UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-Q/A
Amendment No. 1
| T | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2009
OR
| o | 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 or organization) | (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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes T No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o |
| | Smaller reporting company T | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x
As of February 9, 2010, there were 22,725,701 shares of Common Stock, no par value, outstanding.
Explanatory Note
This Amendment No. 1 on Form 10-Q/A (this “Amendment”) amends the Quarterly Report on Form 10-Q of USA Technologies, Inc. (the “Company”) for the quarterly period ended December 31, 2009, which the Company previously filed with the Securities and Exchange Commission on February 11, 2010 (the “Original Filing”).
The Company is filing this Amendment No. 1 to correct three typographical errors made in Item 1. Consolidated Financial Statements (Unaudited) of the Original Filing. The amount of total shareholders’ equity reported on the consolidated balance sheet at December 31, 2009 (unaudited) was incorrectly stated as $26,610,228 and has been corrected to state $25,610,228. The amount of interest expense reported on the consolidated statement of operations (unaudited) for the six months ended December 31, 2008 was incorrectly stated as $(52,138) and has been corrected to state $(53,138). The amount of total shareholders’ equity reported on the consolidated statement of shareholders’ equity (unaudited) for the six months ended December 31, 2009 was incorrectly stated as $265,610,228 and has been corrected to state $25,610,228.
The Company has also included as Exhibits to this Amendment amended principal executive officer and principal financial officer certifications originally filed as Exhibits 31.1 and 31.2 to the Original Filing, which inadvertently omitted certain language referring to internal control over financial reporting.
Except as expressly set forth in this Amendment, the Company is not amending any other part of the Original Filing. This Amendment continues to speak as of the date of the Original Filing, except as such disclosure is amended by this Amendment, and does not reflect events occurring after the filing of the Original Filing.
Consolidated Balance Sheets
| | | December 31, | | | June 30, | |
| | | 2009 | | | 2009 | |
| Assets | | (Unaudited) | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 11,572,878 | | | $ | 6,748,262 | |
| Accounts receivable, less allowance for uncollectible accounts of $111,000 and $42,000, respectively | | | 1,896,257 | | | | 1,468,052 | |
| Finance receivables | | | 883,436 | | | | 212,928 | |
| Inventory, net | | | 2,265,549 | | | | 1,671,226 | |
| Prepaid expenses and other current assets | | | 1,021,029 | | | | 1,078,026 | |
| Total current assets | | | 17,639,149 | | | | 11,178,494 | |
| | | | | | | | | |
| Finance receivables, less current portion | | | 415,848 | | | | 121,624 | |
| Property and equipment, net | | | 2,161,896 | | | | 2,081,909 | |
| Intangibles, net | | | 4,327,853 | | | | 4,845,053 | |
| Goodwill | | | 7,663,208 | | | | 7,663,208 | |
| Other assets | | | 45,052 | | | | 90,090 | |
| Total assets | | $ | 32,253,006 | | | $ | 25,980,378 | |
| | | | | | | | | |
| Liabilities and shareholders’ equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 3,107,488 | | | $ | 3,794,691 | |
| Accrued expenses | | | 2,941,927 | | | | 1,393,356 | |
| Current obligations under long-term debt | | | 369,951 | | | | 494,850 | |
| Total current liabilities | | | 6,419,366 | | | | 5,682,897 | |
| | | | | | | | | |
| Long-term debt, less current portion | | | 223,412 | | | | 325,209 | |
| Total liabilities | | | 6,642,778 | | | | 6,008,106 | |
| | | | | | | | | |
| Commitments and contingencies (Note 7) | | | | | | | | |
| | | | | | | | | |
| Shareholders’ equity: | | | | | | | | |
| Preferred stock, no par value: | | | | | | | | |
| Authorized shares- 1,800,000 | | | | | | | | |
| Series A convertible preferred- Authorized shares 900,000; | | | | | | | | |
| Issued and outstanding shares- 488,657 and 510,270, respectively (liquidation preference of $15,163,344 and $15,451,307, respectively) | | | 3,461,534 | | | | 3,614,554 | |
| Common stock, no par value: | | | | | | | | |
| Authorized shares- 640,000,000; | | | | | | | | |
| Issued and outstanding shares- 22,725,701 and 15,423,022, respectively | | | 207,959,115 | | | | 194,948,693 | |
| Accumulated deficit | | | (185,810,421 | ) | | | (178,590,975 | ) |
| Total shareholders’ equity | | | 25,610,228 | | | | 19,972,272 | |
| Total liabilities and shareholders’ equity | | $ | 32,253,006 | | | $ | 25,980,378 | |
See accompanying notes.
USA Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
| | | Three months ended | | | Six months ended | |
| | | December 31, | | | December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Revenues: | | | | | | | | | | | | |
| Equipment sales | | $ | 1,697,053 | | | $ | 1,244,694 | | | $ | 3,634,460 | | | $ | 3,283,609 | |
| License and transaction fees | | | 2,073,786 | | | | 1,425,535 | | | | 3,964,015 | | | | 2,781,499 | |
| Total revenues | | | 3,770,839 | | | | 2,670,229 | | | | 7,598,475 | | | | 6,065,108 | |
| | | | | | | | | | | | | | | | | |
| Cost of equipment | | | 1,080,878 | | | | 896,742 | | | | 2,390,235 | | | | 2,330,586 | |
| Cost of services | | | 1,680,565 | | | | 1,108,358 | | | | 3,168,722 | | | | 2,165,984 | |
| Cost of sales | | | 2,761,443 | | | | 2,005,100 | | | | 5,558,957 | | | | 4,496,570 | |
| Gross profit | | | 1,009,396 | | | | 665,129 | | | | 2,039,518 | | | | 1,568,538 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Selling, general and administrative | | | 4,857,366 | | | | 3,776,302 | | | | 8,423,143 | | | | 8,215,833 | |
| Depreciation and amortization | | | 400,366 | | | | 388,252 | | | | 785,431 | | | | 807,032 | |
| Total operating expenses | | | 5,257,732 | | | | 4,164,554 | | | | 9,208,574 | | | | 9,022,865 | |
| Operating loss | | | (4,248,336 | ) | | | (3,499,425 | ) | | | (7,169,056 | ) | | | (7,454,327 | ) |
| | | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | | |
| Interest income | | | 12,699 | | | | 96,572 | | | | 27,636 | | | | 224,537 | |
| Interest expense | | | (9,719 | ) | | | (26,180 | ) | | | (30,135 | ) | | | (53,138 | ) |
| Total other income (expense), net | | | 2,980 | | | | 70,392 | ) | | | (2,499 | ) | | | 171,399 | |
| Net loss | | | (4,245,356 | ) | | | (3,429,033 | ) | | | (7,171,555 | ) | | | (7,282,928 | ) |
| Cumulative preferred dividends | | | - | | | | - | | | | (382,703 | ) | | | (390,294 | ) |
| Loss applicable to common shares | | | (4,245,356 | ) | | | (3,429,033 | ) | | | (7,554,258 | ) | | | (7,673,222 | ) |
| | | | | | | | | | | | | | | | | |
| Loss per common share (basic and diluted) | | $ | (0.19 | ) | | $ | (0.23 | ) | | $ | (0.36 | ) | | $ | (0.51 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding (basic and diluted) | | | 22,728,252 | | | | 15,196,988 | | | | 21,274,089 | | | | 15,183,102 | |
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, 2009 | | $ | 3,614,554 | | | $ | 194,948,693 | | | $ | (178,590,975 | ) | | $ | 19,972,272 | |
| Issuance of 7,285,792 shares of common stock at $2.00 per share less issuance costs of $1,613,425 | | | | | | | 12,958,159 | | | | | | | | 12,958,159 | |
| Issuance of 22,000 fully-vested shares of common stock to employees and vesting of shares granted under the 2008 Stock Incentive Plan | | | | | | | 61,931 | | | | | | | | 61,931 | |
| Retirement of 5,113 shares of common stock | | | | | | | (9,668 | ) | | | | | | | (9,668 | ) |
| Retirement of 21,613 shares of preferred stock | | | (153,020 | ) | | | | | | | (47,891 | ) | | | (200,911 | ) |
| Net loss | | | - | | | | - | | | | (7,171,555 | ) | | | (7,171,555 | ) |
| Balance, December 31, 2009 | | $ | 3,461,534 | | | $ | 207,959,115 | | | $ | (185,810,421 | ) | | $ | 25,610,228 | |
See accompanying notes.
USA Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| | | Six months ended | |
| | | December 31, | |
| | | 2009 | | | 2008 | |
| Operating activities | | | | | | |
| Net loss | | $ | (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 | | | 61,931 | | | | 838,304 | |
| Charges incurred (reduced) in connection with the Long-term Equity Incentive Program | | | 104,730 | | | | (268,407 | ) |
| Bad debt expense (recovery) | | | 67,432 | | | | (27,380 | ) |
| Amortization | | | 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 | | | 324,973 | | | | 325,520 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (495,637 | ) | | | 2,601,586 | |
| Finance receivables | | | (964,732 | ) | | | 246,163 | |
| Inventory | | | (594,323 | ) | | | (182,789 | ) |
| Prepaid expenses and other assets | | | 188,026 | | | | 408,822 | |
| Accounts payable | | | (687,203 | ) | | | (1,500,279 | ) |
| Accrued expenses | | | 1,443,841 | | | | (524,485 | ) |
| Net cash used in operating activities | | | (7,205,317 | ) | | | (4,842,694 | ) |
| | | | | | | | | |
| Investing activities | | | | | | | | |
| Purchase of property and equipment, net | | | (387,623 | ) | | | (170,100 | ) |
| Net proceeds from redemption/sale of available-for-sale securities | | | - | | | | 2,025,000 | |
| Net cash provided by (used in) investing activities | | | (387,623 | ) | | | 1,854,900 | |
| | | | | | | | | |
| Financing activities | | | | | | | | |
| Net proceeds from the issuance (retirement) of common stock | | | 12,948,491 | | | | (315,304 | ) |
| Payments for the (retirement) of preferred stock | | | (200,911 | ) | | | (88,048 | ) |
| Repayment of long-term debt | | | (330,024 | ) | | | (467,908 | ) |
| Net cash provided by (used in) financing activities | | | 12,417,556 | | | | (871,260 | ) |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 4,824,616 | | | | (3,859,054 | ) |
| Cash and cash equivalents at beginning of period | | | 6,748,262 | | | | 9,970,691 | |
| Cash and cash equivalents at end of period | | $ | 11,572,878 | | | $ | 6,111,637 | |
| | | | | | | | | |
| Supplemental disclosures of cash flow information: | | | | | | | | |
| Prepaid insurance financed with long-term debt | | $ | 85,991 | | | $ | 225,785 | |
| Prepaid maintenance contracts financed with long-term debt | | | - | | | | 37,429 | |
| Cash paid for interest | | $ | 11,976 | | | $ | 54,351 | |
| Equipment acquired under capital lease | | $ | 17,337 | | | $ | 424,213 | |
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 payment, 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 offer their customers cashless payment options, as well as remotely monitor, control and report on the results of these distributed assets. As part of our Intelligent Vending® solution, our Company also manufactures and sells energy management products which reduce the electrical power consumption of vending related 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. have been prepared in accordance with U.S. 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, 2009. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. Operating results for the six month period ended December 31, 2009 are not necessarily indicative of the results that may be expected for the year ending June 30, 2010. The balance sheet at June 30, 2009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.
The Company has incurred losses from its inception through June 30, 2009 and losses have continued through December 2009 and are expected to continue during fiscal year 2010. The Company's ability to meet its future obligations is dependent upon the success of its products and services in the marketplace and 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 well as raise capital to meet its cash flow requirements including the issuance of Common Stock and the exercise of outstanding Common Stock warrants.
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.
Cash and Cash Equivalents
Cash and cash equivalents represent all highly liquid investments with original maturities of three months or less. Cash equivalents are comprised of certificates of deposit and money market funds. The Company maintains its cash in bank deposit accounts, which may exceed federally insured limits at times.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
1. Accounting Policies (Continued)
Finance receivables
The Company offers extended payment terms to certain customers for equipment sales. Through June 30, 2009 payment terms consisted of fixed term notes. During the quarter ended September 30, 2009 the Company started offering customers the Quick Start Program. In accordance with ASC Topic 840, “Leases”, agreements under the Quick Start program qualify for sales-type lease accounting. Accordingly, the future minimum lease payments are classified as finance receivables in the Company’s consolidated balance sheets. Notes receivable or Quick Start leases are generally for a 36 month term. Finance receivables are carried at their contractual amount and charged off against the allowance for credit losses when management determines that recovery is unlikely and the Company ceases collection efforts. The Company recognizes a portion of the note or lease payments as interest income in the accompanying consolidated financial statements based on the effective interest rate method.
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.
Available-for-sale Securities
The Company accounts for investments in accordance with ASC 320, "Investments - 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, 2009 and June 30, 2009, available-for-sales securities consisted of $0, par value of auction rate securities (“ARS”). During the six months ended December 31, 2008, the ARS broker-dealer purchased $2,025,000 of the Company’s ARS at par. As such, there were no unrealized losses recorded in the three or six month periods ended December 31, 2008 in connection with these investments.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable, finance receivables-current portion, other current assets, accounts payable and accrued expenses reported in the consolidated balance sheets equal or approximate fair value due to their short maturities. The fair value of the Company’s long-term finance receivables and long-term debt approximates book value as such instruments are at market rates currently available to the Company.
Equipment Rental
During the quarter ended December 31, 2009, the Company commenced a rental program for its e-Port equipment devices. In accordance with ASC 840, “Leases”, the Company classifies the rental agreements as operating leases. Since the rental program commenced late in the quarter ended December 31, 2009, there was no rental revenue or cost of sales included in the Consolidated Statements of Operations for the three or six months then ended.
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, 2009 and 2008 given the Company’s losses in 2009 and 2008 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.
Shared-Based Payment
The Company applies ASC Topic 718 “Stock Compensation” 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. The Company recorded stock compensation expense of $61,931 and $838,304 related to common stock grants and the vesting of shares previously granted to employees and officers, excluding the Long-term Equity Incentive Program (the “LTIP Program”), during the six month ended December 31, 2009 and 2008, respectively. There were no common stock options granted, vested or recorded as expense during the six month ended December 31, 2009 and 2008.
The Company recorded stock compensation expense of $104,730 related to the vesting of shares under the LTIP Program during the six months ended December 31, 2009. The Company recorded a reduction of stock compensation expense of $268,407 related to the vesting of shares under the LTIP Program during the six months ended December 31, 2008. However, in February 2009 the fiscal 2009 year Program was deferred to fiscal 2010 and compensation expense for the 2009 Program was reversed.
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, stock purchase warrants, or the conversion of preferred stock or cumulative preferred dividends was assumed during the periods presented because the assumed exercise of these securities would be anti-dilutive.
2. Finance Receivables
Finance receivables consist of the following:
| | | December 31 | | | June 30 | |
| | | 2009 | | | 2009 | |
| | | (unaudited) | | | | |
| Notes receivable | | $ | 137,132 | | | $ | 334,552 | |
| Lease receivables | | | 1,162,152 | | | | - | |
| Total finance receivables | | | 1,299,284 | | | | 334,552 | |
| Less current portion | | | 883,436 | | | | 212,928 | |
| Non-current portion of finance receivables | | $ | 415,848 | | | $ | 121,624 | |
USA Technologies, Inc.
Notes to Consolidated Financial Statements
3. Accrued Expenses
Accrued expenses consist of the following:
| | | December 31 | | | June 30 | |
| | | 2009 | | | 2009 | |
| | | (unaudited) | | | | |
| Accrued compensation and sales commissions | | | 343,828 | | | $ | 318,792 | |
| Accrued proxy costs and legal settlement | | | 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 | |
4. Long-Term Debt
Long-term debt consists of the following:
| | | December 31 | | | June 30 | |
| | | 2009 | | | 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 | |
As of December 31, 2009, $47,186 and $0 of the current and long-term finance receivables, respectively, are collateral for the outstanding balances of loans, of which $9,026 and $0 is classified as current and long-term debt, respectively.
During July 2009, the Company financed a portion of the premiums for various insurance policies totaling $85,991 due in nine monthly installments at an interest rate of 5.1%. During July 2009, the Company also entered into a capital lease for office equipment. The lease total of $24,837 is due in 48 monthly installments at an interest rate of 12.1%.
5. Common Stock and Preferred Stock
During the six months ended December 31, 2009, the Company retired 21,613 shares of its Preferred Stock it purchased on the open market at $9 per share for a total of $200,911, including fees.
During the six months ended December 31, 2009, and as permitted under his employment agreement, an executive officer cancelled an aggregate of 5,113 shares of Common Stock held by him in order to satisfy an aggregate of $9,668 of payroll tax withholding obligations related to shares of Common Stock which vested during January and June 2009.
On May 22, 2009, the Company filed a registration statement with the Securities and Exchange Commission for a rights offering relating to transferable subscription rights to purchase up to $15 million of common stock and warrants. The proceeds from the rights offering are to be used for general corporate purposes, including working capital and are available to finance the e-Ports which may be utilized in the Quick Start Program.
The Company engaged William Blair & Company and Maxim Group LLC to act as the dealer-managers for the rights offering and MacKenzie Partners, Inc. to act as the information agent.
The rights offering expired on July 31, 2009. On August 7, 2009, the closing date of the rights offering, the Company received $14,571,584 of gross proceeds. The net cash proceeds, after deduction of fees and expenses, including dealer-manager fees, was $13,041,332. In addition, the Company issued a total of 291,432 warrants to the dealer-managers to purchase the Company’s Common Stock at $2.20 per share at any time through August 6, 2012.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
5. Common Stock and Preferred Stock (Continued)
In accordance with the terms of the rights offering, the Company issued an aggregate of 7,285,792 shares of common stock for $2.00 per share and 7,285,792 warrants, entitling the holder to purchase one share of common stock at the exercise price of $2.20 per share of common stock commencing January 1, 2010 and through December 31, 2011. The warrants commenced trading on August 7, 2009, on the NASDAQ Global Market under the symbol USATW.
During September 2009, the Company entered into an Amended and Restated Employment Agreement with Mr. Jensen and Mr. Herbert which replaced their prior employment agreements. As part of the amendments, Mr. Jensen was granted 30,000 shares of Common Stock under the 2008 Stock Incentive Plan valued at $1.75 per share which vest as follows: 10,000 on October 1, 2009; 10,000 on April 1, 2010; and 10,000 on October 1, 2010; Mr. Herbert was also granted 9,000 shares of Common Stock under the 2008 Stock Incentive Plan valued at $1.75 per share which vest as follows: 3,000 on October 1, 2009; 3,000 on April 1, 2010; and 3,000 on October 1, 2010.
6. Common Stock Warrants
As of December 31, 2009, there were 10,608,087 Common Stock warrants outstanding, of which 1,822,295 were exercisable at exercise prices ranging from $2.20 to $7.70 per share. In January 2010, 7,285,792 of the warrants will become exercisable at $2.20 per share. The remaining 500,000 and 1,000,000 warrants expiring on October 1, 2010 and October 1, 2011, respectively, are not exercisable until minimum performance hurdles in the First Data Joint Marketing Agreement are achieved.
7. 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 February 2009, the Company provided approval to a third party manufacturer of a pre-production e-Port equipment device. At the time of approval, and per the terms of the contract with the manufacturer, the Company is committed to purchase a certain number of e-Port equipment devices for a maximum of $3,600,000 over an eighteen month period. As of December 31, 2009, the remaining commitment is estimated at approximately $1,500,000 based on our purchase order pricing accepted by the manufacturer less the e-Port equipment devices purchased through December 31, 2009.
8. Subsequent Events
The Company has evaluated subsequent events through February 11, 2010, the date these consolidated financial statements were filed, and determined that other than the settlement of the proxy contest litigation accounted for in the consolidated financial statements, there were no events or transactions occurring subsequent to December 31, 2009 that would have a material impact on the Company’s consolidated financial statements and that there were no events or transactions occurring subsequent to December 31, 2009 that would require disclosure.
On February 4, 2010, the Company and a group of dissident shareholders settled a proxy contest and related litigation, and the pending litigation was voluntarily dismissed with prejudice by all the parties. Total proxy contest related litigation and settlement expenses incurred during the six months ended December 31, 2009 were $1,991,760, of which $1,160,441 related to the settlement of litigation and $831,319 related to litigation and contest costs incurred by the Company, reduced by the insurance contribution from the Company’s insurance carrier of $450,000 and $21,889, respectively, resulting in net expense of $1,519,871. The net expense is reflected in SG&A for the six months ended December 31, 2009. As of December 31, 2009 the Company had paid $351,977 and the remaining costs of $1,639,783 are classified as accrued expenses in the Company’s December 31, 2009 Consolidated Balance Sheet. In addition, the insurance contribution of $471,889 is classified as accounts receivable in the Company’s December 31, 2009 Consolidated Balance Sheet.
Item 5. Exhibits
| | 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. |
| | | |
| | 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. |
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized, on February 22, 2010.
| | USA TECHNOLOGIES, INC. |
| | |
| | /s/ George R. Jensen, Jr. |
| | George R. Jensen, Jr., Chairman |
| | and Chief Executive Officer |
| | |
| | |
| | /s/ David M. DeMedio |
| | David M. DeMedio, |
| | Chief Financial Officer |
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