USA Technologies Reports Results for the First Quarter of Fiscal 2013

  USA Technologies Reports Results for the First Quarter of Fiscal 2013

               Total Revenues Up 25%; Recurring Revenues Up 27%

                             Gross Profit Up 53%

    174,000 Connections to ePort Connect Service, Up 35% (year over year)

                   3,725 Customers, Up 64% (year over year)

Business Wire

MALVERN, Pa. -- November 08, 2012

USA Technologies, Inc. (NASDAQ: USAT), (“USAT”), a leader of wireless,
cashless payment and M2M telemetry solutions for self-serve, small-ticket
retail industries, today reported results for the first quarter of Fiscal 2013
ended September 30, 2012. First quarter highlights, compared to the
corresponding quarter of the prior fiscal year, included:

  *25% increase in total revenues to $8.4 million;
  *53% increase in gross profit to $3.1 million;
  *27% increase in license and transaction fee revenues (“recurring
    revenues”) to $6.9 million, representing 82% of total revenues for the
    quarter;
  *174,000 total connections to its ePort Connect® service, a 35% increase
    from 129,000 connections as of September 30, 2011, with 10,000 net new
    connections added in the first quarter of Fiscal 2013;
  *3,725 total customers, a 64% increase from 2,275, with 450 new customers
    in the first quarter;
  *Adjusted EBITDA of $730,707, up from ($760,088);
  *GAAP net income of $39,140, up from ($78,954); and non-GAAP net loss of
    ($95,993) from ($1,815,563) in the same quarter a year ago.

“Our first quarter results reflect steady progress toward our Fiscal 2013
goals set out in our year-end conference call in September, particularly our
goal for achieving non-GAAP net income in our second fiscal quarter ending
December 31, 2012,” said Stephen P. Herbert, Chairman and CEO of USA
Technologies. “In addition, we were extremely pleased to see Adjusted EBITDA
of $730,707. After excluding $328,000 in remaining expenses related to Fiscal
2012’s proxy contest, our Adjusted EBTIDA would have crossed the $1 million
mark—a tremendous milestone for USAT and we believe a strong indicator of the
value inherent in our ePort Connect service model as we continue to grow our
base of recurring revenues.

“Net new connections for the first quarter were generally in line with our
expectations, particularly in vending, although kiosk–related connections
played a smaller role than anticipated this quarter,” continued Herbert. “At
the same time, while steady progress continued in expanding our ePort Connect
network and recurring revenue base, the first quarter was also marked by a
number of important advancements with respect to growing the value of every
USAT connection longer-term, particularly with respect to our mobile and
diversification strategies,” said Herbert.

Strategic highlights during the first quarter included:

  *A special marketing agreement with Isis—a mobile payment and commerce
    system joint venture between AT&T, T-Mobile and Verizon—that promotes
    cashless adoption in tandem with Isis mobile wallet acceptance in Isis’
    two launch markets of Austin, Texas, and Salt Lake City Utah;
  *Innovative mobile-based loyalty and couponing services demonstrated in the
    Verizon booth at CTIA MobileCON, including contextual applications (which
    provide a customized rewards experience based on where the consumer is and
    what they have purchased in the past), machine coupon redemption, and the
    ability to push information, advertisements, machine location and product
    availability to consumers via NFC smart phones;
  *Accelerated work with customers and partners with respect to the
    introduction of ePort Mobile™-- USAT’s mobile acceptance product-- during
    the quarter, with additional customer demonstrations scheduled for
    mid-November at a NAMA trade event in New Orleans; and,
  *Introduction of QuickConnect™--an API Web service that streamlines the
    process by which developers or OEMs can point their devices to ePort
    Connect—to further expand USAT’s pipeline in the kiosk market.

First Quarter Results

Revenues for the first quarter of Fiscal 2013 were $8.4 million, an increase
of 25% from the same period a year ago. Revenue growth was fueled by a 27%
growth in license and transaction fees and a 15% increase in equipment sales
compared to the first quarter of Fiscal 2012.

Revenue from license and transaction fees, which is driven primarily by
monthly ePort Connect service fees, JumpStart fees and transaction processing
fees, grew to $6.9 million for the first quarter. As of September 30, 2012,
USAT’s ePort Connect service base totaled 174,000 connections.

Gross profit was $3.1 million in the first quarter compared to $2.0 million
for the same period in the prior year, a 53% increase. Increased revenues and
actions taken by management over the course of Fiscal 2012 to strengthen major
supplier contracts and streamline network operations contributed to the
increase. Gross margin was 37.5% for the first quarter compared to 30.6% for
the same period a year ago, as stronger gross margins on revenues from license
and transaction fees, now 82% of total revenues, contributed to a larger share
of the overall mix.

Operating expenses of $3.6 million declined by $0.3 million in the first
quarter of Fiscal 2013 compared to the first quarter of Fiscal 2012. As a
result, operating margins improved to (4.9%) from (27.2%) a year ago and on a
non-GAAP basis, which excludes $328,000 in proxy expenses in the Fiscal 2013
first quarter, non-GAAP operating margins improved to (1.0%) compared to a
non-GAAP operating margin of (27.2%) for the same period a year ago—all while
supporting double-digit top line growth.

GAAP net income for the first quarter of Fiscal 2013 was $39,140. On a
non-GAAP basis, which also excludes fair value of warrant liability
adjustments for both years in order to track the operational progress of the
business, non-GAAP net loss narrowed to ($95,993) from a non-GAAP net loss of
($1.8) million for the first quarter of Fiscal 2012. Continued, strong revenue
growth and actions to enhance gross margins and lower operating expenses led
to this $1.9 million improvement (see non-GAAP Reconciliation table).

After preferred dividends, net loss per common share was ($.01) for the first
quarter of Fiscal 2013 compared to ($.01) for the same period in Fiscal 2012.
On a non-GAAP basis, net loss per common share was ($.01) for the first
quarter of Fiscal 2013 compared to ($.07) for the same period in Fiscal 2012.

Outlook

“Strategies that have delivered double-digit increases in our ePort Connect
service and customer base for the prior corresponding quarter are building a
reliable and high margin revenue stream that is generating cash and taking us
ever closer towards profitability,” continued Herbert. “We are diligently
working towards non-GAAP net income in our second fiscal quarter, and outside
of any unusual or unanticipated non-operational expenses, expect to achieve
that goal (see Discussion of Non-GAAP Financial Measures).

“In addition, we remain on track to meet other Fiscal 2013 targets established
for the year,” said Herbert. “We continue to work toward 60,000 new
connections for the year, and for 224,000 in total connections to our ePort
Connect service by the end of our June 30, 2013 fiscal year. We also remain
committed to achieving over 30% revenue growth for the year, as well as cash
generated from operations in the $4-$5 million range.

“Perhaps more importantly, we believe these Fiscal 2013 targets highlight the
sustainable improvements in the business we were seeking in our turnaround
plan articulated to shareholders less than a year ago,” said Herbert. “They
also highlight how every new connection to our ePort Connect cashless and M2M
telemetry service can further enhance shareholder value through the continued
cash generation characteristic of a service business. With cashless adoption
in the unattended retail market at the early stages of adoption, we remain
very optimistic about the future,” concluded Herbert.

Webcast and Conference Call

USA Technologies will conduct a conference call and webcast at 10:00 a.m.
Eastern Time on November 8, 2012. USA Technologies invites all interested
parties to listen to the live webcast of the conference call, accessible on
the Investor Relations section of USA Technologies’ website. The webcast will
be archived on the website within two hours of the live call. It will remain
available for approximately 90 days. Interested parties unable to access the
webcast may also participate by calling (866) 393-1608 or, if an international
caller, (224) 357-2194. A replay of the call, available until midnight on
November 10, 2012, can be accessed by calling (855) 859-2056; Conference ID#
58774466, (toll free).

Forward-looking Statements:

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: All statements other than statements of historical fact included in this
release, including without limitation the financial position, achieving
profitability or non-GAAP net income or positive adjusted EBITDA, anticipated
connections to our network, business strategy and the plans and objectives of
USAT’s management for future operations, are forward-looking statements. When
used in this release, words such as "anticipate", "believe", "estimate",
"expect", "intend", and similar expressions, as they relate to USAT or its
management, identify forward-looking statements. Such forward-looking
statements are based on the beliefs of USAT’s management, as well as
assumptions made by and information currently available to USAT’s management.
Actual results could differ materially from those contemplated by the
forward-looking statements as a result of certain factors, including but not
limited to, the ability of USAT to generate sufficient sales to generate
operating profits, or conduct operations at a profit; the incurrence by us of
any unanticipated or unusual non-operational expenses, such as in connection
with a proxy contest, which would require us to divert our cash resources from
achieving our business plan; the ability of USAT to retain key customers from
whom a significant portion of its revenues is derived; whether USAT’s
customers would continue to add additional connections to our network in the
future at levels currently anticipated by USAT; the ability of USAT to compete
with its competitors to obtain market share; whether USAT’s customers continue
to utilize USAT’s transaction processing and related services, as our customer
agreements are generally cancelable by the customer on thirty to sixty days’
notice; the ability of USAT to obtain widespread commercial acceptance of it
products; the ability of USAT to raise funds in the future through the sales
of securities in order to sustain its operations if an unexpected or unusual
non-operational event would occur; whether the actions of our former CEO which
resulted in his separation from the Company or the Securities and Exchange
Commission’s investigation would have a material adverse effect on the future
financial results or condition of the Company; and whether USAT’s existing or
anticipated customers purchase, rent or utilize ePort devices in the future at
levels currently anticipated by USAT. Readers are cautioned not to place undue
reliance on these forward-looking statements. Any forward-looking statement
made by us in this release speaks only as of the date of this release. Unless
required by law, USAT does not undertake to release publicly any revisions to
these forward-looking statements to reflect future events or circumstances or
to reflect the occurrence of unanticipated events.

                                                        
USA Technologies, Inc.
Consolidated Statement of Operations
                                                                 
                                                                 
                                            Three months ended
                                            September 30,
                                            2012                 2011
                                            (unaudited)          (unaudited)
Revenues:
License and transaction fees                $ 6,906,356          $ 5,419,663
Equipment sales                              1,483,921           1,286,085
Total revenues                                8,390,277            6,705,748
                                                                 
Cost of services                              4,192,360            3,761,577
Cost of equipment                            1,053,636           895,135
Gross profit                                  3,144,281            2,049,036
                                                                 
Operating expenses:
Selling, general and administrative           3,215,125            3,468,070
Depreciation and amortization                343,388             403,232
Total operating expenses                     3,558,513           3,871,302
Operating loss                                (414,232)            (1,822,266)
                                                                 
Other income (expense):
Interest income                               20,166               17,867
Interest expense                              (23,006)             (11,164)
Change in fair value of warrant              463,133             1,736,609
liabilities
Total other income (expense), net             460,293              1,743,312
                                                                 
Income (loss) before provision for            46,061               (78,954)
income taxes
Provision for income taxes                    (6,921)              -
                                                                
Net income (loss)                             39,140               (78,954)
Cumulative preferred dividends               (332,226)           (332,226)
Loss applicable to common shares            $ (293,086)          $ (411,180)
Loss per common share (basic and            $ (0.01)             $ (0.01)
diluted)
Weighted average number of common
shares outstanding (basic and                 32,518,230           32,288,638
diluted)
                                                                 

                                                   
  USA Technologies, Inc.
  Consolidated Balance Sheets
                                                               
                                       September 30,           June 30,
                                       2012                    2012
                                       (unaudited)
  Assets
  Current assets:
  Cash and cash                        $ 6,203,703             $ 6,426,645
  equivalents
  Accounts receivable,
  less allowance for
  uncollectible accounts
  of $19,000 and
  $25,000, respectively                  2,366,750               2,441,941
  Finance receivables                    139,039                 206,649
  Inventory                              1,185,917               2,511,748
  Prepaid expenses and                  603,893                555,823
  other current assets
  Total current assets                   10,499,302              12,142,806
                                                               
  Finance receivables,                 $ 372,977               $ 336,198
  less current portion
  Property and equipment,                13,037,458              11,800,108
  net
  Intangibles, net                       1,010,853               1,196,453
  Goodwill                               7,663,208               7,663,208
  Other assets                          81,247                 80,884
                                                               
  Total assets                         $ 32,665,045            $ 33,219,657
                                                               
  Liabilities and
  shareholders’ equity
  Current liabilities:
  Accounts payable                     $ 6,020,991             $ 6,136,443
  Accrued expenses                       1,933,093               3,342,456
  Line of credit                         1,337,779               -
  Current obligations                   483,934                466,056
  under long-term debt
  Total current                          9,775,797               9,944,955
  liabilities
                                                               
  Long-term liabilities:
  Long-term debt, less                   210,642                 262,274
  current portion
  Accrued expenses, less                 384,158                 426,241
  current portion
  Deferred tax liabilities               19,520                  12,599
  Warrant liabilities,                  455,433                918,566
  non-current
  Total long-term                        1,069,753               1,619,680
  liabilities
                                                              
  Total liabilities                     10,845,550             11,564,635
                                                               
  Commitments and
  contingencies
                                                               
  Shareholders’ equity:
  Preferred stock, no par
  value:
  Authorized shares-
  1,800,000 Series A
  convertible preferred-
  Authorized shares-
  900,000
  Issued and outstanding
  shares- 442,968
  (liquidation preference
  of $15,693,778 and
  $15,361,552,                           3,138,056               3,138,056
  respectively)
  Common stock, no par
  value: Authorized
  shares- 640,000,000
  Issued and outstanding
  shares- 32,741,732 and                 220,638,660             220,513,327
  32,510,069, respectively
  Accumulated deficit                   (201,957,221)          (201,996,361)
                                                               
  Total shareholders’                   21,819,495             21,655,022
  equity
                                                               
  Total liabilities and                $ 32,665,045            $ 33,219,657
  shareholders’ equity
                                                               

                                                         
USA Technologies, Inc.
Consolidated Statements of Cash Flows
                                                                 
                                             Three months ended
                                             September 30,
                                             2012                2011
OPERATING ACTIVITIES:                        (unaudited)         (unaudited)
Net income (loss)                            $ 39,140            $ (78,954)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Charges incurred in connection with
the vesting and issuance
of common stock for employee and               125,333             240,453
director compensation
Charges reduced for change in fair             (463,133)           (1,736,609)
value of warrants
Depreciation, $676,218 and $418,493,
respectively,
of which is allocated to cost of               834,006             563,125
services
Amortization                                   185,600             258,600
Bad debt recoveries, net                       (6,129)             (22,056)
Provision for deferred tax liability           6,921               -
Changes in operating assets and
liabilities:
Accounts receivable                            81,320              187,501
Finance receivables                            30,831              (43,791)
Inventory                                      1,331,390           160,798
Prepaid expenses and other assets              79,629              48,339
Accounts payable                               (115,452)           (656,552)
Accrued expenses                               (1,451,446)         582,357
                                                               
Net cash provided by (used in)                 678,010             (496,789)
operating activities
                                                                 
INVESTING ACTIVITIES:
Purchase of property and equipment             (1,525)             (60,348)
Purchase of property for rental                (2,075,390)         (1,234,608)
program, net
                                                               
Net cash used in investing                     (2,076,915)         (1,294,956)
activities
                                                                 
FINANCING ACTIVITIES:
Proceeds from the issuance of common         $ -                 $ 10,010
stock
Proceeds from line of credit                   1,337,779           -
Repayment of long-term debt                   (161,816)          (109,839)
                                                                 
Net cash provided by (used in)                1,175,963          (99,829)
financing activities
                                                                 
Net decrease in cash and cash                  (222,942)           (1,891,574)
equivalents
Cash and cash equivalents at                  6,426,645          12,991,511
beginning of year
Cash and cash equivalents at end of          $ 6,203,703         $ 11,099,937
period
                                                                 
Supplemental disclosures of cash
flow information:
Cash paid for interest                       $ 26,150            $ 11,708
Equipment and software acquired              $ -                 $ 495,955
under capital lease
Prepaid insurance financed with debt         $ 128,062           $ 90,372
Disposal of property and equipment           $ -                 $ 20,407
Reclass of rental program property           $ 5,559             $ -
to inventory
                                                                   

                            USA Technologies, Inc.

                              Non-GAAP Schedules

Discussion of Non-GAAP Financial Measures

This press release includes the following measures defined as non-GAAP
financial measures by the Securities and Exchange Commission: adjusted EBITDA,
non-GAAP net income (loss) , non-GAAP operating margin, and non-GAAP net loss
per common share. The presentation of these additional financial measures are
not intended to be considered in isolation from, or superior to, or as a
substitute for the financial measures prepared and presented in accordance
with GAAP (Generally Accepted Accounting Principles), including the net income
or net loss of USAT or net cash used in operating activities. Management
recognizes that non-GAAP financial measures have limitations in that they do
not reflect all of the items associated with USAT’s net income or net loss as
determined in accordance with GAAP. These non-GAAP financial measures are not
required by or defined under GAAP and may be materially different from the
non-GAAP financial measures used by other companies. USAT has provided
reconciliations of the non-GAAP financial measures to the most directly
comparable GAAP financial measures.

As used herein, non-GAAP net income (loss) represents GAAP net income (loss)
excluding costs relating to the proxy contest, the costs associated with the
separation of the former CEO, any adjustment for fair value of warrant
liabilities, and any charges for impairment of intangible assets. As used
herein, non-GAAP net loss per common share is calculated by dividing non-GAAP
net loss applicable to common shares by the number of weighted average shares
outstanding (basic and diluted).

Management believes that non-GAAP net income (loss) and non-GAAP net loss per
common share are important measures of USAT’s business. Management uses the
aforementioned non-GAAP measures to monitor and evaluate ongoing operating
results and trends and to gain an understanding of our comparative operating
performance. We believe that these non-GAAP financial measures serve as useful
metrics for our management and investors because they enable a better
understanding of the long-term performance of our core business and facilitate
comparisons of our operating results over multiple periods, and when taken
together with the corresponding GAAP financial measures and our
reconciliations, enhance investors’ overall understanding of our current and
future financial performance.

As used herein, Adjusted EBITDA represents net income (loss) before interest
income, interest expense, income taxes, depreciation, amortization, and change
in fair value of warrant liabilities and stock-based compensation expense and
impairment expense on intangible assets. We have excluded the non-operating
item, change in fair value of warrant liabilities, because it represents a
non-cash charge that is not related to USAT’s operations. We have excluded the
non-cash expenses, stock-based compensation and impairment expense, as they do
not reflect the cash-based operations of USAT. Adjusted EBITDA is presented
because we believe it is useful to investors as a measure of comparative
operating performance and liquidity, and because it is less susceptible to
variances in actual performance resulting from depreciation and amortization
and non-cash charges for changes in fair value of warrant liabilities and
stock-based compensation expense.

As used herein, operating margin represents operating income or loss divided
by revenues and non-GAAP operating margin represents operating income or loss
excluding any expenses related to the proxy contest divided by revenues.

                                                        
Non GAAP Reconciliation
Reconciliation of Net Loss to Non-GAAP Net Loss and Loss Per Common Share to
Non-
GAAP Loss Per Common Share
                                                                
                                           Three Months Ended
                                           9/30/2012         9/30/2011
Net income (loss)                          $ 39,140             $ (78,954    )
Non-GAAP adjustments:
Operating expenses
Selling, general and
administrative
Proxy related costs                          328,000
Fair value of warrant adjustment            (463,133   )     (1,736,609 )
Non-GAAP net loss                          $ (95,993    )    $ (1,815,563 )
                                                                
Net income (loss)                          $ 39,140             $ (78,954    )
Non-GAAP net loss                          $ (95,993    )       $ (1,815,563 )
                                                                
Cumulative preferred dividends              (332,226   )     (332,226   )
Loss applicable to common shares           $ (293,086   )    $ (411,180   )
Non-GAAP loss applicable to common         $ (428,219   )    $ (2,147,789 )
shares
Weighted average number of common
shares                                      32,518,230      32,288,638 
outstanding (basic and diluted)
Loss per common share                      $ (0.01      )    $ (0.01      )
Non-GAAP loss per common share             $ (0.01      )    $ (0.07      )
                                                                

                                                        
Non GAAP Reconciliation
Reconciliation of Operating Margin to Non-GAAP Operating Margin
                                                                
                                            Three Months Ended
                                            9/30/2012        9/30/2011
Operating Loss                              $ (414,232  )       $ (1,822,266 )
                                                                
Non-GAAP adjustments:
Operating expenses
Selling, general and administrative
Proxy related costs                          328,000       
Operating Loss, Non-GAAP                    $ (86,232   )       $ (1,822,266 )
                                                                
Revenues                                    $ 8,390,277         $ 6,705,748
                                                                
Operating Margin                             -4.9      %     -27.2      %
Operating Margin, Non-GAAP                   -1.0      %     -27.2      %
                                                                             

                                       
Reconciliation of GAAP Net Earnings to Adjusted Earnings
Before Interest, Taxes, Depreciation and Amortization
(Adjusted EBITDA)
                                                           
                                             Three months ended
                                             9/30/2012       9/30/2011
Net income (loss)                            $ 39,140           $ (78,954    )
Less interest income                           (20,166  )         (17,867    )
Plus interest expenses                         23,006             11,164
Plus income tax expense                        6,921              -
Plus depreciation expense                      834,006            563,125
Plus amortization expense                      185,600            258,600
Less change in fair value of warrant           (463,133 )         (1,736,609 )
liabilities
Plus stock-based compensation                  125,333            240,453
                                                                             
Plus intangible asset impairment              -             -          
Adjusted EBITDA                              $ 730,707      $ (760,088   )
                                                                

                                    F-USAT

Contact:

USA Technologies
Veronica Rosa, 484-359-2138
VP Corp. Comm. & Investor Relations
vrosa@usatech.com