USA Technologies, Inc.
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(Name of Issuer)
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Common Stock, no par value
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(Title of Class of Securities)
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90328S500
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(CUSIP Number)
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(Name, Address and Telephone Number of Person
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Authorized to Receive Notices and Communications)
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October 14, 2019
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(Date of Event Which Requires Filing of This Statement)
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CUSIP No. 90328S500
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SCHEDULE 13D
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Page 2 of 7 Pages
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1
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NAMES OF REPORTING PERSON
Hudson Executive Capital LP |
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2
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
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(a) ☐(b) ☐
|
||||
3
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SEC USE ONLY
|
|||||
4
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SOURCE OF FUNDS
OO
|
|||||
5
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CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |
☐
|
||||
6
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CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
|
|||||
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING
PERSON WITH
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7
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SOLE VOTING POWER
0
|
||||
8
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SHARED VOTING POWER
10,385,172
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|||||
9
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SOLE DISPOSITIVE POWER
0
|
|||||
10
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SHARED DISPOSITIVE POWER
10,385,172
|
|||||
11
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,385,172
|
|||||
12
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CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
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☐
|
||||
13
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.3%(1)
|
|||||
14
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TYPE OF REPORTING PERSON
PN, IA
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CUSIP No. 90328S500
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SCHEDULE 13D
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Page 3 of 7 Pages
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1
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NAMES OF REPORTING PERSON
HEC Management GP LLC |
|||||
2
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐(b) ☐
|
||||
3
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SEC USE ONLY
|
|||||
4
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SOURCE OF FUNDS
OO
|
|||||
5
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CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |
☐
|
||||
6
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CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
|
|||||
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING
PERSON WITH
|
7
|
SOLE VOTING POWER
0
|
||||
8
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SHARED VOTING POWER
10,385,172
|
|||||
9
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SOLE DISPOSITIVE POWER
0
|
|||||
10
|
SHARED DISPOSITIVE POWER
10,385,172
|
|||||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,385,172
|
|||||
12
|
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
|
☐
|
||||
13
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.3%(2)
|
|||||
14
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TYPE OF REPORTING PERSON
PN, IA
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CUSIP No. 90328S500
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SCHEDULE 13D
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Page 4 of 7 Pages
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1
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NAMES OF REPORTING PERSON
Douglas L. Braunstein |
|||||
2
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐(b) ☐
|
||||
3
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SEC USE ONLY
|
|||||
4
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SOURCE OF FUNDS
OO
|
|||||
5
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CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |
☐
|
||||
6
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CITIZENSHIP OR PLACE OF ORGANIZATION
United States
|
|||||
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING
PERSON WITH
|
7
|
SOLE VOTING POWER
0
|
||||
8
|
SHARED VOTING POWER
10,385,172
|
|||||
9
|
SOLE DISPOSITIVE POWER
0
|
|||||
10
|
SHARED DISPOSITIVE POWER
10,385,172
|
|||||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,385,172
|
|||||
12
|
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
|
☐
|
||||
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.3% (3)
|
|||||
14
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TYPE OF REPORTING PERSON
IN
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CUSIP No. 90328S500
|
SCHEDULE 13D
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Page 5 of 7 Pages
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CUSIP No. 90328S500
|
SCHEDULE 13D
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Page 6 of 7 Pages
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CUSIP No. 90328S500
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SCHEDULE 13D
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Page 7 of 7 Pages
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HUDSON EXECUTIVE CAPITAL LP
|
|||
By:
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HEC Management GP, LLC, its general partner
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||
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By:
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/s/ Douglas L. Braunstein
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Name: Douglas L. Braunstein
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|||
Title: Managing Member
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HEC MANAGEMENT GP LLC
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|||
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By:
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/s/ Douglas L. Braunstein
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Name: Douglas L. Braunstein
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|||
Title: Managing Member
|
|||
DOUGLAS L. BRAUNSTEIN
|
|||
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By:
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/s/ Douglas L. Braunstein
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|
Douglas L. Braunstein
|
|||
Trade Date
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Transaction
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Security
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Quantity Bought (Sold)
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Unit Cost(1)
|
||||
9/19/2019
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Buy to Cover
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Call Option
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12,500
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$0.50
|
||||
9/23/2019
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Buy
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Common Stock
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143,200
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$4.46(2)
|
||||
9/24/2019
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Buy
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Common Stock
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20,000
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$4.40
|
||||
9/25/2019
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Buy
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Common Stock
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1,176,000
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$4.43(3)
|
||||
9/26/2019
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Buy
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Common Stock
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605,000
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$4.87(4)
|
||||
10/14/2019 |
Buy |
Common Stock | 80,000 | $6.70(5) | ||||
10/16/2019 | Buy |
Common Stock | 165,000 | $7.26(6) |
1.
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Failure to Complete the Audit in a Timely Manner. We offered the services of several experts with financial accounting, control and compliance experience over the past 10 months. These included members of public company boards and seasoned executives
with relevant experience in restatements and control issues. The Board and management did not reach out to a single candidate. Instead, without any shareholder consultation to our knowledge, they added three members to the Board and
retained an interim CFO with de minimis public company experience and no restatement experience. That interim CFO has cost shareholders nearly $700,000 in just six months – while the Company
failed to meet Nasdaq-set reporting deadlines. The Board and management repeatedly assured us, beginning in January, that they would return the Company to compliance with all reporting requirements.
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Despite this, the Company failed to achieve this most basic objective in a timely manner, resulting in the suspension of trading of USAT’s shares on the Nasdaq. USAT incurred over $15.4 million in additional expenses in 2019 despite
numerous missed deadlines. Had the Board and management embraced our help, the shareholders would have preserved significant value and the Company would already be moving forward.
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2.
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Failure to Raise Capital at Appropriate Terms. On numerous occasions we offered to share our insights from more than 30 years of direct experience in capital markets, corporate finance, and capital allocation. The Board and management rejected not
only these offers of advice, but also our proposition that HEC help USAT in its relationships with traditional financial institutions, including its existing banking relationship. We also offered to provide capital to the Company. All
offers over the past 10 months have been rebuffed.
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Last week, we were shocked to learn that the Company had raised additional capital, and angered when we read the onerous, off-market terms. USAT sold equity at a 27% discount to the prior day’s already depressed market price and agreed
to a new debt financing priced 800bps over the current 10-year treasury, more than 350bps above its existing credit facility. Remarkably, the Company paid over $3.5 million in fees and expenses for this financing.
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The Chairman said in our October 10th meeting that there was no pressing need for the capital, and that the full Board chose to enter into this arrangement as a demonstration of strength to the marketplace. We believe it has
had the opposite effect. This financing not only diluted the ownership positions of existing long-term shareholders, but materially increased ongoing financing costs and limited future flexibility, including significant prepayment
penalties, despite no pressing need for liquidity.
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Any competent, arm’s length negotiation with other lenders should have resulted in much better terms for the Company. If equity was needed, many long-term investors could have been approached. Moreover, timing of the execution could
not have been worse – pricing equity just prior to announcing the long-awaited audit strains credulity.
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3.
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Failure to Hold Management Accountable for its Repeated Failures. The Board has failed in its most basic duty to hold management accountable for actions which have destroyed shareholder value. The CEO has been either unwilling or unable to impose effective financial
controls. He has failed to attract and retain senior staff, cycling through five CFOs in the span of four years. Communications with shareholders have been limited and opaque at best, and at times affirmatively misleading. The Board
has repeatedly delayed important executive decisions that have resulted in lost business opportunities, a loss of credibility in the marketplace, squandered financial resources, and ultimately eroded shareholder value significantly. We
have urged the Board to make necessary executive changes for some time. Even in our most recent meeting, the Board was unwilling to commit to management change, yet at the same time openly expressed uncertainty about the CEO’s future
status on the Board.
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The Board’s failure to be decisive, its lack of action and its demonstrated inability to attract talented executives can no longer be excused. These deficiencies have been clear for many months, if not longer. Unfortunately, even if
the current Board were to act unilaterally today to address these issues, we do not have confidence it can manage the process or attract the caliber of talent this business deserves.
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