x
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF
1934
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Pennsylvania
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23-2679963
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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100 Deerfield Lane, Suite 140, Malvern,
Pennsylvania
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19355
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(Address
of principal executive offices)
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(Zip
Code)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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PAGE NO.
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Part I - Financial
Information
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Item
1.
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3
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4
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5
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6
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7
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Item
2.
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12
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Item
3.
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16
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Item
4T.
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16
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Part II - Other
Information
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Item
1.
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17
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Item
2.
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17
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Item
4.
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18
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Item
5.
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19
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20
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December
31,
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June
30,
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|||||||
2009
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2009
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|||||||
Assets
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(Unaudited)
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|||||||
Current
assets:
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||||||||
Cash
and cash equivalents
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$ | 11,572,878 | $ | 6,748,262 | ||||
Accounts
receivable, less allowance for uncollectible accounts of $111,000 and
$42,000, respectively
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1,896,257 | 1,468,052 | ||||||
Finance
receivables
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883,436 | 212,928 | ||||||
Inventory,
net
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2,265,549 | 1,671,226 | ||||||
Prepaid
expenses and other current assets
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1,021,029 | 1,078,026 | ||||||
Total
current assets
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17,639,149 | 11,178,494 | ||||||
Finance
receivables, less current portion
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415,848 | 121,624 | ||||||
Property
and equipment, net
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2,161,896 | 2,081,909 | ||||||
Intangibles,
net
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4,327,853 | 4,845,053 | ||||||
Goodwill
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7,663,208 | 7,663,208 | ||||||
Other
assets
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45,052 | 90,090 | ||||||
Total
assets
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$ | 32,253,006 | $ | 25,980,378 | ||||
Liabilities
and shareholders’ equity
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||||||||
Current
liabilities:
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||||||||
Accounts
payable
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$ | 3,107,488 | $ | 3,794,691 | ||||
Accrued
expenses
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2,941,927 | 1,393,356 | ||||||
Current
obligations under long-term debt
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369,951 | 494,850 | ||||||
Total
current liabilities
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6,419,366 | 5,682,897 | ||||||
Long-term
debt, less current portion
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223,412 | 325,209 | ||||||
Total
liabilities
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6,642,778 | 6,008,106 | ||||||
Commitments
and contingencies (Note 7)
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||||||||
Shareholders’
equity:
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||||||||
Preferred
stock, no par value:
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||||||||
Authorized
shares- 1,800,000
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||||||||
Series
A convertible preferred- Authorized shares 900,000;
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||||||||
Issued
and outstanding shares- 488,657 and 510,270, respectively (liquidation
preference of $15,163,344 and $15,451,307, respectively)
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3,461,534 | 3,614,554 | ||||||
Common
stock, no par value:
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||||||||
Authorized
shares- 640,000,000;
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||||||||
Issued
and outstanding shares- 22,725,701 and 15,423,022,
respectively
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207,959,115 | 194,948,693 | ||||||
Accumulated
deficit
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(185,810,421 | ) | (178,590,975 | ) | ||||
Total
shareholders’ equity
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26,610,228 | 19,972,272 | ||||||
Total
liabilities and shareholders’ equity
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$ | 32,253,006 | $ | 25,980,378 |
Three
months ended
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Six
months ended
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|||||||||||||||
December
31,
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December
31,
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|||||||||||||||
2009
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2008
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2009
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2008
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|||||||||||||
Revenues:
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||||||||||||||||
Equipment
sales
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$ | 1,697,053 | $ | 1,244,694 | $ | 3,634,460 | $ | 3,283,609 | ||||||||
License
and transaction fees
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2,073,786 | 1,425,535 | 3,964,015 | 2,781,499 | ||||||||||||
Total
revenues
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3,770,839 | 2,670,229 | 7,598,475 | 6,065,108 | ||||||||||||
Cost
of equipment
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1,080,878 | 896,742 | 2,390,235 | 2,330,586 | ||||||||||||
Cost
of services
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1,680,565 | 1,108,358 | 3,168,722 | 2,165,984 | ||||||||||||
Cost
of sales
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2,761,443 | 2,005,100 | 5,558,957 | 4,496,570 | ||||||||||||
Gross
profit
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1,009,396 | 665,129 | 2,039,518 | 1,568,538 | ||||||||||||
Operating
expenses:
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||||||||||||||||
Selling,
general and administrative
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4,857,366 | 3,776,302 | 8,423,143 | 8,215,833 | ||||||||||||
Depreciation
and amortization
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400,366 | 388,252 | 785,431 | 807,032 | ||||||||||||
Total
operating expenses
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5,257,732 | 4,164,554 | 9,208,574 | 9,022,865 | ||||||||||||
Operating
loss
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(4,248,336 | ) | (3,499,425 | ) | (7,169,056 | ) | (7,454,327 | ) | ||||||||
Other
income (expense):
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Interest
income
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12,699 | 96,572 | 27,636 | 224,537 | ||||||||||||
Interest
expense
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(9,719 | ) | (26,180 | ) | (30,135 | ) | (52,138 | ) | ||||||||
Total
other income (expense), net
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2,980 | 70,392 | ) | (2,499 | ) | 171,399 | ||||||||||
Net
loss
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(4,245,356 | ) | (3,429,033 | ) | (7,171,555 | ) | (7,282,928 | ) | ||||||||
Cumulative
preferred dividends
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- | - | (382,703 | ) | (390,294 | ) | ||||||||||
Loss
applicable to common shares
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(4,245,356 | ) | (3,429,033 | ) | (7,554,258 | ) | (7,673,222 | ) | ||||||||
Loss
per common share (basic and diluted)
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$ | (0.19 | ) | $ | (0.23 | ) | $ | (0.36 | ) | $ | (0.51 | ) | ||||
Weighted
average number of common shares outstanding (basic and
diluted)
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22,728,252 | 15,196,988 | 21,274,089 | 15,183,102 |
Series
A
Convertible
Preferred
Stock
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Common
Stock
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Accumulated
Deficit
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Total
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|||||||||||||
Balance,
June 30, 2009
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$
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3,614,554
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$
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194,948,693
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$
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(178,590,975
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)
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$
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19,972,272
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|||||||
Issuance
of 7,285,792 shares of common stock at $2.00 per share less issuance costs
of $1,613,425
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12,958,159
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12,958,159
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||||||||||||||
Issuance
of 22,000 fully-vested shares of common stock to employees and vesting of
shares granted under the 2008 Stock Incentive Plan
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61,931
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61,931
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||||||||||||||
Retirement
of 5,113 shares of common stock
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(9,668
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)
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(9,668
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)
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Retirement
of 21,613 shares of preferred stock
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(153,020
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)
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(47,891
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)
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(200,911
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)
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Net
loss
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-
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-
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(7,171,555
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)
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(7,171,555
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)
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Balance,
December 31, 2009
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$
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3,461,534
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$
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207,959,115
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$
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(185,810,421
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)
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$
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265,610,228
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Six
months ended
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December
31,
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||||||||
2009
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2008
|
|||||||
Operating
activities
|
||||||||
Net
loss
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$ | (7,171,555 | ) | $ | (7,282,928 | ) | ||
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
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61,931 | 838,304 | ||||||
Charges
incurred (reduced) in connection with the Long-term Equity Incentive
Program
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104,730 | (268,407 | ) | |||||
Bad
debt expense (recovery)
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67,432 | (27,380 | ) | |||||
Amortization
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517,200 | 523,179 | ||||||
Depreciation,
$56,742 and $20,721 of which is allocated to cost of services for the six
months ended December 31, 2009 and 2008
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324,973 | 325,520 | ||||||
Changes
in operating assets and liabilities:
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||||||||
Accounts
receivable
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(495,637 | ) | 2,601,586 | |||||
Finance
receivables
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(964,732 | ) | 246,163 | |||||
Inventory
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(594,323 | ) | (182,789 | ) | ||||
Prepaid
expenses and other assets
|
188,026 | 408,822 | ||||||
Accounts
payable
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(687,203 | ) | (1,500,279 | ) | ||||
Accrued
expenses
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1,443,841 | (524,485 | ) | |||||
Net
cash used in operating activities
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(7,205,317 | ) | (4,842,694 | ) | ||||
Investing
activities
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||||||||
Purchase
of property and equipment, net
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(387,623 | ) | (170,100 | ) | ||||
Net
proceeds from redemption/sale of available-for-sale
securities
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- | 2,025,000 | ||||||
Net
cash provided by (used in) investing activities
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(387,623 | ) | 1,854,900 | |||||
Financing
activities
|
||||||||
Net
proceeds from the issuance (retirement) of common stock
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12,948,491 | (315,304 | ) | |||||
Payments
for the (retirement) of preferred stock
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(200,911 | ) | (88,048 | ) | ||||
Repayment
of long-term debt
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(330,024 | ) | (467,908 | ) | ||||
Net
cash provided by (used in) financing activities
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12,417,556 | (871,260 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
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4,824,616 | (3,859,054 | ) | |||||
Cash
and cash equivalents at beginning of period
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6,748,262 | 9,970,691 | ||||||
Cash
and cash equivalents at end of period
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$ | 11,572,878 | $ | 6,111,637 | ||||
Supplemental
disclosures of cash flow information:
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||||||||
Prepaid
insurance financed with long-term debt
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$ | 85,991 | $ | 225,785 | ||||
Prepaid
maintenance contracts financed with long-term debt
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- | 37,429 | ||||||
Cash
paid for interest
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$ | 11,976 | $ | 54,351 | ||||
Equipment
acquired under capital lease
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$ | 17,337 | $ | 424,213 |
December
31
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June
30
|
|||||||
2009
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2009
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|||||||
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(unaudited)
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Notes
receivable
|
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$
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137,132
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$
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334,552
|
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Lease
receivables
|
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1,162,152
|
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-
|
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Total
finance receivables
|
|
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1,299,284
|
|
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334,552
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Less
current portion
|
|
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883,436
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|
|
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212,928
|
|
Non-current
portion of finance receivables
|
|
$
|
415,848
|
|
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$
|
121,624
|
|
December
31
|
June
30
|
|||||||
2009
|
2009
|
|||||||
(unaudited)
|
||||||||
Accrued
compensation and sales commissions
|
343,828 | $ | 318,792 | |||||
Accrued
proxy costs and legal settlement
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1,639,783 | - | ||||||
Accrued
professional fees, exclusive of proxy costs
|
290,063 | 439,759 | ||||||
Accrued
taxes and filing fees
|
221,676 | 206,875 | ||||||
Advanced
customer billings
|
92,275 | 101,942 | ||||||
Accrued
share-based payment liability
|
104,730 | - | ||||||
Accrued
other
|
249,572 | 325,988 | ||||||
2,941,927 | $ | 1,393,356 |
|
|
December
31
|
|
|
June
30
|
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||
|
|
2009
|
|
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2009
|
|
||
|
|
(unaudited)
|
|
|
|
|
||
Capital
lease obligations
|
|
$
|
435,745
|
|
|
$
|
580,383
|
|
Loan
agreements
|
|
|
157,618
|
|
|
|
239,676
|
|
Total
long-term debt
|
|
|
593,363
|
|
|
|
820,059
|
|
Less
current portion
|
|
|
369,951
|
|
|
|
494,850
|
|
Non-current
portion of long-term debt
|
|
$
|
223,412
|
|
|
$
|
325,209
|
|
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●
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general
economic, market or business
conditions;
|
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●
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the
ability of the Company to generate sufficient sales to generate operating
profits, or to sell products at a
profit;
|
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●
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the
ability of the Company to raise funds in the future through sales of
securities;
|
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●
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whether
the Company is able to enter into binding agreements with third parties to
assist in product or network
development;
|
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●
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the
ability of the Company to commercialize its developmental products, or if
actually commercialized, to obtain commercial acceptance
thereof;
|
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●
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the
ability of the Company to compete with its competitors to obtain market
share;
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●
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the
ability of the Company to receive reductions from the credit card
companies of transaction processing charges in the future as anticipated
by the Company;
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●
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the
ability of the Company to obtain reduced pricing from its manufacturers
for its e-Port devices in the future as anticipated by the
Company;
|
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●
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whether
the Company’s customers purchase e-Port devices in the future at levels
currently anticipated by the
Company;
|
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●
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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;
|
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●
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the
ability of the Company to obtain approval of its pending patent
applications;
|
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●
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the
ability of the Company to satisfy its trade obligations included in
accounts payable and accrued
liabilities;
|
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●
|
the
ability of the Company to predict or estimate its future quarterly or
annual revenues and expenses given the developing and unpredictable market
for its products and the lack of established
revenues;
|
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●
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the
ability of the Company to retain key customers from whom a significant
portion of its revenues is derived;
|
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●
|
the
ability of a key customer to reduce or delay purchasing products from the
Company; and
|
|
●
|
as
a result of the slowdown in the economy and/or the tightening of the
capital and credit markets, our customers may modify, delay or cancel
plans to purchase our products or services, and suppliers may increase
their prices, reduce their output or change their terms of
sale.
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Period
|
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Total
number of shares (1)
|
Average
price paid per share
|
Total
number of shares purchased as part of publicly announced plans or
programs
|
Approximate
dollar value of shares that yet may be purchased under the plans or
programs (2)
|
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October
1 through October 31, 2009: Series A Convertible Preferred
Stock
|
|
|
7,526
|
|
|
$
|
9.00
|
|
|
|
7,526
|
|
|
$
|
473,740
|
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|
|
|
|
|
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November
1 through November 30, 2009: Series A Convertible Preferred
Stock
|
|
|
2,800
|
|
|
$
|
9.00
|
|
|
|
2,800
|
|
|
$
|
447,958
|
|
December
1 through December 31, 2009: Series A Convertible Preferred
Stock
|
6,258
|
$
|
9.00
|
6,258
|
$
|
390,339
|
||||||||||
Total,
Preferred
|
|
|
16,584
|
|
|
$
|
9.00
|
|
|
|
16,584
|
|
|
$
|
390,339
|
|
Amended
and Restated Bylaws of the Company dated February 4,
2010.
|
||
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934.
|
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Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934.
|
|
|
|
|
|
Certification
of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
Certification
of the Chief Financial Officer pursuant to 18 USC Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
USA
TECHNOLOGIES, INC.
|
|
|
Date: February
11, 2009
|
/s/ George R. Jensen,
Jr.
|
|
George
R. Jensen, Jr., Chairman and
|
|
Chief
Executive Officer
|
|
|
Date: February
11, 2009
|
/s/ David M. DeMedio
|
|
David
M. DeMedio,
|
|
Chief
Financial Officer
|