Release Details

MALVERN, Pa.--(BUSINESS WIRE)-- USA Technologies, Inc. (NASDAQ:USAT), a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market, today reported results for its fourth quarter and fiscal year ended June 30, 2016.

Fourth Quarter Financial Highlights:

• Total quarterly revenue of $21.9 million, a year-over-year increase of 24%
• 429,000 connections to ePort service, including 6,000 new connections attributable to the VendScreen acquisition which closed on January 15, 2016, representing a year-over-year increase of 29%
• Record 11,050 customers compared to 9,600 as of a year ago, a year-over-year increase of 15%
• Quarterly record license and transaction fee revenue of $15.3 million, a year-over-year increase of 28%
• $1.3 million of cash provided by operating activities representing the sixth straight quarter of positive operating cash flow
• Ended the quarter with $19.3 million in cash and cash equivalents
• Quarterly GAAP net loss of $872 thousand, including the impact of a $432 thousand non-cash expense for the write-down of trademarks to net realizable value of zero and $258 thousand of non-recurring expenses related to the acquisition and integration of the VendScreen business
• Quarterly Non-GAAP net loss of $1.4 million
• Quarterly adjusted EBITDA of $0.6 million

Fourth Quarter Financial Highlights, Connections & Transaction Data:

Fiscal Year Financial Highlights:

• Record total revenue of $77.4 million, a year-over-year increase of 33%
• Record net connections of 96,000 for the year
• Net loss for the fiscal year of 2016 was $6.8 million compared to a net loss of $1.1 million for the fiscal year of 2015. The net loss for the fiscal year reflected a $5.7 million non-cash charge for the change in the fair value of warrant liabilities
• Non-GAAP net loss was $0.7 million for the 2016 fiscal year compared to non-GAAP net loss of $0.5 million for the 2015 fiscal year

Fiscal Year Financial Highlights, Connections & Transaction Data:
		Three months ended, unless noted
(Connections and $'s in thousands, transactions in millions, eps is not rounded)		June 30,
			2016				2015			# Change				% Change
Revenues:
License and transaction fees		$	15,263			$	11,938			$	3,325			28	%
Equipment sales			6,681				5,708				973			17	%
Total revenues		$	21,944			$	17,646			$	4,298			24	%
License and transaction fees gross margin			30.5	%			34.1	%			(3.6	%)		(11	%)
Equipment sales gross margin			17.0	%			12.8	%			4.2	%		33	%
Overall Gross Margin			26.4	%			27.2	%			(0.8	%)		(3	%)
Operating loss		$	(1,578	)		$	(357	)		$	(1,221	)		342	%
Adjusted EBITDA		$	626			$	1,251			$	(625	)		(50	%)
Net loss		$	(872	)		$	(201	)		$	(671	)		856	%
Net loss per common share - basic and diluted		$	(0.02	)		$	(0.01	)		$	(0.01	)		177	%
Net New Connections			28				31				(3	)		(10	%)
Total Connections (at period end)			429				333				96			29	%
Total Number of Transactions (millions)			89				62				27			44	%
Transaction Volume ($millions)		$	169			$	113			$	56			50	%

			Year ended, unless noted
			June 30,
			2016				2015				# Change				% Change
(Connections and $'s in thousands, transactions in millions, eps is not rounded)
Revenues:
License and transaction fees			$	56,589			$	43,633			$	12,956			30	%
Equipment sales				20,819				14,444				6,375			44	%
Total revenues			$	77,408			$	58,077			$	19,331			33	%
License and transaction fees gross margin				32.7	%			32.6	%			0.1	%		0	%
Equipment sales gross margin				16.7	%			18.1	%			(1.4	%)		(8	%)
Overall Gross Margin				28.4	%			29.0	%			(0.6	%)		(2	%)
Operating loss			$	(1,467	)		$	(240	)		$	(1,227	)		511	%
Adjusted EBITDA			$	5,984			$	6,259			$	(275	)		(4	%)
Net income (loss)			$	(6,806	)		$	(1,089	)		$	(5,717	)		525	%
Net loss per common share - basic and diluted			$	(0.21	)		$	(0.05	)		$	(0.16	)		318	%
Net New Connections				96				67				29			43	%
Total Connections (at period end)				429				333				96			29	%
Total Number of Transactions (millions)				316				217				99			46	%
Transaction Volume ($millions)			$	584			$	389			$	195			50	%

"We ended the fiscal year with strong momentum as we continue to drive growth by the adoption of our cashless payment solutions," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "Our customers are increasingly realizing the positive benefits of upgrading 100% of their locations with our ePort Connect service to enable consumers the cashless payment option. The addition of our ePort Interactive Service provides additional value with the ability to provide a more robust consumer experience and yields improved performance at the location. We've grown our business substantially and are poised for the next phase of growth as we work to improve profitability and scale our business."

As described in our Form 10-K for the fiscal year, to be filed today, based on management's assessment of the effectiveness of its internal control over financial reporting as of June 30, 2016, management identified control deficiencies, including three significant deficiencies, in the design or operating effectiveness of the Company's internal control over financial reporting, which when aggregated, represent a material weakness in internal control. The Company is committed to remediating the control deficiencies that gave rise to the material weakness. These internal controls are being evaluated by management, and will be adjusted appropriately as soon as is practical. Due its increased market capitalization, this is the first fiscal year that the Company's internal control over financial reporting has been subject to audit by its independent registered public accounting firm.

Fiscal 2017 Outlook

For full fiscal year 2017, management expects to add between 115,000 and 125,000 net new connections for the year, bringing total connections to our service to a range of 544,000 to 554,000 and expects total revenue to be between $95 million and $100 million. We also expect to have year-over-year increases of adjusted EBITDA and non-GAAP net income.

Webcast and Conference Call

Management will host a conference call and webcast the event beginning at 8:30 a.m. Eastern Time today, September 13, 2016.

To participate in the conference call, please dial (866) 393-1608 approximately 10 minutes prior to the call. International callers should dial (224) 357-2194. Please reference conference ID # 75053191.

A live webcast of the conference call will be available at http://investor.usatech.com/events.cfm. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.

A telephone replay of the conference call will be available from 11:30 a.m. Eastern Time on September 13, 2016 until 11:30 a.m. Eastern Time on September 16, 2016 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 75053191. An archived replay of the conference call will also be available in the investor relations section of the company's website.

About USA Technologies

USA Technologies, Inc. is a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market. The company also provides a broad line of cashless acceptance technologies including its NFC-ready ePort® G-series, ePort Mobile™ for customers on the go, ePort® Interactive, and QuickConnect, an API Web service for developers. USA Technologies has 78 United States and foreign patents in force; and has agreements with Verizon, Visa, Chase Paymentech and customers such as Compass, AMI Entertainment and others. For more information, please visit the website at www.usatech.com.

Forward-looking Statements:

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: All statements other than statements of historical fact included in this release, including without limitation the business strategy and the plans and objectives of USAT's management for future operations, are forward-looking statements. When used in this release, words such as "anticipate", "believe", "estimate", "expect", "intend", and similar expressions, as they relate to USAT or its management, identify forward looking statements. Such forward-looking statements are based on the beliefs of USAT's management, as well as assumptions made by and information currently available to USAT's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, the ability of management to accurately predict or forecast future financial results, including earnings or taxable income of USAT, or increased revenues at a customer location; the incurrence by USAT of any unanticipated or unusual non-operational expenses which would require us to divert our cash resources from achieving our business plan; the ability of USAT to retain key customers from whom a significant portion of its revenues is derived; the ability of USAT to compete with its competitors to obtain market share; whether USAT's customers continue to utilize USAT's transaction processing and related services, as our customer agreements are generally cancelable by the customer on thirty to sixty days' notice; the ability of USAT to raise funds in the future through the sales of securities or debt financings in order to sustain its operations if an unexpected or unusual non-operational event would occur; the ability of USAT to use available data to predict future market conditions, consumer behavior and any level of cashless usage; the ability to prevent a security breach of our systems or services or third party services or systems utilized by us; whether any patents issued to USAT will provide USAT with any competitive advantages or adequate protection for its products, or would be challenged, invalidated or circumvented by others; the ability of USAT to operate without infringing or violating the intellectual property rights of others; whether USAT would be able to sell sufficient ePort hardware to third party leasing companies as part of the QuickStart program in order to continue to increase cash flows from operations; whether USAT's future remediation efforts in connection with the control deficiencies that resulted in a material weakness in USAT's internal controls over financial reporting as of June 30, 2016 would be effective; whether USAT experiences additional material weaknesses in its internal controls over financial reporting in future periods, and USAT is not able to accurately or timely report its financial condition or results of operations; and whether USAT's existing or anticipated customers purchase, rent or utilize ePort devices or our other products or services in the future at levels currently anticipated by USAT. Readers are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement made by us in this release speaks only as of the date of this release. Unless required by law, USAT does not undertake to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

Financial Schedules:

A.		Statement of Operations for the 3 Months and Fiscal Years Ended June 30, 2016 and June 30, 2015
B.		Five Quarter Select Key Performance Indicators in Process
C.		Comparative Condensed Balance Sheets for Year Ended June 30, 2016 and Year Ended June 30, 2015
D.		Five Quarter Statement of Operations and Adjusted EBITDA
E.		Five Quarter Selling, General, & Administrative Expenses - in Process
F.		Five Quarter Condensed Balance Sheet and Other Data
G.		Five Quarter Statement of Cash Flows
H.		Five Quarter Reconciliation of Net Income/(Loss) to Non-GAAP Net Income (Loss) and Net Earnings/(Loss) Per Common Share - Basic and Diluted to Non-GAAP Net Earnings/(Loss) Per Common Share - Basic and Diluted
I.		Annual Reconciliation of Net Loss to Non-GAAP Net Loss and Net Loss Per Common Share - Basic and Diluted to Non-GAAP Net Loss Per Common Share - Basic and Diluted

(A) Statement of Operations for the 3 Months and Fiscal Years Ended June 30, 2016 and June 30, 2015
($ in thousands, except share and per share data)			For the three months ended June 30,									For the year ended June 30,
(unaudited)				2016				2015					2016				2015
Revenues:
License and transaction fees			$	15,263			$	11,938				$	56,589			$	43,633
Equipment sales				6,681				5,708					20,819				14,444
Total revenues				21,944				17,646					77,408				58,077
Costs of sales/revenues:
Cost of services				10,614				7,863					38,089				29,429
Cost of equipment				5,547				4,975					17,334				11,825
Total costs of sales/revenues				16,161				12,838					55,423				41,254
Gross profit:
License and transaction fees				4,649				4,075					18,500				14,204
Equipment sales				1,134				733					3,485				2,619
Total gross profit				5,783				4,808					21,985				16,823
Operating expenses:
Selling, general and administrative				6,721				5,009					22,373				16,451
Depreciation				208				156					647				612
Impairment of intangible asset				432				-					432				-
Total operating expenses				7,361				5,165					23,452				17,063
Operating loss				(1,578	)			(357	)				(1,467	)			(240	)
Other income (expense):
Interest income				182				42					320				83
Other Gain				-				52					-				52
Interest expense				(197	)			(92	)				(600	)			(302	)
Change in fair value of warrant liabilities				18				263					(5,674	)			(393	)
Total other income (expense), net				3				265					(5,954	)			(560	)
Loss before provision for income taxes				(1,575	)			(92	)				(7,421	)			(800	)
Benefit (provision) for income taxes				703				(109	)				615				(289	)
Net loss				(872	)			(201	)				(6,806	)			(1,089	)
Cumulative preferred dividends				-				-					(668	)			(668	)
Net loss applicable to common shares			$	(872	)		$	(201	)			$	(7,474	)		$	(1,757	)
Net loss per common share - basic and diluted			$	(0.02	)		$	(0.01	)			$	(0.21	)		$	(0.05	)
Basic weighted average number of common shares outstanding				37,325,681				35,761,370					36,309,047				35,719,211
Adjusted EBITDA			$	626			$	1,251				$	5,984			$	6,259
Non-GAAP net loss			$	(1,373	)		$	(392	)			$	(713	)		$	(470	)
Total connections at period-end			429				333						429				333
Net new connections in period				28			31						96				67

(B) Five Quarter Select Key Performance Indicators
			Three months ended
(unaudited)			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
			2016			2016			2015			2015			2015			2015
Connections:
Gross New Connections			33,000			34,000			24,000			19,000			34,000			24,000
% from Existing Customer Base			81%			91%			89%			86%			89%			82%
Net New Connections			28,000			32,000			20,000			16,000			31,000			14,000
Total Connections			429,000			401,000			369,000			349,000			333,000			302,000
Customers:
New Customers Added			225			75			350			675			675			475
Total Customers			11,050			75			10,625			10,275			9,600			8,925
Volumes:
Total Number of Transactions (millions)			89.0			82.0			76.0			68.8			62.2			54.8
Transaction Volume ($millions)			$169.0			$151.0			$138.0			$126.4			$112.8			$97.7
Financing Structure of Connections:
JumpStart			6.5%			7.4%			10.1%			10.2%			6.0%			11.3%
QuickStart & All Others *			93.5%			92.6%			89.9%			89.8%			94.0%			88.7%
Total			100.0%			100.0%			100.0%			100.0%			100.0%			100.0%

(C) Comparative Balance Sheets June 30, 2016 to June 30, 2015
($ in thousands)			June 30,					June 30,
				2016					2015				$ Change					% Change
Assets
Current assets:
Cash			$	19,272				$	11,374				$	7,898				69	%
Accounts receivable, less allowance				4,899					5,971					(1,072	)			-18	%
Finance receivables				3,588					941					2,647				281	%
Inventory, net				2,031					4,216					(2,185	)			-52	%
Prepaid expenses and other current assets				987					574					413				72	%
Deferred income taxes				2,271					1,258					1,013				81	%
Total current assets				33,048					24,334					8,714				36	%
Finance receivables, less current portion				3,718					3,698					20				1	%
Other assets				348					350					(2	)			-1	%
Property and equipment, net				9,765					12,869					(3,104	)			-24	%
Deferred income taxes				25,453					25,788					(335	)			-1	%
Intangibles, net				798					432					366				85	%
Goodwill				11,703					7,663					4,040				53	%
Total assets			$	84,833				$	75,134				$	9,699				13	%
Liabilities and shareholders' equity
Current liabilities:
Accounts payable			$	12,356				$	10,542				$	1,814				17	%
Accrued expenses				3,456					2,108					1,348				64	%
Line of credit, net				7,119					4,000					3,119				78	%
Current obligations under long-term debt				629					478					151				32	%
Income taxes payable				18					54					(36	)			-67	%
Warrant liabilities				3,739					-					3,739				100	%
Deferred gain from sale-leaseback transactions				860					860					-				0	%
Total current liabilities				28,177					18,042					10,135				56	%
Long-term liabilities
Long-term debt, less current portion				1,576					1,854					(278	)			-15	%
Accrued expenses, less current portion				15					49					(34	)			-69	%
Warrant liabilities, less current portion				-					978					(978	)			-100	%
Deferred gain from sale-leaseback transactions, less current portion				40					900					(860	)			-96	%
Total long-term liabilities				1,631					3,781					(2,150	)			-57	%
Total liabilities				29,808					21,823					7,985				37	%
Shareholders' equity:
Preferred stock, no par value				3,138					3,138					-				0	%
Common stock, no par value				233,394					224,874					8,520				4	%
Accumulated deficit				(181,507	)				(174,701	)				(6,806	)			4	%
Total shareholders' equity				55,025					53,311					1,714				3	%
Total liabilities and shareholders' equity			$	84,833				$	75,134				$	9,699				13	%
Total current assets			$	33,048				$	24,334				$	8,714				36	%
Total current liabilities				28,177					18,042					10,135				56	%
Net working capital			$	4,871				$	6,292				$	(1,421	)			-23	%
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications			$	-				$	1,299

(D) Five Quarter Statement of Operations and Adjusted EBITDA
($ in thousands)		For the three months ended
(unaudited)		June 30, 2016				% of Sales			March 31, 2016				% of Sales			December 31, 2015				% of Sales			September 30, 2015				% of Sales			June 30, 2015				% of Sales
Revenues:
License and transaction fees		$	15,263			69.6	%		$	14,727			72.3	%		$	13,674			73.9	%		$	12,925			77.9	%		$	11,938			67.7	%
Equipment Sales			6,681			30.4	%			5,634			27.7	%			4,829			26.1	%			3,675			22.1	%			5,708			32.3	%
Total revenue			21,944			100.0	%			20,361			100.0	%			18,503			100.0	%			16,600			100.0	%			17,646			100.0	%
Costs of sales/revenues:
License and transaction fees		$	10,614			69.5	%			9,703			65.9	%			9,067			66.3	%			8,705			67.4	%			7,863			65.9	%
Equipment sales			5,547			83.0	%			4,986			88.5	%			3,953			81.9	%			2,848			77.5	%			4,975			87.2	%
Total costs of sales/revenues			16,161			73.6	%			14,689			72.1	%			13,020			70.4	%			11,553			69.6	%			12,838			72.8	%
Gross Profit:
License and transaction fees			4,649			30.5	%			5,024			34.1	%			4,607			33.7	%			4,220			32.6	%			4,075			34.1	%
Equipment sales			1,134			17.0	%			648			11.5	%			876			18.1	%			827			22.5	%			733			12.8	%
Total gross profit			5,783			26.4	%			5,672			27.9	%			5,483			29.6	%			5,047			30.4	%			4,808			27.2	%
Operating expenses:
Selling, general and administrative		$	6,721			30.6	%			6,094			29.9	%			4,762			25.7	%			4,796			28.9	%			5,009			28.4	%
Depreciation			208			0.9	%			173			0.8	%			127			0.7	%			139			0.8	%			156			0.9	%
Impairment of intangible asset			432			2.0	%			-			0.0	%			-			0.0	%			-			0.0	%			-			0.0	%
Total operating expenses			7,361			33.5	%			6,267			30.8	%			4,889			26.4	%			4,935			29.7	%			5,165			29.3	%
Operating income (loss)			(1,578	)		-7.2	%			(595	)		-2.9	%			594			3.2	%			112			0.7	%			(357	)		-2.0	%
Other income (expense):
Interest income			182			0.8	%			67			0.3	%			20			0.1	%			51			0.3	%			42			0.2	%
Other income			-			0.0	%			-			0.0	%			-			0.0	%			-			0.0	%			52			0.3	%
Interest expense			(197	)		-0.9	%			(180	)		-0.9	%			(104	)		-0.6	%			(119	)		-0.7	%			(92	)		-0.5	%
Change in fair value of warrant liabilities			18			0.1	%			(4,805	)		-23.6	%			(1,230	)		-6.6	%			343			2.1	%			263			1.5	%
Total other income (expense), net			3			0.0	%			(4,918	)		-24.2	%			(1,314	)		-7.1	%			275			1.7	%			265			1.5	%
Loss before provision for income taxes			(1,575	)		-7.2	%			(5,513	)		-27.1	%			(720	)		-3.9	%			387			2.3	%			(92	)		-0.5	%
Benefit (provision) for income taxes			703			3.2	%			93			0.5	%			(154	)		-0.8	%			(27	)		-0.2	%			(109	)		-0.6	%
Net income (loss)			(872	)		-4.0	%			(5,420	)		-26.6	%			(874	)		-4.7	%			360			2.2	%			(201	)		-1.1	%
Less interest income			(182	)		-0.8	%			(67	)		-0.3	%			(20	)		-0.1	%			(51	)		-0.3	%			(42	)		-0.2	%
Plus interest expenses			197			0.9	%			180			0.9	%			104			0.6	%			119			0.7	%			92			0.5	%
Plus income tax expense			(703	)		-3.2	%			(93	)		-0.5	%			154			0.8	%			27			0.2	%			109			0.6	%
Plus depreciation expense			1,272			5.8	%			1,190			5.8	%			1,323			7.2	%			1,350			8.1	%			1,381			7.8	%
Plus amortization expense			44			0.2	%			44			0.2	%			-			0.0	%			-			0.0	%			-			0.0	%
Plus (less) change in fair value of warrant liabilities			(18	)		-0.1	%			4,805			23.6	%			1,230			6.6	%			(343	)		-2.1	%			(263	)		-1.5	%
Plus stock-based compensation			198			0.9	%			142			0.7	%			237			1.3	%			272			1.6	%			175			1.0	%
Plus intangible asset impairment			432			2.0	%			-			0.0	%			-			0.0	%			-			0.0	%			-			0.0	%
Plus VendScreen non-recurring charges			258			1.2	%			461			2.3	%			106			0.6	%			17			0.1	%			-			0.0	%
Plus litigation related professional fees			-			0.0	%			105			0.5	%			-			0.0	%			-			0.0	%			-			0.0	%
Adjusted EBITDA		$	626			2.9	%		$	1,347			6.6	%		$	2,260			12.2	%		$	1,751			10.6	%		$	1,251			7.1	%
See discussion of Non-GAAP financial measures later in this document

(E) Five Quarter Selling, General, & Administrative Expenses
	Three months ended
($ in thousands)			June 30, 2016				% of SG&A			March 31, 2016				% of SG&A			December 31, 2015				% of SG&A			September 30, 2015				% of SG&A			June 30, 2015				% of SG&A
(unaudited)
Salaries and benefit costs			$	3,050			45.4	%		$	2,761			45.4	%		$	2,786			58.6	%		$	2,685			56.0	%		$	2,295			45.8	%
Marketing related expenses				635			9.4	%			362			5.9	%			335			7.0	%			333			6.9	%			580			11.6	%
Professional services				1,533			22.8	%			1,256			20.6	%			839			17.6	%			782			16.3	%			844			16.8	%
Bad debt expense				470			7.0	%			505			8.3	%			239			5.0	%			236			4.9	%			497			9.9	%
Premises, equipment and insurance costs				555			8.3	%			460			7.5	%			347			7.3	%			399			8.3	%			475			9.5	%
Research and development expenses				123			1.8	%			131			2.1	%			37			0.8	%			191			4.0	%			154			3.1	%
VendScreen non-recurring charges				258			3.8	%			461			7.6	%			106			2.2	%			17			0.4	%			-			0.0	%
Litigation related professional fees				51			0.8	%			105			1.7	%			-			0.0	%			-			0.0	%			-			0.0	%
Other expenses				46			0.7	%			53			0.9	%			73			1.5	%			153			3.2	%			164			3.3	%
Total SG&A expenses			$	6,721			100	%		$	6,094			100	%		$	4,762			100	%		$	4,796			100	%		$	5,009			100	%
Total Revenue				21,944							20,361							18,503							16,600							17,646
SG&A expenses as a percentage of revenue				30.6	%						29.9	%						25.7	%						28.9	%						28.4	%

(F) Five Quarter Condensed Balance Sheet and Other Data
($ in thousands)			June 30,			March 31,				December 31,			September 30,			June 30,
(unaudited)			2016			2016				2015			2015			2015
Assets
Current assets:
Cash			$	19,272		$	14,901			$	14,809		$	11,592		$	11,374
Accounts receivable, less allowance	*			4,899			8,345				6,976			6,448			5,971
Finance receivables				3,588			1,677				1,503			946			941
Inventory				2,031			2,341				2,849			3,718			4,216
Other current assets				3,258			2,336				2,160			1,883			1,832
Total current assets				33,048			29,600				28,297			24,587			24,334
Finance receivables, less current portion				3,718			3,042				2,435			3,525			3,698
Other assets				348			337				326			342			350
Property and equipment, net				9,765			10,584				10,856			11,890			12,869
Deferred income taxes				25,453			25,701				25,607			25,761			25,788
Goodwill and intangibles				12,501			12,976				8,095			8,095			8,095
Total assets			$	84,833		$	82,240			$	75,616		$	74,200		$	75,134
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses	*		$	15,812		$	15,368			$	9,992		$	11,615		$	10,542
Line of credit				7,119			6,980				7,000			4,000			2,108
Warrant Liabilities				3,739			5,964				-			-			-
Other current liabilities				1,507			1,485				1,384			1,497			5,392
Total current liabilities				28,177			29,797				18,376			17,112			18,042
Long-term liabilities
Total long-term liabilities				1,631			2,016				3,945			3,116			3,781
Total liabilities				29,808			31,813				22,321			20,228			21,823
Shareholders' equity:
Total shareholders' equity				55,025			50,427				53,295			53,972			53,311
Total liabilities and shareholders' equity			$	84,833		$	82,240			$	75,616		$	74,200		$	75,134
Total current assets			$	33,048		$	29,600			$	28,297		$	24,587		$	24,334
Total current liabilities				28,177			29,797				18,376			17,112			18,042
Net working capital			$	4,871		$	(197	)		$	9,921		$	7,475		$	6,292
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications			$	-		$	-			$	-		$	-		$	1,299

(G) Five Quarter Statements of Cash Flows
			Three months ended
			June 30,				March 31,				December 31,				September 30,				June 30,
($ in thousands)			2016				2016				2015				2015				2015
(unaudited)
OPERATING ACTIVITIES:
Net (loss) income				(872	)			(5,420	)			(874	)			360				(201	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Charges incurred in connection with the vesting and issuance of common stock for employee and director compensation				198				142				237				272				175
Gain on disposal of property and equipment				(110	)			(15	)			(41	)			(1	)			(4	)
Non-cash interest and amortization of debt discount				13				-				-				-				-
Bad debt expense				470				506				238				236				497
Depreciation				1,272				1,190				1,323				1,350				1,381
Amortization of intangible assets				43				44				-				-				-
Impairment of intangible asset				432				-				-				-				-
Change in fair value of warrant liabilities				(18	)			4,805				1,230				(343	)			(263	)
Deferred income taxes, net				(748	)			(93	)			154				27				31
Gain on sale of finance receivables				-				-				-				-				(52	)
Recognition of deferred gain from sale-leaseback transactions				(215	)			(215	)			(215	)			(215	)			(215	)
Changes in operating assets and liabilities:
Accounts receivable				2,977				(1,872	)			(767	)			(713	)			(1,223	)
Finance receivables				(2,587	)			(154	)			533				168				(332	)
Inventory				(82	)			250				649				219				(639	)
Prepaid expenses and other assets				(397	)			(160	)			(254	)			48				(97	)
Accounts payable				328				4,154				(1,624	)			(1,044	)			3,492
Accrued expenses				115				1,166				(13	)			(2	)			93
Income taxes payable				453				-				(70	)			-				37
Net change in operating assets and liabilities				807				3,384				(1,546	)			(1,324	)			1,331
Net cash provided by operating activities				1,272				4,328				506				362				2,680
INVESTING ACTIVITIES:
Purchase and additions of property and equipment				(207	)			(164	)			(117	)			(49	)			(6	)
Proceeds from sale of property and equipment				265				19				101				4				8
Cash paid for assets acquired from VendScreen				-				(5,625	)			-				-				-
Net cash provided by (used in) investing activities				58				(5,770	)			(16	)			(45	)			2
FINANCING ACTIVITIES:
Cash used for the retirement of common stock				(173	)			-				(40	)			-				-
Proceeds from exercise of common stock warrants				3,237				1,652				-				29				-
Proceeds (payments) from line of credit				4,130				33				3,000				-				-
Repayment of line of credit				(3,992	)
Repayment of long term debt				(162	)			(151	)			(233	)			(128	)			(97	)
Proceeds from long-term debt				-				-				-				-				304
Excess tax benefits from share-based compensation				-				-				-				-				10
Net cash provided by (used in) financing activities				3,040				1,534				2,727				(99	)			217
Net increase in cash				4,371				92				3,217				218				2,899
Cash at beginning of period				14,901				14,809				11,592				11,374				8,475
Cash at end of period			$	19,272			$	14,901			$	14,809			$	11,592			$	11,374
Supplemental disclosures of cash flow information:
Interest paid in cash			$	147			$	191			$	107			$	106			$	99
Income taxes paid by cash			$	501			$	-			$	-			$	-			$	-
Depreciation expense allocated to cost of services			$	1,139			$	1,051			$	1,186			$	1,199			$	1,179
Reclass of rental program property to inventory, net			$	415			$	347			$	777			$	(279	)		$	(718	)
Prepaid items financed with debt			$	-			$	-			$	-			$	103			$	-
Warrant issuance for debt discount			$	52			$	-			$	-			$	-			$	-
Debt financing cost financed with debt			$	-			$	79			$	-			$	-			$	-
Equipment and software acquired under capital lease			$	-			$	409			$	-			$	35			$	-
Disposal of property and equipment			$	555			$	189			$	238			$	99			$	447
Disposal of property and equipment under sale-leaseback transactions			$	(52	)		$	52			$	-			$	-			$	-
* Accounts Receivable
·Reclassification of cash provided by and included in accounts payable to accounts receivable			$	-			$	-			$	-			$	-			$	543
* Accounts Payable
·Reclassification of cash provided by and included in accounts payable to accounts receivable			$	-			$	-			$	-			$	-			$	(543	)

(H) Five Quarter Reconciliation of Net Income/(Loss) to Non-GAAP Net Income (Loss) and Net Earnings/(Loss) Per Common Share - Basic and Diluted to Non-GAAP Net Earnings/(Loss) Per Common Share - Basic and Diluted
					Three months ended
	($ in thousands)				June 30,					March 31,					December 31,					September 30,					June 30,
	(unaudited)				2016					2016					2015					2015					2015
	Net income (loss)				$	(872	)			$	(5,420	)			$	(874	)			$	360				$	(201	)
	Non-GAAP adjustments:
	Non-cash portion of income tax provision					(792	)				(38	)				224					27					72
	Change in fair value of warrant adjustment					(18	)				4,805					1,230					(343	)				(263	)
	VendScreen non-recurring charges					258					461					106					17					-
	Litigation related professional fees					51					105					-					-					-
	Non-GAAP net income (loss)				$	(1,373	)			$	(87	)			$	686				$	61				$	(392	)
	Net income (loss)				$	(872	)			$	(5,420	)			$	(874	)			$	360				$	(201	)
	Cumulative preferred dividends					-					(334	)				-					(334	)				-
	Net income (loss) applicable to common shares				$	(872	)			$	(5,754	)			$	(874	)			$	26				$	(201	)
	Non-GAAP net income (loss)				$	(1,373	)			$	(87	)			$	686				$	61				$	(392	)
	Cumulative preferred dividends					-					(334	)				-					(334	)				-
	Non-GAAP net income (loss) applicable to common shares				$	(1,373	)			$	(421	)			$	686				$	(273	)			$	(392	)
	Net earnings (loss) per common share - basic				$	(0.02	)			$	(0.16	)			$	(0.02	)			$	0.00				$	(0.01	)
	Non-GAAP net earnings (loss) per common share - basic					(0.04	)				(0.01	)				0.02					(0.01	)				(0.01	)
	Basic weighted average number of common shares outstanding					37,325,681					36,161,626					35,909,933					35,848,395					35,761,370
	Net earnings (loss) per common share - diluted				$	(0.02	)			$	(0.16	)			$	(0.02	)			$	-				$	(0.01	)
	Non-GAAP net earnings (loss) per common share - diluted				$	(0.04	)			$	(0.01	)			$	0.02				$	(0.01	)			$	(0.01	)
	Diluted weighted average number of common shares outstanding					37,325,681					36,161,626					35,909,933					36,487,879					35,651,732
	See discussion of Non-GAAP financial measures later in this document

(I) Reconciliation of Net Loss to Non-GAAP Net Loss and Net Loss Per Common Share - Basic and Diluted to Non-GAAP Net Loss Per Common Share - Basic and Diluted
					Year ended
					June 30, 2016						June 30, 2015
($ in thousands)
Net loss					$	(6,806	)				$	(1,089	)
Non-GAAP adjustments:
Non-cash portion of income tax provision						(579	)					226
Fair value of warrant adjustment						5,674						393
VendScreen non-recurring charges						842						-
Litigation related professional fees						156						-
Non-GAAP net loss					$	(713	)				$	(470	)
Net loss					$	(6,806	)				$	(1,089	)
Cumulative preferred dividends						(668	)					(668	)
Net loss applicable to common shares					$	(7,474	)				$	(1,757	)
Non-GAAP net loss					$	(713	)				$	(470	)
Cumulative preferred dividends						(668	)					(668	)
Non-GAAP net loss applicable to common shares					$	(1,381	)				$	(1,138	)
Net loss per common share - basic and diluted					$	(0.21	)				$	(0.05	)
Non-GAAP net loss per common share - basic and diluted					$	(0.04	)				$	(0.03	)
Basic and diluted weighted average number of common shares outstanding						36,309,047						35,719,211

Discussion of Non-GAAP Financial Measures:

This press release contains certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Reconciliations between non-GAAP and GAAP measures are set forth above in Financial Schedules (E) and (J).

The following non-GAAP financial measures are discussed herein: adjusted EBITDA, non-GAAP net income (loss) and non-GAAP net earnings (loss) per common share - basic and diluted. The presentation of these additional financial measures is not intended to be considered in isolation from, or superior to, or as a substitute for the financial measures prepared and presented in accordance with GAAP (Generally Accepted Accounting Principles), including the net income or net loss of USAT. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with USAT's net income or net loss as determined in accordance with GAAP. These non-GAAP financial measures are not required by or defined under GAAP and may be materially different from the non-GAAP financial measures used by other companies. USAT has provided above in Financial Schedules (E) and (J) the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

As used herein, non-GAAP net income (loss) represents GAAP net income (loss) excluding costs or benefits relating to any adjustment for fair value of warrant liabilities and non-cash portions of the Company's income tax benefit (provision), non-recurring fees and charges that were incurred in connection with the acquisition and integration of the VendScreen business, and professional fees incurred in connection with the class action litigation and the SLC investigation. Non-GAAP net earnings (loss) per common share - diluted is calculated by dividing non-GAAP net income (loss) applicable to common shares by the number of diluted weighted average shares outstanding. Management believes that non-GAAP net income (loss) is an important measure of USAT's business. Non-GAAP net income (loss) is a non-GAAP financial measure which is not required by or defined under GAAP (Generally Accepted Accounting Principles). The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of the Company or net cash used in operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company's net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of the Company's profitability or net earnings. Management believes that non-GAAP net income (loss) and non-GAAP net earnings (loss) per share are important measures of the Company's business. Management uses the aforementioned non-GAAP measures to monitor and evaluate ongoing operating results and trends and to gain an understanding of our comparative operating performance. We believe that this non-GAAP financial measure serves as a useful metric for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods, and when taken together with the corresponding GAAP (United States' Generally Accepted Accounting Principles) financial measures and our reconciliations, enhance investors' overall understanding of our current and future financial performance. Additionally, the Company utilizes non-GAAP net income (loss) as a metric in its executive officer and management incentive compensation plans.

As used herein, Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, non-recurring fees and charges that were incurred in connection with the acquisition and integration of the VendScreen business, professional fees incurred in connection with the class action litigation incurred during the third quarter of the fiscal year, impairment charges related to our EnergyMiser asset trademarks, and change in fair value of warrant liabilities and stock-based compensation expense. We have excluded the non-operating item, change in fair value of warrant liabilities, because it represents a non-cash gain or charge that is not related to the Company's operations. We have excluded the non-cash expense, stock-based compensation, as it does not reflect the cash-based operations of the Company. We have excluded the non-recurring costs and expenses incurred in connection with the VendScreen transaction in order to allow more accurate comparison of the financial results to historical operations. We have excluded the professional fees incurred in connection with the class action litigation as well as the trademark impairment charges because we believe that they represent a charge that is not related to the Company's operations. Adjusted EBITDA is a non-GAAP financial measure which is not required by or defined under GAAP (Generally Accepted Accounting Principles). The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of the Company or net cash used in operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company's net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of the Company's profitability or net earnings. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance. Additionally, the Company utilizes Adjusted EBTIDA as a metric in its executive officer and management incentive compensation plans.

F-USAT

View source version on businesswire.com: http://www.businesswire.com/news/home/20160913005845/en/

Investor Contact:
The Blueshirt Group
Mike Bishop, +1 415-217-4968
mike@blueshirtgroup.com

Source: USA Technologies, Inc.

News Provided by Acquire Media