
void and the Options shall without any action on behalf of the Company become
null and void.

            6. Lost, Mutilated Certificate. In case this Common Stock Option
Certificate shall become mutilated, lost, stolen or destroyed, the Company shall
issue in exchange and substitution for and upon cancellation of the mutilated
certificate, or in lieu of and in substitution for the Certificate lost, stolen,
or destroyed, a new Certificate of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the Company
of such loss, theft or destruction of such certificate and indemnity, if
requested, also satisfactory to the Company.

            7. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Option Price and number of shares of Common Stock subject to the
Options shall be subject to adjustment from time to time only as set forth
hereinafter:

                a. In case the Company shall declare a Common Stock dividend on
the Common Stock, then the Option Price shall be proportionately decreased as of
the close of business on the date of record of said Common Stock dividend in
proportion to such increase of outstanding shares of Common Stock.

                b. If the Company shall at any time subdivide its outstanding
Common Stock by recapitalization, reclassification or split-up thereof, the
Option Price immediately prior to such subdivision shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock by

                                        3






recapitalization, reclassification, or combination thereof, the Option Price
immediately prior to such combination shall be proportionately increased. Any
such adjustment to the Option Price shall become effective at the close of
business on the record date for such subdivision or combination. The Option
Price shall be proportionately increased or decreased, as the case may be, in
proportion to such increase or decrease, as the case may be, of outstanding
shares of Common Stock.

                c. Upon any adjustment of the Option Price as hereinabove
provided, the number of shares of Common Stock issuable upon exercise of the
Options remaining unexercised immediately prior to any such adjustment, shall be
changed to the number of shares determined by dividing (i) the appropriate
Option Price payable for the purchase of all shares of Common Stock issuable
upon exercise of all of the Options remaining unexercised immediately prior to
such adjustment by (ii) the Option Price per share of Common Stock in effect
immediately after such adjustment. Pursuant to this formula, the total sum
payable to the Company upon the exercise of the Options remaining unexercised
immediately prior to such adjustment shall remain constant.

                d. (i) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, person, or entity, or the sale of all or substantially all
of its assets to another corporation, person, or entity, shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash, property, or assets with respect to or in exchange for Common
Stock, and provided no election is made by the Company pursuant to subsection
(ii) hereof, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, the Company or such successor or purchasing
corporation, person, or entity, as the case may be, shall agree that the
registered holder of the Options shall have the right thereafter and until the
Termination Date to exercise such Options for the kind and amount of stock,
securities, cash, property, or assets receivable upon such reorganization,
reclassification, consolidation, merger, or sale by a holder of the number of
shares of Common Stock for the purchase of which such Options might have been
exercised immediately prior to such reorganization, reclassification,
consolidation, merger or sale, subject to such subsequent adjustments which
shall be equivalent or nearly equivalent as may be practicable to the
adjustments provided for in this Section 8.

                (ii) Notwithstanding subsection (i) hereof and in lieu thereof,
the Company may elect by written notice to the registered holder hereof, to
require such registered holder to exercise all of the Options remaining
unexercised prior to any such reorganization, reclassification, consolidation,
merger or sale. If the holder of this Option shall not exercise all or any part
of

                                        4






the Options remaining unexercised prior to such event, such unexercised Options
shall automatically become null and void upon the occurrence of any such event,
and of no further force and effect. The Common Stock issued pursuant to any such
exercise shall be deemed to be issued and outstanding immediately prior to any
such event, and shall be entitled to be treated as any other issued and
outstanding share of Common Stock in connection with such event. If an election
is not made by the Company pursuant to this subsection (ii) in connection with
any such event, then the provisions of subsection (i) hereof shall apply to such
event.

                e. Whenever the Option Price and number of shares of Common
Stock subject to this Option is adjusted as herein provided, the Company shall
promptly mail to the registered holder of this Option a statement signed by an
officer of the Company setting forth the adjusted Option Price and the number of
shares of Common Stock subject to this Option, determined as so provided.

                f. This form of Certificate need not be changed because of any
adjustment which is required pursuant to this Section 8. However, the Company
may at any time in its sole discretion (which shall be conclusive) make any
change in the form of this Certificate that the Company may deem appropriate and
that does not affect the substance hereof; and any Certificate thereafter
issued, whether in exchange or substitution for this Certificate or otherwise,
may be in the form as so changed.

            8. Reservation. There has been reserved, and the Company shall at
all times keep reserved out of the authorized and unissued shares of Common
Stock, a number of shares of Common Stock sufficient to provide for the exercise
of the right of purchase represented by the Options. The Company agrees that all
shares of Common Stock issued upon exercise of the Options shall be, at the time
of delivery of the Certificates for such Common Stock, validly issued and
outstanding, fully paid and non-assessable.

            9. Fractional Shares. The Company shall not issue any fractional
shares of Common Stock pursuant to any exercise of any Option and shall pay cash
to the holder of any Option in lieu of any such fractional shares.

            10. No Right. The holder of any Options shall not be entitled to any
of the rights of a shareholder of the Company prior to the date of issuance of
the Common Stock by the Company pursuant to an exercise of any Option.

            11. Securities Laws. As a condition to the issuance of any Common
Stock pursuant to the Options, the holder of such Common Stock shall execute and
deliver such representations, warranties, and covenants, that may be required by
applicable federal and state securities law, or that the Company determines is
reasonably necessary in connection with the issuance of such Common Stock. In

                                        5






addition, the certificates representing the Common Stock shall contain such
legends, or restrictive legends, or stop transfer instructions, as shall be
required by applicable Federal or state securities laws, or as shall be
reasonably required by the Company.

            12. Applicable Law. The Options and this Certificate shall be deemed
to be a contract made under the laws of the Commonwealth of Pennsylvania and for
all purposes shall be construed in accordance with the laws thereof regardless
of its choice of law rules.

            IN WITNESS WHEREOF, USA TECHNOLOGIES, INC., has executed and
delivered this Certificate and caused its corporate seal to be affixed hereto.

                                           USA TECHNOLOGIES, INC.

Corporate Seal                    By:      /s/ George R. Jensen, Jr.
                                           -------------------------------
                                           George R. Jensen, Jr.
                                           Chief Executive Officer

                                  Attest:  /s/ Keith L. Sterling
                                           ------------------------------- 
                                             Keith L. Sterling, Secretary

Dated:  April 15, 1996

                                        6






USA TECHNOLOGIES, INC.
3 Glenhardie Corporate Center
1265 Drummers Lane, Suite 306
Wayne, Pennsylvania  19087
Attn:  George R. Jensen, Jr.,
       Chief Executive Officer

                              ELECTION TO PURCHASE

            The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Option Certificate No.____ of the Company.
The undersigned desires to purchase ______ shares of Common Stock provided for
therein and tenders herewith full payment of the Option Price for the shares of
Common Stock being purchased, all in accordance with the Certificate. The
undersigned requests that a Certificate representing such shares of Common
Stock shall be issued in the name of _________________________________________

____________________________________and be delivered to_______________________

_________________________. If said number of shares of Common Stock shall not
be all the shares purchasable under the Cetificate, then a new Certificate for
the balance remaining of the shares of Common Stock purchasable shall be
registeed in the name of, and delivered, to the undersigned at the following

address:___________________________________________________________. 


Dated: _________ , 19___                  Signature:__________________________



                                        7



                                                                   Exhibit 10.32
                             USA Technologies, Inc.
                          3 Glenhardie Corporate Center
                          1265 Drummers Lane, Suite 306
                            Wayne, Pennsylvania 19087

                                  July 17, 1996

Mr. William W. Sellers
394 East Church Road
King of Prussia, PA 19406

                  Re: Consulting Arrangement

Dear Bill:

                  This letter will confirm the consulting arrangement between
you and the Company which existed during the fiscal year ended June 30, 1996. In
exchange for the substantial and valuable services performed by you for the
Company during the fiscal year, the Company has agreed to pay to you the sum of
$80,000 (i.e., $6,666.66 per month), of which $76,600 has been paid to you to
date. This compensation, as well as your services, were in addition to and
exclusive of your dedicated and loyal service since May 1993 as a Director of
the Company. I look forward to your continued service on the Board of Directors
for many years.

                  During the fiscal year, you provided assistance and advice to,
and consulted with the Company and myself, as its Chief Executive Officer, in
connection with a variety of business matters. In this regard, your extensive
technical background (including your being awarded several United States
patents) and business operations experience was valuable to the Company. Your
contributions included consulting with the Company and myself in connection with
the general operation of the business of the Company, expansion of its product
line, and identification of new business directions for the Company's
technology. You also reviewed and advised the Company regarding the Company's
overall progress, needs and financial condition. During the fiscal year and with
your assistance and valuable guidance, the Company completed the development of
the Credit Card Computer Express and the C3X, and considerably strengthened the
Company's marketing capabilities.

                  You have also been very helpful and valuable to the Company in
connection with investor and public relations. In this regard, I appreciate the
many friends you introduced me to, many of which became shareholders in the
Company. In addition, during the fiscal year, you answered many questions
regarding the Company from our shareholders, and assisted the Company in its
overall public relations efforts. Finally, your assistance to me in connection
with various written materials which were distributed to our shareholders was
much appreciated.








                  This will confirm that at no time did you act as a "broker"
under the applicable securities laws, and at no time did you solicit the sale
of, or offer to sell, or negotiate the sale of, any securities of the Company.
Your efforts consisted solely of introducing the Company to your many friends
and contacts in the community, and any discussions concerning the sale or
purchase of securities were conducted solely by other Company employees.

                  In addition, your actions fall within the "safe harbor"
contained in Rule 3a4-1 promulgated under the Securities Exchange Act of 1934
and, therefore, you did not act as a "broker". During the fiscal year, you
performed substantial duties for the Company otherwise than in connection with
your introduction efforts, you were not associated with any broker-dealer, and
you have not participated in selling securities for any issuer more than once
every twelve months. Finally, your compensation during the fiscal year was not
based either directly or indirectly on the amount of securities sold by the
Company or on any transaction in securities.

                  Bill, in connection with your consultancy, you served as an
independent contractor to the Company, and you will be responsible for payment
of all applicable taxes in connection with the compensation paid to you by the
Company.

                  Thank you again for your dedicated service and advice and I
look forward to having you on our team for many years to come. The Company
appreciates your support and confidence. Please confirm that this letter sets
forth our prior understanding and arrangement by signing below where indicated,
and returning it to me.

                                           Sincerely,

                                           USA TECHNOLOGIES, INC.

                                           By: /s/ George R. Jensen, Jr.
                                               --------------------------------
                                                    George R. Jensen, Jr.,
                                                    President

AGREED TO:
/s/ William W. Sellers
- ---------------------------
William W. Sellers


                                                                   Exhibit 10.33
                             USA Technologies, Inc.
                          3 Glenhardie Corporate Center
                          1265 Drummers Lane, Suite 306
                            Wayne, Pennsylvania 19087

                                  July 17, 1996

Mr. Peter G. Kapourelos
1515 Richard Drive
West Chester, PA 19380

                  Re: Consulting Arrangement

Dear Pete:

                  This letter will confirm the consulting arrangement between
you and the Company which existed during the fiscal year ended June 30, 1996. In
exchange for the substantial and valuable services performed by you for the
Company during the fiscal year, the Company has agreed to pay to you the sum of
$24,000 (i.e., $2,000 per month), of which $22,000 has been paid to you to date.
This compensation, as well as your services, were in addition to and exclusive
of your dedicated and loyal service since May 1993 as a Director of the Company.
I look forward to your continued service on the Board of Directors for many
years.

                  You have been very helpful and valuable to the Company in
connection with investor and public relations. In this regard, I appreciate the
friends you introduced me to, many of which became shareholders in the Company.
In addition, during the fiscal year, you answered many questions regarding the
Company from our shareholders, and assisted the Company in its overall public
relations efforts. Finally, your assistance to me in connection with various
written materials which were distributed to our shareholders was much
appreciated.

                  This will confirm that at no time did you act as a "broker"
under the applicable securities laws in connection with any offer or sales of
the Company's securities, and at no time did you solicit the sale of, or offer
to sell, or negotiate the sale of, any securities of the Company to any person
introduced to us by you. Your efforts consisted solely of introducing the
Company to your friends, and any discussions concerning the sale or purchase of
securities were conducted solely by other Company employees.

                  Pete, in connection with your consultancy, you served as an
independent contractor to the Company, and you will be responsible for payment
of all applicable taxes in connection with the compensation paid to you by the
Company.






                  Thank you again for your dedicated service and advice and I
look forward to having you on our team for many years to come. The Company
appreciates your support and confidence. Please confirm that this letter sets
forth our prior understanding and arrangement by signing below where indicated,
and returning it to me.

                                       Sincerely,

                                       USA TECHNOLOGIES, INC.

                                       By: /s/ George R. Jensen, Jr.
                                          -----------------------------------
                                                George R. Jensen, Jr.,
                                                President

AGREED TO:
/s/ Peter G. Kapourelos
- ---------------------------
Peter G. Kapourelos





                                                                    Exhibit 23.1

                        CONSENT OF INDEPENDENT AUDITORS

         We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated August 21, 1995 in the Registration Statement
(Form SB-2 No. 33-XXXXX) and related Prospectus of USA Technologies, Inc. dated
August 2, 1996, for the registration of 5,200,000 shares of its common stock.


                                                      Ernst & Young LLP
                                                      /s/ Ernst & Young LLP

Philadelphia, Pennsylvania
August 2, 1996