SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of report (Date of earliest event reported): May 14, 2002
USA TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 33-70992 23-269963
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
200 Plant Avenue
Wayne, Pennsylvania 19087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 989-0340
Item 2. Acquisition of Stitch Networks Corporation
As previously reported, on May 14, 2002, USA Acquisition Corp., a wholly-owned
subsidiary of USA Technologies, Inc. (the Company or Registrant), merged with
and into Stitch Networks Corporation (Stitch) pursuant to an Agreement and Plan
of Merger by and among the Company, USA Acquisition Corp., Stitch, and the
stockholders of Stitch dated April 10, 2002. At the close of the transaction,
Stitch became a wholly-owned subsidiary of the Company. The stockholders of
Stitch were David H. Goodman, Pennsylvania Early Stage Partners, L.P., and
Maytag Holdings, Inc. Stitch, located in Kennett Square Pennsylvania, is a
provider of wireless remote monitoring, and cashless and mobile commerce
solutions.
All of the outstanding shares of stock of Stitch were converted into the right
to receive an aggregate of 22,762,341 shares of Common Stock of the Company and
warrants to purchase up to 7,587,447 shares of Common Stock at $.40 per share at
any time through June 30, 2002. None of these warrants were exercised and these
warrants have expired. Additionally, the Company assumed outstanding Stitch
stock options which were converted into options to purchase an aggregate of
2,475,318 shares of Common Stock at $.165 per share at any time prior to May 14,
2007 and warrants identical to those issued to the stockholders to purchase up
to 412,553 shares of Common Stock. A total of 4,800,000 of the shares of Common
Stock issued to the former stockholders of Stitch are being held in escrow in
order to secure the former stockholders' indemnification obligations under the
Agreement and Plan of Merger and are subject to cancellation.
Item 7. Financial Statements and Exhibits:
(a) Financial Statements of business acquired (Stitch Networks Corporation):
(1) Report of Independent Auditors. F-1
Balance Sheets as of December 31, 2001 and 2000. F-2
Statements of Operations for the years ended December 31, 2001 and 2000. F-3
Statements of Stockholders' Equity for the years ended December 31, 2001 and 2000. F-4
Statements of Cash Flows for the years ended December 31, 2001 and 2000. F-5
Notes to Financial Statements. F-6
(2) Unaudited Financial Statements:
Balance Sheets as of March 31, 2002 and 2001 (Unaudited). F-17
Statements of Operations for the three months ended March 31, 2002
and 2001 (Unaudited). F-18
Statements of Stockholders' Equity (Deficit) for the three months
ended March 31, 2002 (Unaudited). F-19
Statements of Cash Flows for the three months ended March 31, 2002
and 2001 (Unaudited). F-20
Selected Notes to Financial Statements (Unaudited). F-21
(b) Pro Forma Financial Information (Unaudited):
Pro Forma Consolidated Balance Sheet as of March 31, 2002 (Unaudited). F-25
Pro Forma Consolidated Statement of Operations for the year ended
June 30, 2001 (Unaudited). F-26
Pro Forma Consolidated Statement of Operations for the nine months ended
March 31, 2002 (Unaudited). F-27
Pro Forma Notes to Consolidated Financial Statements (Unaudited) F-28
(c) Exhibits
2.1 Agreement and Plan of Merger dated April 10, 2002 by and among USA
Technologies, Inc., USA Acquisition, Inc., Stitch Networks Corporation,
David H. Goodman, PA Early Stage Partners, L.P., and Maytag Holdings,
Inc. (Incorporated by reference to Exhibit 2.1 to the Company's Form
10-QSB for the quarter ended March 31, 2002).
Report of Independent Auditors
The Board of Directors
Stitch Networks Corporation
We have audited the accompanying balance sheets of Stitch Networks Corporation
(formerly e-Vend.net Corporation) as of December 31, 2001 and 2000, and the
related statements of operations, stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stitch Networks Corporation at
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States.
The accompanying financial statements have been prepared assuming Stitch
Networks Corporation will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company has never been profitable, continues to
incur losses from operations, and anticipates that it will require additional
debt or equity financing which may not be readily available. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that might result from the outcome of this
uncertainty.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
June 28, 2002,
except for paragraph 3 of Note 11,
as to which the date is July 26, 2002
F-1
Stitch Networks Corporation
Balance Sheets
December 31
2001 2000
---------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 2,436,308 $ 7,079,397
Accounts receivable, net of allowance for doubtful accounts of
$3,600 at December 31, 2001 and 2000 132,160 10,487
Inventory 235,000 49,532
Other 88,604 131,923
---------------------------------------
Total current assets 2,892,072 7,271,339
Property and equipment, net 1,626,212 1,986,094
Other assets 32,638 9,027
---------------------------------------
Total assets $ 4,550,922 $ 9,266,460
=======================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 724,117 $ 182,778
Accrued expenses 218,773 123,051
Due to related party, net 5,888 8,875
Current portion of long-term debt 2,386,506 147,238
---------------------------------------
Total current liabilities 3,335,284 461,942
Long-term debt, net of current portion 424,331 2,077,849
Stockholders' equity:
Series A convertible preferred stock, $.01 par value; 3,114,637 shares
authorized, issued and outstanding; liquidation value of
$2,383,476 at December 31, 2001 31,146 31,146
Series B convertible preferred stock, $.01 par value; 5,276,895
shares authorized, issued and outstanding; liquidation value of
$11,483,885 at December 31, 2001 52,769 52,769
Common stock, $.01 par value; 17,000,000 shares authorized at
December 31, 2001 and 16,000,000 shares authorized at
December 31, 2000; 6,000,000 shares issued and outstanding 60,000 60,000
Additional paid-in capital 14,619,244 14,611,985
Accumulated deficit (13,971,852) (8,029,231)
---------------------------------------
Total stockholders' equity 791,307 6,726,669
---------------------------------------
Total liabilities and stockholders' equity $ 4,550,922 $ 9,266,460
=======================================
See accompanying notes.
F-2
Stitch Networks Corporation
Statements of Operations
Year ended December 31
2001 2000
-----------------------------------------
Revenue $ 1,003,241 $ 219,982
Operating expenses:
Cost of revenue 1,149,620 142,249
Compensation 3,085,946 2,256,751
General and administrative 730,811 754,001
Research and development 746,814 647,400
Sales and marketing 442,447 299,693
Depreciation and amortization 779,285 576,228
-----------------------------------------
Total operating expenses 6,934,923 4,676,322
-----------------------------------------
(5,931,682) (4,456,340)
Other income (expense):
Interest income 191,703 547,642
Interest expense (197,314) (128,314)
Other, net (5,328) (24,135)
-----------------------------------------
(10,939) 395,193
-----------------------------------------
Net loss $ (5,942,621) $ (4,061,147)
=========================================
See accompanying notes.
F-3
Stitch Networks Corporation
Statements of Stockholders' Equity
Years ended December 31, 2001 and 2000
Preferred Stock
---------------------------------------------
Series A Convertible Series B Convertible Common Stock Additional Total
------------------------------------------------------------- Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Shares Amount Capital Deficit Equity
------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 3,114,637 $31,146 5,276,895 $52,769 6,000,000 $60,000 $14,604,726 $ (3,968,084) $10,780,557
Compensation expense
relating to options issued
to nonemployees - - - - - - 7,259 - 7,259
Net loss - - - - - - - (4,061,147) (4,061,147)
------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 3,114,637 31,146 5,276,895 52,769 6,000,000 60,000 14,611,985 (8,029,231) 6,726,669
Compensation expense
relating to options issued
to nonemployees - - - - - - 7,259 - 7,259
Net loss - - - - - - - (5,942,621) (5,942,621)
------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 3,114,637 $31,146 5,276,895 $52,769 6,000,000 $60,000 $14,619,244 $(13,971,852) $ 791,307
======================================================================================================
See accompanying notes.
F-4
Stitch Networks Corporation
Statements of Cash Flows
Year ended December 31
2001 2000
---------------------------------------------
Cash flows from operating activities
Net loss $ (5,942,621) $ (4,061,147)
Adjustments to reconcile net loss to cash used in operating
activities:
Depreciation and amortization 779,285 576,228
Non-cash stock compensation expense 7,259 7,259
Loss on disposal of property and equipment 127,859 49,709
Changes in operating assets and liabilities:
Accounts receivable (121,673) 17,891
Inventory (185,468) 69,381
Other current assets 43,319 (37,319)
Accounts payable 541,339 (60,804)
Accrued expenses 95,722 62,802
Due to related party, net (2,987) (8,045)
Other assets (23,611) -
---------------------------------------------
Net cash used in operating activities (4,681,577) (3,384,045)
Cash flows from investing activities
Purchase of property and equipment (547,262) (1,987,441)
---------------------------------------------
Net cash used in investing activities (547,262) (1,987,441)
Cash flows from financing activities
Borrowings of long-term debt 706,322 2,000,000
Repayments of long-term debt (120,572) (136,448)
---------------------------------------------
Net cash provided by financing activities 585,750 1,863,552
---------------------------------------------
Net decrease in cash and cash equivalents (4,643,089) (3,507,934)
Cash and cash equivalents at beginning of year 7,079,397 10,587,331
---------------------------------------------
Cash and cash equivalents at end of year $ 2,436,308 $ 7,079,397
=============================================
Supplemental disclosures of cash flow information:
Interest paid $ 205,727 $ 111,717
=============================================
See accompanying notes.
F-5
Stitch Networks Corporation
Notes to Financial Statements
December 31, 2001 and 2000
1. Description of Business
Stitch Networks Corporation (the Company), a Delaware corporation, was
incorporated in February 1996 as Goodvest Corporation and, in March 1999,
changed its name to e-Vend.net Corporation. In June 2001 the Company changed its
name to Stitch Networks Corporation. The Company designs and employs embedded
connectivity solutions that enable network servers to monitor and control
vending machines and appliances over the internet. The Company's customers are
principally located in the United States.
On December 31, 2000, the Company executed a Vending Placement, Supply and
Distribution Agreement (the Agreement) with Eastman Kodak Company, Maytag
Corporation and Dixie Narco, Inc., which formed a strategic alliance to market
and execute a national vending program for the sale of one-time use camera and
film products. The Agreement provides for an initial term of three years ending
December 31, 2003, with additional provisions for early termination and
extensions as defined. Furthermore, the Agreement also provides for exclusivity
among the parties for the term of the Agreement relating to the sale of camera
and film products from vending machines within the Continental United States.
This agreement represented the majority of the Company's operations in 2001.
2. Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The financial statements of the Company have been prepared assuming the Company
will continue as a going concern, which contemplates the realization of assets
and the satisfaction on liabilities in the normal course of business.
Accordingly, the financial statements do not include any adjustments to recorded
asset values that might be necessary should the Company be unable to continue in
existence. The Company has never been profitable, has incurred net losses of
$5.9 million and $4.1 million during the years ending December 31, 2001 and
2000, respectively, and cumulative losses from its inception through December
31, 2001 amounting to approximately $14.0 million. Losses have continued through
June 2002 and are expected to continue throughout 2002. The Company's ability to
meet its future obligations is dependent upon the success of its products in the
marketplace and its ability to raise capital, which may not be readily
available, until the Company's products can generate sufficient operating
revenues.
F-6
2. Summary of Significant Accounting Policies (continued)
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management believes that actions presently being taken will
allow for the Company to continue as a going concern. Such actions include the
generation of revenues from operations, a restructuring of the Company's cost
structure which includes reductions in personnel and facility costs and
additional financing activities.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 includes all highly liquid investments purchased with
an original maturity of three months or less.
Inventory
Inventory, which principally consists of finished goods, components, and
packaging materials, is stated at the lower of cost (first in, first out basis)
or market. The Company maintains a valuation reserve, which reflects the
Company's estimate of the impact on inventory of potential obsolescence, excess
quantities, and declines in market values. Such reserves approximated $459,000
and $0 at December 31, 2001 and 2000, respectively.
F-7
2. Summary of Significant Accounting Policies (continued)
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives. Leasehold improvements are
recorded at cost and are amortized on a straight-line basis over the shorter of
the estimated useful life of the asset or the related lease term. The estimated
useful lives are as follows:
Vending machines and related components 3 to 7 years
Computers and purchased software 3 years
Equipment and furniture 5 to 7 years
Leasehold improvements 3 years
Long-Lived Assets
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, the Company periodically
evaluates the carrying value of long-lived assets when events and circumstances
warrant such review. The carrying value of a long-lived asset is considered
impaired when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than the carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined by
using the anticipated cash flows discounted at a rate commensurate with the risk
involved. Measurement of the impairment, if any, will be based upon the
difference between carrying value and the fair value of the asset.
Financial Instruments
The Company's financial instruments principally consist of cash and cash
equivalents, accounts receivable, and accounts payable and debt. Cash and cash
equivalents, accounts receivable and accounts payable are carried at cost, which
approximates fair value because of the short maturity of these instruments. The
Company's debt is carried at cost, which approximates fair value, as the debt
bears interest at rates approximating current market rates.
F-8
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Revenue from the sale of products from the Company's vending machines is
recognized upon the sale of such products and acceptance by the customer.
Monthly fees for the use of vending machines equipped with embedded Internet
connectivity technology is recognized upon usage of the equipment.
Research and Development
The Company expenses research and development costs as incurred.
Income Taxes
The Company uses the liability method to account for income taxes. Accordingly,
deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts reportable for income tax purposes.
Advertising Expenses
Advertising costs are expensed as incurred. Advertising expense for the years
ended December 31, 2001 and 2000 was approximately $155,000 and $121,000,
respectively.
Accounting for Stock Options
Financial Accounting Standards Board Statement ("SFAS") No. 123, Accounting for
Stock Based Compensation, provides companies with a choice to follow the
provisions of SFAS 123 in determination of stock-based compensation expense or
to continue with the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"). The Company has elected to
follow the provisions of APB 25. Under APB 25, if the exercise price of the
Company's stock options equals or exceeds the market price of the underlying
Common Stock on the date of grant, no compensation expense is recognized. The
effect of applying SFAS No. 123 to the Company's stock-based awards results in
net loss that is not materially different from the reported net loss.
F-9
2. Summary of Significant Accounting Policies (continued)
New Accounting Pronouncements
The FASB recently issued Statement No. 144, Accounting for the Impairment of
Disposal of Long-Lived Assets, that is applicable to financial statements issued
for fiscal years beginning after December 15, 2001. The FASB's new rules on
asset impairment supersede FASB Statement 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and portions of
APB Opinion 30, Reporting the Results of Operations. This Standard provides a
single accounting model for long-lived assets to be disposed of and
significantly changes the criteria that would have to be met to classify an
asset as held-for-sale. Classification as held-for-sale is an important
distinction since such assets are not depreciated and are stated at the lower of
fair value and carrying amount. This Standard also requires expected future
operating losses from discontinued operations to be displayed in the period in
which the losses are incurred, rather than as of the measurement date as
presently required. The provisions of this Standard are not expected to have an
effect on the Company's financial position or results of operations.
3. Property and Equipment
Property and equipment consist of the following:
December 31
2001 2000
------------------------------------
Vending machines and related components $ 1,034,099 $ 774,503
Computers and purchased software 1,518,079 1,477,243
Equipment and furniture 453,218 477,332
Leasehold improvements and other 210,288 255,197
------------------------------------
3,215,684 2,984,275
Less accumulated depreciation and amortization 1,589,472 998,181
------------------------------------
$ 1,626,212 $ 1,986,094
====================================
4. Accrued Expenses
Accrued expenses consist of the following:
December 31
2001 2000
-----------------------------------
Professional fees $ 63,373 $ 56,000
Interest payable 10,519 18,932
Sales tax payable 26,686 3,826
Delivery costs 41,539 5,871
Other 76,656 38,422
-----------------------------------
$ 218,773 $ 123,051
===================================
F-10
5. Long-Term Debt
In July 1998, the Company obtained a $425,000 Bank Loan (Loan) for working
capital purposes. The Loan bore interest at 7.5% and was repayable in 36 equal
monthly installments with a due date of June 1, 2002. The Loan was
collateralized by substantially all of the Company's assets and was personally
guaranteed by the Company's President and Chief Executive Officer.
In May 2000, the Company obtained a $2,000,000 Equipment Line of Credit (Line of
Credit) from a bank to fund the purchase of property and equipment. As of
December 31, 2000, $2,000,000 was outstanding under the Line of Credit. The Line
of Credit bore interest at a variable rate based on the bank's prime rate and
was due on May 1, 2002, with interest only due on a monthly basis in the
interim. This loan was collateralized by substantially all of the Company's
assets.
In May 2001, the $2,000,000 outstanding principal on the Line of Credit and the
$165,042 outstanding balance on the Loan were restructured and combined into a
single Loan (New Loan). The New Loan bears interest at a variable rate based on
the bank's prime rate, and is due in full in June 2002, with interest payable
monthly. The personal guarantee of the President was removed from any and all
bank debt, and the collateral was replaced by an assignment of the Company's
brokerage account containing the equivalent amount of cash and cash equivalents.
The New Loan balance of $2,165,042 was repaid in accordance with its terms in
June 2002. In connection with this borrowing arrangement, the Company was also
granted additional borrowing capacity in the form of a $50,000 loan commitment.
The $50,000 commitment was utilized during February 2002 (see Note 11).
F-11
5. Long-Term Debt (continued)
In May 2001, the Company obtained from a separate bank a borrowing facility (the
Facility) in the aggregate amount of approximately $1,500,000 to fund the
purchase of vending machines used for the distribution and sale of Kodak film
products. Borrowings are made from time to time under the facility, with
repayment schedules set at the time of each borrowing, including equal monthly
payments over 36 months and an interest rate based upon an amount in excess of
three year U.S. Treasury Notes. The outstanding principal balance under this
facility was $645,795 as of December 31, 2001. The Company has granted the bank
a security interest in the specific film products vending machines. Repayment of
principal is also insured by a Surety Bond issued by a third-party insurer in
exchange for an initial fee paid by the Company. Subsequent to December 31, 2001
and through April 2002, the Company borrowed an additional $779,111 under this
facility.
Long-term debt consists of the following:
December 31
2001 2000
---------------------------------
New loan $ 2,165,042 $ -
Borrowing facility 645,795 -
Equipment line of credit - 2,000,000
Bank loan - 225,087
---------------------------------
2,810,837 2,225,087
Less current portion (2,386,506) (147,238)
---------------------------------
$ 424,331 $ 2,077,849
=================================
6. Stockholders' Equity
Holders of the Series A and Series B Preferred Stock have the option to convert
such shares into shares of Common Stock on a one-to-one ratio, subject to
certain exceptions. The conversion rate on a particular series of Preferred
Stock is subject to an adjustment in the event that any additional Common Stock,
or other shares convertible into Common Stock, are issued for a per-share price
less than the particular series conversion price. The Series A and Series B
Preferred Stockholders vote on an as-if-converted basis. Mandatory conversion
occurs upon the closing of an initial public offering of the Company's Common
Stock, as defined. The holders of the Series A and Series B also have demand and
piggyback registration rights, as defined. The Series A and Series B rank
paripassu in liquidation, and the holders of non-cumulative Series A and Series
B are each entitled to receive an amount equal to their initial investment plus
any declared but unpaid dividends and 7% of the initial investment amount
compounded annually from the date of investment prior to distribution to the
common shareholders.
F-12
7. Income Taxes
At December 31, 2001, the Company has approximately $10,900,000 ($5,215,000 in
2000) and $11,400,000 ($5,615,000 in 2000) of net operating loss carryforwards
for federal and state income tax purposes, respectively. The federal operating
loss carryforwards will begin expiring in 2019, and the state operating loss
carryforwards expire principally between 2005 and 2020. At December 31, 2001 and
2000, the Company recorded a deferred tax asset of approximately $4,503,100 and
$2,122,200, respectively, which was reduced by a valuation allowance of the same
amount, as the realization of the deferred tax asset is not certain.
Significant components of the Company's deferred tax asset is as follows:
December 31
2001 2000
-----------------------------------
Deferred tax asset:
Net operating loss carryforwards $ 4,460,700 $ 2,120,700
Other 42,400 1,500
-----------------------------------
4,503,100 2,122,200
Valuation allowance (4,503,100) (2,122,200)
-----------------------------------
Net deferred tax asset $ - $ -
===================================
The timing and extent in which the Company can utilize future tax deductions in
any year may be limited by provisions of the Internal Revenue Code regarding
changes in ownership of corporations.
8. Stock Option Plan
In March 1999, the Company adopted the 1999 Equity Compensation Plan (the Plan),
which provides for the granting of stock options, restricted stock and stock
appreciation rights (SARs) to employees, directors and consultants of the
Company. Options granted under the Plan may be either Incentive Stock Options
(ISOs) or Nonqualified Stock Options (NSOs). ISOs may be granted only to Company
employees (including officers and directors who are also employees). NSOs may be
granted to employees, directors and consultants. At December 31, 2001, the
Company reserved 2,559,059 shares of common stock for issuance under the Plan.
Options under the Plan are granted for periods of up to ten years and generally
vest over four years. All options are subject in general to earlier termination
if the optionee leaves the employ of the Company. To date, no restricted stock
or SARs have been issued under the Plan.
The Company does not recognize compensation expense on the issuance of its stock
options to employees and directors when the option terms are fixed and the
exercise price equals the fair value of the underlying stock on the grant date.
To date, all options issued to employees under the Plan have been ISOs and all
are exercisable at a price not less than the fair value of the Common Stock at
the date of the grant. Accordingly, no compensation expense has been recognized.
F-13
8. Stock Option Plan (continued)
The following summarizes the activity of the Plan since its adoption:
Common
Shares
Under Weighted
Options Average
Granted Exercise Price
--------------------------------------
Outstanding at December 31, 1999 769,000 $ 0.67
Granted 428,000 1.89
Cancelled/forfeited (12,109) 0.67
--------------------------------------
Outstanding at December 31, 2000 1,184,891 1.41
Granted 229,500 1.89
Cancelled/forfeited (424,121) 1.74
--------------------------------------
Outstanding at December 31, 2001 990,270 $ 0.97
======================================
Information with respect to options outstanding under the Plan as of December
31, 2001 is as follows:
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------------------------
Weighted-
Number Average Weighted- Number Weighted-
Exercise Outstanding at Remaining Average Outstanding at Average
Price December 31 Contractual Exercise December 31 Exercise
Range 2001 Life (Years) Price 2001 Price
--------------------------------------------------------------------------------------------------------
$ .67 702,000 7.3 $ 0.67 618,927 $ 0.67
$ 1.89 288,270 8.6 $ 1.89 112,123 $ 1.89
------------------- ------------------
990,270 731,050
=================== ==================
Included in the 2001 options outstanding at December 31, 2001 are 35,770 stock
options granted to a nonemployee. The fair value of the options granted to the
nonemployee is recognized as an expense over the period that the nonemployee
provides services. The total expense for these options in each of the years
ended December 31, 2001 and 2000 was $7,259.
F-14
9. Commitments and Contingencies
The Company leases various properties under operating leases expiring at various
times through 2006. The aggregate minimum annual lease payments under the
noncancelable operating leases as of December 31, 2001, are as follows:
2002 $163,400
2003 146,400
2004 143,800
2005 38,600
2006 1,400
--------
Total $493,600
========
Total rental expense for 2001 and 2000 was approximately $206,000 and $224,000,
respectively.
In normal course of business, various legal actions and claims 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.
10. Related-Party Transactions
During the years 2001 and 2000, the Company purchased vending machines from
Dixie-Narco, Inc. (Dixie), a wholly-owned subsidiary of a shareholder of the
Company. Total purchases from Dixie for the years ended December 31, 2001 and
2000 were $661,000 and $35,000, respectively. Amounts due to related party in
the accompanying 2001 balance sheet represents the net amount owed to Dixie
under the terms of the Dixie agreement.
F-15
11. Subsequent Events
On May 14, 2002, USA Acquisition Corp., a wholly-owned subsidiary of USA
Technologies merged with and into Stitch Networks Corporation (Stitch) pursuant
to an Agreement and Plan of Merger by and among USA Technologies, Inc., USA
Acquisition Corp., Stitch and the stockholders of Stitch dated April 10, 2002.
At the close of the transaction, Stitch became a wholly owned subsidiary of USA
Technologies, Inc.
All of the outstanding shares of stock of Stitch were converted into the right
to receive an aggregate of 22,762,341 shares of Common Stock of USA
Technologies, Inc. and warrants to purchase up to 7,587,447 shares of Common
Stock of USA Technologies, Inc. at $.40 per share at any time through June 30,
2002. Additionally, USA Technologies, Inc. assumed outstanding Stitch stock
options which were converted into options to purchase an aggregate of 2,475,318
shares of Common Stock of USA Technologies, Inc. at $.165 per share at any time
prior to May 14, 2007 and warrants identical to those issued to the stockholders
to purchase up to 412,553 shares of Common Stock of USA Technologies, Inc. A
total of 4,800,000 of the shares of Common Stock issued to the former
stockholders of Stitch are being held in escrow in order to secure the former
stockholders' indemnification obligations under the Agreement and Plan of Merger
and are subject to cancellation.
On January 9, 2002, the Company obtained a $225,000 loan from a bank to fund
working capital. The loan was payable to the bank on July 8, 2002. On February
26, 2002, the Company borrowed an additional $50,000 from the same bank which
was payable on demand. On July 26, 2002 the bank agreed to extend the due dates
on the $225,000 loan and $50,000 loan to September 1, 2002, provided the Company
pay the bank the July and August interest payments on such loans and a $6,750
extension fee.
F-16
Stitch Networks Corporation
Balance Sheets
(Unaudited)
March 31
2002 2001
--------------------------------
Assets
Current assets:
Cash and cash equivalents $ 2,174,857 $ 5,773,807
Accounts receivable, net of allowance for doubtful accounts of
$5,224 and $11,818 at March 31, 2002 and 2001, respectively 113,927 78,254
Inventory 227,966 460,845
Due from related party, net 57,469 -
Other 34,550 62,273
--------------------------------
Total current assets 2,608,769 6,375,179
Property and equipment, net 1,520,554 1,782,305
Other assets 32,638 9,027
--------------------------------
Total assets $ 4,161,961 $ 8,166,511
================================
Liabilities and stockholder's equity (deficit)
Current liabilities:
Accounts payable $ 650,525 $ 590,358
Accrued expenses 300,791 118,948
Current portion of long-term debt 2,706,088 111,415
--------------------------------
Total current liabilities 3,657,404 820,721
Long-term debt, net of current portion 629,910 2,077,849
Stockholder's equity (deficit):
Series A convertible preferred stock, $.01 par value; 3,114,637
shares authorized, issued and outstanding; liquidation value of
$2,425,186 (unaudited) at March 31, 2002 31,146 31,146
Series B convertible preferred stock, $.01 par value; 5,276,895
shares authorized, issued and outstanding; liquidation value of
$11,684,853 (unaudited) at March 31, 2002 52,769 52,769
Common stock, $.01 par value; 17,000,000 shares authorized;
6,000,000 shares issued and outstanding 60,000 60,000
Additional paid-in capital 14,626,505 14,611,985
Accumulated deficit (14,895,773) (9,487,959)
--------------------------------
Total stockholders' equity (deficit) (125,353) 5,267,941
--------------------------------
Total liabilities and stockholders' equity (deficit) $ 4,161,961 $ 8,166,511
================================
See accompanying notes.
F-17
Stitch Networks Corporation
Statements of Operations
(Unaudited)
Three months ended March 31
2002 2001
-------------------------------------
Revenue $ 368,928 $ 94,346
Operating expenses:
Cost of revenue 230,203 42,826
Compensation 483,151 756,465
General and administrative 156,396 273,920
Research and development 136,622 192,453
Sales and marketing 45,884 134,689
Depreciation and amortization 199,628 205,909
-------------------------------------
Total operating expenses 1,251,884 1,606,262
-------------------------------------
(882,956) (1,511,916)
Other income (expense):
Interest income 6,937 87,339
Interest expense (48,786) (51,345)
Other, net 884 17,194
-------------------------------------
(40,965) 53,188
-------------------------------------
Net loss $ (923,921) $ (1,458,728)
=====================================
See accompanying notes.
F-18
Stitch Networks Corporation
Statements of Stockholders' Equity (Deficit)
Three months ended March 31, 2002
(Unaudited)
Preferred Stock
---------------------------------------------
Series A Convertible Series B Convertible Common Stock Additional Total
------------------------------------------------------------- Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit)
---------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 3,114,637 $31,146 5,276,895 $52,769 6,000,000 $60,000 $14,619,244 $(13,971,852) $791,307
Compensation expense relating
to options issued to
nonemployees - - - - - - 7,261 - 7,261
Net loss - - - - - - - (923,921) (923,921)
------------------------------------------------------------------------------------------------------
Balance, March 31, 2002 3,114,637 $31,146 5,276,895 $52,769 6,000,000 $60,000 $14,626,505 $(14,895,773) $(125,353)
========= ======= ========= ======= ========= ======= =========== ============ =========
See accompanying notes.
F-19
Stitch Networks Corporation
Statements of Cash Flows
(Unaudited)
Three months ended March 31
2002 2001
------------------------------------
Cash flows from operating activities
Net loss $ (923,921) $ (1,458,728)
Adjustments to reconcile net loss to cash used in operating
activities:
Depreciation and amortization 199,628 205,909
Non-cash stock compensation expense 7,261 -
Loss on disposal of property and equipment - 17,344
Changes in operating assets and liabilities:
Accounts receivable 18,233 (67,767)
Inventory 7,034 (411,313)
Other assets 54,054 69,650
Accounts payable (73,592) 407,580
Accrued expenses 82,018 (4,103)
Due to/from related party (63,357) (8,875)
------------------------------------
Net cash used in operating activities (692,642) (1,250,303)
Cash flows from investing activities
Purchase of property and equipment (93,970) (19,464)
------------------------------------
Net cash used in investing activities (93,970) (19,464)
Cash flows from financing activities
Borrowings of long term debt 587,287 -
Repayments of long term debt (62,126) (35,823)
------------------------------------
Net cash provided by (used in) financing activities 525,161 (35,823)
------------------------------------
Net decrease in cash and cash equivalents (261,451) (1,305,590)
Cash and cash equivalents, beginning of period 2,436,308 7,079,397
------------------------------------
Cash and cash equivalents, end of period $ 2,174,857 $ 5,773,807
====================================
Supplemental disclosures of cash flow information:
Interest paid $ 48,950 $ 53,165
====================================
See accompanying notes.
F-20
Stitch Networks Corporation
Selected Notes to Financial Statements
Three months ended March 31, 2002 and 2001
(Unaudited)
1. Description of Business
Stitch Networks Corporation (the Company), a Delaware corporation was
incorporated in February 1996 as Goodvest Corporation and, in March 1999,
changed its name to e-Vend.net Corporation. In June 2001 the Company changed its
name to Stitch Networks Corporation. The Company designs and employs embedded
connectivity solutions that enable network servers to monitor and control
vending machines and appliances over the internet. The Company's customers are
principally located in the United States.
On December 31, 2000, the Company executed a Vending Placement, Supply and
Distribution Agreement (the Agreement) with Eastman Kodak Company, Maytag
Corporation and Dixie Narco, Inc., in order to form a strategic alliance to
market and execute a national vending program for the sale of one-time use
camera and film products. The Agreement provides for an initial term of three
years ending December 31, 2003, with additional provisions for early termination
and extensions as defined. Furthermore, the Agreement also provides for
exclusivity among the parties for the term of the Agreement relating to the sale
of camera and film products from vending machines within the Continental United
States. This agreement represents the majority of the Company's operations in
2001 and during the first quarter of 2002.
2. Summary of Significant Accounting Policies
Interim Financial Information
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary have been included. Operating
results for the three month period ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-21
2. Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
Cash and cash equivalents includes all highly liquid investments purchased with
original maturity of three months or less.
Inventory
Inventory, which consists of finished goods, components, and packaging
materials, is stated at the lower of cost (first in, first out basis) or market.
The Company maintains a valuation reserve which reflects the Company's estimate
of the impact on inventory of potential obsolescence, excess quantities, and
declines in market values. Such reserves approximated $459,000 and $0 at March
31, 2002 and 2001, respectively.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Leasehold improvements
are recorded at cost and amortized on a straight-line basis over the shorter of
the estimated useful life of the asset or the related lease term. The estimated
useful lives are as follows:
Vending machines and related components 3 to 7 years
Computers and purchased software 3 years
Equipment and furniture 5 to 7 years
Leasehold improvements 3 years
Revenue Recognition
Revenue from the sale of products from the Company's vending machines is
recognized upon the sale of such products and acceptance by the customer.
Monthly fees for the use of vending machines equipped with embedded internet
connectivity is recognized upon usage of the equipment.
Research and Development
The Company expenses research and development costs as incurred.
3. Property and Equipment
Property and equipment consist of the following:
March 31
2002 2001
-------------------------------------
Vending machines and related components $ 1,131,063 $ 775,048
Computers and purchased software 1,518,079 1,501,760
Equipment and furniture 444,242 451,819
Leasehold improvements and other 207,748 199,854
-------------------------------------
3,301,132 2,928,481
Less accumulated depreciation and amortization 1,780,578 1,146,176
-------------------------------------
$ 1,520,554 $ 1,782,305
=====================================
F-22
4. Long-Term Debt
During the period from January 2002 to April 2002 the Company borrowed
approximately $779,000 under their borrowing facility to fund the purchase of
vending machines used for the distribution and sale of Kodak film products.
These borrowings are being repaid in accordance with the repayment schedules set
at the time of each borrowing, including equal monthly payments over periods
ranging from 31 to 36 months and an interest rate based upon an amount in excess
of three year U.S. Treasury Notes.
On January 9, 2002, the Company obtained a $225,000 loan from a bank to fund
working capital. The loan was payable to the bank on July 8, 2002. On February
26, 2002, the Company borrowed an additional $50,000 from the same bank which
was payable on demand. On July 26, 2002 the bank agreed to extend the due dates
on the $225,000 loan and $50,000 loan to September 1, 2002, provided the Company
pay the bank the July and August interest payments on such loans and a $6,750
extension fee.
5. Related-Party Transactions
During the three months ended March 31, 2002 and 2001, the Company purchased
vending machines from Dixie-Narco, Inc. (Dixie), a wholly-owned subsidiary of a
shareholder of the Company. Total purchases from Dixie for the quarter ended
March 31, 2002 and 2001 were $156,571 and $1,321, respectively. Amounts due from
related party in the accompanying balance sheet represents the net amount due
from Dixie under the terms of the Dixie agreement.
6. Subsequent Events
On May 14, 2002, USA Acquisition Corp., a wholly-owned subsidiary of USA
Technologies merged with and into Stitch Networks Corporation (Stitch) pursuant
to an Agreement and Plan of Merger by and among USA Technologies, Inc., USA
Acquisition Corp., Stitch and the stockholders of Stitch dated April 10, 2002.
At the close of the transaction, Stitch became a wholly owned subsidiary of USA
Technologies, Inc.
All of the outstanding shares of stock of Stitch were converted into the right
to receive an aggregate of 22,762,341 shares of Common Stock of USA
Technologies, Inc. and warrants to purchase up to 7,587,447 shares of Common
Stock of USA Technologies, Inc. at $.40 per share at any time through June 30,
2002. None of these warrants were exercised and these warrants have expired.
Additionally, USA Technologies, Inc. assumed outstanding Stitch stock options
which were converted into options to purchase an aggregate of 2,475,318 shares
of Common Stock of USA Technologies, Inc. at $.165 per share at any time prior
to May 14, 2007 and warrants identical to those issued to the stockholders to
purchase up to 412,553 shares Common Stock of USA Technologies, Inc. A total of
4,800,000 of the shares of the Common Stock issued to the former stockholders of
Stitch are being held in escrow in order to secure the former stockholders'
indemnification obligations under the Agreement and Plan of Merger and are
subject to cancellation.
The management of USA Technologies, Inc. has taken measures to reduce costs at
Stitch subsequent to the acquisition date. Head count has been significantly
reduced and a consultant has been engaged to sublet the Stitch facility.
Operating costs are also being reduced as the two operations integrate under one
facility.
F-23
USA Technologies Inc.
Unaudited Pro Forma Consolidated Financial Statements
Basis of Presentation
The Pro Forma Consolidated Balance Sheet as of March 31, 2002, the Pro Forma
Consolidated Statement of Operations for the nine months ended March 31, 2002,
and the Pro Forma Consolidated Statement of Operations for the year ended June
30, 2001, are based on the historical financial statements of USA Technologies,
Inc. (USA) and Stitch Networks Corporation (Stitch). The acquisition of Stitch
has been accounted for using the purchase method of accounting. The Pro Forma
Consolidated Balance Sheet as of March 31, 2002 has been prepared assuming the
Stitch acquisition was completed March 31, 2002. The Pro Forma Consolidated
Statement of Operations for the nine months ended March 31, 2002 has been
prepared assuming the Stitch acquisition was completed on July 1, 2001. The Pro
Forma Consolidated Statement of Operations for the year ended June 30, 2001 has
been prepared assuming that the Stitch acquisition was completed on July 1,
2000.
The Unaudited Pro Forma financial statement information is presented for
informational purposes only. The Pro Forma Consolidated Balance Sheet and
Statements of Operations do not purport to represent what USA's actual financial
position or results of operations would have been had the acquisition of Stitch
occurred as of such dates, or to project USA's financial position or results of
operations for any period or date, nor does it give effect to any matters other
than those described in the notes thereto. In addition, the allocations of
purchase price to the assets and liabilities of Stitch are preliminary and the
final allocations may differ from the amounts reflected herein. The Unaudited
Pro Forma Consolidated Balance Sheet and Unaudited Pro Forma Statements of
Operations should be read in conjunction with USA's financial statements and
notes thereto, and the historical financial statements of Stitch which are
included elsewhere on this current report on Form 8-K.
F-24
USA Technologies Inc.
Pro Forma Consolidated Balance Sheet
March 31, 2002
(Unaudited)
Acquisition
Stitch USA Adjustments Pro Forma
------ ---- ----------- ---------
Assets:
Current assets:
Cash and cash equivalents $2,174,857 $1,328,455 - $ 3,503,312
Accounts receivable, net 113,927 237,047 - 350,974
Due from related party 57,469 - - 57,469
Inventory 227,966 876,765 - 1,104,731
Subscriptions receivable - 79,237 - 79,237
Prepaid expenses and other current assets 34,550 899,214 - 933,764
---------------------------------------------------------
Total current assets 2,608,769 3,420,718 - 6,029,487
Property and equipment, net 1,520,554 576,939 - 2,097,493
Software development costs - 5,326,186 - 5,326,186
Goodwill - - (1) 5,386,999 5,386,999
Intangible assets - - (1) 3,268,000 3,268,000
Other assets 32,638 408,215 - 440,853
---------------------------------------------------------
Total assets $4,161,961 $9,732,058 $8,654,999 $22,549,018
=========================================================
Liabilities and shareholder's equity
Current liabilities:
Accounts payable $ 650,525 $2,118,063 - $2,768,588
Accrued expenses 300,791 1,346,017 - 1,646,808
Equipment line of credit - 34,632 - 34,632
Current portion of long-term debt 2,706,088 58,113 - 2,764,201
---------------------------------------------------------
Total current liabilities 3,657,404 3,556,825 - 7,214,229
Long-term debt, less current portion 629,910 4,605,370 - 5,235,280
Convertible debentures, less current portion - 51,667 - 51,667
Shareholders' equity:
Series A convertible preferred stock, no par value;
1,800,000 shares authorized; 540,789 issued and
outstanding at March 31, 2002 (Unaudited) 83,915 3,830,628 (1) (83,915) 3,830,628
Stitch Common Stock, $.01 par value; 17,000,000 shares
authorized; 6,000,000 shares issued and outstanding at
March 31, 2002 (Unaudited) 60,000 - (1) (60,000) -
USA Common Stock, no par value; 85,000,000 shares
authorized; 39,787,136 issued and outstanding shares at
March 31, 2002 (Unaudited) 14,626,505 45,252,955 (1)(14,626,505) 45,252,955
Deferred compensation - (25,750) - (25,750)
Additional paid-in-capital - - (1) 8,529,646 8,529,646
Accumulated deficit (14,895,773) (47,539,637) (1)14,895,773 (47,539,637)
---------------------------------------------------------
Total shareholders' equity (deficit) (125,353) 1,518,196 8,654,999 10,047,842
---------------------------------------------------------
Total liabilities and shareholders' equity $4,161,961 $9,732,058 $8,654,999 $22,549,018
=========================================================
See Notes to Unaudited Pro Forma Consolidated Financial Statements
F-25
USA Technologies, Inc.
Pro Forma Consolidated Statement of Operations
For the year ended June 30, 2001
(Unaudited)
Acquisition
Stitch USA Adjustments Pro Forma
------ --- ----------- ---------
Revenues $ 502,248 $ 1,451,002 - $ 1,953,250
Operating expenses:
Cost of sales 318,067 816,239 - 1,134,306
General and administrative 1,298,648 4,666,636 - 5,965,284
Compensation 3,009,020 2,966,776 - 5,975,796
Research and development 761,078 961,378 - 1,722,456
Depreciation and amortization 828,059 209,646 - 1,364,505
Total operating expenses 6,214,872 9,620,675 (2) 326,800 16,162,347
------------ ------------ ---------- ------------
(5,712,624) (8,169,673) (326,800) (14,209,097)
Other income (expense):
Interest income 410,968 60,034 - 471,002
Interest expense (199,495) (1,122,505) - (1,322,000)
Other, net 7,037 (40,100) - (33,063)
------------ ------------ ---------- ------------
Total other income (expense) 218,510 (1,102,571) - (884,061)
Loss before cumulative effect of accounting change
and extraordinary item (5,494,114) (9,272,244) (2)(326,800) (15,093,158)
Cumulative effect of accounting change - (821,000) - (821,000)
------------ ------------ ---------- ------------
Loss before extraordinary item (5,494,114) (10,093,244) (326,800) (15,914,158)
Extraordinary loss on exchange of debt - (863,000) - (863,000)
------------ ------------ ---------- ------------
Net loss (5,494,114) (10,956,244) (326,800) (16,777,158)
Cumulative preferred dividends - (836,541) - (836,541)
------------ ------------ ---------- ------------
Loss applicable to common shares $ (5,494,114) $(11,792,785) $ (326,800) $(17,613,699)
============ ============ ========== ============
Loss per common share (basic and diluted) $(0.70) $(0.44)
====== ======
Weighted average number of common shares
outstanding (basic and diluted) 16,731,999 23,637,341 40,369,340
=========== ========== ===========
F-26
USA Technologies, Inc.
Pro Forma Consolidated Statement of Operations
for the nine months ended March 31, 2002
(Unaudited)
Acquisition
Stitch USA Adjustments Pro Forma
------ --- ----------- ---------
Revenue $ 1,005,394 $ 1,118,271 - $ 2,123,665
Operating expenses:
Cost of sales 1,137,153 611,805 - 1,748,958
General and administrative 731,398 3,665,611 - 4,397,009
Compensation 1,988,871 3,155,986 - 5,144,857
Research and development 477,879 642,438 - 1,120,317
Depreciation and amortization 578,789 243,812 - 1,067,701
Total operating expenses 4,914,090 8,319,652 (3) 245,100 13,478,842
----------- ----------- ---------- ------------
(3,908,696) (7,201,381) (245,100) (11,355,177)
Other income (expense):
Interest income 6,937 10,464 - 17,401
Interest expense (150,123) (991,578) - (1,141,701)
Other, net 39,347 - - 39,347
----------- ----------- ---------- ------------
Total other income (expense) (103,839) (981,114) - (1,084,953)
----------- ----------- ---------- ------------
Net loss (4,012,535) (8,182,495) (3)(245,100) (12,440,130)
Cumulative preferred dividends - (822,561) - (822,561)
----------- ----------- ---------- ------------
Loss applicable to common shares $(4,012,535) $(9,005,056) $(245,100) $(13,262,691)
=========== =========== ========== ============
Loss per common share (basic and diluted) $(0.30) $(0.25)
====== ======
Weighted average number of common shares
outstanding (basic and diluted) 30,186,045 23,637,341 53,823,386
========== ========== ==========
F-27
Notes to Unaudited Pro Forma Consolidated Financial Statements
(1) To record the acquisition of Stitch at an assumed purchase price
(calculated pursuant to the Merger Agreement dated May 14, 2002). The
purchase price is assumed to be paid by the issuance of 22,762,341 shares
of USA Technologies, Inc. Common Stock ($7,511,573), the issuance of
8,000,000 Common Stock warrants ($160,000), the issuance of 2,475,318
Common Stock options ($569,323), and the issuance of 875,000 shares of
Common Stock ($288,750) to Technology Partners, LLC for payment of
services rendered to the Company in connection with the acquisition. This
adjustment also records the difference between the assumed purchase price
of $8,529,646 and the net assets of Stitch to: intangible assets
($3,268,000) and goodwill ($5,386,999).
(2) To amortize the intangible assets recorded in connection with the Stitch
acquisition over a 10 year estimated useful life as if the acquisition
occurred on July 1, 2000.
(3) To amortize the intangible assets recorded in connection with the Stitch
acquisition over a 10 year estimated useful life as if the acquisition
occurred on July 1, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
USA Technologies, Inc.
Dated: July 29, 2002 By: /s/ George R. Jensen, Jr.,
------------------------------
George R. Jensen, Jr.
Chief Executive Officer
F-28