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USAT Counterclaims Charges By Dissident Shareholder Group

Posted On: 1/1/2010

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MALVERNE, PA -- USA Technologies said it has filed counterclaims against the dissident shareholders who filed suit in federal court to prevent it from rescheduling its annual meeting from Dec. 15, 2009, to June 15, 2010.

The manufacturer of cashless-payment and energy-saving devices for vending machines alleges that the dissident shareholders, Bradley Tirpak and Craig Thomas, violated the Security Exchange Act in their attempt to get their three candidates elected to the board of directors.

USAT accused the shareholders, who call themselves Shareholder Advocates for Value Enhancement (SAVE), of soliciting proxy votes for their board candidates from more than 10 people without filing a proxy statement. It also charged that they made numerous false and misleading statements and omissions in their proxy solicitations, press releases and the written presentation they used but never filed with the Securities and Exchange Commission.

Under a stipulation to the suit that Tirpak and Thomas filed on Dec. 14, USAT agreed to convene its annual meeting on Dec. 15 as originally scheduled, accept votes and then adjourn the meeting pending the court's ruling on SAVE's motion to prevent it from moving the meeting to next June.

In its counterclaim, USAT is asking the court to declare that the votes solicited by SAVE are null and void, and direct that the annual meeting be held next June. Separately, a recent Philadelphia Inquirer editorial attributed the dissident shareholders' actions to problems USAT shares with many software firms. It has an attractive product, but hasn't yet been able to sell it profitably.

USAT has effectively been refining its cashless systems to meet the market and signing up customers for a decade, but has been losing money for just as long, according to analysts. The Inquirer quoted one of them as saying its ePort card reader "makes sense, but profits have been hard to come by." The analyst noted that operators see the merits of cashless vending, but far too few of them have yet been willing to pay $500 per device. USAT responded by making two smaller versions priced at $199 and $329. But so far there are only around 65,000 card readers at eight million U.S. vending machines, the newspaper pointed out.

USAT has raised $48 million from stock sales since 2005 and reportedly remains virtually debt-free. The company also recently laid off 20% of its workforce to keep expenses in line. But despite the company's projections that it will be profitable by late next year, its shares have been declining in value.

USA Technologies, based here, provides cashless payment solutions to the vending, kiosk, online laundry and self-serve point of sale markets. Its ePort systems have been installed in traditional vending markets, as well as in the photo kiosk, laundry service, hospitality, coffee, entertainment, transportation, gas station and convenience store industries.