<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
------------------------------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _____________________
Commission file number 33-70992
USA Technologies, Inc.
----------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Pennsylvania 23-2679963
- ------------ ----------
(State jurisdiction of incorporation or organization) (I.R.S. employer Identification No.)
200 Plant Avenue, Wayne, Pennsylvania 19087
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, area code first. (610)-989-0340
--------------
</TABLE>
Check whether the Registrant has (1) 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
--- ---
As of March 31, 1997, there were 26,760,227 shares of Common Stock, no par
value, and 797,255 shares of Series A Convertible Preferred Stock, no par value,
outstanding.
<PAGE>
USA TECHNOLOGIES, INC.
INDEX
PAGE NO.
Part I - Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 1997 and June 30, 1996 1
Statements of Operations - Three and nine months ended 2
March 31, 1997 and 1996
Statement of Shareholders' Equity - March 31, 1997 3
Statement of Cash Flows - Nine months ended 4
March 31, 1997
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 2. Unregistered Equity Securities Sold or Issued by the Registrant 12
Item 4. Submission of Matters to a Vote of Security Holders 13
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
ASSETS: ------------- -------------
Current Assets: (Unaudited)
<S> <C> <C>
Cash ............................................................. $ 381,934 1,773,356
Trade receivables................................................. 135,443
Inventory......................................................... 420,760 426,391
Stock subscriptions receivable.................................... 106,350
Prepaid expenses and deposits..................................... 4,012 3,614
------------ -------------
Total current assets................................................... 942,149 2,309,711
Property and equipment, at cost, net................................... 201,186 235,214
Other Assets........................................................... 10,000 42,446
------------ -------------
Total assets........................................................... $ 1,153,335 2,587,371
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 252,633 301,849
Accrued expenses.................................................. 89,988 41,559
Capital lease obligations......................................... 17,373 9,048
------------- -------------
Total current liabilities.............................................. 359,994 352,456
Obligation under capital leases, less current portion............. 28,812 21,209
Accrued rent...................................................... 25,525 13,516
------------- -------------
Total liabilities...................................................... $ 414,331 387,181
Shareholders' equity:
Preferred stock, no par value:
Authorized shares -1,200,000
Series A Convertible issued and outstanding shares -
797,255 at March 31,1997 and 796,025 at June 30, 1996
(Liquidation preference of $10,900,492 at March 31, 1997) 6,800,530 6,776,132
Common stock, no par value:
Authorized shares - 55,000,000
Issued and outstanding shares - 26,760,227 at March
31, 1997 and 23,023,976 at June 30, 1996.......................... 3,576,160 2,720,201
Deficit accumulated during the development stage....................... (9,637,686) (7,296,143)
------------- ------------
Total shareholders' equity............................................. 739,004 2,200,190
------------- ------------
Total liabilities and shareholders' equity............................. $ 1,153,335 2,587,371
============= ============
</TABLE>
(See accompanying notes)
1
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Statements of Operations
<TABLE>
<CAPTION>
Three months ended Nine months ended Date of Inception Through
March 31, March 31, ---------------------------
-------------------- ---------------------------- March 31, June 30,
1997 1996 1997 1996 1997 1996
-------------- ------------- ------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue:
<S> <C> <C> <C> <C> <C> <C>
Equipment sales........................ $102,347 $189,514 $189,514
License fee income..................... 32,332 13,419 77,441 36,302 141,099 63,658
Other Income........................... 9,857 5,209 14,039 25,263 67,443 53,404
----------- ----------- ----------- ----------- ----------- -----------
Total revenue............................ 144,536 18,628 280,994 61,565 398,056 117,062
----------- ----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of equipment sold................. 93,923 -- 158,867 -- 158,867
General and administrative............. 390,811 439,708 1,482,870 1,043,603 4,348,393 2,865,523
Compensation........................... 240,802 195,629 732,621 649,699 3,198,397 2,465,776
Depreciation and amortization.......... 28,297 5,106 74,819 15,318 173,213 98,394
Advertising............................ 4,517 1,981 83,988 45,115 436,990 353,002
Provision for losses on inventory...... 10,440 -- 46,541 -- 447,256 400,715
Interest............................... 2,760 3,580 14,780 4,240 141,391 126,611
Costs incurred in connection with 0
abandoned private placement.......... -- -- 50,000 50,000
----------- ----------- ----------- ----------- ----------- -----------
Total costs and expenses................. 771,550 646,004 2,594,486 1,757,975 8,954,507 6,360,021
----------- ----------- ----------- ----------- ----------- -----------
Net loss................................. (627,014) (627,376) (2,313,492) (1,696,410) (8,556,451) (6,242,959)
----------- ----------- ----------- ----------- =========== ===========
Cumulative preferred dividends........... (577,301) (477,150) (1,169,452) (954,300)
----------- ----------- ----------- -----------
Loss applicable to common shares......... (1,204,315) (1,104,526) (3,482,944) (2,650,710)
=========== =========== =========== ===========
Loss per common share.................... ($0.05) ($0.07) ($0.17) ($0.18)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding.............. 21,960,852 14,871,767 20,114,083 14,760,322
=========== =========== =========== ===========
</TABLE>
(See accompanying notes)
2
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Statement of
Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Series A Accumulated
Convertible During the
Preferred Common Development
Stock Stock Stage Total
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1996 $ 6,776,132 $2,720,201 ($7,296,143) $2,200,190
October 1996-issuance of 250,000 shares
of Common Stock in exchange for
consulting services........................ 117,500 117,500
October 1996-issuance of 15,000 shares
of Common Stock in exchange for
consulting services........................ 8,000 8,000
November 1996-conversion of 2,030 shares of
Convertible Preferred Stock to 20,300
shares of Common Stock..................... (17,275) 17,275 0
November 1996-conversion of $4,868 of
cumulative preferred dividends into 4,868
shares of Common Stock at $1.00 per share.. 4,868 (4,868) 0
December 1996- Common Stock warrants
exercised-2,345,000 at $.20 per warrant.... 469,000 469,000
January/February 1997- sale of 9,350 shares
of Convertible Preferred Stock at $10.00/share 93,500 93,500
January/February/March 1997- Common Stock warrants
exercised-857,000 at $.20 per warrant, net
of offering costs.......................... 107,106 107,106
March 1997- issuance of 160,000 shares in
exchange for consulting services .......... 57,200 57,200
January-March 1997-conversion of 6,090 shares
of Convertible Preferred Stock to 60,900
shares of Common Stock..................... (51,827) 51,827 0
January-March 1997-conversion of $23,183 of
cumulative preferred dividends into 23,183
shares of Common Stock at $1.00 per share 23,183 (23,183) 0
Net loss....................................... (2,313,492) (2,313,492)
------------- -------------- ------------- ----------
Balance, March 31, 1997 $ 6,800,530 $3,576,160 ($9,637,686) $ 739,004
============= ============== ============ ==========
</TABLE>
(See accompanying notes)
3
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
March 31,
-----------------------------
1997 1996
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................. ($2,313,492) ($1,696,410)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation/amortization................ 74,819 15,318
Compensation charges incurred
in connection with the issuance
of Common Stock.......................... 182,700 247,205
Changes in operating assets and liabilities
Trade receivables........................ (135,443)
Inventory................................ 5,631
Prepaid expenses,deposits,
and other assets......................... 32,048 38,763
Accounts payable......................... (49,216) 66,268
Accrued expenses......................... 59,703 5,250
Net cash used by operating ------------- -------------
activities............................... (2,143,250) (1,323,606)
INVESTING ACTIVITIES
Purchase of property and equipment................... (17,856) (445,511)
Proceeds from sale of property and equipment......... -- 51,000
------------- -------------
Net cash used by investing activities................ (17,856) (394,511)
FINANCING ACTIVITIES
Repayment of note payable............................ -- (2,330)
Repayment of principal on
capital lease obligations................ (6,272) (4,777)
Net proceeds from issuance of
common stock............................. 682,456 122,400
Net proceeds from issuance of
preferred convertible stock.............. 93,500 1,641,185
------------- -------------
Net cash provided by financing activities............ 769,684 1,756,478
------------- -------------
Net (decrease)increase in cash....................... (1,391,422) 38,361
Cash at beginning of period.......................... 1,773,356 376,191
------------- -------------
Cash at end of period................................ $381,934 $414,552
============= =============
SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATION:
Capital lease obligations $32,762 --
============= =============
</TABLE>
(See accompanying notes)
4
<PAGE>
USA TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(A Development Stage Corporation)
1. Business
USA Technologies, Inc. a Pennsylvania corporation (the "Company"), was
incorporated on January 16, 1992. Substantially all of the Company's activities
to date have been devoted to raising capital, developing markets, and starting
up operations which commenced during July 1994. The Company is an owner and
licenser of credit card activated control systems for use in connection with
copying machines, debit card purchase/revalue stations, facsimile machines,
personal computers, and computer printers. The Company's products make available
credit card payment technology in connection with the sale of a variety of
products and services.
The Company generally sells equipment, including the control systems,
directly to the location service provider or through authorized dealers.
Concurrent with the sale of equipment, locations are required to execute a
software licensing and transaction processing agreement with the Company.
In connection with its control systems, the Company generally retains a
percentage of the gross revenues, depending upon the level of services provided
by the Company. Through March 31, 1997, the total gross revenues received by the
Company from these systems has been nominal.
2. Accounting Policies
Interim Financial Information
The financial statements and disclosures included herein for the three
and nine months ended March 31, 1997 and 1996, and for the date of inception
through March 31, 1997 are unaudited. These financial statements and disclosures
have been prepared by the Company in accordance with generally accepted
accounting principles and reflect all adjustments consisting of adjustments of a
normal and recurring nature which, in the opinion of management, are necessary
for a fair presentation of the Company's financial position and the results of
its operations and cash flows.
5
<PAGE>
Inventory
Inventory is stated at the lower of cost (first-in, first-out method)
or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed
using the straight-line method over three to seven years for financial statement
purposes and accelerated methods for income tax reporting purposes.
Revenue Recognition
Licensing revenues are recognized upon the usage of the equipment
connected to the Company's credit card activated control systems. Revenue from
the sale of equipment is recognized upon installation and customer acceptance of
the equipment.
Loss per Common Share
Loss per common share is based on the weighted average number of common
shares outstanding during the periods. No exercise of stock options, purchase
rights, purchase warrants, or the conversion of preferred stock and cumulative
preferred dividends was assumed because the exercise or conversion of these
securities would be antidilutive. The 4,365,000 common shares held in escrow or
conversion are not considered outstanding for purposes of calculating the loss
per common share for all periods presented.
3. Stock Transactions
In December, 1996 the Board of Directors authorized a $200,000 private
placement offering of 20 units at a unit price of $10,000. Each unit included
1,000 shares of Series A Convertible Preferred Stock and 40,000 1996-B Common
Stock purchase warrants at an exercise price of $.20 per share through August
31, 1997 and $.30 per share through February 28, 2002. The offering closed in
February 1997 resulting in the sale of 9,350 shares of preferred stock and gross
proceeds of $93,500.
During the quarter ended March 31, 1997 the Company issued 857,000
shares of Common Stock upon the exercise of 857,000 Common Stock Purchase
Warrants at the price of $.20 per warrant, generating gross proceeds of
$171,400.
6
<PAGE>
In March 1997 the Company issued to a consultant 160,000 shares of
Common Stock in exchange for consulting services valued at $57,200.
On April 8, 1997 the Company commenced a private placement offering of
110 units at a price of $10,000 per unit, with each unit consisting of 2,000
shares of Series A Convertible Preferred Stock and 40,000 1997 Common Stock
Purchase Warrants. The offering ends on May 31, 1997 and can be extended for up
to 90 days at the Company's election. Through May 14, 1997 there were 20.94
units purchased, generating gross proceeds of $104,700.
4. Stock Options and Purchase Rights
During the quarter ended March 31, 1997, the Company granted to an
employee options to purchase up to 200,000 shares of Common Stock at $.45 per
share. As of March 31, 1997, there were a total of 157,300 purchase rights
outstanding at a price of $1.00 per share. As of March 31, 1997 there was a
total of 3,816,000 options outstanding at exercise prices ranging from $.05 to
$.65 per share, of which 3,266,000 were vested. Other than the options issued at
$.05, all of the options and purchase rights granted were issued at or above
fair market value on the date of grant.
5. Escrow and Cancellation Arrangements
In January 1994, at the time of the Company's initial public offering,
and as a condition of effectiveness of the offering in Pennsylvania, the
Pennsylvania Securities Commission requested that Mr. Jensen place in escrow
with CoreStates Bank (formerly Meridian Bank) as escrow agent, all of the
7,593,000 shares of Common Stock beneficially owned by him until June 30, 1998.
Any additional shares of Common Stock beneficially acquired by him will also be
held in escrow. Subject to the provisions of the escrow agreement, Mr. Jensen,
has agreed not to sell, pledge, or transfer, directly or indirectly, any of the
Common Stock held in escrow.
The escrow agreement provides that it shall be terminated prior to
June 30, 1998, and all of Mr. Jensen's shares of Common Stock currently held in
escrow shall be released and returned to him in the event of any dissolution,
merger, consolidation, sale of assets, stock sale, liquidation, tender offer,
exchange offer or otherwise of or to the Company or its shareholders.
7
<PAGE>
In connection with any such event, Mr. Jensen would not receive any
consideration for his shares of Common Stock unless and until each shareholder
(other than Mr. Jensen) has received an amount equal to $1.00 per share of
Common Stock.
Mr. Jensen has agreed that 4,365,000 shares of his escrowed Common
Stock would be cancelled by the Company and would no longer be issued and
outstanding unless one of the following occurs (i) the bid price of the Common
Stock equals or exceeds $1.75 for 30 consecutive trading days at any time during
the period of July 1, 1996 through June 30, 1998; or (ii) the Company's
cumulative operating income (before taxes, dividends or extraordinary items) per
share of Common Stock (on a fully diluted basis) at any time after July 1, 1994
through June 30, 1998, equals or exceeds $.18. Mr. Jensen has agreed that an
amount equal to 1,030,000 shares of his escrowed Common Stock (rather than
4,365,000 shares) would be cancelled if at any time after July 1, 1994 and prior
to June 30, 1998, the Company's cumulative operating income per share of Common
Stock is at least $.12 but less than $.18.
Subject to the terms of the escrow agreement, Mr. Jensen's Common Stock
will be held in escrow until the earlier of the satisfaction of any of the above
conditions (in which event no shares, or only 1,030,000 shares would be
cancelled) or June 30, 1998. Unless and until any such shares would be
cancelled, and subject to the restrictions on sale or transfer pursuant to the
escrow agreement, Mr. Jensen has retained all rights pertaining to such shares,
including voting rights.
Prior to the date hereof, Mr. Jensen canceled an aggregate of 2,305,000
shares of Common Stock which has been owned by him and which had been held in
escrow pursuant to the above arrangements. Prior to such cancellation, a maximum
of 6,670,000 shares (rather than 4,365,000 shares as currently provided) were
subject to cancellation.
In January 1994, at the time of the Company's initial public offering,
and as a condition of effectiveness of the offering in Pennsylvania, the
Pennsylvania Securities Commission also requested that all of the Directors and
executive officers of the Company (in addition to Mr. Jensen) place in escrow
all of the shares of Common Stock owned or to be owned by them until January 5,
1997. As set forth above, Mr. Jensen's shares of Common Stock are to remain in
escrow until June 30, 1998. The escrow agreement provided that such escrowed
shares could not be sold, pledged or transferred. On January 5, 1997, all of
such shares of Common Stock were released from escrow, returned to their
respective owner, and are no longer subject to the terms of the escrow
agreement. An aggregate of 1,009,500 shares of Common Stock were released from
escrow and only Mr. Jensen's shares remain in escrow.
8
<PAGE>
Item 2 Management's Discussion and Analysis of Results of Operation and
Financial Condition.
Introduction
Since its inception in January 1992, the Company, a development stage
corporation, has been engaged almost exclusively in research and development
activities focused on designing, developing, and marketing its credit card
activated control systems. From inception through March 31, 1997, the Company
has had nominal operating revenues and has generated funds primarily through the
sale of its securities. As of March 31, 1997 the Company has received, net of
expenses of such sales, the amount of $4,460,585 in connection with private
placements, $1,681,906 from the exercise of Common Stock purchase warrants, and
$2,345,104 in connection with its initial public offering. The Company has
incurred operating losses and converted some preferred dividends since its
inception resulting in an accumulated deficit of $9,637,686 at March 31, 1997
and such losses are expected to continue at least through December 31, 1997.
Results of Operations
The fiscal quarter ended March 31, 1997 resulted in a net operating
loss of $627,014 compared to a net loss of $627,376 for the comparable fiscal
quarter ended March 31, 1996. On an overall basis these continuing losses
reflect the development stage nature of the Company. Losses are projected to
continue until sufficient revenue is generated from various applications of the
Company's proprietary technology.
Revenue from operations was $144,536 compared to $18,628 from the
previous year's fiscal quarter. This improvement reflects the Company's revised
strategy of selling its proprietary equipment as opposed to relying solely on
licensing and transaction processing revenues. Equipment sales totaled $102,347.
Licensing and processing revenue increased to $32,332 from $13,419 for the same
period during the prior year. Despite this modest increase and change in
approach to marketing its products, revenue is still well below the level
required to be profitable.
Expenses and Cost of Equipment Sold for the period were $771,550 which
represents an increase of $125,546 over the same period during the prior year.
This is principally due to the increase in cost of equipment sold of $93,923
which did not exist last year in the same period, and to an increase in staffing
levels. The major contributors to the increased expense level are discussed
below:
9
<PAGE>
General and administrative expenses of $390,811 decreased by $48,897 or
11.1% from the third quarter last year, despite a non cash charge of $57,200 for
the issuance of Common Stock in exchange for consulting services in the current
quarter.
Compensation expense of $240,802 increased by 23% due to permanent and
significantly higher staffing levels in the Marketing/Sales area. Depreciation
and amortization expense increased from $5,106 to $28,297 reflecting the
increased depreciable capital asset base.
The nine month period ended March 31, 1997 resulted in a net loss of
$2,313,492, which compares to a net loss of $1,696,410 for the same period
during the previous year. Net revenue increased to $280,994 from the previous
year's $61,565. Total costs and expenses rose to $2,594,486, representing an
increase of $836,511 or 47.6% over the previous year's comparable period. Major
contributors to the increased spending levels were in General and Administrative
(increase of $439,267), Cost of Equipment Sold (increase of $158,687),
Depreciation (increase of $59,501), Provision for Losses on Inventory (increase
of $46,541), and Advertising (increase of $38,873).
Plan of Operations
As of March 31, 1997 the Company had a total of 183 credit card
activated control systems installed in the field as follows:
Credit Card Copy Express(TM) 49, Credit Card Debit Express(TM) 35,
Public PC (formerly Credit Card Computer Express(TM) 41, Fax Express(TM) 12, and
Business Express(TM) 46. The total gross revenues received by the Company from
these systems has been increasing but is still nominal.
During the past year the Company has refined its direction on new
product development. It has shifted its emphasis toward the sale of equipment
utilizing the company's control systems rather than the revenue sharing
arrangements previously employed. The Company still retains all rights to
software and proprietary technology which it licenses to location operators for
their exclusive use. This shift in approach reduces the Company's dependency on
licensing revenues and simultaneously reduces the Company's capital asset
requirements.
The Company completed development of the Business Express(TM) in August
1996 and as of March 31, 1997 there are fifteen sites in operation containing 46
of the Company's control systems. The Company is marketing its products through
its full-time sales staff consisting of four persons, either directly to
customer locations or through facility management companies servicing these
locations.
10
<PAGE>
Liquidity and Capital Resources
For the nine month period ended March 31, 1997, there was a net
decrease in cash of $1,391,422. This was attributable to using $2,143,250 for
operating activities and $17,856 for capital expenditures, partially offset by
$769,684 raised through the issuance of Preferred and Common Stock, netted
against offering costs. As of March 31, 1997, total cash on hand was $381,934;
working capital was approximately $582,155 of which $420,760 was invested in
inventory.
The Board of Directors approved a reduction in the exercise price of
5,200,000 Common Stock warrants issued in 1996. Effective November 1, 1996 the
exercise price was reduced to $.20 per share through February 28, 1997. This
resulted in the exercise of 857,000 1996 Common Stock purchase warrants for
gross proceeds to the Company of $171,400 during the third quarter, and a total
of 3,202,000 warrants and gross proceeds of $640,400 for the full period.
In December, 1996 the Board of Directors authorized a $200,000 private
placement offering of 20 units at a unit price of $10,000. Each unit included
1,000 shares of Series A Convertible Preferred Stock and 40,000 1996-B Common
Stock purchase warrants at an exercise price of $.20 per share through August
31, 1997 and $.30 per share through February 28, 2002. The offering closed in
February 1997 resulting in the sale of 9,350 shares of preferred stock and
proceeds of $93,500.
On April 8, 1997 the Company commenced a private placement offering of
110 units at a price of $10,000 per unit, with each unit consisting of 2,000
shares of Series A Convertible Preferred Stock and 40,000 1997 Common Stock
Purchase Warrants. The offering ends on May 31, 1997 and can be extended for up
to 90 days at the Company's election. Through May 14, 1997 there were 20.94
units purchased, generating gross proceeds of $104,700.
The Company anticipates that it would raise net proceeds of $950,000
from the current offering. Additionally the Company expects to raise funds from
the exercise of outstanding warrants during the balance of calendar 1997. The
Company believes that these funds together with increased revenues from its
business would be sufficient to fund operations through March 31, 1998. There
can be no assurance that additional sales of securities could be made by the
Company or that increased revenues would result from its business. In such
event, the Company may cease to be a going concern or may have to reduce its
operations or operating procedures.
11
<PAGE>
Part II - Other information
Items 1, 3, 5, and 6 are not applicable.
Item 2. Unregistered Equity Securities Sold or Issued by the Registrant
During January and February 1997, the Company sold 9.35 Units of a
private placement offering. Each unit consisted of 1,000 shares of Series A
Convertible Preferred Stock and 40,000 1996-B Common Stock Purchase Warrants
("1996-B Warrants") and was sold at a price of $10,000. Thus, the aggregate
offering consisted of 9,350 shares of Preferred Stock and 374,000 1996-B
Warrants and generated gross proceeds of $93,500. There were no underwriting
commissions related to this offering and all sales were made to accredited
investors. The Company issued these securities under the exemption from the
registration requirements of Section 4(2) of the Securities Act of 1933, as
amended ("the Act").
During the quarter ended March 31, 1997, the Company sold 857,000
shares of Common Stock in connection with the exercise of 1996 Common Stock
Purchase Warrants ("1996 Warrants"). Each of these 1996 Warrants was exercised
at a price of $.20 per share generating aggregate gross proceeds of $171,400.
There were approximately $64,000 in expenses and no underwriting commissions
related to this offering. All sales were made to individuals owning 1996
Warrants. The Company issued these securities under the exemption from the
registration requirements of Section 4(2) of the Act.
In February 1997 the Company issued to Leland P. Maxwell, the Chief
Financial Officer of the Company, options to acquire up to 200,000 shares of
Common Stock at an exercise price of $.45 per share. Subject to Mr. Maxwell's
continued employment with the Company, the options will become vested over a two
year period at the rate of 25,000 shares per quarter. The options must be
exercised within five years of vesting. The Company issued the options under the
exemption from the registration requirements of Section 4(2) of the Act.
12
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on March 20, 1997
(b) Election of Directors
The number of votes cast with respect to the election of the directors was
as follows:
For Withhold
--- ---------
George R. Jensen, Jr. 20,568,011 184,950
Keith L. Sterling 20,550,881 202,080
Stephen P. Herbert 20,566,011 186,950
Peter G. Kapourelos 20,564,011 188,950
William W. Sellers 20,565,011 187,950
Henry B. DuPont Smith 20,563,011 189,950
William L. VanAlen, Jr. 20,566,011 186,950
(c) In addition to the election of directors, the following other matters
were also voted on and approved at the Annual Meeting:
(i) A proposal to ratify the appointment of Ernst & Young LLP as
independent auditors for the Company for its 1997 fiscal year.
The number of votes cast with respect to such matter was as
follows:
Affirmative Votes 20,561,581
----------
Negative Votes 152,200
----------
Abstaining Votes 39,180
----------
(ii) A proposal to act upon an Amendment to the Company's Articles of
Incorporation which increases the number of authorized shares of
Common Stock from 45,000,000 to 55,000,000. The number of votes cast
with respect to such matter was as follows:
Affirmative Votes 19,505,482
----------
Negative Votes 984,679
----------
Abstaining Votes 242,800
----------
13
<PAGE>
(iii) A proposal to act upon an amendment to the Company's Articles of
Incorporation which increases the number of designated shares of
Series A Preferred Stock from 1,000,000 to 1,200,000. The number of
votes cast with respect to such matter was as follows:
Affirmative Votes 13,493,230
----------
Negative Votes 1,020,676
----------
Abstaining Votes 272,100
----------
(iv) A proposal to act upon an amendment to the Company's Articles of
Incorporation which would, during the period from March 24, 1997
through December 31, 1997, increase from 10 to 12 the number of
shares of Common Stock into which each share of Series A Preferred
Stock may be converted. The number of votes cast with respect to
such matter was as follows:
Affirmative Votes 13,805,332
----------
Negative Votes 770,344
----------
Abstaining Votes 209,830
----------
(v) A proposal to act upon an amendment to the Company's Articles of
Incorporation which would, during the period from March 24, 1997
through December 31, 1997, decrease from $1.00 to $.83 the price at
which accrued but unpaid dividends on Series A Preferred Stock may
be exchanged for shares of Common Stock. The number of votes with
respect to such matter was as follows:
Affirmative Votes 13,863,575
----------
Negative Votes 683,801
----------
Abstaining Votes 195,130
----------
14
<PAGE>
Signature
in accordance with 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: May 14, 1997 /s/ George R. Jensen, Jr.
---------------------------------------------------------
George R. Jensen, Jr., President, Chief Executive Officer
Date: May 14, 1997 /s/ Leland P. Maxwell
---------------------------------------------------------
Leland P. Maxwell, Senior Vice President,
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000896429
<NAME> USA TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 381,934
<SECURITIES> 0
<RECEIVABLES> 140,443
<ALLOWANCES> (5,000)
<INVENTORY> 420,760
<CURRENT-ASSETS> 942,149
<PP&E> 353,584
<DEPRECIATION> 152,398
<TOTAL-ASSETS> 1,153,335
<CURRENT-LIABILITIES> 359,994
<BONDS> 0
0
6,800,530
<COMMON> 3,576,160
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,153,335
<SALES> 134,679
<TOTAL-REVENUES> 144,536
<CGS> 93,923
<TOTAL-COSTS> 771,550
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,760
<INCOME-PRETAX> (627,014)
<INCOME-TAX> 0
<INCOME-CONTINUING> (627,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (627,014)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
