----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------|

| For the transition period from |   | to |   |   |
|--------------------------------|--------|----|--------|--------|

| Pennsylvania                                                   | 23-2679963                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

| 100 Deerfield Lane, Suite 140, Malvern, Pennsylvania | 19355      |
|------------------------------------------------------|------------|
| (Address of principal executive offices)             | (Zip Code) |

| Large accelerated filer o | Accelerated filer o         | Non-accelerated filer o |
|---------------------------|-----------------------------|-------------------------|
|                      | Smaller reporting company x |                    |

----

----

----

USA

|                          |                                                                                                | PAGE  NO. |
|-------------------------------|-----------------------------------------------------------------------------------------------------|---------------------|
|                          |                                                                                                |                |
| Part I - Financial Statements |                                                                                                |
|                          |                                                                                                |                |
| Item 1.                       | Condensed Financial Statements (Unaudited)                                                          |                |
|                          |                                                                                                |                |
|                          | Consolidated Balance Sheets – December 31, 2010 and June 30, 2010                             | 3                   |
|                          |                                                                                                |                |
|                          | Consolidated Statements of Operations – Three and Six months ended December 31, 2010 and 2009 | 4                   |
|                          |                                                                                                |                |
|                          | Consolidated Statement of Shareholders’ Equity – Six months ended December 31, 2010     | 5                   |
|                          |                                                                                                |                |
|                          | Consolidated Statements of Cash Flows – Six months ended December 31, 2010 and 2009           | 6                   |
|                          |                                                                                                |                |
|                          | Notes to Consolidated Financial Statements                                                          | 7                   |
|                          |                                                                                                |                |
| Item 2.                       | Management's Discussion and Analysis of Financial Condition and Results of Operations               | 12                  |
|                          |                                                                                                |                |
| Item 3.                       | Quantitative and Qualitative Disclosures About Market Risk                                          | 18                  |
|                          |                                                                                                |                |
| Item 4.                       | Controls and Procedures                                                                             | 18                  |
|                          |                                                                                                |                |
| Part II - Other Information   |                                                                                                |
|                          |                                                                                                |                |
| Item 2.                       | Unregistered Sales of Equity Securities and Use of Proceeds                                         | 18                  |
|                          |                                                                                                |                |
| Item 6.                       | Exhibits                                                                                            | 19                  |
|                          |                                                                                                |                |
|                          | Signatures                                                                                          | 20                  |

----

Table of Contents

US

|                                                                                                                                                                                                                                                          |   | December 31,2010 |         |   | June 30,2010 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                          |   | (Unaudited)           |         |   |              |   |
| Assets                                                                                                                                                                                                                                                        |   |                  |         |   |              |   |
| Current assets:                                                                                                                                                                                                                                               |   |                  |         |   |              |   |
| Cash and cash equivalents                                                                                                                                                                                                                                     |   | $                     | 4,995,996    |   |              | $      | 7,604,324 |   |
| Accounts receivable, less allowance for uncollectible accounts of $47,000 and $41,000, respectively                                                                                                                                                           |   |                  | 1,260,945    |   |              |   | 2,048,421 |   |
| Finance receivables                                                                                                                                                                                                                                           |   |                  | 256,781      |   |              |   | 242,452 |   |
| Inventory, net                                                                                                                                                                                                                                                |   |                  | 1,351,601    |   |              |   | 2,633,971 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                                     |   |                  | 480,542      |   |              |   | 847,344 |   |
| Total current assets                                                                                                                                                                                                                                          |   |                  | 8,345,865    |   |              |   | 13,376,512 |   |
|                                                                                                                                                                                                                                                          |   |                  |         |   |              |   |   |   |
| Finance receivables, less current portion                                                                                                                                                                                                                     |   |                  | 228,871      |   |              |   | 339,341 |   |
| Property and equipment, net                                                                                                                                                                                                                                   |   |                  | 7,934,562    |   |              |   | 4,511,889 |   |
| Intangibles, net                                                                                                                                                                                                                                              |   |                  | 3,293,453    |   |              |   | 3,810,653 |   |
| Goodwill                                                                                                                                                                                                                                                      |   |                  | 7,663,208    |   |              |   | 7,663,208 |   |
| Other assets                                                                                                                                                                                                                                                  |   |                  | 160,299      |   |              |   | 146,821 |   |
| Total assets                                                                                                                                                                                                                                                  |   | $                     | 27,626,258   |   |              | $      | 29,848,424 |   |
|                                                                                                                                                                                                                                                          |   |                  |         |   |              |   |   |   |
| Liabilities and shareholders’ equity                                                                                                                                                                                                                    |   |                  |         |   |              |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                          |   |                  |         |   |              |   |   |   |
| Accounts payable                                                                                                                                                                                                                                              |   | $                     | 4,768,289    |   |              | $      | 4,570,730 |   |
| Accrued expenses                                                                                                                                                                                                                                              |   |                  | 1,494,995    |   |              |   | 1,869,367 |   |
| Current obligations under long-term debt                                                                                                                                                                                                                      |   |                  | 308,147      |   |              |   | 344,652 |   |
| Total current liabilities                                                                                                                                                                                                                                     |   |                  | 6,571,431    |   |              |   | 6,784,749 |   |
|                                                                                                                                                                                                                                                          |   |                  |         |   |              |   |   |   |
| Long-term debt, less current portion                                                                                                                                                                                                                          |   |                  | 150,206      |   |              |   | 251,503 |   |
| Total liabilities                                                                                                                                                                                                                                             |   |                  | 6,721,637    |   |              |   | 7,036,252 |   |
|                                                                                                                                                                                                                                                          |   |                  |         |   |              |   |   |   |
| 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 and 444,468, respectively (liquidation preference of $14,364,874 and $14,079,523, respectively) |   |                  | 3,138,056    |   |              |   | 3,148,676 |   |
| Common stock, no par value: Authorized shares- 640,000,000; Issued and outstanding shares- 26,009,281 and 25,497,155, respectively                                                                                                                            |   |                  | 210,114,364  |   |              |   | 209,958,552 |   |
| Accumulated deficit                                                                                                                                                                                                                                           |   |                  | (192,347,799 | )      |              |   | (190,295,056 | )  |
| Total shareholders’ equity                                                                                                                                                                                                                              |   |                  | 20,904,621   |   |              |   | 22,812,172 |   |
| Total liabilities and shareholders’ equity                                                                                                                                                                                                              |   | $                     | 27,626,258   |   |              | $      | 29,848,424 |   |

----

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Con

|                                                                     |   | Three months ended December 31, |       |   | Six months ended December 31, |   |
|--------------------------------------------------------------------------|--------|-------------------------------------------|------------|--------|-----------------------------------------|--------|
|                                                                     |   | 2010                                      |       |   | 2009                                    |   |   | 2010 |   |   | 2009 |   |
| Revenues:                                                                |   |                                      |       |   |                                    |   |   |   |   |   |   |   |
| Equipment sales                                                          |   | $                                         | 2,260,826  |   |                                    | $      | 1,697,053 |   |   | $ | 3,357,020 |   |   | $ | 3,634,460 |   |
| License and transaction fees                                             |   |                                      | 3,755,690  |   |                                    |   | 2,073,786 |   |   |   | 7,100,163 |   |   |   | 3,964,015 |   |
| Total revenues                                                           |   |                                      | 6,016,516  |   |                                    |   | 3,770,839 |   |   |   | 10,457,183 |   |   |   | 7,598,475 |   |
|                                                                     |   |                                      |       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Cost of equipment                                                        |   |                                      | 843,683    |   |                                    |   | 1,080,878 |   |   |   | 1,492,581 |   |   |   | 2,390,235 |   |
| Cost of services                                                         |   |                                      | 2,684,812  |   |                                    |   | 1,680,565 |   |   |   | 5,121,011 |   |   |   | 3,168,722 |   |
| Cost of sales                                                            |   |                                      | 3,528,495  |   |                                    |   | 2,761,443 |   |   |   | 6,613,592 |   |   |   | 5,558,957 |   |
| Gross profit                                                             |   |                                      | 2,488,021  |   |                                    |   | 1,009,396 |   |   |   | 3,843,591 |   |   |   | 2,039,518 |   |
|                                                                     |   |                                      |       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                      |   |                                      |       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative                                      |   |                                      | 2,262,967  |   |                                    |   | 4,857,366 |   |   |   | 5,176,266 |   |   |   | 8,423,143 |   |
| Depreciation and amortization                                            |   |                                      | 365,677    |   |                                    |   | 400,366 |   |   |   | 707,218 |   |   |   | 785,431 |   |
| Total operating expenses                                                 |   |                                      | 2,628,644  |   |                                    |   | 5,257,732 |   |   |   | 5,883,484 |   |   |   | 9,208,574 |   |
| Operating loss                                                           |   |                                      | (140,623   | )      |                                    |   | (4,248,336 | ) |   |   | (2,039,893 | ) |   |   | (7,169,056 | ) |
|                                                                     |   |                                      |       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                  |   |                                      |       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                          |   |                                      | 17,469     |   |                                    |   | 12,699 |   |   |   | 42,779 |   |   |   | 27,636 |   |
| Interest expense                                                         |   |                                      | (9,977     | )      |                                    |   | (9,719 | ) |   |   | (22,629 | ) |   |   | (30,135 | ) |
| Total other income (expense), net                                        |   |                                      | 7,492      |   |                                    |   | 2,980 |   |   |   | 20,150 |   |   |   | (2,499 |  ) |
| Net loss                                                                 |   |                                      | (133,131   | )      |                                    |   | (4,245,356 | ) |   |   | (2,019,743 | ) |   |   | (7,171,555 | ) |
| Cumulative preferred dividends                                           |   |                                      | -          |   |                                    |   | - |   |   |   | (333,351 | ) |   |   | (382,703 | ) |
| Loss applicable to common shares                                         |   |                                      | (133,131   | )      |                                    |   | (4,245,356 | ) |   |   | (2,353,094 | ) |   |   | (7,554,258 | ) |
|                                                                     |   |                                      |       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Loss per common share (basic and diluted)                                |   | $                                         | (0.01      | )      |                                    | $      | (0.19 | ) |   | $ | (0.09 | ) |   | $ | (0.36 | ) |
|                                                                     |   |                                      |       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding (basic and diluted) |   |                                      | 26,005,257 |   |                                    |   | 22,728,252 |   |   |   | 25,923,931 |   |   |   | 21,274,089 |   |

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Table of Contents

Con

|                                                                                                                                  |   | Series AConvertiblePreferredStock |      |   | CommonStock |   |        | Accumulated Deficit |   |   | Total        |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------|-------------|--------|-------------|---------------------|--------|--------|--------------|--------|
|                                                                                                                                  |   |                              |      |   |        |   |        |                |   |   |         |   |   |   |   |   |
| Balance, June 30, 2010                                                                                                                |   | $                                 | 3,148,676 |   |        | $      | 209,958,552 |                |   | $      | (190,295,056 | )      |   | $ | 22,812,172 |   |
| Conversion of 1,500 shares of preferred stock into 15 shares of common stock                                                          |   |                              | (10,620)  |   |        |   | 10,620      |                |   |   |         |   |   |   | - |   |
| Conversion of $33,000 of preferred dividends into 33 shares of common stock at $1,000 per share                                       |   |                              |      |   |        |   | 33,000      |                |   |   | (33,000      | )      |   |   | - |   |
| Issuance of 261,953 shares of common stock at $0.90 per share less issuance costs of $227,672                                         |   |                              |      |   |        |   | 8,085       |                |   |   |         |   |   |   | 8,085 |   |
| Retirement of 2,217 shares of common stock                                                                                            |   |                              |      |   |        |   | (2,261      | )                   |   |   |         |   |   |   | (2,261 | ) |
| Issuance of 16,000 fully-vested shares of common stock to employees and vesting of shares granted under the 2008 Stock Incentive Plan |   |                              |      |   |        |   | 8,802       |                |   |   |         |   |   |   | 8,802 |   |
| Issuance of 86,342 shares of common stock for settlement of Long-Term Equity Incentive Program liability for Fiscal Year 2010         |   |                              |      |   |        |   | 97,566      |                |   |   |         |   |   |   | 97,566 |   |
| Issuance of 150,000 shares of common stock to Lincoln Park Capital                                                                    |   |                              |      |   |        |   | -           |                |   |   |         |   |   |   | - |   |
| Net Loss                                                                                                                              |   |                              |      |   |        |   |        |                |   |   | (2,019,743   | )      |   |   | (2,019,743 | ) |
| Balance, December 31, 2010                                                                                                            |   | $                                 | 3,138,056 |   |        | $      | 210,114,364 |                |   | $      | (192,347,799 | )      |   | $ | 20,904,621 |   |

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Table of Contents

ons

|                                                                                                                             |   | Six months ended December 31, |       |
|----------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                                                                                             |   | 2010                                    |       |   | 2009 |   |
| Operating activities                                                                                                             |   |                                    |       |   |   |   |
| Net loss                                                                                                                         |   | $                                       | (2,019,743 | ) |   | $ | (7,171,555 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities:                                                      |   |                                    |       |   |   |   |   |   |
| Charges incurred in connection with the vesting and issuance of common stock for employee compensation                           |   |                                    | 8,802      |   |   |   | 61,931 |   |
| Charges incurred in connection with the Long-term Equity Incentive Program                                                       |   |                                    | 54,395     |   |   |   | 104,730 |   |
| Bad debt expense                                                                                                                 |   |                                    | 25,728     |   |   |   | 67,432 |   |
| Amortization                                                                                                                     |   |                                    | 517,200    |   |   |   | 517,200 |   |
| Depreciation, $414,646 and $56,742 of which is allocated to cost of services for the six months ended December 31, 2010 and 2009 |   |                                    | 604,664    |   |   |   | 324,973 |   |
| Loss on disposal of property and equipment                                                                                       |   |                                    | 10,380     |   |   |   | - |   |
| Changes in operating assets and liabilities:                                                                                     |   |                                    |       |   |   |   |   |   |
| Accounts receivable                                                                                                              |   |                                    | 761,748    |   |   |   | (495,637 | ) |
| Finance receivables                                                                                                              |   |                                    | 96,141     |   |   |   | (964,732 | ) |
| Inventory                                                                                                                        |   |                                    | (2,541,602 | ) |   |   | (700,555 | ) |
| Prepaid expenses and other assets                                                                                                |   |                                    | 447,635    |   |   |   | 188,026 |   |
| Accounts payable                                                                                                                 |   |                                    | 197,559    |   |   |   | (687,203 | ) |
| Accrued expenses                                                                                                                 |   |                                    | (331,201   | ) |   |   | 1,443,841 |   |
| Net cash used in operating activities                                                                                            |   |                                    | (2,168,294 | ) |   |   | (7,311,549 | ) |
|                                                                                                                             |   |                                    |       |   |   |   |   |   |
| Investing activities                                                                                                             |   |                                    |       |   |   |   |   |   |
| Purchase of property and equipment, net                                                                                          |   |                                    | (213,745   | ) |   |   | (281,391 | ) |
| Net cash used in investing activities                                                                                            |   |                                    | (213,745   | ) |   |   | (281,391 | ) |
|                                                                                                                             |   |                                    |       |   |   |   |   |   |
| Financing activities                                                                                                             |   |                                    |       |   |   |   |   |   |
| Net proceeds from the issuance (retirement) of common stock                                                                      |   |                                    | 5,824      |   |   |   | 12,948,491 |   |
| Payments for the retirement of preferred stock                                                                                   |   |                                    | -          |   |   |   | (200,911 | ) |
| Repayment of long-term debt                                                                                                      |   |                                    | (232,113   | ) |   |   | (330,024 | ) |
| Net cash provided by (used in) financing activities                                                                              |   |                                    | (226,289   | ) |   |   | 12,417,556 |   |
|                                                                                                                             |   |                                    |       |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                             |   |                                    | (2,608,328 | ) |   |   | 4,824,616 |   |
| Cash and cash equivalents at beginning of period                                                                                 |   |                                    | 7,604,324  |   |   |   | 6,748,262 |   |
| Cash and cash equivalents at end of period                                                                                       |   | $                                       | 4,995,996  |   |   | $ | 11,572,878 |   |
|                                                                                                                             |   |                                    |       |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                                               |   |                                    |       |   |   |   |   |   |
| Prepaid insurance financed with long-term debt                                                                                   |   | $                                       | 94,311     |   |   | $ | 85,991 |   |
| Cash paid for interest                                                                                                           |   | $                                       | 23,269     |   |   | $ | 11,976 |   |
| Transfer of inventory to property and equipment for rental units                                                            |   | $                                       | 3,823,972  |   |   | $ | 106,232 |   |
| Conversion of convertible preferred stock to common stock                                                                        |   | $                                       | 10,620     |   |   | $ | - |   |
| Conversion of cumulative preferred dividends to common stock                                                                     |   | $                                       | 33,000     |   |   | $ | - |   |
| Disposal of property and equipment                                                                                               |   | $                                       | 140,931    |   |   | $ | - |   |
| Equipment acquired under capital lease                                                                                           |   | $                                       | -          |   |   | $ | 17,337 |   |

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Table of Contents

Note

| 1. | Accounting Policies |
|----|---------------------|

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Table of Contents

| 1. | Accounting Policies (Continued) |
|----|---------------------------------|

----

Table of Contents

| 2. | Finance Receivables |
|----|---------------------|

|                                       |   | December 312010 |    |   | June 302010 |   |
|--------------------------------------------|--------|----------------------|---------|--------|------------------|--------|
|                                       |   | (unaudited)          |    |   |             |   |
| Notes receivable                           |   | $                    | 7,599   |   |             | $      | 56,962 |   |
| Lease receivables                          |   |                 | 478,053 |   |             |   | 524,831 |   |
| Total finance receivables                  |   |                 | 485,652 |   |             |   | 581,793 |   |
| Less current portion                       |   |                 | 256,781 |   |             |   | 242,452 |   |
| Non-current portion of finance receivables |   | $                    | 228,871 |   |             | $      | 339,341 |   |

| Credit Quality IndicatorsAs of December 31, 2010 |   |
|--------------------------------------------------|--------|
|                                             |   |   |   |   |   |   |   |   |   |
| Credit risk profile based on payment activity:   |   |   |   |   |   |   |   |   |   |
|                                             |   | Notes |   |   | Leases |   |   | Total |   |
|                                             |   |   |   |   |   |   |   |   |   |
| Performing                                       |   | $ | 7,599 |   |   | $ | 475,329 |   |   | $ | 482,928 |   |
| Nonperforming                                    |   |   | - |   |   |   | 2,724 |   |   |   | 2,724 |   |
| Total                                            |   | $ | 7,599 |   |   | $ | 478,053 |   |   | $ | 485,652 |   |

| Age Analysis of Past Due Finance ReceivablesAs of December 31, 2010 |   |
|---------------------------------------------------------------------|--------|
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   | 31 – 60 Days Past Due |   |   | 61 – 90 Days Past Due |   |   | Greater than 90 Days |   |   | Total Past Due |   |   | Current |   |   | Total Finance Receivables |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes                                                               |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 7,599 |   |   | $ | 7,599 |   |
| Leases                                                              |   |   | 71 |   |   |   | 71 |   |   |   | 675 |   |   |   | 817 |   |   |   | 477,236 |   |   |   | 478,053 |   |
| Total                                                               |   | $ | 71 |   |   | $ | 71 |   |   | $ | 675 |   |   | $ | 817 |   |   | $ | 484,835 |   |   | $ | 485,652 |   |

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Table of Contents

| 3. | Accrued Expenses |
|----|------------------|

|                                       |   | December 312010 |      |   | June 302010 |   |
|--------------------------------------------|--------|----------------------|-----------|--------|------------------|--------|
|                                       |   | (unaudited)          |      |   |             |   |
| Accrued compensation and sales commissions |   | $                    | 764,382   |   |             | $      | 922,741 |   |
| Accrued professional fees                  |   |                 | 153,039   |   |             |   | 374,288 |   |
| Accrued taxes and filing fees              |   |                 | 226,671   |   |             |   | 222,249 |   |
| Advanced customer billings                 |   |                 | 39,241    |   |             |   | 55,773 |   |
| Accrued share-based payment liability      |   |                 | -         |   |             |   | 43,171 |   |
| Accrued other                              |   |                 | 311,662   |   |             |   | 251,145 |   |
| Accrued Expenses                           |   | $                    | 1,494,995 |   |             | $      | 1,869,367 |   |

| 4. | Long-Term Debt |
|----|----------------|

|                                  |   | December 312010 |    |   | June 302010 |   |
|---------------------------------------|--------|----------------------|---------|--------|------------------|--------|
|                                  |   | (unaudited)          |    |   |             |   |
| Capital lease obligations             |   | $                    | 168,996 |   |             | $      | 280,261 |   |
| Loan agreements                       |   |                 | 289,357 |   |             |   | 315,894 |   |
| Total long-term debt                  |   |                 | 458,353 |   |             |   | 596,155 |   |
| Less current portion                  |   |                 | 308,147 |   |             |   | 344,652 |   |
| Non-current portion of long-term debt |   | $                    | 150,206 |   |             | $      | 251,503 |   |

| 5. | Common Stock and Preferred Stock |
|----|----------------------------------|

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Table of Contents

| 5. | Common Stock and Preferred Stock (Continued) |
|----|----------------------------------------------|

| 6. | Common Stock Warrants |
|----|-----------------------|

| Expiration Date            | NASDAQSymbol     | Exercise Price | Warrants    Outstanding                      |
|----------------------------|------------------|----------------|--------------------------------------------------------|
| 5/12/2013                  | Not Listed       | $1.13          |        165,207      |
| 7/7/2013                   | Not Listed       | $1.13          |         15,717 |
| 12/31/2013                 | USATZ            | $1.13          |      3,015,407                |
| 12/31/2011                 | USATW            | $2.20          |      7,285,792                |
| 12/31/2011                 | Not Listed       | $2.20          |        291,432      |
| 9/14/2013                  | Not Listed       | $5.90          |        903,955      |
| 12/31/2011                 | Not Listed       | $6.40          |        609,376      |
| 10/17/2012                 | Not Listed       | $7.70          |         17,532 |
|                       |             |           |                                                   |
| Total Warrants Outstanding |  12,304,418 |

| 7. | Commitments |
|----|-------------|

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Table of Contents

| Item 2. |  Management's Discussion and Analysis of Financial Condition and Results of Operations |
|--------------|---------------------------------------------------------------------------------------------|

|   | ● | general economic, market or business conditions; |
|--------|---------|--------------------------------------------------|

|   | ● | the ability of the Company to generate sufficient sales to generate operating profits, or to sell products at a profit; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to raise funds in the future through sales of securities; |
|--------|---------|--------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to obtain commercial acceptance of its products and services; |
|--------|---------|------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to compete with its competitors to obtain market share; |
|--------|---------|------------------------------------------------------------------------------------|

|   | ● | whether our Company’s customers purchase ePort devices or our other products in the future at levels currently anticipated by our Company; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | whether the Company’s customers continue to operate or commence operating ePorts received under the Jump Start Program or otherwise at levels currently anticipated by the Company; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to obtain sufficient funds through operations or otherwise to repay its debt obligations, or to fund development and marketing of its products; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to satisfy its trade obligations included in accounts payable and accrued liabilities; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to predict or estimate its future quarterly or annual revenues and expenses given the developing and unpredictable market for its products and the lack of established revenues; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to maintain its reduced cash-based SG&A expenses during the remainder of the 2011 fiscal year; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to retain key customers from whom a significant portion of its revenues is derived; |
|--------|---------|----------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of a key customer to reduce or delay purchasing products from the Company; and |
|--------|---------|--------------------------------------------------------------------------------------------|

|   | ● | as a result of the slowdown in the economy and/or the tightening of the capital and credit markets, our customers may modify, delay or cancel plans to purchase our products or services, and suppliers may increase their prices, reduce their output or change their terms of sale. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                      |   | 3 Months Ended   |     |   | 3 Months Ended   |   |
|---------------------------|--------|-----------------------|----------|--------|-----------------------|--------|
|                      |   | December 31,2010 |     |   | December 31,2009 |   |
| Net loss                  |   | $                     | (133,131 | )      |                  | $      | (4,245,356 | ) |
|                      |   |                  |     |   |                  |   |   |   |
| Less interest income      |   |                  | (17,469  | )      |                  |   | (12,699 | ) |
|                      |   |                  |     |   |                  |   |   |   |
| Plus interest expense     |   |                  | 9,977    |   |                  |   | 9,719 |   |
|                      |   |                  |     |   |                  |   |   |   |
| Plus income tax expense   |   |                  | --       |   |                  |   | -- |   |
|                      |   |                  |     |   |                  |   |   |   |
| Plus depreciation expense |   |                  | 338,358  |   |                  |   | 171,441 |   |
|                      |   |                  |     |   |                  |   |   |   |
| Plus amortization expense |   |                  | 258,600  |   |                  |   | 258,600 |   |
|                      |   |                  |     |   |                  |   |   |   |
| EBITDA                    |   | $                     | 456,335  |   |                  | $      | (3,818,295 | ) |

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| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
|---------|------------------------------------------------------------|

| Item 4. | Controls and Procedures |
|---------|-------------------------|

| Part II - | Other Information |
|-----------|-------------------|

| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
|---------|-------------------------------------------------------------|

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| Item 6. | Exhibits |
|---------|----------|

| 10.1   | Second Amendment to Agreement of Lease between BMR-Spring Mill Drive, L.P., as landlord, and the Company, as tenant, dated December 28, 2010.       |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                |
| 10.2   | Second Amendment to Office Space Lease dated as of November 17, 2010 by and between the Company and Liberty Malvern, LP.                            |
|   |                                                                                                                                                |
| 31.1   | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                                  |
|   |                                                                                                                                                |
| 31.2   | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                                  |
|   |                                                                                                                                                |
| 32.1   | Certification of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |                                                                                                                                                |
| 32.2   | Certification of the Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

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ign

|                              | USA TECHNOLOGIES, INC.              |
|-----------------------------------|-------------------------------------|
|                              |                                |
| Date:  January 20, 2011 | /s/ George R. Jensen, Jr.           |
|                              | George R. Jensen, Jr., Chairman and |
|                              | Chief Executive Officer             |
|                              |                                |
| Date:  January 20, 2011 | /s/ David M. DeMedio                |
|                              | David M. DeMedio,                   |
|                              | Chief Financial Officer             |

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