UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C.
20549
FORM
1O-Q
(Mark
One)
|
T
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For
the
quarterly period ended December
31, 2007
|
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE
ACT OF 1934
|
For
the
transition period from ____________________ to
_____________________
Commission
file number 001-33365
USA
Technologies, Inc.
(Exact
name of registrant as specified in its charter)
|
Pennsylvania
|
23-2679963
|
|
(State
or other jurisdiction of incorporation)
|
(I.R.S.
employer Identification No.)
|
|
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 T No
£
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
and large accelerated filer” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer £
|
Accelerated
filer £
|
Non-accelerated
filer T
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).Yes £ No
T
As
of
February 8, 2008, there were 14,915,557 shares of Common Stock, no par value,
outstanding.
TABLE
OF
CONTENTS
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PAGE NO.
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Part
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I
-
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Financial
Information
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Item
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1.
|
Condensed
Financial Statements (Unaudited)
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3
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4
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|||
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5
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|||
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6
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|||
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7
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2.
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15
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3.
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20
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4T.
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20
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Part
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II
-
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Other
Information
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|
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Item.
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2
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21
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6.
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21
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||
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22
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USA
Technologies, Inc.
Consolidated
Balance Sheets
|
December 31,
|
June 30,
|
|||||||
|
2007
|
2007
|
|||||||
|
Assets
|
(Unaudited)
|
|||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 23,875,095 | $ | 5,163,844 | ||||
|
Available-for-sale
securities
|
- | 6,350,000 | ||||||
|
Accounts
receivable, less allowance for uncollectible accounts of approximately
$246,000 at December 31, 2007 and $142,000 at June 30,
2007
|
3,627,294 | 2,269,193 | ||||||
|
Finance
receivables
|
367,213 | 330,692 | ||||||
|
Inventory
|
2,456,006 | 3,033,792 | ||||||
|
Prepaid
expenses and other current assets
|
1,068,023 | 206,508 | ||||||
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Total
current assets
|
31,393,631 | 17,354,029 | ||||||
|
Finance
receivables, less current portion
|
397,943 | 279,324 | ||||||
|
Property
and equipment, net
|
1,955,243 | 1,876,754 | ||||||
|
Intangibles,
net
|
6,503,732 | 7,122,032 | ||||||
|
Goodwill
|
7,663,208 | 7,663,208 | ||||||
|
Other
assets
|
196,150 | 196,150 | ||||||
|
Total
assets
|
$ | 48,109,907 | $ | 34,491,497 | ||||
|
Liabilities
and shareholders’ equity
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 5,546,999 | $ | 3,945,894 | ||||
|
Accrued
expenses
|
2,301,234 | 1,431,652 | ||||||
|
Current
obligations under long-term debt
|
730,920 | 514,302 | ||||||
|
Total
current liabilities
|
8,579,153 | 5,891,848 | ||||||
|
Long-term
debt, less current portion
|
526,032 | 515,443 | ||||||
|
Total
liabilities
|
9,105,185 | 6,407,291 | ||||||
|
Commitments
and contingencies (Note 6)
|
||||||||
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Shareholders’
equity:
|
||||||||
|
Preferred
stock, no par value:
|
||||||||
|
Authorized
shares- 1,800,000
|
||||||||
|
Series
A convertible preferred- Authorized shares-900,000; Issued and outstanding
shares- 520,392 as of December 31, 2007 and as of June 30, 2007
(liquidation preference of $14,586,926 at December 31,
2007)
|
3,686,218 | 3,686,218 | ||||||
|
Common
stock, no par value:
|
||||||||
|
Authorized
shares- 640,000,000;
|
||||||||
|
Issued
and outstanding shares- 14,915,557at December 31, 2007 and 11,810,849
at
June 30, 2007
|
192,646,039 | 172,822,868 | ||||||
|
Accumulated
deficit
|
(157,327,535 | ) | (148,424,880 | ) | ||||
|
Total
shareholders’ equity
|
39,004,722 | 28,084,206 | ||||||
|
Total
liabilities and shareholders’ equity
|
$ | 48,109,907 | $ | 34,491,497 | ||||
|
See
accompanying notes.
|
USA
Technologies, Inc.
Consolidated
Statements of Operations
(Unaudited)
|
Three
months ended
December 31,
|
Six
months ended
December 31,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Revenues:
|
||||||||||||||||
|
Equipment
sales
|
$ | 2,631,061 | $ | 1,654,314 | $ | 5,281,325 | $ | 3,325,121 | ||||||||
|
License
and transaction fees
|
828,342 | 357,408 | 1,533,734 | 695,498 | ||||||||||||
|
Total
revenues
|
3,459,403 | 2,011,722 | 6,815,059 | 4,020,619 | ||||||||||||
|
Cost
of equipment
|
1,756,000 | 1,456,779 | 4,028,492 | 2,587,938 | ||||||||||||
|
Cost
of services
|
660,493 | 270,754 | 1,224,481 | 532,956 | ||||||||||||
|
Cost
of sales
|
2,416,493 | 1,727,533 | 5,252,973 | 3,120,894 | ||||||||||||
|
Gross
profit
|
1,042,910 | 284,189 | 1,562,086 | 899,725 | ||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Selling,
general and administrative
|
4,442,646 | 3,459,174 | 9,834,680 | 6,806,231 | ||||||||||||
|
Depreciation
and amortization
|
507,048 | 429,524 | 1,007,675 | 856,496 | ||||||||||||
|
Total
operating expenses
|
4,949,694 | 3,888,698 | 10,842,355 | 7,662,727 | ||||||||||||
|
Operating
loss
|
(3,906,784 | ) | (3,604,509 | ) | (9,280,269 | ) | (6,763,002 | ) | ||||||||
|
Other
expense:
|
||||||||||||||||
|
Interest
income
|
302,661 | 26,568 | 451,553 | 59,112 | ||||||||||||
|
Interest
expense:
|
||||||||||||||||
|
Coupon
or stated rate
|
(35,543 | ) | (298,811 | ) | (73,939 | ) | (596,191 | ) | ||||||||
|
Non-cash
interest and amortization of debt discount
|
- | (500,336 | ) | - | (757,321 | ) | ||||||||||
|
Total
interest expense
|
(35,543 | ) | (799,147 | ) | (73,939 | ) | (1,353,512 | ) | ||||||||
|
Total
other income (expense)
|
267,118 | (772,579 | ) | 377,614 | (1,294,400 | ) | ||||||||||
|
Net
loss
|
(3,639,666 | ) | (4,377,088 | ) | (8,902,655 | ) | (8,057,402 | ) | ||||||||
|
Cumulative
preferred dividends
|
- | - | (390,294 | ) | (391,157 | ) | ||||||||||
|
Loss
applicable to common shares
|
$ | (3,639,666 | ) | $ | (4,377,088 | ) | $ | (9,292,949 | ) | $ | (8,448,559 | ) | ||||
|
Loss
per common share (basic and diluted)
|
$ | (0.25 | ) | $ | (0.60 | ) | $ | (0.70 | ) | $ | (1.23 | ) | ||||
|
Weighted
average number of common shares outstanding (basic and
diluted)
|
14,469,667 | 7,248,300 | 13,250,598 | 6,849,926 | ||||||||||||
See
accompanying notes.
USA
Technologies, Inc.
Consolidated
Statement of Shareholders’ Equity
(Unaudited)
|
Series
A Convertible Preferred
Stock
|
Common
Stock
|
Accumulated
Deficit
|
Total
|
|||||||||||||
|
Balance,
June 30, 2007
|
$ | 3,686,218 | $ | 172,822,868 | $ | (148,424,880 | ) | $ | 28,084,206 | |||||||
|
Issuance
of 2,142,871 shares of common stock to an accredited investor at
$7.00 per
share, less issuance costs of $1,012,597
|
- | 13,987,500 | - | 13,987,500 | ||||||||||||
|
Issuance
of 669,745 shares of common stock to an accredited investor at varying
prices per share, less issuance costs of $1,410
|
- | 4,713,390 | - | 4,713,390 | ||||||||||||
|
Exercise
of 58,543 warrants at $6.40 per share
|
- | 374,675 | - | 374,675 | ||||||||||||
|
Retirement
of 400 shares of common stock
|
- | (5,600 | ) | - | (5,600 | ) | ||||||||||
|
Issuance
of 8,700 shares of common stock to employees under the 2007-A Stock
Compensation Plan
|
- | 86,591 | - | 86,591 | ||||||||||||
|
Reclassification
of charges from Long-Term Equity Incentive Program for Fiscal Year
2007 to
a share-based liability until settlement
|
- | (599,311 | ) | - | (599,311 | ) | ||||||||||
|
Issuance
of 225,249 shares of common stock for settlement of the Long-Term
Equity
Incentive Program liability for Fiscal Year 2007
|
- | 1,189,222 | - | 1,189,222 | ||||||||||||
|
Charges
incurred in connection with the vesting of common stock for employee
compensation
|
- | 16,150 | - | 16,150 | ||||||||||||
|
Charges
incurred in connection with stock options
|
- | 60,554 | - | 60,554 | ||||||||||||
|
Net
loss
|
- | - | (8,902,655 | ) | (8,902,655 | ) | ||||||||||
|
Balance,
December 31, 2007
|
$ | 3,686,218 | $ | 192,646,039 | $ | (157,327,535 | ) | $ | 39,004,722 | |||||||
See
accompanying notes.
USA
Technologies, Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
|
Six
months ended
|
||||||||
|
December 31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Operating
activities
|
||||||||
|
Net
loss
|
$ | (8,902,655 | ) | $ | (8,057,402 | ) | ||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
Charges
incurred in connection with the vesting and issuance of common stock
for
employee compensation
|
1,215,749 | 605,995 | ||||||
|
Charges
incurred in connection with stock options
|
60,554 | 188,684 | ||||||
|
Non-cash
interest and amortization of debt discount
|
- | 757,321 | ||||||
|
Charges
incurred in connection with the issuance of common stock for legal
settlements
|
- | 288,000 | ||||||
|
Gain
on repayment of senior notes
|
- | (42,073 | ) | |||||
|
Bad
debt expense
|
125,711 | 51,322 | ||||||
|
Amortization
|
618,300 | 618,300 | ||||||
|
Depreciation
|
389,375 | 238,196 | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(1,483,812 | ) | (53,403 | ) | ||||
|
Finance
receivables
|
(155,140 | ) | (88,006 | ) | ||||
|
Inventory
|
577,786 | (426,483 | ) | |||||
|
Prepaid
expenses and other assets
|
(657,739 | ) | 120,203 | |||||
|
Accounts
payable
|
1,601,105 | 291,802 | ||||||
|
Accrued
expenses
|
346,486 | (504,215 | ) | |||||
|
Net
cash used in operating activities
|
(6,264,280 | ) | (6,011,759 | ) | ||||
|
Investing
activities
|
||||||||
|
Purchase
of property and equipment, net
|
(403,939 | ) | (301,619 | ) | ||||
|
Net
proceeds from the sale of available-for-sale securities
|
6,350,000 | - | ||||||
|
Net
cash provided by (used in) investing activities
|
5,946,061 | (301,619 | ) | |||||
|
Financing
activities
|
||||||||
|
Net
proceeds from the issuance of common stock and exercise of common
stock
warrants
|
19,069,965 | 15,879,367 | ||||||
|
Proceeds
from the issuance of long-term debt
|
332,740 | 470,000 | ||||||
|
Repayment
of long-term debt
|
(373,235 | ) | (27,273 | ) | ||||
|
Repayment
of senior notes
|
- | (4,410,598 | ) | |||||
|
Net
cash provided by financing activities
|
19,029,470 | 11,911,496 | ||||||
|
Net
increase in cash and cash equivalents
|
18,711,251 | 5,598,118 | ||||||
|
Cash
and cash equivalents at beginning of period
|
5,163,844 | 2,866,801 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 23,875,095 | $ | 8,464,919 | ||||
|
Supplemental
disclosures of cash flow information:
|
||||||||
|
Cash
paid for interest
|
$ | 73,097 | $ | 597,097 | ||||
|
Equipment
under capital lease
|
$ | 63,925 | $ | - | ||||
|
Prepaid
insurance financed with long-term debt
|
$ | 203,777 | $ | - | ||||
|
Conversion
of senior notes to common stock
|
$ | - | $ | 500 | ||||
|
Conversion
of convertible preferred stock to common stock
|
$ | - | $ | 8,142 | ||||
|
Conversion
of convertible preferred dividends to common stock
|
$ | - | $ | 15,000 | ||||
|
Common
stock issued to settle lawsuits
|
$ | - | $ | 288,000 | ||||
See
accompanying notes.
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
1. Accounting
Policies
Business
USA
Technologies, Inc. (the “Company”, “We” or “Our”) was incorporated in the
Commonwealth of Pennsylvania in January 1992. The Company is a leading supplier
of cashless, remote management, reporting and energy management solutions
serving the unattended Point of Sale market. Our networked devices and
associated services enable the owners and operators of everyday, stand-alone,
distributed assets, such as vending machines, kiosks, personal computers,
photocopiers, and laundry equipment, the ability to remotely monitor, control
and report on the results of these distributed assets, as well as the ability
to
offer their customers cashless payment options. As part of our Intelligent
Vending®
Solution, our Company also manufactures and sells energy management
products which reduce the electrical power consumption of equipment, such as
refrigerated vending machines and glass front coolers, thus reducing the
electrical energy costs associated with operating this equipment.
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-K for the year ended June 30, 2007.
In the opinion of management, all adjustments considered necessary, consisting
of normal recurring adjustments, have been included. Operating results for
the
six-month period ended December 31, 2007 are not necessarily indicative of
the
results that may be expected for the year ending June 30, 2008. The balance
sheet at June 30, 2007 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.
The
Company has incurred losses from its inception through June 30, 2007 and losses
have continued through December 2007 and are expected to continue during fiscal
year 2008. The Company's ability to meet its future obligations is dependent
upon the success of its products and services in the marketplace and the
available capital resources. Until the Company's products and services can
generate sufficient operating revenues, the Company will be required to use
its
cash and cash equivalents on hand as discussed below, as well as raise capital
to meet its cash flow requirements including the issuance of Common Stock (Note
4) and the exercise of outstanding Common Stock warrants (Note 5).
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
1. Accounting
Policies (Continued)
Consolidation
The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Stitch Networks Corporation
("Stitch") and USAT Capital Corp LLC (“USAT Capital”). All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with U.S.
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.
Reclassification
Certain
amounts in the prior period financial statements have been reclassified to
conform to the current period presentation.
Cash
Equivalents
Cash
equivalents represent all highly liquid investments with original maturities
of
three months or less. Cash equivalents are comprised of certificates of deposit
and a money market fund. The Company maintains its cash in bank deposit
accounts, which may exceed federally insured limits at times.
Available-For-Sale
Securities
The
Company accounts for investments in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Management determines the appropriate classifications of
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses reported as a separate component of
shareholders' equity in accumulated other comprehensive income (loss). If the
investment sustains an other-than-temporary decline in fair value, the
investment is written down to its fair value by a charge to
earnings.
As
of
December 31, 2007, there were no available-for-sale securities.
Inventory
Inventory
consists of finished goods and packaging materials. The Company's inventory
is
stated at the lower of cost (average cost basis) or market.
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
1. Accounting
Policies (Continued)
Income
Taxes
No
provision for income taxes has been made in the six months ended December 31,
2007 and 2006 given the Company’s losses in 2007 and 2006 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.
In
July 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an
interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an entity’s financial
statements in accordance with FASB Statement No. 109, “Accounting for
Income Taxes”. FIN 48 prescribes a recognition threshold and measurement
attribute for financial statement disclosure of tax positions taken or expected
to be taken on a tax return. Additionally, FIN 48 provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company adopted FIN 48 effective
July 1, 2007 and there was no material affect on our results of operations
or financial position.
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 potential common
shares. 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.
Shared-Based
Payment
The
Company applies FAS123(R) “Share-Based Payment” which requires the measurement
of the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award. There were no
common stock options granted during the six months ended December 31, 2007.
The
Company recorded stock compensation expense of $1,587,355 and $1,215,749 related
to Common Stock grants and the vesting of shares previously granted to employees
and $30,277 and $60,554 related to the vesting of Common Stock options during
the three and six months ended December 31, 2007, respectively.
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
2. Accrued
Expenses
Accrued
expenses consist of the following:
|
December 31
|
June 30
|
|||||||
|
2007
|
2007
|
|||||||
|
(unaudited)
|
||||||||
|
Accrued
compensation and related sales commissions
|
$ | 472,455 | $ | 502,431 | ||||
|
Accrued
interest
|
- | 14,574 | ||||||
|
Accrued
professional fees
|
101,966 | 207,786 | ||||||
|
Accrued
taxes and filing fees
|
398,267 | 202,428 | ||||||
|
Advanced
customer billings
|
379,374 | 96,264 | ||||||
|
Accrued
consulting fees
|
13,925 | 5,300 | ||||||
|
Accrued
share-based payment liability
|
523,099 | - | ||||||
|
Accrued
other
|
392,148 | 402,869 | ||||||
| $ | 2,301,234 | $ | 1,431,652 | |||||
3. Senior
Notes and Long-Term Debt
As
of
December 31, 2007 there were no outstanding Senior Notes as all of the remaining
Senior Note balances were repaid during the fiscal year ended June 30, 2007.
As
of December 31, 2006, the outstanding balance of Senior Notes was
$3,961,040. Debt discount and other issuance costs associated with
the Senior Notes were amortized to interest expense over the life of the Senior
Notes. Total charges to interest for amortization of debt discount and other
issuance costs were $500,336 and $757,321 for the three and six months ended
December 31, 2006, respectively.
Long-term
debt consists of the following:
|
December 31
|
June 30
|
|||||||
|
2007
|
2007
|
|||||||
|
(unaudited)
|
||||||||
|
Capital
lease obligations
|
$ | 576,519 | $ | 677,475 | ||||
|
Loan
agreements
|
508,292 | 318,224 | ||||||
|
Software
licensing and other
|
172,141 | 34,046 | ||||||
| 1,256,952 | 1,029,745 | |||||||
|
Less
current portion
|
730,920 | 514,302 | ||||||
| $ | 526,032 | $ | 515,443 | |||||
During
July 2007, the Company entered into a loan agreement for $150,355 with a
financial institution bearing interest at 12% that was collaterized by $169,420
of the Finance Receivables. The Company agreed to make 32 monthly payments
of
$5,826, which include interest and principal, from the proceeds received from
the Finance Receivables. During July 2007, the Company also entered into a
loan
agreement for $89,385 with the same financial institution bearing interest
at
12% that was collaterized by $105,074 of the Finance Receivables. The Company
agreed to make 32 monthly payments of $3,278, which include interest and
principal, from the proceeds received from the Finance Receivables.
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
3. Senior
Notes and Long-Term Debt (Continued)
As
of
December 31, 2007, $280,510 and $281,846 of the current and long-term Finance
Receivables, respectively, are collateral for the outstanding balances of loans,
of which $246,782 and $169,337 is classified as current and long-term debt,
respectively.
During
November 2007, the Company entered into a long-term debt agreement for $93,000
with a financial institution bearing interest at 8.25% that was collaterized
by
the assets of the Company. The Company agreed to make 84 monthly payments of
$1,467, including interest and principal.
During
the six months ended December 31, 2007, the Company financed the premiums for
various insurance policies totaling $203,777, due in 10 monthly
installments.
4. Common
Stock
On
October 17, 2007, the Company entered into a securities purchase agreement
(collectively, the “Securities Purchase Agreement”) with 37 accredited investors
(“Buyers”). Pursuant to the Securities Purchase Agreement, the Company sold to
the Buyers a total of 2,142,871 shares of the Company’s Common Stock (“Shares”)
at a price of $7.00 per Share, for gross proceeds of $15,000,097. William Blair
& Co., LLC (“Blair”), a broker-dealer registered under the 1934 Act, acted
as the exclusive placement agent for the private placement. As compensation
for
its services, the Company paid Blair a fee equal to approximately eight percent
of the total consideration received by the Company as a result of the offering.
The fee was comprised of cash of $945,000 and warrants to purchase up to 17,532
shares of the Company’s Common Stock at $7.70 per share at any time through
October 17, 2012. Pursuant to the Registration Rights Agreement entered into
between the Company and each Buyer, the Company registered the Buyers shares
with the Securities and Exchange Commission (“SEC”) covering the resale of the
Shares effective December 20, 2007.
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
4. Common
Stock (Continued)
On
September 25, 2006, the Company entered into a Common Stock Purchase Agreement
(the “2006-B Common Stock Agreement”) with Steve Illes. Mr. Illes agreed to
purchase shares of the Company's Common Stock with an aggregate purchase price
not to exceed $15,000,000. Under the 2006-B Common Stock Agreement, the Company
has the right at any time to require Mr. Illes to purchase Common Stock from
the
Company at the lower of: (i) $30.00 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
Mr. Illes of notice of his obligation to purchase. The Company can require
Mr.
Illes to purchase shares only if the shares have been registered by the Company
for resale by Mr. Illes under the Securities Act of 1933, as amended (the
“Act”). On October 20, 2006 and July 9, 2007 the Company filed a registration
statement under the 1933 Act that included 1,000,000 and 800,000 shares of
Common Stock, respectively. During any calendar month, Mr. Illes cannot be
required by the Company to purchase Common Stock for an aggregate purchase
price
in excess of $800,000. The 2006-B Common Stock Agreement terminates August
30,
2009. During the six months ended December 31, 2007, the Company issued shares
of Common Stock under the 2006-B Common Stock Agreement for total gross proceeds
of $4,713,390, net of issuance costs of $1,410.
On
February 12, 2007, the Company adopted the Long-Term Equity Incentive Program
(the “Plan”) for each of George R. Jensen, Jr., Stephen P. Herbert, and David M.
DeMedio. Based upon the financial results of the Company for the fiscal year
ended June 30, 2007, the target goal (100%) relating to revenues was met and
the
minimum target goals relating to gross profit and EBITDA were not met. EBITDA
is
defined as earnings before interest, taxes, depreciation, and amortization,
and
excludes non-cash stock payments/awards and stock options granted to officers
and Board members. Substantially all of the e-Port units sold during fiscal
year
2007 consisted of units pertaining to the MasterCard PayPass seeding program
with substantially reduced selling prices which resulted in reduced gross profit
and EBITDA. Management’s goal was to have the maximum number of units deployed
in the field as quickly as possible. The Compensation Committee agreed with
management that given the current stage of the Company’s business, it was more
beneficial to the Company to maximize the number of e-Ports in the field as
soon
as possible.
As
a
result, on September 21, 2007, the Compensation Committee recommended to the
Board of Directors that the selling price of all the e-Ports sold during the
fiscal year be “normalized” to the current retail price. This normalization
resulted in increased proforma revenues, gross profit and EBITDA for the e-Port
units sold in the MasterCard PayPass seeding program. The Compensation Committee
also recommended that the executive officers be given the option to elect to
satisfy certain minimum statutory tax withholding obligations for the restricted
stock bonuses previously awarded and issued to the executives under their
employment agreements by reducing the number of Common Shares otherwise issuable
to them under the Plan. The Board of Directors approved the recommendations
of
the Compensation Committee.
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
4. Common
Stock (Continued)
As
a
result of the normalization, certain target hurdles were met resulting in the
vesting of a total of 241,249 shares under the Plan for the fiscal year rather
than a total of 101,578 shares prior to the normalization. The value of the
number of the shares the executives may apply to tax withholding was in excess
of the minimum statutory obligation and, as a result the Plan is classified
as a
liability award rather than an equity award. As such, the Company reclassified
the $599,311 related to the 101,578 shares that was previously recorded in
Common Stock to a short-term share-based payment liability. As the price of
the
Company’s shares was $8.45 on the date of the approval of the normalization, a
charge of $1,180,220 was also recorded to compensation expense, related to
the
additional 139,671 additional shares, with a corresponding amount to the
short-term share-based payment liability for a total share-based payment
liability of $1,779,531 as of September 21, 2007. On September 28, 2007, as
the
Company’s share price was $8.38, the total share-based payment liability related
to fiscal year 2007 was $1,769,754 ($599,311 compensation expense in fiscal
year
2007 and $1,170,443 in the three months ended September 30, 2007). Of the
241,249 shares vested for fiscal year 2007, the Company issued 225,249 shares
of
Common Stock and the remaining 16,000 shares were exchanged by the executives
and redeemed by the Company to settle tax withholding obligations paid by
the Company totaling $134,080 in connection with the restricted stock bonuses
previously awarded and issued to them under their employment agreements. As
a
result of the fact that a portion of the remaining 225,249 shares were subject
to redemption at September 30, 2007, the Company had recorded the entire
fair value of those remaining shares as a short-term share-based payment
liability as of September 30, 2007 totaling $1,635,674. On December 30, 2007
the redemption provision lapsed, no further shares were redeemed and
the final settlement resulted in a reduction of the short-term share-based
payment liability of $1,635,674, a reduction of compensation expense of $446,452
and a credit to Common Stock of $1,189,222 (123,671 shares at $4.77 and 101,578
shares at $5.90), as the share price on the date of settlement was
$4.77.
In
conjunction with the Plan award for fiscal year 2008, the Company recorded
compensation expense of $320,988 and $523,099 and a corresponding amount to
the
short-term accrued shared-based payment liability during the three and six
months ended December 31, 2007. This amount was based on management’s estimate
of the probability of meeting the target goals and fair value of the Company’s
stock of $4.95 at the end of the reporting period, December 31, 2007. Management
will update this estimate and remeasure the short-term share-based payment
liability at the end of each reporting period until settlement. The final
measurement and charge to compensation expense will be determined on the date
of
settlement.
5. Common
Stock Warrants
During
the six months ended December 31, 2007, the Company received $374,675 upon
the
exercise of 58,543 Common Stock warrants at an exercise price of $6.40 per
share.
As
of
December 31, 2007, there were 1,591,735 Common Stock warrants outstanding,
all
of which were exercisable at exercise prices ranging from $6.40 to $20 per
share.
USA
Technologies, Inc.
Notes
to
Consolidated Financial Statements
6. Commitments
and Contingencies
Various
legal actions and claims occurring in the normal course of business are pending
or may be instituted or asserted in the future against the Company. The Company
does not believe that the resolution of these matters will have a material
effect on the financial position or results of operations of the
Company.
In
September 2007 and provided that the manufacturer can produce a lower cost
e-Port for the Company, the Company had committed to purchase approximately
$3,600,000 of inventory from a third party contract manufacturer over an
eighteen month period.
|
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, (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, 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 or to fund
development and marketing of its products, (vii) the ability of the Company
to
obtain approval of its pending patent applications or the risk that its
technologies would infringe patents owned by others, (viii) the ability of
the
Company to satisfy its trade obligations included in accounts payable and
accrued liabilities, (ix) the ability of the Company to predict or estimate
its
future quarterly or annual revenues given the developing and unpredictable
market for its products and the lack of established revenues, (x) the ability
of
the Company to retain key customers as a significant portion of its revenues
is
derived from a limited number of key customers, and (xi) the ability of a key
customer to reduce or delay purchasing products from the Company. 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, 2007
Revenues
for the three months ended December 31, 2007 were $3,459,403 compared to
$2,011,722 for the corresponding three-month period in the previous fiscal
year.
This $1,447,681 or 72% increase was due to an increase in equipment sales of
$976,747 and an increase in license and transaction fees of $470,934. The
increase in equipment sales was due to an increase in sales of approximately
$748,000 in e-Port vending equipment sales, primarily related to the MasterCard
PayPass Participation Agreement entered into by the Company, Coca-Cola
Enterprises and MasterCard Worldwide (the “CCE/MasterCard Agreement”), and an
increase in sales of approximately $306,000 in energy conservation equipment,
offset by a decrease in sales of business centers of approximately
$68,000 and a decrease of approximately $9,000 in laundry equipment sales.
Of
the 4,000 e-Ports purchased by MasterCard Worldwide as part of the November
2007
agreement between the Company and MasterCard Worldwide, this increase in
equipment sales only includes 469 of those e-Ports, with the remaining 3,531
e-Ports expected to be reflected in revenues during the third quarter of fiscal
year 2008. The increase in license and transaction fees was due to
the increase in the number of e-Port units on our USALive® network, primarily as
a result of the CCE/MasterCard Agreement.
In
regards to license fees, as of December 31, 2007, the Company had approximately
25,000 devices connected to our USALive® network as compared to approximately
9,000 devices as of December 31, 2006.
In
regards to transaction fees, during the quarter ended December 31, 2007, the
Company processed approximately 2.4 million transactions totaling over $7.7
million as compared to approximately 737 thousand transactions totaling over
$4.7 million during the quarter ended December 31, 2006, an increase of 226%
in
transaction volume and 64% in dollars processed.
Cost
of
sales for the period consisted of equipment costs of $1,756,000 and network
and
transaction services related costs of $660,493. The increase in total cost
of
sales of $688,960 or 40% over the same period in the prior year was due to
an
increase in equipment costs of $299,221 and network and transaction services
related costs of $389,739.
Gross
profit for the three months ended December 31, 2007 was $1,042,910, compared
to
a gross profit of $284,189 for the corresponding three-month period in the
previous fiscal year. This $758,721 or 267% increase is primarily due to an
increase in the profit margins of both the energy equipment sales as well as
the
e-Port vending equipment sales as a result of producing the products at a lower
cost primarily due to offshore production, as well as selling both of the
products at higher average sales prices.
Selling,
general and administrative expense of $4,442,646 increased by $983,472 or 28%
primarily due to an increase in compensation expense of approximately $486,000,
an increase in recruiting fees of approximately $115,000, an increase in
consulting services of approximately $166,000, and an increase in bad debt
expense of $126,000.
Compensation
expense increased by approximately $486,000 primarily due to an increase in
salaries expense of approximately $431,000 and an increase in benefit costs
of
approximately $28,000, due to the increase in the number of employees over
the
prior year.
Interest
expense of $35,543 decreased by $763,604 or 96% primarily due to retirement
of
the outstanding convertible Senior Notes that were repaid in April 2007.
Interest income increased by $276,093 due to the investment of proceeds received
from private placements.
The
quarter ended December 31, 2007 resulted in a net loss of $3,639,666
(approximately $0.3 million of non-cash charges) compared to a net loss of
$4,377,088 (approximately $0.7 million of non-cash charges) for the quarter
ended December 31, 2006.
Six
months ended December 31, 2007
Revenues
for the six months ended December 31, 2007 were $6,815,059 compared to
$4,020,619 for the corresponding six-month period in the previous fiscal year.
This $2,794,440 or 70% increase was primarily due to an increase in equipment
sales of $1,956,204 and license and transaction fees of $838,236. The increase
in equipment sales was due to an increase in sales of approximately $1,849,000
of e-Port vending equipment sales and approximately $324,000 in energy
conservation equipment, offset by decreases of approximately $199,000 in
business center sales and approximately $18,000 in laundry equipment sales.
The
increase in e-Port vending equipment sales was primarily related to the
CCE/MasterCard Agreement. The increase in license and transaction fees was
due
to the increase in the number of e-Port units on our USALive® network, primarily
as a result of the CCE/MasterCard Agreement.
Cost
of
sales for the period consisted of equipment costs of $4,028,492 and network
and
transaction services related costs of $1,224,481. The increase in cost of sales
of $2,132,079 or 68% over the prior year period was due to an increase in
equipment costs of approximately $2,727,000 and an increase of approximately
$692,000 of network and transaction related costs. The increase in equipment
costs is due to the increase in equipment sales, specifically, the increase
in
equipment costs was due to the change in sales mixture that consisted of an
increase in our higher cost e-Port equipment, as compared to the cost of our
energy conservation equipment.
Gross
profit for the six months ended December 31, 2007 was $1,562,086 compared to
gross profit of $899,725 for the corresponding six-month period in the previous
fiscal year.
This 74% increase is primarily due to an increase in the profit margins
of both the energy equipment sales as well as the e-Port vending equipment
sales
as a result of producing the products at a lower cost primarily due to offshore
production, as well as selling both of the products at higher average sales
prices.
Selling,
general and administrative expense of $9,834,680, increased by $3,028,449 or
44%
primarily due to an increase in compensation expense of approximately
$2,243,000, an increase in recruiting fees of approximately $285,000, an
increase in consulting services of approximately $307,000, and an increase
of
approximately $74,000 in bad debt expense.
Compensation
expense increased by approximately $2,243,000 due primarily to an increase
in
salaries and benefits expense of approximately $861,000, an increase in bonus
expense of approximately $228,000, and due to non-cash charges of approximately
$1,247,000 related to the vesting of shares under the Long-Term Equity Incentive
Program for fiscal years 2007 and 2008.
Interest
expense of $73,939 decreased by $1,279,573 primarily due to retirement of the
outstanding convertible Senior Notes that were repaid in April 2007. Interest
income increased by $392,441 due to the investment in available-for-sale
securities with proceeds received from private placements.
The
six-month period ended December 31, 2007 resulted in a net loss of $8,902,655
(approximately $2.4 million of non-cash charges) compared to a net loss of
$8,057,402 (approximately $2.7 million of non-cash charges) for the six-month
period ended December 31, 2006.
Liquidity
and Capital Resources
For
the
six months ended December 31, 2007, net cash of $6,264,280 was used by operating
activities, primarily due to the net loss of $8,902,655 offset by non-cash
charges totaling $2,409,689 for transactions involving the vesting and issuance
of common stock to employees, the vesting of stock options, bad debt expense
and
the depreciation and amortization of assets. In addition to these non-cash
charges, the Company’s net operating assets decreased by $228,686 primarily due
to increases in accounts payable and accrued expenses and a decrease in
inventories, partially offset by an increase in accounts and finance receivables
and prepaid expenses.
Proceeds
from financing activities for the six months ended December 31, 2007 provided
$19,029,470 of funds, which were necessary to support cash used in operating
activities. Net proceeds of $19,069,965 were realized from the issuance of
Common Stock and exercise of Common Stock warrants, offset by the net repayment
of $40,495 of long-term debt.
The
Company has incurred losses since inception. Cumulative losses through December
31, 2007 amounted to approximately $154,000,000. The Company has continued
to
raise capital through equity offerings to fund operations.
During
the year ended June 30, 2007, cash used in operating activities was
approximately $1,140,000 per month, approximately $96,000 higher per month
than
experienced during the first six months of fiscal year 2008. Using the prior
fiscal year as a basis for estimating cash requirements for the year ending
June
30, 2008 (which assumes a static level of revenues), cash requirements for
the
fiscal year 2008, including requirements for capital expenditures and repayments
of long-term debt, would be approximately $14,600,000.
As
of
December 31, 2007 the Company had approximately $23,875,000 of cash and cash
equivalents on hand.
As
of
December 31, 2007, the remaining total aggregate purchase price of shares able
to be purchased under the 2006-B Common Stock Agreement is
$958,457.
Funding
sources in place to meet the Company's cash requirements for the year ending
June 30, 2008 are primarily comprised of approximately $23,875,000 of cash
and
cash equivalents on hand as of December 31, 2007 and $958,457 in proceeds that
are available under the 2006-B Common Stock Agreement for total resources of
approximately $24,833,000. The Company believes these existing sources will
provide sufficient funds to meet its cash requirements through at least December
31, 2008.
During
January 2008, in order to preserve our cash and cash equivalents, and in
recognition of the existing condition of the capital markets, we took
appropriate action to reduce our annual expenses by the amount of approximately
$2,400,000. These actions consisted of staff reductions and reductions in our
controllable costs. We believe that these actions will not materially adversely
affect our planned revenue growth for the foreseeable future.
During
the 2008 fiscal year, the Company intends to continue to attempt to improve
its
business model and financial results. In this regard, we are marketing an e-Port
rental program under which our customer would not purchase the unit from us
but
would pay a higher monthly service fee in order to compensate us for the use
of
the unit. Under this arrangement, the Company would retain ownership of the
unit. Management believes that this rental business model would accelerate
the
adoption of its e-Port technology. The Company is also considering the
possibility of becoming a credit card processor (rather than a merchant as
is
currently the case). We believe that becoming a credit card processor would
enable us to increase our processing revenues and gross profits. Finally, during
the first quarter of the 2008 fiscal year, the Company entered into a contract
with a manufacturer under which the manufacturer would attempt to produce for
us
a lower cost e-Port device. If successful, we have committed to purchase at
least $3,600,000 of the new e-Port device from this manufacturer over an
eighteen month period.
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 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
4T. 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,
2007. Based on this evaluation, they conclude that the disclosure
controls and procedures were effective to ensure that the information required
to be disclosed by the Company in the reports that it files or submits under
the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms
and to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934
is
accumulated and communicated to the Company’s management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
|
(b)
|
Changes
in internal controls.
|
There
have been no changes during the quarter ended December 31, 2007 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, 2007, the Company issued to Steve Illes 195,360
shares for an aggregate purchase price of $1,222,500 pursuant to the 2006-B
Common Stock Purchase Agreement. 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. As agreed between Mr. Illes and the Company,
the shares issued to Mr. Illes were registered for resale by Mr. Illes under
the
1933 Act.
As
detailed in Note 4 to the consolidated financial statements, during October
2007, the Company sold 2,142,871 shares of Common Stock for $7.00 per share
to
37 accredited investors. The offer and sale of the shares was exempt from
registration under Rule 506 promulgated under Section 4(2) of the 1933 Act.
As
also detailed, we issued to William Blair & Company, LLC, a registered
broker-dealer acting as the exclusive placement agent, warrants to purchase
up
to 17,532 shares of Common Stock at $7.70 per share. The offer and sale of
the
warrants was exempt from registration under Section 4(2) of the 1933
Act.
Item
6. Exhibits
|
Certifications
of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.
|
|
Certifications
of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.
|
|
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.
|
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
11, 2008
|
/s/
George R. Jensen,
Jr.
|
|
George
R. Jensen, Jr., Chairman and
|
|
|
Chief
Executive Officer
|
|
|
Date: February
11, 2008
|
/s/
David M.
DeMedio
|
|
David
M. DeMedio,
|
|
|
Chief
Financial Officer
|
22
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 11, 2008
|
/s/ George R. Jensen,
Jr.
|
|
George
R. Jensen, Jr.,
|
|
|
Chief
Executive Officer
|
Exhibit
31.2
CERTIFICATIONS
I, David
M. DeMedio, 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 11, 2008
|
/s/ David M.
DeMedio
|
|
David
M. DeMedio,
|
|
|
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, 2007 (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, 2007 (the "Report"), I, David M.
DeMedio, 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/ David M.
DeMedio
David M.
DeMedio
Chief
Financial Officer