UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
--------------------
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _____________________
Commission file number 000-50054
USA Technologies, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2679963
- --------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. employer Identification No.)
of incorporation or organization)
100 Deerfield Lane, Suite 140, Malvern, Pennsylvania 19355
- ---------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(610) 989-0340 (Registrant's
telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of February 8, 2005, there were 395,418,013 shares of Common Stock, no par
value, outstanding.
USA TECHNOLOGIES, INC.
INDEX
PAGE NO.
Part I - Financial Information
Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheets - December 31, 2004
and June 30, 2004 2
Consolidated Statements of Operations - Three and six months ended
December 31, 2004 and 2003 3
Consolidated Statement of Shareholders' Equity - Six months
ended December 31, 2004 4
Consolidated Statements of Cash Flows - Six months ended
December 31, 2004 and 2003 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
Part II - Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 19
Item 6. Exhibits 19
Signatures 20
Certifications
1
USA Technologies, Inc.
Consolidated Balance Sheets
December 31, June 30,
2004 2004
(Unaudited)
-------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 1,935,922 $ 3,019,214
Accounts receivable, less allowance for uncollectible accounts
of $220,000 at December 31, 2004 and $240,000 at June 30, 2004 1,214,173 1,075,858
Inventory 1,572,377 1,707,684
Prepaid expenses and other current assets 207,438 234,448
Subscriptions receivable -- 300,000
Investment 52,248 68,636
Assets held for sale 42,300 46,200
------------- -------------
Total current assets 5,024,458 6,452,040
Property and equipment, less accumulated depreciation of $3,062,913
at December 31, 2004 and $2,892,679 at
June 30, 2004 552,503 602,953
Intangibles, less accumulated amortization of $2,155,469 at
December 31, 2004 and $1,537,168 at June 30, 2004 10,213,531 10,831,832
Goodwill 7,663,208 7,985,208
Other assets 12,408 8,544
------------- -------------
Total assets $ 23,466,108 $ 25,880,577
============= =============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 2,839,281 $ 2,929,491
Accrued expenses 1,213,689 1,569,368
Current obligations under long-term debt 48,134 240,764
Convertible Senior Notes 2,714,010 401,887
------------- -------------
Total current liabilities 6,815,114 5,141,510
Convertible Senior Notes, less current portion 5,755,247 6,617,987
Long-term debt, less current portion 1,678 12,418
------------- -------------
Total liabilities 12,572,039 11,771,915
Shareholders' equity:
Preferred Stock, no par value:
Authorized shares--1,800,000
Series A Convertible Preferred--Authorized shares - 900,000 Issued and
outstanding shares--522,742 at December 31, 2004 and
June 30, 2004 (liquidation preference of $12,296,657 at
December 31, 2004) 3,702,856 3,702,856
Common Stock, no par value:
Authorized shares--475,000,000
Issued and outstanding shares--394,082,468 at December 31, 2004
and 351,654,131 at June 30, 2004 114,883,179 110,635,743
Accumulated other comprehensive income 15,861 32,249
Accumulated deficit (107,707,827) (100,262,186)
------------- -------------
Total shareholders' equity 10,894,069 14,108,662
------------- -------------
Total liabilities and shareholders' equity $ 23,466,108 $ 25,880,577
============= =============
See accompanying notes
2
USA Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
Three months ended Six months ended
December 31, December 31,
2004 2003 2004 2003
------------- ------------- ------------- -------------
Revenues:
Equipment sales $ 882,731 $ 1,425,176 $ 1,648,076 $ 2,711,654
License and transaction fees 252,718 267,157 519,950 586,806
Product sales and other -- 222,253 -- 296,734
------------- ------------- ------------- -------------
Total revenues 1,135,449 1,914,586 2,168,026 3,595,194
Cost of sales (including amortization of
software development costs of $0,
$332,887, $0 and $665,774, respectively)
792,744 1,083,419 1,694,787 2,165,582
------------- ------------- ------------- -------------
Gross profit 342,705 831,167 473,239 1,429,612
Operating expenses:
General and administrative 1,750,016 1,780,242 3,171,900 3,282,011
Compensation 1,359,056 1,740,012 2,679,371 7,443,210
Depreciation and amortization 392,356 420,945 788,535 815,904
Loss on debt modification -- 41,618 -- 318,915
------------- ------------- ------------- -------------
Total operating expenses 3,501,428 3,982,817 6,639,806 11,860,040
------------- ------------- ------------- -------------
Operating loss (3,158,723) (3,151,650) (6,166,567) (10,430,428)
Other income (expense):
Interest income 9,554 12,087 20,091 19,816
Gain on investment -- -- -- 31,361
Gain on contract settlement -- 515,844 -- 515,844
Interest expense:
Coupon or stated rate (298,082) (241,749) (594,673) (507,240)
Non-cash interest and amortization of debt
discount (357,753) (872,156) (704,492) (2,670,061)
------------- ------------- ------------- -------------
Total interest expense (655,835) (1,113,905) (1,299,165) (3,177,301)
------------- ------------- ------------- -------------
Total other income (expense) (646,281) (585,974) (1,279,074) (2,610,280)
------------- ------------- ------------- -------------
Net loss (3,805,004) (3,737,624) (7,445,641) (13,040,708)
Cumulative preferred dividends -- -- (392,057) (393,369)
------------- ------------- ------------- -------------
Loss applicable to common shares $ (3,805,004) $ (3,737,624) $ (7,837,698) $ (13,434,077)
============= ============= ============= =============
Loss per common share (basic and diluted) $ (0.01) $ (0.01) $ (0.02) $ (0.05)
============= ============= ============= =============
Weighted average number of common shares
outstanding (basic and diluted) 376,933,808 284,277,552 366,326,724 267,133,382
============= ============= ============= =============
See accompanying notes.
3
USA Technologies, Inc.
Consolidated Statement of Shareholders' Equity
(Unaudited)
Series A Accumulated
Convertible Other
Preferred Common Comprehensive Accumulated
Stock Stock Income Deficit Total
----------------------------------------------------------------------------------------
Balance, June 30, 2004 $ 3,702,856 $ 110,635,743 $ 32,249 $(100,262,186) $ 14,108,662
Exercise of 10,965,828 Common Stock
Warrants at $0.10 per share, net -- 1,090,395 -- -- 1,090,395
Issuance of 236,459 shares of Common
Stock from the conversion of 12%
Senior Notes -- 47,292 -- -- 47,292
Issuance of 475,580 shares of Common
Stock for employee compensation -- 59,570 -- -- 59,570
Issuance of 31,450,470 shares of Common
Stock to an accredited investor at
varying prices per share, less 3,055,559
issuance costs of $128,062 -- 3,055,559 -- --
Cancellation of 700,000 shares of Common
Stock in connection with the Bayview
acquisition -- (322,000) -- -- (322,000)
Debt discount related to the beneficial
conversion feature on Senior Notes
issued -- 316,620 -- -- 316,620
Comprehensive loss:
Net loss -- -- -- (7,445,641) (7,445,641)
Unrealized loss on investment -- -- (16,388) -- (16,388)
-------------
Total comprehensive loss (7,462,029)
----------------------------------------------------------------------------------------
Balance, December 31, 2004 $ 3,702,856 $ 114,883,179 $ 15,861 $(107,707,827) $ 10,894,069
========================================================================================
See accompanying notes.
4
USA Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
December 31,
2004 2003
------------ ------------
Operating activities
Net loss $ (7,445,641) $(13,040,708)
Adjustments to reconcile net loss to net cash used in operating activities:
Charges incurred in connection with the issuance of Common Stock,
Common Stock Purchase Warrants and Senior Notes 59,570 4,835,980
Interest expense on Senior Notes paid through the issuance of Common
Stock -- 479,617
Interest amortization related to Senior Notes 704,492 2,190,444
618,301 1,256,142
Amortization
Depreciation 170,234 271,294
Loss on debt modification -- 318,915
Gain on sale of investment -- (31,361)
Gain on contract settlement -- (515,844)
Changes in operating assets and liabilities:
Accounts receivable (138,315) (1,442,536)
Inventory 135,307 (559,314)
Prepaid expenses and other assets 3,346 (131,744)
Accounts payable (90,210) 474,592
Accrued expenses (355,679) 410,372
------------ ------------
Net cash used in operating activities (6,338,595) (5,484,151)
Investing activities
Purchase of property and equipment (119,784) (229,369)
Cash paid in connection with Bayview acquisition -- (727,969)
Cash received from the sale of investment -- 395,249
Cash received from the sale of assets held for sale 23,700 --
------------ ------------
Net cash used in investing activities (96,084) (562,089)
Financing activities
Net proceeds from issuance of Common Stock and
exercise of Common Stock Warrants 4,145,954 5,574,055
Net proceeds from the issuance of Senior Notes 1,108,803 --
Collection of subscriptions receivable 300,000 1,002,163
Repayment of long-term debt (203,370) (392,629)
------------ ------------
Net cash provided by financing activities 5,351,387 6,183,589
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,083,292) 137,349
Cash and cash equivalents at beginning of period 3,019,214 2,384,455
------------ ------------
Cash and cash equivalents at end of period $ 1,935,922 $ 2,521,804
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 648,123 $ 464,864
============ ============
Subscriptions receivable $ -- $ 11,237
============ ============
Conversion of Senior Notes to Common Stock $ 47,292 $ 1,994,334
============ ============
Beneficial conversion feature related to Senior Notes $ 316,620 $ 1,981,007
============ ============
Prepaid stock expenses through issuance of Common Stock $ -- $ 105,000
============ ============
Issuance (cancellation) of Common Stock in connection with the Bayview
acquisition $ (322,000) $ 9,278,200
============ ============
Other receivable from contract termination $ -- $ 674,649
============ ============
Conversion of Convertible Preferred Stock to Common Stock $ -- $ 2,125
============ ============
Conversion of Convertible Preferred Dividends to Common Stock $ -- $ 3,820
============ ============
See accompanying notes.
5
USA Technologies, Inc.
Notes To Consolidated Financial Statements
(Unaudited)
1. Accounting Policies
Interim Financial Information
The accompanying unaudited consolidated financial statements of USA
Technologies, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and therefore should be read in conjunction
with the Company's Annual Report on Form 10-KSB for the year ended June 30,
2004. In the opinion of management, all adjustments considered necessary,
consisting of normal recurring adjustments, have been included. Operating
results for the three-month and six-month periods ended December 31, 2004 are
not necessarily indicative of the results that may be expected for the year
ending June 30, 2005. The balance sheet at June 30, 2004 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended June
30, 2004.
Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Stitch Networks Corporation ("Stitch").
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
United States 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.
Inventory
Inventory is stated at the lower of cost (first-in, first-out basis) or market
and consists of finished goods and packaging materials.
Income Taxes
No provision for income taxes has been made in either the three or six months
ended December 31, 2004 and 2003 given the Company's losses in 2004 and 2003 and
available net operating loss carryforwards. A benefit has not been recorded as
the realization of the net operating losses is not assured and the timing in
which the Company can utilize its net operating loss carryforwards in any year
or in total may be limited by provisions of the Internal Revenue Code regarding
changes in ownership of corporations.
6
USA Technologies, Inc.
Notes To Consolidated Financial Statements
(Unaudited)
1. Accounting Policies (Continued)
Loss Per Common Share
Basic earnings per share is calculated by dividing income (loss) applicable to
common shares by the weighted average common shares outstanding for the period.
Diluted earnings per share is calculated by dividing income (loss) applicable to
common shares by the weighted average common shares outstanding for the period
plus the dilutive effect (unless such effect is anti-dilutive) of equity
instruments. No exercise of stock options, purchase rights, stock purchase
warrants, or the conversion of senior notes, debentures, preferred stock, or
cumulative preferred dividends was assumed during the periods presented because
the assumed exercise of these securities would be anti-dilutive.
Accounting For Stock Options
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), as amended by Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure", provides
companies with a choice to follow the provisions of FAS 123 in determination of
stock-based compensation expense or to continue with the provisions of APB No.
25, "Accounting for Stock Issued to Employees and Related Interpretations in
Accounting for Stock-Compensation Plans" ("APB 25") and the related FASB
Interpretation No. 44. The Company has elected to follow the provisions of APB
25. Under APB 25, if the exercise price of the Company's stock options granted
to employees and directors equals or exceeds the market price of the underlying
Common Stock on the date of grant, no compensation expense is recognized. All
stock options granted by the Company have been at prices equal to the market
price of the Company's Common Stock on the date of grant. Under FAS 123, the
fair value of stock options is estimated at the date of grant using an option
pricing model such as Black-Scholes and the value determined is amortized to
expense over the option vesting period.
There were no stock options granted during the six months ended December 31,
2004. The pro-forma disclosures required by FAS 148 have not been included as
the pro-forma compensation expense related to the vesting of options during the
six months ended December 31, 2004 was not considered to be material and there
was no pro-forma compensation expense during the six months ended December 31,
2003.
In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 123(R), "Share-Based Payment" ("FAS 123(R)"), which establishes standards
for transactions in which an entity exchanges its equity instruments for goods
or services. This standard requires a public entity to measure the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award. This eliminates the alternative to
account for such awards using the intrinsic method currently allowable under APB
25. FAS 123(R) will be effective for the Company for the interim reporting
period beginning on July 1, 2005. The Company believes FAS 123(R) will not have
a material impact on the Company's financial statements. 2.
7
USA Technologies, Inc.
Notes To Consolidated Financial Statements
(Unaudited)
2. Acquisition of Bayview Technology Group, LLC ("Bayview")
On July 11, 2003, the Company acquired substantially all of the assets of
Bayview. The initial acquisition cost was $10,030,894, which principally was
comprised of the issuance of 20,000,000 shares of restricted Common Stock valued
at $9,200,000 and a cash payment of $631,247. The value of the 20,000,000 shares
of Common Stock was determined based on the average market price of the
Company's Common Stock over the two-day period before and after the definitive
agreement date of July 11, 2003. The purchase price also included acquisition
related costs of $199,647.
Of the 20,000,000 shares issued to Bayview, 700,000 shares were placed into an
escrow account to be issued to one owner of Bayview if certain Bayview stock
options were exercised. This agreement called for these shares to be returned to
the Company if the Bayview stock options were not exercised. During the
three-month period ended September 30, 2004, the Company determined that the
Bayview stock options would not be exercised and the shares previously issued
into escrow would be cancelled. Therefore, the Company decreased the purchase
price by $322,000 due to the return and cancellation of the 700,000 shares held
in escrow. The decrease in the purchase price resulted in a reduction of
goodwill and shareholders' equity of $322,000 in the three months ended
September 30, 2004.
The following table summarizes the final purchase price allocation to reflect
the fair values of the assets acquired and liabilities assumed at the date of
acquisition.
Current assets $ 7,628
Property and equipment 244,704
Intangible assets 9,449,000
Goodwill 7,562
----------
Total assets acquired $9,708,894
==========
The acquisition was accounted for using the purchase method and, accordingly,
the results of operations of Bayview have been included in the accompanying
consolidated statements of operations since the date of acquisition. Results of
operations of the Company for three and six months ended December 31, 2003 would
not have been significantly different than reported had the acquisition taken
place July 1, 2003 as the acquisition occurred on July 11, 2003.
8
USA Technologies, Inc.
Notes To Consolidated Financial Statements
(Unaudited)
3. Senior Notes
As of December 31, 2004, the outstanding balance of Senior Notes was $8,469,257.
This is comprised of notes with a face amount of $10,757,352 less unamortized
debt discount and other issuance costs of $2,288,095.
Debt discount and other issuance costs associated with the Senior Notes are
amortized to interest expense over the remaining life of the Senior Notes. Upon
conversion of Senior Notes into Common Stock, unamortized costs relating to the
notes converted are charged to interest expense. Total charges to interest for
amortization of debt discount and other issuance costs were $357,753 and
$704,492 for the three and six months ended December 31, 2004, respectively and
$756,369 and $2,190,444 for the three and six months ended December 31, 2003.
During the six months ended December 31, 2004 and 2003, Senior Notes totaling
$47,292 and $1,994,334, respectively, converted into 236,459 and 9,971,669
shares, respectively, of the Company's Common Stock.
Certain Senior Notes outstanding, which matured on December 31, 2004, had an
aggregate face amount of $451,152 and were convertible into shares of Common
Stock at $0.40 per share. During January 2005, the Company repaid $131,152 of
these Senior Notes and agreed with the holders of the remaining $320,000 of
these notes to extend the maturity date to June 30, 2005. In exchange for
extending the maturity date, the Company authorized a reduction of the
conversion price to $0.10.
On November 3, 2004, the Company authorized the issuance of up to $2,500,000 of
Senior Notes convertible into shares of Common Stock at $0.10 per share and
maturing on June 30, 2007 (the "2004-B Senior Notes"). Interest is payable
quarterly at a rate of 10% per annum. Participation in the Senior Note offering
was offered to the holders of certain warrants issued in conjunction with the
payment of interest on Senior Notes (see "Additional Interest Warrants" in Note
5), holders of the warrants issued in conjunction with the 2004-A Private
Placement Offering, and to an accredited investor and current warrant holder.
Due to the limited number of authorized shares available for issuance, the terms
of the offering provided that all of such warrant holder's warrants would be
cancelled if they participated in the offering. Through December 31, 2004, the
Company received $1,108,803 in gross proceeds from sales of the 2004-B Senior
Notes and 1,770,635 shares underlying the warrants were cancelled. As the
Company's share price on the day of issuance of each of these Senior Notes was
greater than the conversion price of $0.10, the Company recorded the intrinsic
value of this beneficial conversion feature totaling $316,620 as additional debt
discount, which is being amortized to interest expense through the maturity date
of these Senior Notes. 4.
9
USA Technologies, Inc.
Notes To Consolidated Financial Statements
(Unaudited)
4. Common Stock
On August 6, 2004, the Company entered into a Common Stock purchase agreement
(the "Common Stock Agreement") with an accredited investor to purchase shares of
the Company's Common Stock, provided that the aggregate purchase price does not
exceed $7,500,000. Under the Common Stock Agreement, the Company has the right
at any time to require the investor to purchase Common Stock from the Company at
the lower of: (i) $0.30 per share; or (ii) 90% of the closing bid price per
share on the date prior to the date of the delivery by the Company to the
investor of notice of his obligation to purchase. The Company can require the
investor to purchase shares under the Common Stock Agreement only if the shares
have been registered by the Company for resale under the Act. Such shares were
registered effective August 13, 2004. Additionally, the shares are only
available for purchase for a period of one year from the date the shares are
registered under the Act. During any calendar month, the investor cannot be
required by the Company to purchase Common Stock for an aggregate purchase price
in excess of $700,000. The Company has registered 35,000,000 shares for resale
by the investor and the Company has the right in the future, if necessary, to
register additional shares in order to ensure that a sufficient number of shares
are available for purchase by the investor. The Company paid the investor a due
diligence fee of $45,000 in connection with this transaction. During the
six-month period ended December 31, 2004, the Company issued 31,450,470 shares
of Common Stock under the Common Stock Agreement for total gross proceeds of
$3,183,621. In addition to the due diligence fee, the Company incurred $83,062
of other stock issuance costs during the six months ended December 31, 2004.
On October 29, 2004, the Board of Directors approved the 2004-B Stock
Compensation Plan to allow up to 500,000 shares of Common Stock to be available
for issuance to future or current employees, directors or consultants of the
Company.
5. Common Stock Warrants
Prior to June 30, 2004, the Company issued warrants to purchase approximately
3,700,000 shares of Common Stock to holders of the Senior Notes who elected to
receive quarterly interest on their Notes in shares of Common Stock, in lieu of
a cash payment of interest ("Original Interest Warrants"). These warrants were
exercisable at $0.20 per share through August 30, 2004. In June 2004, the
Company issued additional warrants to the Senior Note holders who elected to
receive interest in shares of Common Stock ("Additional Interest Warrants"). One
additional warrant was issued for each warrant previously issued with an
exercise price of $0.20 per share through December 31, 2004.
10
USA Technologies, Inc.
Notes To Consolidated Financial Statements
(Unaudited)
5. Common Stock Warrants (Continued)
The Company reduced the exercise price of the Original Interest Warrants to
$0.15 per share and extended their expiration through October 29, 2004. In
addition, for each Original Interest Warrant exercised through October 4, 2004,
the expiration date of one Additional Interest Warrant was extended to June 30,
2005 from December 31, 2004, and the exercise price was reduced to $0.15 per
share through June 30, 2005. The Company also reduced the exercise price of the
Additional Interest Warrants to $0.15 per share through November 30, 2004 and
then retroactively to $0.10 per share through December 31, 2004. Investors who
had previously exercised Original Interest Warrants and Additional Interest
Warrants at $0.15 per share were refunded the equivalent of $0.05 per share in
recognition of the reduction of the exercise price to $0.10 per share that
occurred after the warrants were exercised. Such refunds amounted to $40,971.
During the six-month period ended December 31, 2004, Original Interest Warrants
and Additional Interest Warrants were exercised to purchase 807,494 shares of
Common Stock. Such exercises generated net proceeds of approximately $75,000,
after considering the above-mentioned refund.
As of October 25, 2004, the Company reduced the exercise price of the Common
Stock warrants issued as part of the 2004-A Private Placement Offering to $0.10
per share, from $0.20 per share, through November 30, 2004. On December 13,
2004, the exercise price of $0.10 per share was retroactively extended to
December 31, 2004. During the six-month period ended December 31, 2004, the
Company received $765,833 upon the exercise of 7,658,334 of these warrants at an
exercise price of $0.10 per share.
During the quarter ended December 31, 2004, the Company received $250,000 from
an accredited investor upon the exercise of 2,500,000 Common Stock warrants at
an exercise price of $0.10 per share.
As of December 31, 2004, there were 9,071,579 Common Stock warrants outstanding,
all of which were exercisable at exercise prices ranging from $0.07 to $1.25 per
share.
6. Subsequent Events
From January 1, 2005 to February 8, 2005, the Company issued an additional
1,700,000 shares of Common Stock under the Common Stock Agreement (Note 4) for
total gross proceeds of $170,000.
From January 1, 2005 to February 8, 2005, the Company received an additional
$142,485 in gross proceeds from the 2004-B Senior Note offering.
11
USA Technologies, Inc.
Notes To Consolidated Financial Statements
(Unaudited)
6. Subsequent Events (Continued)
On February 3, 2005, the Company authorized the issuance of up to $6,000,000 of
Senior Notes, which will not result in any additional dilution to existing
shareholders, due December 31, 2008 (the "2008 Senior Notes") and up to
15,000,000 shares of Common Stock to accredited investors and holders of the
Convertible Senior Notes due December 31, 2005 (the "2005 Senior Notes").
Interest is payable quarterly at a rate of 12% per annum. This offering will
allow the Company to raise up to $3,000,000 to repay the 2005 Senior Notes and
up to $3,000,000 for working capital requirements. For each $10,000 invested in
the offering, the subscriber shall receive a $10,000 12% Senior Note and 25,000
shares of restricted Common Stock. Due to the fact that a portion of the
proceeds could be used to repay the 2005 Senior Notes and release the reserved
underlying shares, the offering will not require the Company to reserve any
additional shares of Common Stock and will not result in any additional dilution
to existing shareholders.
Additionally, each holder of the 2005 Senior Notes has the right to exchange
their Notes as part of the offering. For each $10,000 of 2005 Senior Notes
exchanged, the holder will receive $10,000 of 2008 Senior Notes and 25,000
shares of restricted Common Stock. Due to the fact that the 2005 Senior Notes
are being exchanged for the 2008 Senior Notes and thus releasing the reserved
underlying shares, the offering will not require the Company to reserve any
additional shares of Common Stock and will not result in any additional dilution
to existing shareholders.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
This Form 10-Q contains certain forward looking statements regarding, among
other things, the anticipated financial and operating results of the Company.
For this purpose, forward looking statements are any statements contained herein
that are not statements of historical fact and include, but are not limited to,
those preceded by or that include the words, "believes," "expects,"
"anticipates," or similar expressions. Those statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from those contemplated by the statements. The
forward looking information is based on various factors and was derived using
numerous assumptions. Important factors that could cause the Company's actual
results to differ materially from those projected, include, for example (i) the
ability of the Company to generate sufficient sales to generate operating
profits, or to sell products at a profit, (ii) the ability of the Company to
raise funds in the future through sales of securities, including but not limited
to the exercise of outstanding options and warrants, (iii) whether the Company
is able to enter into binding agreements with third parties to assist in product
or network development, (iv) the ability of the Company to commercialize its
developmental products including the e-Port(TM), or if actually commercialized,
to obtain commercial acceptance thereof, (v) the ability of the Company to
compete with its competitors to obtain market share, (vi) the ability of the
Company to obtain sufficient funds through operations or otherwise to repay its
debt obligations, including but not limited to Senior Notes, or to fund
development and marketing of its products (vii) the ability of the Company to
obtain approval of its pending patent applications, or (viii) the ability of the
Company to satisfy its trade obligations included in accounts payable and
accrued liabilities. Although the Company believes that the forward looking
statements contained herein are reasonable, it can give no assurance that the
Company's expectations will be met.
Results of Operations
Three months ended December 31, 2004
Revenues for the three months ended December 31, 2004 were $1,135,449 compared
to $1,914,586 for the corresponding three-month period in the previous fiscal
year. This $779,137 or 41% decrease was primarily due to a decrease in equipment
sales and a one-time payment that only occurred in the prior fiscal year. The
$542,446 decrease in equipment sales was primarily due to a decrease in sales of
approximately $516,000 of energy conservation equipment and a decrease of
approximately $104,000 in intelligent vending equipment sales, offset by an
increase of approximately $79,000 in business center equipment sales. Of the
$516,000 decrease in energy conservation equipment sales, approximately $454,000
relates to one large customer order of energy Miser(TM) products during the
three-month period ended December 31, 2003. There was no corresponding equipment
sale of this magnitude in the three-month period of the current fiscal year.
License and transaction fees decreased by $14,000 primarily due to a decrease of
approximately $122,000 in fees due to the termination of the Kodak Vending
Placement Agreement, offset by an increase in our intelligent vending fees of
approximately $106,000. Product sales and other decreased $222,253 primarily due
to the one-time payment of $200,000 in the corresponding prior period related to
the Strategic Alliance Agreement executed in October 2003 between the Company
and Conopco, Inc dba Unilever Home & Personal Care North America.
13
As previously disclosed, the Company had been in negotiations with a Fortune 50
company for the sale of its internal vending miser product. The Company and the
Fortune 50 company have entered into a one-year contract pursuant to which the
Company has agreed to supply its energy miser products to the customer. Under
the contract, the Fortune 50 customer would purchase our vending miser products
for delivery to its own customer, a Fortune 50 major retailer, which has
thousands of locations in the United States and abroad. The Fortune 50 customer
has agreed to provide us with a forecast of its requirements during the third
quarter of our fiscal year, at which time it is contemplated that the Company
will receive its first purchase order. Furthermore, it is contemplated that the
Fortune 50 customer could purchase our energy miser products for delivery to
other major accounts. The Company anticipates that installations by the Fortune
50 customer would commence during the fourth quarter of our current fiscal year.
The Company can make no assurances as to how many internal vending misers would
ultimately be purchased by the Fortune 50 customer under the contract. Based
upon our discussions with the Fortune 50 customer and subject to the receipt of
purchase orders, the Company believes that the impact upon revenues could be
material.
Cost of sales for the three-month period consisted of equipment costs of
approximately $629,000 and network and transaction related costs of $163,524.
The decrease in cost of sales of $290,675 or 27% over the prior year period was
due to the fact that software development costs were fully amortized as of June
30, 2004, resulting in a decrease of approximately $333,000. This decrease was
offset by an increase of approximately $39,000 of network and transaction
related costs. The increase in network and transaction related costs was
primarily due to an increase in the number of vending and business center
transactions processed and the related infrastructure support costs due to an
increase in the number of intelligent vending devices.
Gross profit for the three months ended December 31, 2004 was $342,705, compared
to gross profit of $831,167 for the corresponding three-month period in the
previous fiscal year. This 59% decrease is due to the combined effect of the
lack of amortization of software development costs, the termination of the Kodak
agreement, the decrease in energy and intelligent vending equipment sales, the
one-time Unilever payment in the prior period, and decreased margins on
intelligent vending equipment sales. Specifically, despite a decrease of
approximately $540,000 in equipment sales, equipment costs increased by $4,000
as a result of decreased margins on our intelligent vending equipment sales as
well as a one-time cost of approximately $80,000 to switch some of our
customers' intelligent vending devices to the AT&T wireless network.
Compensation expense of $1,359,056 decreased by $380,956 or 22% primarily due to
a decrease in bonus expense of approximately $665,000, offset by an increase in
salaries and benefits expense of approximately $284,000, due to an increase in
the number of employees, as compared to the prior period.
During the three-month period of the prior fiscal year, the Company incurred a
charge of $41,618 related to the modification of debt terms for certain 2003 and
2004 Senior Notes in order to manage short-term cash flows. This charge
represents the unamortized debt discount that remained on the Senior Notes that
were scheduled to mature in December 2003 and 2004, and whose terms were
substantially modified when the note holders agreed to extend the maturity date
of their notes in exchange for a reduction in the conversion rate on the note.
There was no such comparable charge in the period ended December 31, 2004.
During the three-month period of the prior fiscal year, the Company recorded a
one-time gain of $515,844 relating to the termination of the Kodak Vending
Placement Agreement. This gain was comprised of the payment from Kodak of
approximately $675,000 plus the cancellation of Stitch Network's obligation to
the supplier of the vending machines of approximately $124,000 reduced by a
write down of the carrying value of vending machines of approximately $283,000
to their net realizable value of $300 per vending machine.
14
Interest expense decreased by $458,070 or 41% due to a decrease in non-cash
charges related to accelerated interest charges for the unamortized debt
discount and other issuance costs on the Senior Notes that were converted into
Common Stock during the corresponding three-month period of the prior fiscal
year. Conversions of Senior Notes totaled $494,167 during the three-month period
ended December 31, 2003 whereas only $37,292 of Senior Notes were converted
during the corresponding period of the current fiscal year.
The three-month period ended December 31, 2004 resulted in a net loss of
$3,805,004 (approximately $0.8 million of non-cash charges) compared to a net
loss of $3,737,624 (approximately $1.3 million of non-cash charges) for the
three-month period ended December 31, 2003.
Six months ended December 31, 2004
Revenues for the six months ended December 31, 2004 were $2,168,026 compared to
$3,595,194 for the corresponding six-month period in the previous fiscal year.
This $1,427,168 or 40% decrease was primarily due to a decrease in equipment
sales, a one-time payment that only occurred in the prior fiscal year and the
termination of the Kodak Vending Placement Agreement. The $1,063,578 decrease in
equipment sales was primarily due to a decrease in sales of approximately
$1,032,000 of energy conservation equipment and a decrease of approximately
$176,000 in intelligent vending equipment sales, offset by an increase of
approximately $158,000 in business center equipment sales. Of the $1,032,000
decrease in energy conservation equipment sales, approximately $886,000 relates
to two large customer orders of energy Miser(TM) products during the six-month
period ended December 31, 2003. There were no corresponding equipment sales of
this magnitude in the six-month period of the current fiscal year. License and
transaction fees decreased by $67,000 primarily due to a decrease of
approximately $253,000 in fees due to the termination of the Kodak agreement and
a decrease of approximately $24,000 in fees from our business centers, offset by
an increase in our intelligent vending fees of approximately $202,000. Product
sales and other decreased $296,734 due to the termination of the Kodak vending
placement agreement and the one-time payment of $200,000 in the corresponding
prior period related to the agreement with Unilever.
Cost of sales for the period consisted of equipment costs of approximately
$1,072,000 and network and transaction related costs of $623,000. The decrease
in cost of sales of $470,795 or 22% over the prior year period was due to the
fact that software development costs were fully amortized as of June 30, 2004,
resulting in a decrease of approximately $666,000. Additionally, equipment costs
decreased by approximately $183,000 due to the reduction in energy and
intelligent vending equipment sales. These two decreases were offset by an
increase of approximately $378,000 of network and transaction related costs.
Gross profit for the six months ended December 31, 2004 was $473,239, compared
to gross profit of $1,429,612 for the corresponding six-month period in the
previous fiscal year. This 67% decrease is due to the combined effect of the
lack of amortization of software development costs, the termination of the Kodak
Vending Placement Agreement, the decrease in energy and intelligent vending
equipment sales, the one-time Unilever payment in the prior period, the
decreased margins on intelligent vending equipment sales, and the increase in
transaction processing costs.
Compensation expense of $2,679,371 decreased by $4,763,839 or 64% primarily due
to the issuance of 10,500,000 shares of Common Stock valued at $0.44 per share
to the Company's Chief Executive Officer in connection with the amendment of his
employment agreement during the corresponding period in the prior fiscal year.
This was a one-time, non-cash payment valued at $4,620,000. Compensation expense
further decreased by approximately $134,000 due to a decrease in bonus expense,
excluding the above-mentioned one-time non cash payment, of approximately
$715,000 due to a reduction in bonuses granted, offset by an increase in
salaries and benefits expense of approximately $551,000 due to an increase in
the number of employees as compared to the prior period.
15
During the six-month period of the prior fiscal year, the Company incurred a
charge of $318,915 related to the modification of debt terms for certain 2003
and 2004 Senior Notes. This charge represents the unamortized debt discount that
remained on the Senior Notes that were scheduled to mature in December 2003 and
2004, and whose terms were substantially modified when the note holders agreed
to extend the maturity date of their notes in exchange for a reduction in the
conversion rate on the note. There was no such comparable charge in the period
ended December 31, 2004.
During the six-month period of the prior fiscal year, the Company recorded a
one-time gain of $515,844 relating to the termination of the Kodak Vending
Placement Agreement. This gain was comprised of the payment from Kodak of
approximately $675,000 plus the cancellation of Stitch Network's obligation to
the supplier of the vending machines of approximately $124,000 reduced by a
write down of the carrying value of vending machines of approximately $283,000
to their net realizable value of $300 per vending machine.
Interest expense decreased by $1,878,136 or 59% due to a decrease in non-cash
charges related to accelerated interest charges for the unamortized debt
discount and other issuance costs on the Senior Notes that were converted into
Common Stock during the corresponding six months of the prior fiscal year.
Conversions of Senior Notes totaled $1,994,334 during the six-month period ended
December 31, 2003 whereas only $47,292 of Senior Notes were converted during the
corresponding period of the current fiscal year.
The six-month period ended December 31, 2004 resulted in a net loss of
$7,445,641 (approximately $1.6 million of non-cash charges) compared to a net
loss of $13,040,708 (approximately $8.8 million of non-cash charges) for the
six-month period ended December 31, 2003.
Liquidity and Capital Resources
For the six months ended December 31, 2004, net cash of $6,338,595 was used by
operating activities, primarily due to the net loss of $7,445,641 offset by
non-cash charges aggregating to $1,552,597 for transactions involving the
issuance of Common Stock for services, depreciation and amortization of assets,
and amortization of debt discount. In addition, the Company's net operating
assets increased by $445,551 primarily due to decreases in accrued expenses. The
Company's working capital decreased during the six months ended December 31,
2004 due primarily to cash utilized to fund operations and a portion of the
long-term Senior Notes becoming current.
Proceeds from financing activities for the six months ended December 31, 2004
provided funds to support cash used in operating and investing activities. Net
proceeds of $5,351,387 were realized from the sale of Common Stock ($3,055,559),
the exercise of Common Stock Warrants ($1,090,395), the collection of Common
Stock subscriptions receivable ($300,000), and the issuance of Senior Notes
($1,108,803), offset by cash used to repay long-term debt ($203,370).
The Company has incurred losses since inception. Cumulative losses through
December 31, 2004 amounted to approximately $105,000,000. The Company has raised
capital through equity and debt offerings to fund operations.
16
During the year ended June 30, 2004, cash used in operating activities was
approximately $1,050,000 per month. These cash flows were impacted by working
capital increases that were disproportionate to the increase in revenues. The
Company is in the process of improving its management of working capital,
specifically as it relates to controllable costs, accounts receivable,
inventory, accounts payable and accrued expenses. During the first six months of
fiscal year 2005, the Company used approximately $1,056,000 cash per month in
operating activities. For the three months ended December 31, 2004, cash used in
operating activities was approximately $964,000 per month. Using the first two
quarters of the fiscal year as a basis for estimating cash requirements for the
year ending June 30, 2005 (which assumes a static level of revenues as compared
to the prior fiscal year), cash requirements for the fiscal year 2005, including
requirements for capital expenditures and repayments of long-term debt, would be
approximately $12,100,000.
Through the funding sources outlined below and by improving the management of
working capital, the Company believes it has a plan to obtain funding for
operating activities through the end of the fiscal year. As of December 31,
2004, the Company had approximately $1,936,000 of cash and cash equivalents on
hand.
As of December 31, 2004, the Company issued 31,450,470 shares out of 35,000,000
shares registered for issuance under the Common Stock Agreement. From January 1
through February 8, 2005, the Company issued 1,700,000 additional shares under
this agreement for gross proceeds of $170,000.
From January 1 through February 8, 2005, the Company received $142,485 in gross
proceeds from the 2004-B Senior Note offering.
On February 3, 2005, the Company authorized the issuance of up to $6,000,000 of
Senior Notes, which will not result in any additional dilution to existing
shareholders, due December 31, 2008 (the "2008 Senior Notes") and up to
15,000,000 shares of Common Stock to accredited investors and holders of the
Convertible Senior Notes due December 31, 2005 (the "2005 Senior Notes").
Interest is payable quarterly at a rate of 12% per annum. This offering will
allow the Company to raise up to $3,000,000 to repay the 2005 Senior Notes and
up to $3,000,000 for working capital requirements. For each $10,000 invested in
the offering, the subscriber shall receive a $10,000 12% Senior Note and 25,000
shares of restricted Common Stock. Due to the fact that a portion of the
proceeds could be used to repay the 2005 Senior Notes and release the reserved
underlying shares, the offering will not require the Company to reserve any
additional shares of Common Stock and will not result in any additional dilution
to existing shareholders.
Additionally, each holder of the 2005 Senior Notes has the right to exchange
their Notes as part of the offering. For each $10,000 of 2005 Senior Notes
exchanged, the holder will receive $10,000 of 2008 Senior Notes and 25,000
shares of restricted Common Stock. Due to the fact that the 2005 Senior Notes
are being exchanged for the 2008 Senior Notes and thus releasing the reserved
underlying shares, the offering will not require the Company to reserve any
additional shares of Common Stock and will not result in any additional dilution
to existing shareholders.
Future exercises of warrants that are "in the money", with exercise prices below
$0.10 per share, could yield approximately $500,000 as of February 8, 2005.
The Company has scheduled the 2005 Annual Meeting of Shareholders for March 17,
2005. One of the proposals to be considered by the shareholders at the meeting
is the approval of the increase in the number of authorized shares of Common
Stock of the Company from 475,000,000 to 560,000,000, which could provide the
Company with the flexibility to issue Common Stock for a variety of corporate
purposes, such as to raise equity capital, to issue convertible debt, to issue
additional warrants or options or to make acquisitions through the use of
shares. However, the Company currently has no specific plans in place regarding
future offerings.
17
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risks for interest rate changes is not
significant. Interest rates on its Senior Notes and long-term debt are generally
fixed and its investments in cash equivalents and other securities are not
significant. Market risks related to fluctuations of foreign currencies are not
significant and the Company has no derivative financial instruments.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
The principal executive officer and principal financial officer have evaluated
the Company's disclosure controls and procedures as of December 31, 2004. Based
on this evaluation, they conclude that the disclosure controls and procedures
effectively ensure that the information required to be disclosed in our filings
and submissions under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) Changes in internal controls.
There have been no changes during the quarter ended December 31, 2004 in the
Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, internal control over
financial reporting.
Part II - Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended December 31, 2004, the Company issued an aggregate of
186,459 shares of Common Stock to 2 holders of its Convertible Senior Notes upon
their conversion at the rate of $0.20 per share for an aggregate of $37,292. The
offer and sales of the shares was exempt from the registration requirements of
the Act under Rule 506 promulgated thereunder. In this regard, the offer and
sale thereof was to existing security holders and did not involve any general
advertising or solicitation and the securities contained appropriate restrictive
legends under the Act.
During the quarter ended December 31, 2004, the Company issued to Steve Illes
23,396,797 shares of Common Stock for an aggregate purchase price of $2,270,167
pursuant to a Common Stock Purchase Agreement dated August 6, 2004 between Mr.
Illes and the Company. The offer and sale of the shares were exempt from
registration under Rule 506 promulgated under Section 4(2) of the Act. Mr. Illes
is an accredited investor, made appropriate investment representations, was
afforded access to all public filings and all other information that the Company
could reasonably obtain. We have agreed to register the shares for resale under
the Act.
During the quarter ended December 31, 2004, the Company received net proceeds of
$741,888 from the exercise of Common Stock warrants at $.10 per share, resulting
in the issuance of 7,788,484 shares of Common Stock. We have agreed to register
the shares for resale under the Act. The securities were offered and sold under
the exemption from registration set forth in Rule 506 promulgated under Section
4(2) of the Act. All of the warrant holders were accredited investors and there
was no general solicitation or advertising.
During the quarter ended December 31, 2004, the Company received $250,000 from
Kazi Management VI, Inc., an accredited investor, upon the exercise of 2,500,000
Common Stock warrants at an exercise price of $0.10 per share. The offer and
sale of the shares were exempt from registration under Rule 506 promulgated
under Section 4(2) of the Act and there was no general solicitation or
advertising. We have agreed to register the shares for resale under the Act.
18
In November 2004, the Company initiated a private placement offering, the 2004-B
offering, consisting of up to $2,500,000 of 10% Senior Notes. The Senior Notes
are convertible into shares of Common Stock at $0.10 per share and mature on
June 30, 2007. The securities were offered and sold pursuant to the exemption
from registration set forth in Section 4(2) of the Act and Rule 506 promulgated
thereunder. The Company has agreed at its cost and expense to use its best
efforts to register the underlying Common Stock for resale by the holder under
the Act. Through December 31, 2004, the Company received $1,108,803 in gross
proceeds pursuant to this offering to 54 accredited investors.
Item 3. Defaults Upon Senior Securities
There were no defaults on any senior securities. However, on February 1, 2005,
an additional $392,057 of dividends accrued on our cumulative Series A
Convertible Preferred Stock. The total accrued and unpaid dividends on our
Series A Convertible Preferred Stock as of February 8, 2005 was $7,461,294. The
dividend accrual dates for our Preferred Stock are February 1 and August 1. The
annual cumulative dividend on our Preferred Stock is $1.50 per share.
Item 6. Exhibits
31.1 Certification by the Chief Executive Officer pursuant to Rule
13a-14(a)under the Securities Exchange act of 1934 .
31.2 Certification by the Chief Financial Officer pursuant to Rule 13a-14(a0
under the Securities Exchange Act of 1934.
32 Certifications by the Chief Executive Officer and Chief Financial Officer
pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
19
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USA TECHNOLOGIES, INC.
Date: February 14, 2005 /s/ George R. Jensen, Jr.
----------------------------------------
George R. Jensen, Jr.,
Chairman, Chief Executive Officer
Date: February 14, 2005 /s/ Mary W. Young
----------------------------------------
Mary W. Young, Chief Financial Officer
20
Exhibit 31.1
CERTIFICATIONS
I, George R. Jensen, Jr., Chief Executive Officer of the registrant, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of USA Technologies,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based upon such
evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, of internal control over financial reporting
to the registrant's auditors and the audit committee of the registrant's
board of directors:
a. all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: February 14, 2005 /s/ George R. Jensen, Jr.
----------------------------------------
George R. Jensen, Jr.,
Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Mary W. Young, Chief Financial Officer of the registrant, certify that:
1. I have reviewed this quarterly report on Form 10-Q of USA Technologies,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based upon such
evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, of internal control over financial reporting
to the registrant's auditors and the audit committee of the registrant's
board of directors:
a. all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: February 14, 2005 /s/ Mary W. Young
----------------------------------------
Mary W. Young,
Chief Financial Officer
Exhibit 32
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of USA Technologies, Inc., (the
"Company") on Form 10-Q for the period ended December 31, 2004 (the "Report"),
I, George R. Jensen, Jr., Chief Executive Officer of the Company, hereby certify
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350), that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ George R. Jensen, Jr.
- -----------------------------------
George R. Jensen, Jr.
Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of USA Technologies, Inc., (the
"Company") on Form 10-Q for the period ended December 31, 2005 (the "Report"),
I, Mary W. Young, Chief Financial Officer of the Company, hereby certify
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350), that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Mary W. Young
- -----------------------------------
Mary W. Young
Chief Financial Officer
