USA Technologies Sends Letter to Shareholders
URGES THEM TO PROECT THEIR INVESTMENT BY VOTING FOR THE BOARD'S NOMINEES ON THE WHITE PROXY CARD
MALVERN, Pa.- December 7, 2009 -USA Technologies, Inc. (NASDAQ: USAT) (the "Company") today issued the following letter to shareholders in connection with the Company's Annual Meeting of Shareholders, scheduled for December 15, 2009.
December 7, 2009
PROTECT YOUR INVESTMENT!
VOTE THE WHITE PROXY CARD
Dear Fellow Shareholders:
The USA Technologies Annual Meeting of Shareholders is just days away. You have an important opportunity to protect the value of your investment in USA Technologies by voting to re-elect all the members of your Company's highly-experienced and dedicated Board of Directors. Vote FOR the Company's directors on the WHITE proxy card today.
As you may know, two relatively new dissident investors, who together own less than 1.5% of USAT's shares, have nominated their own candidates to your Board. In so doing, they are attempting to seize effective control of your Company. If you receive a blue proxy card from the dissident group, we urge you to immediately discard it.
Your vote is important, no matter how many or how few shares you own, and we urge you to vote your shares. 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 instructions on the enclosed WHITE proxy card.
YOUR COMPANY HAS IN PLACE OPERATIONAL AND STRATEGIC INITIATIVES TO ACHIEVE PROFITABILITY FOR THE QUARTER ENDING DECEMBER 31, 2010
USAT has a clear action plan in place to continue to capitalize on a strong product portfolio and customer relationships. The Company's management team, employees, and Board have built this Company into the recognized leader in the small-ticket, self-serve, cashless transaction market, and positioned USAT to generate shareholder value. We recently added several new products to our existing portfolio, including the innovative ePort G8™ and ePort EDGE™, that have been well received by customers, who are experiencing a better return on investment in the Company's products. As a leading provider in our industry, we have positioned ourselves aggressively in large, growing markets and have built a diversified customer base that includes leading consumer brands. In particular, today we do business with the leading brands that control a majority of the $57 billion all-cash vending industry. Our business model is based on superior client service and multiple revenue streams: equipment sales, activation fees and recurring service and transaction fees.
Your Board and management team have taken proactive steps to reduce costs and improve profit margins. This has resulted in a 28% reduction in operating expenses during the past fiscal year, and we are targeting further cost reductions. As of the end of the last fiscal quarter, the Company had $16.7 million in cash, and today is virtually debt free. We expect 2010 to be a year of substantial growth as we continue to implement strategic initiatives to increase revenues and reduce costs. As a result, we expect each quarter to build towards profitability and we anticipate generating positive net income for the quarter ending December 31, 2010.
THE DISSIDENT GROUP HAS NO CREDIBLE PLAN - JUST WORDS
The dissidents do not have any credible plan to create value that goes beyond USAT's initiatives, which are already underway.
- For example, the dissidents propose to "examine and scrutinize" the Company's cost structure. While the dissidents offer only words, we have already taken actions to significantly reduce costs after we have successfully commercialized our technology.
- Similarly, the dissidents suggest that the Company should "examine" its contracts with suppliers and the transaction fees charged by credit card companies. They apparently fail to recognize that we have already successfully renegotiated one major contract (as disclosed on November 20, 2009) and that we have been actively engaged for the last few months in a collaborative effort with our customers, business partners and suppliers to reduce transaction processing fees.
- The dissidents also propose that USAT should divest what they mistakenly consider "non-core" parts of the business. We believe the dissidents' proposal reveals their lack of understanding of what our core business is, namely: serving the small-ticket, self-serve, cashless transaction market. To leverage the investments we have made for the benefit of all shareholders, we strategically leverage our technology across key markets, targeting vending, kiosk and laundry, the largest all-cash markets in the United States.
We believe that the election of the dissidents' nominees who, we believe have demonstrated a lack of knowledge of our Company and industry, cannot further our progress. It is our view that giving them a near-majority on the Board could undermine important business inroads the Company has made and could jeopardize value for all shareholders.
PROTECT THE GROWTH WE HAVE ACHIEVED DO NOT LET THE DISSIDENTS TAKE CONTROL OF YOUR COMPANY WITHOUT PAYING YOU FOR IT
The simple truth is that your Board and management team have grown USAT from a penny stock on the OTC Bulletin Board in 2003 into a company listed on The NASDAQ Global Market with commercialized industry leading technology. We now proudly serve approximately 700 customers and service approximately 60,000 connections, and we recently achieved revenues of $3.8 million for the fiscal quarter ended September 30, 2009. At precisely the moment in the Company's history when we achieved market leadership and have developed a roadmap to achieve profitability, we believe that the dissidents are opportunistically seeking to take control of your Company to serve their own agenda. The dissidents are attempting to distort and discount our achievements by cherry-picking stock price data that paints our Company, management team and Board in the worst possible light.
Under what we consider to be a smokescreen of misleading assertions, the dissidents seek to replace three of your experienced directors with three of their own nominees and have also made it clear that they intend to eventually reduce the Board's size to seven. This would mean that the dissidents would gain control of your Company extremely disproportionate to their less than 1.5% ownership. With immediate control of 37.5% of the Board, or 42% if they succeed in reducing the size of the Board, they would be well-positioned to take over your Company without paying you a premium for your investment.
In the dissidents' own filings with the Securities and Exchange Commission, they admit, "we believe there is significant value in the company's business, talented employee base, and intellectual property." The dissidents clearly recognize the significant value that USAT's management team and Board have built and are seeking to seize control of it.
Unlike the dissidents' nominees, every member of your Board is entirely committed to enhancing value for all shareholders. The results we are already seeing from our strategic plan are evidence of that commitment. In fact, our commitment to serving your interests is why we recently added two highly-qualified directors to the Board and why we sought to negotiate with the dissidents to reach a mutually agreeable resolution in order to avoid this costly, disruptive and unnecessary proxy fight.
WE URGE YOU TO REJECT THE DISSIDENTS' NOMINEES BY VOTING THE WHITE PROXY CARD TODAY
If you receive a blue proxy card, please discard it. If you have previously submitted a blue proxy card, you may vote in favor of the Board's nominees by following the instructions on the WHITE 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 .
Thank you for your continued support and confidence in us.
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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