USA Technologies Sends Letter to Shareholders
USA TECHNOLOGIES URGES SHAREHOLDERS TO VOTE THE WHITE PROXY CARD FOR RE-ELECTION OF EXPERIENCED DIRECTORS WHO ARE DELIVERING SHAREHOLDER VALUE
Company Achieving Accelerated ePort® Customer Growth and Record Cashless Vending Transactions
On Track to Meet Benchmarks and Timetable for Profitability and Responds to Dissidents' Misleading Assertions
December 1, 2009, Malvern, PA: USA Technologies, Inc. (NASDAQ: USAT) (the "Company") today issued the following letter to shareholders urging its shareholders to vote the WHITE proxy card for the re-election of experienced directors at the December 15, 2009 Annual Meeting and to disregard any blue proxy card sent to them by the dissident shareholders, Bradley Tirpak and Craig Thomas. The complete text of the Company's letter to shareholders follows.
Dear Fellow Shareholders:
I am pleased to report to you that our Company has increased its customer base to approximately 700 customers, servicing approximately 60,000 connections. We attribute much of the increase to the successful execution of our strategic plan by management, the Board, and our employees.
The rapidly growing number of vending machine and point-of-sale (POS) operators installing ePort®, supported by recent record numbers of consumer transactions, we believe puts USAT on course to achieve positive net income by the quarter ended December 31, 2010. As previously stated, we anticipate growing the ePort® installed base to approximately 114,000 connections by the end of December 2010.
The Company is focused on increasing customer connections to the network to drive quarter over quarter increases in recurring revenues from license and transaction fees, coupled with revenue from equipment sales, and by making further planned cost savings in the Company. We increased the installed base of devices connected to the USALive® Network by 36% to 57,000 in the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009. This followed a 37% year-over-year increase in installed base in fiscal 2009 compared with fiscal 2008. In addition, we increased the number of transactions processed, which in the first quarter of fiscal 2010 increased to 7.4 million, a 57% year-over-year quarterly increase; this is following a 97% year-over-year increase in fiscal year 2009 versus fiscal year 2008 when transactions processed reached 22.3 million. Finally, we increased the dollar value of transactions processed for the first quarter of fiscal year 2010 by 26% to $14.6 million over first quarter of fiscal year 2009.
USAT is experiencing success as a result of the successful implementation of the strategic plan, reporting improving quarterly results, the development of new products and services that are responding to customer needs and market trends, and a broader customer base.
Consumers increasingly are demanding the ability to use credit and debit cards at vending machines and kiosks, and operators, small and large, are responding by installing cashless payment technology in their machines in greater numbers, and faster than before.
USAT is facilitating further customer adoption by its development of innovative and lower-cost products, such as the ePort EDGETM, the cashless technology priced under $200, and ePort SDKTM, the software version of the ePort® hardware, especially designed for the kiosk market.
The strategic plan we are executing is evidence of our commitment to grow shareholder value. We have a skilled, highly professional and experienced team in place to accomplish this.
It is unfortunate that dissident shareholders Bradley Tirpak and Craig Thomas (the "Dissidents") launched a disruptive and costly proxy contest for the Company, seeking to elect three opposition and less qualified candidates to the USAT board. Their actions are disruptive to the execution of our strategic plan and erode shareholder value.
The Dissidents Suggest That They Have a Better Plan To Generate Value for Shareholders - They Do Not.
The Dissidents have no credible business plan for USAT's continued growth, except for a poor and ill-informed set of "bullet points", including a reference to the need to renegotiate contracts, one of which we have already renegotiated for the Company's benefit. As we recently announced, the Company successfully negotiated an amended contract with one of its largest and important suppliers which we anticipate will result in immediate and significant increase in gross profits. If this amendment had been in place for the quarter ended September 30, 2009, gross profits would have been approximately 34% rather than 27%.
The Dissidents' self serving mission and disingenuous statements and actions have the potential to slow down the pace of, or reverse, the Company's recent operational and financial gains.
We have a seamless plan in place for improving USAT's performance, based on effective and workable business and financial strategies. The management team and employees, guided by our Board, are committed to achieving our plan.
We believe that the Dissidents continue to mislead our shareholders on their basic intent, the background of their candidates, and with the data which they choose to state their case.
The Dissidents Claim That They are Acting on Behalf of Shareholders - They Are Not.
We believe the move by the Dissidents to attempt to elect three directors is blatant opportunism as USAT begins to post record business performance and approaches profitability after years of building up the business. Simply put, it is our view that they are seeking employment and additional equity in USAT, and are using a disruptive and costly proxy contest to achieve their goals.
The Dissidents State That They Do Not Seek a Change In Control. We Believe That This Is Simply Not True.
Their repeated statements that they are not interested in a change in control of the Company are contradicted by the stated goals in a document selectively circulated by the Dissidents to certain of our shareholders but not filed with the Securities and Exchange Commission. In this document, among other things, it is stated that their candidates, including Mr. Tirpak, are prepared to step into USAT management roles and run our Company. This document sheds light on the true intentions of the Dissidents, and also may explain why shareholders with a relatively small stake in the Company such as the Dissidents would spend an estimated $350,000 on a proxy fight.
Mr. Tirpak has Attempted to Minimize his Involvement as a Defendant in a Securities Class Action Lawsuit which was Settled for $2,250,000.
Section 29(b) of the class action complaint filed against Mr. Tirpak states that "Tirpak, by virtue of his position as an employee of CS FBC's equity trading department, knew of CS FBC's short positions in Data Dimensions and Viasoft stock. Notwithstanding such knowledge, as well as the fact that he was not a research analyst, Tirpak authored and disseminated the materially false and misleading Trading Notes. Tirpak lacked a reasonable basis for the sell recommendation and target prices contained in the Trading Notes but prepared and disseminated the false and misleading Trading Notes anyway because he knew it would cause the price of Data Dimensions and Viasoft stock to drop and allow CS FBC to profit on its short positions."
The press release of Credit Suisse First Boston dated June 23, 1997 states: "The Trading Notes were not a product of the Firm's standard operating procedures, and should not have been circulated in their original form .... Credit Suisse First Boston regrets any confusion that may have been caused by the circulation of the original Trading Notes."
The Opinion of Judge Koeltl, refusing to dismiss the complaint against Mr. Tirpak, states on page 24 that: "Additional facts pleaded with particularity by the plaintiffs similarly give rise to a strong inference of scienter….The plaintiffs allege that defendant Tirpak, who wrote the original Trading Notes, worked in the equity trading department and not in the firm's research department."
Complete copies of these documents are available at http://www.usatech.com/dl/class_action_litigation.pdf.
Alan Gotcher was Forced to Resign From Altair Nanotechnologies (ALTI), Which had Posted Approximately $77 Million in Losses over the Last Three Years
Until February 2008, Mr. Gotcher was President and CEO of Altair Nanotechnologies, Inc. During his stewardship, Altair's net losses steadily increased. On February 27, 2008, he agreed to resign as President and CEO of Altair. According to a press account, the company's board "determined that the level of progress made at this point in the development timeline of the company did not keep pace with the expectations that were set." See: "Altairnano CEO Alan Gotcher Ousted," Cleantech Group News report dated February 29, 2008. http://www.usatech.com/dl/Article_on_Gotcher_and_Altairnano.pdf.
During the 2007 calendar year, Altair lost $31,470,621 and had revenues of only $9,108,483. At the time of his resignation, Gotcher directly owned only 0.19% of the issued and outstanding shares of Altair. Further, in the year 2007, when Altair lost over $31 million, Gotcher received a bonus of $776,318 ($428,600 of which was cash and $347,718 of which was stock). $459,451 of this bonus was discretionary.
Mr. Gotcher does not even own any shares of USAT.
Peter Michel Presides Over iSECUREtrac Corp (ISEC.OB), an OTC Bulletin Board Company With Only a $4.3 Million Market Cap and $22.4 Million In Negative Shareholder Equity
Since August 4, 2006, Mr. Peter Michel has been the CEO and President of iSECUREtrac Corp., a bulletin board company. On January 3, 2006, public records indicate that the price of the stock was $1.85. As of November 25, 2009, the stock was trading at $0.40. During the calendar year ended December 31, 2008, iSECUREtrac had a loss of $5,825,000, and had revenues of only $9,702,000. Mr. Michel currently directly owns only 0.69% of the issued and outstanding shares of iSECUREtrac Corp.
From May 23, 2005 to July 8, 2005, Mr. Michel served as the President and CEO of General Fiber Communications. On July 8, 2005, that company filed for Chapter 7 bankruptcy protection.
Mr. Michel does not even own any shares of USAT.
The Company's Board believes that an alleged securities law violator, a corporate executive of a bankrupt company and a corporate executive who was ousted from his job would not serve our shareholders well as directors of USAT.
Stock Price. We believe that the manner in which the Dissidents have characterized the USAT stock price is self-serving and misleading. They have chosen to highlight the stock price in 2003, when USAT was still in the research and development stage of its growth, with only $2,853,068 in annual revenues for the fiscal year ended June 30, 2003. At the time, the USAT stock price (OTCBB) had a short term spike. To base their calculations related to stock price from a short term spike six years ago, while the Company was a penny stock on the OTC Bulletin Board, is misleading, and a blatant attempt to sensationalize the data to suit their agenda.
The Dissidents Propose to Remove the Staggered Board only to Serve their Own Interests.
We believe the removal of the Company's staggered Board would not be in the best interests of you or the Company. If our experienced Board were declassified, it could be entirely replaced in a single election by directors who are unfamiliar with our Company and its business strategies, thus jeopardizing the achievement of our strategic plan. A classified board structure also restricts persons, such as the Dissidents, focused on short-term gain at the expense of long-term value, from taking rapid control of our company without paying an appropriate premium to all of our shareholders. If the Company's Board were not classified, a potential acquirer whose nominees receive a plurality of the votes cast at an annual meeting could replace all or a majority of the directors with its own nominees, who could then approve a takeover proposal from that acquirer even if the price did not adequately value the Company.
Our Board Has Added Two New Highly Qualified Directors.
In October 2009, we added two new independent directors, Steven Barnhart and Jack Price. These and other actions taken by the Company's Board are the antithesis of an "entrenched" Board and demonstrate the Board's proactive thinking. Our Board believes that our experienced directors benefit from the new perspectives and viewpoints added by Messrs. Price and Barnhart. At the same time, new directors benefit from interaction with our existing directors who have much longer experience with our Company. From 2007 until January 2009, Mr. Barnhart was the President and CEO of Orbitz Worldwide, Inc., a publicly-traded, online travel business. Prior thereto and since 2003, Mr. Barnhart held various positions with Orbitz, including Chief Financial Officer. From 1990 to 2003, Mr. Barnhart held various positions with PepsiCo, Inc. From 2007 through March 2009, Mr. Price was President and CEO of NovaRay Medical, Inc., a medical imaging systems business. From 2003 to 2006, Mr. Price was the President and CEO of VSM MedTech Ltd. From 1996 through 2003, Mr. Price was the President and Division Chief Executive Officer of Philips Medical Systems, North America. Each of Mr. Barnhart and Mr. Price has on point knowledge and experience with our business model.
YOUR VOTE IS IMPORTANT - RE-ELECT YOUR DIRECTORS BY VOTING THE WHITE PROXY CARD
As explained in detail in our proxy materials, the directors of the Company's Board are elected by a plurality of votes. In other words, the nominees with the most votes will be elected. Therefore, we urge you to take action and send in the Company's enclosed WHITE proxy card and discard the Dissidents' blue proxy card. Our Board recommends that you not sign or return any proxy card sent to you by the Dissidents, even as a protest, since doing so may invalidate any previous vote you may have cast on our WHITE proxy card.
Your vote is important, no matter how many or how few shares you own. To vote your shares, please sign, date and return the enclosed WHITE proxy card by mailing it in the enclosed pre-addressed, stamped envelope. You may also vote by phone or the Internet by following the instruction on the enclosed proxy card.
If you have any questions or need any assistance voting your shares, please contact MacKenzie Partners, Inc., which is assisting the Company in this matter, toll-free at (800) 322-2885, (212) 929-5500 or .
We will continue to keep you informed on this matter. Thank you for your continued support and confidence.
Sincerely,
George R. Jensen Jr.
Chief Executive Officer
Statement under the Private Securities Litigation Reform Act:
With the exception of the historical information contained in this release, the matters described herein contain forward-looking statements that involve risk and uncertainties that may individually or mutually impact the matters herein described, including but not limited to product acceptance, the ability to continually obtained increased orders of its products, the ability to meet installation goals, economic, competitive, governmental impacts, whether its pending patents will be granted or defendable; validity of intellectual property and patents of USA, the ability of USA to license its patents, the ability of USA to commercialize its developmental products, technological and/or other factors, which could cause actual results or revenues to differ materially from those contemplated by these statements.
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