----

----

| T | 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 |
|---|--------------------------------------------------------------------------------|

| 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 Information |                                                                                               |                |
|                           |                                                                                               |                |   |
| Item 1.                        | Condensed Financial Statements (Unaudited)                                                         |                |   |
|                           |                                                                                               |                |   |
|                           | Consolidated Balance Sheets – September 30, 2010 and June 30, 2010                           | 3                   |   |
|                           |                                                                                               |                |   |
|                           | Consolidated Statements of Operations – Three months ended September 30, 2010 and 2009       | 4                   |   |
|                           |                                                                                               |                |   |
|                           | Consolidated Statement of Shareholders’ Equity – Three months ended September 30, 2010 | 5                   |   |
|                           |                                                                                               |                |   |
|                           | Consolidated Statements of Cash Flows – Three months ended September 30, 2010 and 2009       | 6                   |   |
|                           |                                                                                               |                |   |
|                           | Notes to Consolidated Financial Statements                                                         | 7                   |   |
|                           |                                                                                               |                |   |
| Item 2.                        | Management's Discussion and Analysis of Financial Condition and Results of Operations              | 11                  |   |
|                           |                                                                                               |                |   |
| Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                         | 15                  |   |
|                           |                                                                                               |                |   |
| Item 4.                        | Controls and Procedures                                                                            | 15                  |   |
|                           |                                                                                               |                |   |
| Part II - Other Information    |                                                                                               |                |
|                           |                                                                                               |                |   |
| Item 2.                        | Unregistered Sales of Equity Securities and Use of Proceeds                                        | 16                  |   |
|                           |                                                                                               |                |   |
| Item 3.                        | Defaults Upon Senior Securities                                                                    | 16                  |   |
|                           |                                                                                               |                |   |
| Item 6.                        | Exhibits                                                                                           | 17                  |   |
|                           |                                                                                               |                |   |
|                           | Signatures                                                                                         | 18                  |   |

----

Table of Contents

US

|                                                                                                                                                                                              |   | September 30, |         |   | June 30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------------|--------|---------------|--------|
|                                                                                                                                                                                              |   | 2010               |         |   | 2010          |   |
|                                                                                                                                                                                              |   | (Unaudited)        |         |   |          |   |
| Assets                                                                                                                                                                                            |   |               |         |   |          |   |
| Current assets:                                                                                                                                                                                   |   |               |         |   |          |   |
| Cash and cash equivalents                                                                                                                                                                         |   | $                  | 5,467,381    |   |          | $      | 7,604,324 |   |
| Accounts receivable, less allowance for uncollectible accounts of $32,000 and $41,000, respectively                                                                                               |   |               | 1,896,529    |   |          |   | 2,048,421 |   |
| Finance receivables                                                                                                                                                                               |   |               | 193,576      |   |          |   | 242,452 |   |
| Inventory, net                                                                                                                                                                                    |   |               | 3,102,162    |   |          |   | 2,633,971 |   |
| Prepaid expenses and other current assets                                                                                                                                                         |   |               | 772,466      |   |          |   | 847,344 |   |
| Total current assets                                                                                                                                                                              |   |               | 11,432,114   |   |          |   | 13,376,512 |   |
|                                                                                                                                                                                              |   |               |         |   |          |   |   |   |
| Finance receivables, less current portion                                                                                                                                                         |   |               | 276,393      |   |          |   | 339,341 |   |
| Property and equipment, net                                                                                                                                                                       |   |               | 4,818,789    |   |          |   | 4,511,889 |   |
| Intangibles, net                                                                                                                                                                                  |   |               | 3,552,053    |   |          |   | 3,810,653 |   |
| Goodwill                                                                                                                                                                                          |   |               | 7,663,208    |   |          |   | 7,663,208 |   |
| Other assets                                                                                                                                                                                      |   |               | 183,090      |   |          |   | 146,821 |   |
| Total assets                                                                                                                                                                                      |   | $                  | 27,925,647   |   |          | $      | 29,848,424 |   |
|                                                                                                                                                                                              |   |               |         |   |          |   |   |   |
| Liabilities and shareholders’ equity                                                                                                                                                        |   |               |         |   |          |   |   |   |
| Current liabilities:                                                                                                                                                                              |   |               |         |   |          |   |   |   |
| Accounts payable                                                                                                                                                                                  |   | $                  | 4,550,912    |   |          | $      | 4,570,730 |   |
| Accrued expenses                                                                                                                                                                                  |   |               | 1,862,775    |   |          |   | 1,869,367 |   |
| Current obligations under long-term debt                                                                                                                                                          |   |               | 374,081      |   |          |   | 344,652 |   |
| Total current liabilities                                                                                                                                                                         |   |               | 6,787,768    |   |          |   | 6,784,749 |   |
|                                                                                                                                                                                              |   |               |         |   |          |   |   |   |
| Long-term debt, less current portion                                                                                                                                                              |   |               | 196,133      |   |          |   | 251,503 |   |
| Total liabilities                                                                                                                                                                                 |   |               | 6,983,901    |   |          |   | 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- 444,468 and 444,468, respectively (liquidation preference of $14,412,874 and $14,079,523, respectively) |   |               | 3,148,676    |   |          |   | 3,148,676 |   |
| Common stock, no par value: Authorized shares- 640,000,000; Issued and outstanding shares-25,910,608 and 25,497,155, respectively                                                                 |   |               | 209,974,740  |   |          |   | 209,958,552 |   |
| Accumulated deficit                                                                                                                                                                               |   |               | (192,181,670 | )      |          |   | (190,295,056 | ) |
| Total shareholders’ equity                                                                                                                                                                  |   |               | 20,941,746   |   |          |   | 22,812,172 |   |
| Total liabilities and shareholders’ equity                                                                                                                                                  |   | $                  | 27,925,647   |   |          | $      | 29,848,424 |   |

----

Table of Contents

USA

|                                                                     |   | Three months ended |       |
|--------------------------------------------------------------------------|--------|------------------------------|------------|
|                                                                     |   | September 30,                |       |
|                                                                     |   | 2010                         |       |   | 2009 |   |
| Revenues:                                                                |   |                         |       |   |   |   |
| Equipment sales                                                          |   | $                            | 1,096,193  |   |   | $ | 1,937,407 |   |
| License and transaction fees                                             |   |                         | 3,344,472  |   |   |   | 1,890,229 |   |
| Total revenues                                                           |   |                         | 4,440,665  |   |   |   | 3,827,636 |   |
|                                                                     |   |                         |       |   |   |   |   |   |
| Cost of equipment                                                        |   |                         | 648,898    |   |   |   | 1,309,356 |   |
| Cost of services                                                         |   |                         | 2,436,200  |   |   |   | 1,488,157 |   |
| Cost of sales                                                            |   |                         | 3,085,098  |   |   |   | 2,797,513 |   |
| Gross profit                                                             |   |                         | 1,355,567  |   |   |   | 1,030,123 |   |
|                                                                     |   |                         |       |   |   |   |   |   |
| Operating expenses:                                                      |   |                         |       |   |   |   |   |   |
| Selling, general and administrative                                      |   |                         | 2,913,298  |   |   |   | 3,565,778 |   |
| Depreciation and amortization                                            |   |                         | 341,541    |   |   |   | 385,066 |   |
| Total operating expenses                                                 |   |                         | 3,254,839  |   |   |   | 3,950,844 |   |
| Operating loss                                                           |   |                         | (1,899,272 | ) |   |   | (2,920,721 | ) |
|                                                                     |   |                         |       |   |   |   |   |   |
| Other income (expense):                                                  |   |                         |       |   |   |   |   |   |
| Interest income                                                          |   |                         | 25,310     |   |   |   | 14,938 |   |
| Interest expense                                                         |   |                         | (12,652    | ) |   |   | (20,416 | ) |
| Total other income (expense), net                                        |   |                         | 12,658     |   |   |   | (5,478 | ) |
| Net loss                                                                 |   |                         | (1,886,614 | ) |   |   | (2,926,199 | ) |
| Cumulative preferred dividends                                           |   |                         | (333,351   | ) |   |   | (382,703 | ) |
| Loss applicable to common shares                                         |   | $                            | (2,219,965 | ) |   | $ | (3,308,902 | ) |
| Loss per common share (basic and diluted)                                |   | $                            | (0.09      | ) |   | $ | (0.17 | ) |
| Weighted average number of common shares outstanding (basic and diluted) |   |                         | 25,842,604 |   |   |   | 19,819,926 |   |

----

Table of Contents

USA 

|                                                                                                                                 |   | Series AConvertiblePreferredStock |      |   | CommonStock |   |        | Accumulated Deficit |   |   | Total        |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------|-------------|--------|-------------|---------------------|--------|--------|--------------|--------|
|                                                                                                                                 |   |                              |      |   |        |   |        |                |   |   |         |   |
| Balance, June 30, 2010                                                                                                               |   | $                                 | 3,148,676 |   |        | $      | 209,958,552 |                |   | $      | (190,295,056 | )      |   | $ | 22,812,172 |   |
| Issuance of 261,953 shares of common stock at $0.90 per share less issuance costs of $227,672                                        |   |                              |      |   |        |   | 8,085       |                |   |   |         |   |   |   | 8,085 |   |
| Issuance of 1,500 fully-vested shares of common stock to employees and vesting of shares granted under the 2008 Stock Incentive Plan |   |                              |      |   |        |   | 8,103       |                |   |   |         |   |   |   | 8,103 |   |
| Issuance of 150,000 shares of common stock to Lincoln Park Capital                                                                   |   |                              |      |   |        |   | -           |                |   |   |         |   |   |   |   |   |
| Net loss                                                                                                                             |   |                              |      |   |        |   |        |                |   |   | (1,886,614   | )      |   |   | (1,886,614 | ) |
| Balance, September 30, 2010                                                                                                          |   | $                                 | 3,148,676 |   |        | $      | 209,974,740 |                |   | $      | (192,181,670 | )      |   | $ | 20,941,746 |   |

----

Table of Contents

USA 

|                                                                                                                                |   | Three months ended |       |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|
|                                                                                                                                |   | September 30,                |       |
|                                                                                                                                |   | 2010                         |       |   | 2009 |   |
| Operating activities                                                                                                                |   |                         |       |   |   |   |
| Net loss                                                                                                                            |   | $                            | (1,886,614 | ) |   | $ | (2,926,199 | ) |
| 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                              |   |                         | 8,103      |   |   |   | 40,574 |   |
| Charges incurred in connection with the Long-term Equity Incentive Program                                                          |   |                         | 61,303     |   |   |   | 77,258 |   |
| Bad debt expense                                                                                                                    |   |                         | 8,316      |   |   |   | 15,970 |   |
| Amortization                                                                                                                        |   |                         | 258,600    |   |   |   | 258,600 |   |
| Depreciation, $183,365 and $27,066 of which is allocated to cost of services for the three months ended September 30, 2010 and 2009 |   |                         | 266,306    |   |   |   | 153,532 |   |
| Loss on disposal of property and equipment                                                                                          |   |                         | 10,380     |   |   |   | - |   |
| Changes in operating assets and liabilities:                                                                                        |   |                         |       |   |   |   |   |   |
| Accounts receivable                                                                                                                 |   |                         | 143,576    |   |   |   | (89,225 | ) |
| Finance receivables                                                                                                                 |   |                         | 111,824    |   |   |   | (583,642 | ) |
| Inventory                                                                                                                           |   |                         | (961,778   | ) |   |   | (28,293 | ) |
| Prepaid expenses and other assets                                                                                                   |   |                         | 132,920    |   |   |   | 199,099 |   |
| Accounts payable                                                                                                                    |   |                         | (19,818    | ) |   |   | (288,603 | ) |
| Accrued expenses                                                                                                                    |   |                         | (67,895    | ) |   |   | 344,315 |   |
| Net cash used in operating activities                                                                                               |   |                         | (1,934,777 | ) |   |   | (2,826,614 | ) |
|                                                                                                                                |   |                         |       |   |   |   |   |   |
| Investing activities                                                                                                                |   |                         |       |   |   |   |   |   |
| Purchase of property and equipment, net                                                                                             |   |                         | (89,999    | ) |   |   | (24,015 | ) |
| Net cash used in investing activities                                                                                               |   |                         | (89,999    | ) |   |   | (24,015 | ) |
|                                                                                                                                |   |                         |       |   |   |   |   |   |
| Financing activities                                                                                                                |   |                         |       |   |   |   |   |   |
| Net proceeds from the issuance (retirement) of common stock                                                                         |   |                         | 8,085      |   |   |   | 13,035,942 |   |
| Payments for the retirement of preferred stock                                                                                      |   |                         | -          |   |   |   | (48,272 | ) |
| Repayment of long-term debt                                                                                                         |   |                         | (120,252   | ) |   |   | (194,834 | ) |
| Net cash provided by (used in) financing activities                                                                                 |   |                         | (112,167   | ) |   |   | 12,792,836 |   |
|                                                                                                                                |   |                         |       |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                                |   |                         | (2,136,943 | ) |   |   | 9,942,207 |   |
| Cash and cash equivalents at beginning of period                                                                                    |   |                         | 7,604,324  |   |   |   | 6,748,262 |   |
| Cash and cash equivalents at end of period                                                                                          |   | $                            | 5,467,381  |   |   | $ | 16,690,469 |   |
|                                                                                                                                |   |                         |       |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                                                  |   |                         |       |   |   |   |   |   |
| Prepaid insurance financed with long-term debt                                                                                      |   | $                            | 94,311     |   |   | $ | 85,991 |   |
| Cash paid for interest                                                                                                              |   | $                            | 13,472     |   |   | $ | 19,751 |   |
| Equipment acquired under capital lease                                                                                              |   | $                            | -          |   |   | $ | 17,337 |   |
| Disposal of Property Plant and Equipment                                                                                            |   | $                            | 140,931    |   |   | $ | - |   |
| Reclass of inventory to fixed assets for rental units                                                                               |   | $                            | 493,587    |   |   | $ | - |   |

----

Table of Contents

US

----

Table of Contents

|                                       |   | September 30 |      |   | June 30 |   |
|--------------------------------------------|--------|-------------------|-----------|--------|--------------|--------|
|                                       |   | 2010              |      |   | 2010         |   |
|                                       |   | (unaudited)       |      |   |         |   |
| Accrued compensation and sales commissions |   | $                 | 775,388   |   |         | $      | 922,741 |   |
| Accrued professional fees                  |   |              | 249,394   |   |         |   | 374,288 |   |
| Accrued taxes and filing fees              |   |              | 218,200   |   |         |   | 222,249 |   |
| Advanced customer billings                 |   |              | 230,516   |   |         |   | 55,773 |   |
| Accrued share-based payment liability      |   |              | 104,474   |   |         |   | 43,171 |   |
| Accrued other                              |   |              | 284,803   |   |         |   | 251,145 |   |
|                                       |   | $                 | 1,862,775 |   |         | $      | 1,869,367 |   |

----

Table of Contents

|                                  |   | September 30 |    |   | June 30 |   |
|---------------------------------------|--------|-------------------|---------|--------|--------------|--------|
|                                  |   | 2010              |    |   | 2010         |   |
|                                  |   | (unaudited)       |    |   |         |   |
| Capital lease obligations             |   | $                 | 217,998 |   |         | $      | 280,261 |   |
| Loan agreements                       |   |              | 352,216 |   |         |   | 315,894 |   |
| Total long-term debt                  |   |              | 570,214 |   |         |   | 596,155 |   |
| Less current portion                  |   |              | 374,081 |   |         |   | 344,652 |   |
| Non-current portion of long-term debt |   | $                 | 196,133 |   |         | $      | 251,503 |   |

----

Table of Contents

----

Table of Contents

2. Management's 

|   | ● | 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; |
|--------|---------|--------------------------------------------------------------------------------------|

|   | ● | whether the Company is able to enter into binding agreements with third parties to assist in product or network development; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of the Company to commercialize its developmental products, or if actually commercialized, to obtain commercial acceptance thereof; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | ● | the ability of our Company to receive reductions from the credit card companies of transaction processing charges in the future; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------|

|   | ● | the ability of our Company to obtain reduced pricing from its manufacturers for its ePort devices in the future as currently anticipated by our Company; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | ● | whether the Company’s customers participate in the Jump Start program 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 reduce its cash-based SG&A expenses for the quarter ending December 31, 2010 to the levels anticipated and to maintain such levels 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. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

----

Table of Contents

| Net loss                  |   | $      | (1,886,614 | )      |
|---------------------------|--------|--------|------------|--------|
|                      |   |   |       |   |
| Less interest income      |   |   | (25,310    | )      |
|                      |   |   |       |   |
| Plus interest expense     |   |   | 12,652     |   |
|                      |   |   |       |   |
| Plus income tax expense   |   |   | --         |   |
|                      |   |   |       |   |
| Plus depreciation expense |   |   | 266,306    |   |
|                      |   |   |       |   |
| Plus amortization expense |   |   | 258,600    |   |
|                      |   |   |       |   |
| EBITDA                    |   | $      | (1,374,366 | )      |

----

Table of Contents

Item 3

4.  

----

Table of Contents

2.

| Period                                                             |   | Total number of shares |   |   | Average price paid per share |   |   | Total number of shares purchased as part of publicly announced plans or programs |   |   | Approximate dollar value of shares that yet may be purchased under the plans or programs |   |
|--------------------------------------------------------------------|--------|------------------------|--------|--------|------------------------------|--------|--------|----------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------|--------|
|                                                               |   |                   |   |   |                         |   |   |                                                                             |   |   |                                                                                     |   |
| July 1 through July 31, 2010: Series A Convertible Preferred Stock |   |                   | 1,200  | (1)    |                         | $      | 5.29   |                                                                             |   |   | -                                                                                        |   |   |   | - |   |
| Total, Preferred                                                   |   |                   | 1,200  |   |                         | $      | 5.29   |                                                                             |   |   | -                                                                                        |   |   |   | - |   |

 3. 

----

Table of Contents

6. 

| 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. |

----

Table of Contents

Sig

|                               | USA TECHNOLOGIES, INC.              |
|------------------------------------|-------------------------------------|
|                               |                                |
| Date:  November 10, 2010 | /s/ George R. Jensen, Jr.           |
|                               | George R. Jensen, Jr., Chairman and |
|                               | Chief Executive Officer             |
|                               |                                |
| Date:  November 10, 2010 | /s/ David M. DeMedio                |
|                               | David M. DeMedio,                   |
|                               | Chief Financial Officer             |

----