Release Details

MALVERN, Pa.--(BUSINESS WIRE)-- USA Technologies, Inc. (NASDAQ:USAT) ("USAT"), a leader of wireless, cashless payment and M2M/IoT solutions for small-ticket, self-serve retailing industries, today reported results for its second quarter ended December 31, 2015.

Second Quarter Financial Highlights:

• Total quarterly revenue of $18.5 million, a year-over-year increase of 44%
• 20,000 net connections for the quarter compared to 12,000 in the same quarter last year, a year-over-year increase of 67%
• 369,000 connections to ePort service, a year-over-year increase of 28%
• Record 10,625 customers compared to 8,450 in the same quarter last year, a year-over-year increase of 26%
• Quarterly record license and transaction fee revenue of $13.7 million, a year-over-year increase of 30%
• Quarterly license and transaction fees gross margins increased to 33.7% from 31.7% in the prior year
• Quarterly adjusted EBITDA of $2.3 million, a year-over-year increase of 34%
• Quarterly GAAP net loss of $0.9 million, including the impact of $1.2 million non-cash expense for the fair value warrant liability adjustment
• Quarterly Non-GAAP net income of $0.7 million, or $0.02 per share
• Achieved positive free cash flow* for fourth straight quarter fueled by success in the company's QuickStart third-party leasing program

*(Defined as cash flow from operations less cash used for the purchase of equipment for the JumpStart rental program.)

Second Quarter Financial Highlights & Transaction Data:
				Three months ended,
				December 31,
(Connections, transactions and $'s in thousands, except per share data)				2015					2014					# Change					% Change
Revenues:
License and transaction fees				$	13,674				$	10,480				$	3,194				30	%
Equipment sales					4,829					2,342					2,487				106	%
Total revenues				$	18,503				$	12,822				$	5,681				44	%
License and transaction fees gross margin					33.7	%				31.7	%				2.0	%			6.3	%
Equipment sales gross margin					18.1	%				17.6	%				0.6	%			3.2	%
Operating income				$	594				$	51				$	543				1064.7	%
Adjusted EBITDA				$	2,260				$	1,681				$	579				34.4	%
Net loss				$	(874	)			$	(261	)			$	(613	)			234.9	%
Net loss per common share - basic and diluted				$	(0.02	)			$	(0.01	)			$	(0.01	)			100.0	%
Net New Connections					20					12					8				67	%
Total Connections (at period end)					369					288					81				28	%
Total Number of Transactions					76,000					51,000					25,000				49	%
Transaction Volume				$	138,000				$	89,300				$	48,700				55	%

"The growing success at USA Technologies validates that the self-service retail market is moving toward the acceptance and adoption of cashless payments," said Stephen P. Herbert, USA Technologies' chairman and chief executive officer. "This is an exciting time for us as we see major customers move toward migrating all of their machines to the ePort Connect service, as we simultaneously increase our customer base. With the acquisition of VendScreen we are driving additional value to each connection with the most advanced cloud based interactive content delivery system for the self-service market. We are enthusiastic about the traction we have made this quarter and our organic growth, coupled with the increasing operating leverage, underpin our confidence that USAT will continue to deliver strong results."

Fiscal 2016 Outlook

For full fiscal year 2016, management expects to add more than 75,000 net new connections, bringing total connections on the service to over 400,000 and expects total revenue to be between $69 million and $71 million. Additionally, we anticipate that QuickStart will remain a popular program for customers, and management expects it to drive positive free cash flows in fiscal year 2016. 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, February 12, 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 # 42182812.

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 February 12, 2016 until 11:59 p.m. Eastern Time on February 15, 2016 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 42182812. 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 is a leader of wireless, cashless payment and M2M/IoT telemetry solutions for small-ticket, self-serve retailing industries. ePort Connect® is the company's flagship service platform, a PCI-compliant, end-to-end suite of cashless payment and telemetry services specially tailored to fit the needs of small ticket, self-service retailing industries. USA Technologies also provides a broad line of cashless acceptance technologies including its NFC-ready ePort® G-series, ePort Mobile™ for customers on the go, and QuickConnect, an API Web service for developers. USA Technologies has 78 United States and foreign patents in force; and has agreements with Verizon, Chase Paymentech, Visa, MasterCard, and customers such as Compass and others. 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; 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 ongoing remediation of a material weakness that USAT identified in its internal controls over financial reporting, and which was reflected in our annual report on Form 10-K for the fiscal year ended June 30, 2015, would be effective; whether USAT experiences additional material weaknesses in its internal controls over financial reporting in the future, 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. Comparative Income Statement For 6 Months Ended December 31, 2015 and December 31, 2014

B. Comparative Income Statement For 3 Months Ended December 31, 2015 and December 31, 2014

C. Five Quarter Select Key Performance Indicators

D. Comparative Condensed Balance Sheets December 31, 2015 to June 30, 2015

E. Five Quarter Statement of Operations and Adjusted EBITDA

F. Five Quarter Selling, General, & Administrative Expenses

G. Five Quarter Condensed Balance Sheet and Other Data

H. Five Quarter Condensed Statement of Cash Flows

I. Consolidated Statement of Shareholders' Equity

J. Reconciliation of Net 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

NEW ACCOUNTING CLASSIFICATION

Commencing with the September 30, 2015 financial statements, the Company changed the manner in which it presents certain uncollected customer accounts receivable and the related allowance in its consolidated balance sheets and the related statements of cash flows. These accounts receivable represent a large number of small balance amounts due from customers for processing and service fees which had not been billed to customers, and as to which, there had been no customer transaction proceeds from which the Company could collect the amounts due in accordance with its normal procedures. The previous accounting classification recorded these amounts as a reduction of its accounts payable in the consolidated balance sheets and the related statements of cash flows. The new accounting classification moves these amounts to accounts receivable and allowance for bad debt.

Accordingly, the respective balances for all prior periods presented in these financial statements were reclassified in order to be consistent and comparable to the accounting treatment of these items in our December 31, 2015 financial statements. The new accounting classification as well as the reclassification for prior periods had no effect on the consolidated statements of operations or the consolidated statements of shareholders' equity.

(A) Comparative Income Statement For 6 Months Ended December 31, 2015 and December 31, 2014
($ in thousands, except share and per share data)				For the six months ended December 31,
(unaudited)				2015					% of Sales				2014					% of Sales				Change					% Change
Revenues:
License and transaction fees				$	26,599				75.8	%			$	20,636				82.3	%			$	5,963				28.9	%
Equipment sales					8,504				24.2	%				4,438				17.7	%				4,066				91.6	%
Total revenues					35,103				100.0	%				25,074				100.0	%				10,029				40.0	%
Costs of sales/revenues:
Cost of services					17,772				66.8	%				14,409				69.8	%				3,363				23.3	%
Cost of equipment					6,801				80.0	%				3,796				85.5	%				3,005				79.2	%
Total costs of sales/revenues					24,573				70.0	%				18,205				72.6	%				6,368				35.0	%
Gross profit:
License and transaction fees					8,827				33.2	%				6,227				30.2	%				2,600				41.8	%
Equipment sales					1,703				20.0	%				642				14.5	%				1,061				165.3	%
Total gross profit					10,530				30.0	%				6,869				27.4	%				3,661				53.3	%
Operating expenses:
Selling, general and administrative					9,558				27.2	%				7,163				28.6	%				2,395				33.4	%
Depreciation					266				0.8	%				321				1.3	%				(55	)			-17.1	%
Total operating expenses					9,824				28.0	%				7,484				29.8	%				2,340				31.3	%
Operating income (loss)					706				2.0	%				(615	)			-2.5	%				1,321				-214.8	%
Other income (expense):
Interest income					71				0.2	%				14				0.1	%				57				407.1	%
Interest expense					(223	)			-0.6	%				(124	)			-0.5	%				(99	)			79.8	%
Change in fair value of warrant liabilities					(887	)			-2.5	%				445				1.8	%				(1,332	)			-299.3	%
Total other income (expense), net					(1,039	)			-3.0	%				335				1.3	%				(1,374	)			-410.1	%
(Loss) before provision for income taxes					(333	)			-0.9	%				(280	)			-1.1	%				(53	)			18.9	%
Provision for income taxes					(181	)								(42	)								(139	)			331.0	%
Net loss					(514	)			-1.5	%				(322	)			-1.3	%				(192	)			59.6	%
Cumulative preferred dividends					(332	)			-0.9	%				(332	)			-1.3	%				-				0.0	%
Net loss applicable to common shares				$	(846	)			-2.4	%			$	(654	)			-2.6	%			$	(192	)			29.4	%
Net loss per common share - basic and diluted				$	(0.02	)							$	(0.02	)							$	-				0.0	%
Basic and diluted weighted average number of common shares outstanding					35,808,488									35,625,199									183,289				0.5	%
Adjusted EBITDA				$	4,011				11.4	%			$	2,627				20.5	%			$	1,384				52.7	%
Non-GAAP net income (loss) applicable to common shares				$	415				1.2	%			$	(704	)			-5.5	%			$	1,119				158.9	%

(B) Comparative Income Statement For 3 Months Ended December 31, 2015 and December 31, 2014
($ in thousands, except share and per share data)				For the three months ended December 31,
(unaudited)				2015					% of Sales				2014					% of Sales				Change					% Change
Revenues:
License and transaction fees				$	13,674				73.9	%			$	10,480				81.7	%			$	3,194				30.5	%
Equipment sales					4,829				26.1	%				2,342				18.3	%				2,487				106.2	%
Total revenues					18,503				100.0	%				12,822				100.0	%				5,681				44.3	%
Costs of sales/revenues:
Cost of services					9,067				66.3	%				7,158				68.3	%				1,909				26.7	%
Cost of equipment					3,953				81.9	%				1,930				82.4	%				2,023				104.8	%
Total costs of sales/revenues					13,020				70.4	%				9,088				70.9	%				3,932				43.3	%
Gross profit:
License and transaction fees					4,607				33.7	%				3,322				31.7	%				1,285				38.7	%
Equipment sales					876				18.1	%				412				17.6	%				464				112.6	%
Total gross profit					5,483				29.6	%				3,734				29.1	%				1,749				46.8	%
Operating expenses:
Selling, general and administrative					4,762				25.7	%				3,531				27.5	%				1,231				34.9	%
Depreciation					127				0.7	%				152				1.2	%				(25	)			-16.4	%
Total operating expenses					4,889				26.4	%				3,683				28.7	%				1,206				32.7	%
Operating income					594				3.2	%				51				0.4	%				543				1064.7	%
Other income (expense):
Interest income					20				0.1	%				4				0.0	%				16				400.0	%
Interest expense					(104	)			-0.6	%				(49	)			-0.4	%				(55	)			112.2	%
Change in fair value of warrant liabilities					(1,230	)			-6.6	%				135				1.1	%				(1,365	)			-1011.1	%
Total other income (expense), net					(1,314	)			-7.1	%				90				0.7	%				(1,404	)			-1560.0	%
Income (loss) before provision for income taxes					(720	)			-3.9	%				141				1.1	%				(861	)			-610.6	%
Provision for income taxes					(154	)								(402	)								248				-61.7	%
Net loss					(874	)			-4.7	%				(261	)			-2.0	%				(613	)			234.9	%
Cumulative preferred dividends					-				0.0	%				-				0.0	%				-				0.0	%
Net loss applicable to common shares				$	(874	)			-4.7	%			$	(261	)			-2.0	%			$	(613	)			234.9	%
Net loss per common share - basic and diluted				$	(0.02	)							$	(0.01	)							$	(0.01	)			100.0	%
Basic and diluted weighted average number of common shares outstanding					35,828,776									35,657,519									171,257				0.5	%
Adjusted EBITDA				$	2,260				12.2	%			$	1,681				13.1	%			$	579				34.4	%
Non-GAAP net income (loss) applicable to common shares				$	686				3.7	%			$	6				0.0	%			$	680				11333.3	%

(C) Five Quarter Select Key Performance Indicators:
			Three months ended
(unaudited)			December 31,				September 30,				June 30,				March 31,				December 31,
			2015				2015				2015				2015				2014
Connections:
Gross New Connections				24,000				20,000				34,000				24,000				14,000
% from Existing Customer Base				89	%			86	%			89	%			82	%			82	%
Net New Connections				20,000				16,000				31,000				14,000				12,000
Total Connections				369,000				349,000				333,000				302,000				288,000
Customers:
New Customers Added				350				675				675				475				550
Total Customers				10,625				10,275				9,600				8,925				8,450
Volumes:
Total Number of Transactions (millions)				76.0				68.8				62.2				54.8				51.0
Transaction Volume ($millions)			$	138.0			$	126.4			$	112.8			$	97.7			$	89.3
Financing Structure of Connections:
JumpStart				10.1	%			10.2	%			6.0	%			11.3	%			14.4	%
QuickStart & All Others *				89.9	%			89.8	%			94.0	%			88.7	%			85.6	%
Total				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
*Includes credit sales with standard trade receivable terms

(D) Comparative Condensed Balance Sheets December 31, 2015 to June 30, 2015
($ in thousands)						December 31,					June 30,
(unaudited)						2015					2015					$ Change					% Change
Assets
Current assets:
Cash						$	14,809				$	11,374				$	3,435				30	%
Accounts receivable, less allowance				*			6,976					5,971					1,005				17	%
Finance receivables							1,503					941					562				60	%
Inventory							2,849					4,216					(1,367	)			-32	%
Deferred income taxes							1,258					1,258					-				0	%
Prepaid expenses and other current assets							902					574					328				57	%
Total current assets							28,297					24,334					3,963				16	%
Finance receivables, less current portion							2,435					3,698					(1,263	)			-34	%
Property and equipment, net							10,856					12,869					(2,013	)			-16	%
Goodwill and intangbiles							8,095					8,095					-				0	%
Deferred income taxes							25,607					25,788					(181	)			-1	%
Other assets							326					350					(24	)			-7	%
Total assets						$	75,616				$	75,134				$	482				1	%
Liabilities and shareholders' equity
Current liabilities:
Accounts payable				*		$	7,876				$	10,542				$	(2,666	)			-25	%
Accrued expenses							2,116					2,108					8				0	%
Line of credit							7,000					4,000					3,000				75	%
Current obligations under long-term debt							524					478					46				10	%
Income taxes payable							-					54					(54	)			-100	%
Deferred gain from sale-leaseback transactions							860					860					-				0	%
Total current liabilities							18,376					18,042					334				2	%
Long-term liabilities
Long-term debt, less current portion							1,584					1,854					(270	)			-15	%
Accrued expenses, less current portion							26					49					(23	)			-47	%
Warrant liabilities							1,865					978					887				91	%
Deferred gain from sale-leaseback transactions, less current portion							470					900					(430	)			-48	%
Total long-term liabilities							3,945					3,781					164				4	%
Total liabilities							22,321					21,823					498				2	%
Shareholders' equity:
Preferred stock, no par value							3,138					3,138					-				0	%
Common stock, no par value							225,372					224,874					498				0	%
Accumulated deficit							(175,215	)				(174,701	)				(514	)			0	%
Total shareholders' equity							53,295					53,311					(16	)			0	%
Total liabilities and shareholders' equity						$	75,616				$	75,134				$	482				1	%
Total current assets						$	28,297				$	24,334				$	3,963				16	%
Total current liabilities							18,376					18,042					334				2	%
Net working capital						$	9,921				$	6,292				$	3,629				58	%
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications						$	-				$	1,299

(E) Five Quarter Statement of Operations and Adjusted EBITDA
			For the three months ended
(unaudited)			December 31,							September 30,							June 30,							March 31,							December 31,
			2015				% of Sales			2015				% of Sales			2015				% of Sales			2015				% of Sales			2014				% of Sales
Revenues:
License and transaction fees			$	13,674			73.9	%		$	12,925			77.9	%		$	11,938			67.7	%		$	11,060			72.0	%		$	10,480			81.7	%
Equipment Sales				4,829			26.1	%			3,675			22.1	%			5,708			32.3	%			4,298			28.0	%			2,342			18.3	%
Total revenue				18,503			100.0	%			16,600			100.0	%			17,646			100.0	%			15,358			100.0	%			12,822			100.0	%
Costs of sales/revenues:
License and transaction fees				9,067			66.3	%			8,705			67.4	%			7,863			65.9	%			7,157			64.7	%			7,158			68.3	%
Equipment sales				3,953			81.9	%			2,848			77.5	%			4,975			87.2	%			3,055			71.1	%			1,930			82.4	%
Total costs of sales/revenues				13,020			70.4	%			11,553			69.6	%			12,838			72.8	%			10,213			57.9	%			9,088			51.5	%
Gross Profit:
License and transaction fees				4,607			33.7	%			4,220			32.6	%			4,075			34.1	%			3,903			35.3	%			3,323			31.7	%
Equipment sales				876			18.1	%			827			22.5	%			733			12.8	%			1,243			28.9	%			412			17.6	%
Total gross profit				5,483			29.6	%			5,047			30.4	%			4,808			27.2	%			5,145			33.5	%			3,734			29.1	%
Operating expenses:
Selling, general and administrative				4,762			25.7	%			4,796			28.9	%			5,009			28.4	%			4,280			27.9	%			3,531			27.5	%
Depreciation				127			0.7	%			139			0.8	%			156			0.9	%			135			0.9	%			152			1.2	%
Total operating expenses				4,889			26.4	%			4,935			29.7	%			5,165			29.3	%			4,415			28.7	%			3,683			28.7	%
Operating income (loss)				594			3.2	%			112			0.7	%			(357	)		-2.0	%			730			4.8	%			51			0.4	%
Other income (expense):
Interest income				20			0.1	%			51			0.3	%			42			0.3	%			26			0.2	%			4			0.0	%
Other income				-			0.0	%			-			0.0	%			52			0.3	%			-			0.0	%			-			0.0	%
Interest expense				(104	)		-0.6	%			(119	)		-0.7	%			(92	)		-0.6	%			(85	)		-0.5	%			(49	)		-0.3	%
Change in fair value of warrant liabilities				(1,230	)		-7.4	%			343			2.1	%			263			1.6	%			(1,101	)		-6.6	%			135			0.8	%
Total other income (expense), net				(1,314	)		-7.1	%			275			1.7	%			265			1.5	%			(1,160	)		-7.6	%			90			0.7	%
Income (loss) before provision for income taxes				(720	)		-3.9	%			387			2.3	%			(92	)		-0.5	%			(429	)		-2.8	%			141			1.1	%
Provision for income taxes				(154	)		-0.8	%			(27	)		-0.2	%			(109	)		-0.6	%			(138	)		-0.9	%			(402	)		-3.1	%
Net income (loss)				(874	)		-4.7	%			360			2.2	%			(201	)		-1.1	%			(567	)		-3.7	%			(261	)		-2.0	%
Less interest income				(20	)		-0.1	%			(51	)		-0.3	%			(42	)		-0.3	%			(26	)		-0.2	%			(4	)		0.0	%
Plus interest expenses				104			0.6	%			119			0.7	%			92			0.6	%			85			0.5	%			49			0.3	%
Plus income tax expense				154			0.9	%			27			0.2	%			109			0.7	%			138			0.8	%			402			2.4	%
Plus depreciation expense				1,323			8.0	%			1,350			8.1	%			1,381			8.3	%			1,433			8.6	%			1,444			8.7	%
Plus (less) change in fair value of warrant liabilities				1,230			7.4	%			(343	)		-2.1	%			(263	)		-1.6	%			1,101			6.6	%			(135	)		-0.8	%
Plus stock-based compensation				237			1.4	%			272			1.6	%			175			1.1	%			216			1.3	%			186			1.1	%
Plus due diligence/ acquisition costs				106			0.6	%			17			0.1	%			-			0.0	%			-			0.0	%			-			0.0	%
Adjusted EBITDA			$	2,260			12.2	%		$	1,751			10.6	%		$	1,251			7.1	%		$	2,380			15.5	%		$	1,681			13.1	%

See discussion of Non-GAAP financial measures later in this document

(F) Five Quarter Selling, General, & Administrative Expenses
			Three months ended
($ in thousands)			December 31,				% of				September 30,				% of				June 30,				% of				March 30,				% of				December 31,				% of
(unaudited)			2015				SG&A				2015				SG&A				2015				SG&A				2015				SG&A				2014				SG&A
Salaries and benefit costs			$	2,786			58.6	%			$	2,685			56.0	%			$	2,295			45.8	%			$	2,533			59.2	%			$	2,132			60.4	%
Marketing related expenses				335			7.0	%				333			6.9	%				580			11.6	%				184			4.3	%				215			6.1	%
Professional services				839			17.6	%				782			16.3	%				844			16.8	%				708			16.5	%				460			13.0	%
Bad debt expense				239			5.0	%				236			4.9	%				497			9.9	%				303			7.1	%				141			4.0	%
Premises, equipment and insurance costs				347			7.3	%				399			8.3	%				475			9.5	%				372			8.7	%				370			10.5	%
Research and development expenses				37			0.8	%				191			4.0	%				154			3.1	%				96			2.2	%				115			3.3	%
Due Diligence/ Acquisition Costs				106			2.2	%				17			0.4	%				-			0.0	%				-			0.0	%				-			0.0	%
Other expenses				73			1.5	%				153			3.2	%				164			3.3	%				84			2.0	%				98			2.8	%
Total SG&A expenses			$	4,762			100	%			$	4,796			100	%			$	5,009			100	%			$	4,280			100	%			$	3,531			100	%

(G) Five Quarter Condensed Balance Sheet and Other Data
($ in thousands)					December 31,			September 30,			June 30,			March 31,			December 31,
(unaudited)					2015			2015			2015			2015			2014
Assets
Current assets:
Cash					$	14,809		$	11,592		$	11,374		$	8,475		$	6,734
Accounts receivable, less allowance			*			6,976			6,448			5,971			5,245			4,591
Finance receivables						1,503			946			941			750			363
Inventory						2,849			3,718			4,216			4,241			3,448
Other current assets						2,160			1,883			1,832			1,322			1,495
Total current assets						28,297			24,587			24,334			20,033			16,631
Finance receivables, less current portion						2,435			3,525			3,698			3,505			1,643
Other assets						326			342			350			423			411
Property and equipment, net						10,856			11,890			12,869			13,574			16,451
Deferred income taxes						25,607			25,761			25,788			26,169			26,290
Goodwill and intangibles						8,095			8,095			8,095			8,095			8,095
Total assets					$	75,616		$	74,200		$	75,134		$	71,799		$	69,521
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses			*		$	9,992		$	11,615		$	12,650		$	9,044		$	8,945
Line of credit						7,000			4,000			4,000			4,000			4,000
Other current liabilities						1,384			1,497			1,392			1,294			1,064
Total current liabilities						18,376			17,112			18,042			14,338			14,009
Long-term liabilities
Total long-term liabilities						3,945			3,116			3,781			4,134			1,834
Total liabilities						22,321			20,228			21,823			18,472			15,843
Shareholders' equity:
Total shareholders' equity						53,295			53,972			53,311			53,327			53,678
Total liabilities and shareholders' equity					$	75,616		$	74,200		$	75,134		$	71,799		$	69,521
Total current assets					$	28,297		$	24,587		$	24,334		$	20,033		$	16,631
Total current liabilities						18,376			17,112			18,042			14,338			14,009
Net working capital					$	9,921		$	7,475		$	6,292		$	5,695		$	2,622
* Accounts receivable, net of allowance for doubtful accounts and accounts payable have increased by the following amounts due to reclassifications					$	-		$	-		$	1,299		$	1,842		$	1,832
Free cash flow (from operations less cash for purchase of rental equipment)					$	507		$	362		$	2,680		$	65		$	(3,039	)

(H) Five Quarter Condensed Statement of Cash Flows
				Three months ended
				December 31,				September 30,				June 30,				March 31,				December 31,
($ in thousands)				2015				2015				2015				2015				2014
(unaudited)
OPERATING ACTIVITIES:
Net income (loss)				$	(874	)		$	360			$	(201	)		$	(567	)		$	(261	)
Adjustments to reconcile net income (loss) 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					237				272				175				216				186
Gain on disposal of property and equipment					(41	)			(1	)			(4	)			(6	)			(4	)
Bad debt expense					238				236				497				303				141
Depreciation					1,323				1,350				1,381				1,433				1,444
Change in fair value of warrant liabilities					1,230				(343	)			(263	)			1,101				(135	)
Deferred income taxes, net					154				27				31				121				424
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			*		(767	)			(713	)			(1,223	)			(984	)			(842	)
Finance receivables					533				168				(332	)			(2,249	)			(778	)
Inventory					649				219				(639	)			651				(805	)
Prepaid expenses and other assets					(254	)			48				(97	)			151				(248	)
Accounts payable			*		(1,623	)			(1,044	)			3,491				(141	)			(1,859	)
Accrued expenses					(13	)			(2	)			93				234				(87	)
Income taxes payable					(70	)			-				37				17				-
Net change in operating assets and liabilities					(1,545	)			(1,324	)			1,330				(2,321	)			(4,619	)
Net cash provided by (used in) operating activities					507				362				2,680				65				(3,039	)
INVESTING ACTIVITIES:
Purchase of property and equipment					(33	)			(49	)			(6	)			(4	)			(19	)
Additions of internally developed software					(85	)			-				-				-				-
Proceeds from sale of property and equipment					101				4				8				19				11
Net cash provided by (used in) investing activities					(17	)			(45	)			2				16				(8	)
FINANCING ACTIVITIES:
Net proceeds from the issuance (retirement) of common stock and exercise of common stock warrants					(40	)			29				-				-				(62	)
Excess tax benefits from share-based compensation					-				-				10				-				-
Proceeds (repayment) of line of credit, net					3,000				-				-				-				(1,000	)
Proceeds from long-term debt					-				-				304				1,753				-
Repayment of long-term debt					(233	)			(128	)			(97	)			(93	)			(73	)
Net cash provided by (used in) financing activities					2,727				(99	)			217				1,660				(1,135	)
Net increase (decrease) in cash					3,217				218				2,899				1,741				(4,182	)
Cash at beginning of period					11,592				11,374				8,475				6,734				10,916
Cash at end of period				$	14,809			$	11,592			$	11,374			$	8,475			$	6,734
Supplemental disclosures of cash flow information:
Depreciation expense allocated to cost of services				$	1,186			$	1,199			$	1,252			$	1,289			$	1,283
Reclass of rental program property to (from) inventory, net				$	777			$	(279	)		$	(719	)		$	1,374			$	14
* Accounts Receivable
·Reclassification of cash provided by and included in accounts payable to accounts receivable				$	-			$	-			$	543			$	(10	)		$	(479	)
* Accounts Payable
·Reclassification of cash provided by and included in accounts payable to accounts receivable				$	-			$	-			$	(543	)		$	10			$	479

(I) Consolidated Statement of Shareholders' Equity
			Series A
			Convertible
			Preferred Stock					Common Stock							Accumulated
($ in thousands, except shares)			Shares		Amount			Shares			Amount				Deficit				Total
Balance, June 30, 2015			442,968		$	3,138		35,747,242			$	224,874			$	(174,701	)		$	53,311
Exercise of warrants			-			-		11,000				29				-				29
Stock based compensation
2013 Stock Incentive Plan			-			-		88,678				302				-				302
2014 Stock Option Incentive Plan			-			-		-				207				-				207
Retirement of common stock			-			-		(12,746	)			(40	)			-				(40	)
Net loss			-			-		-				-				(514	)			(514	)
Balance, December 31, 2015			442,968		$	3,138		35,834,174			$	225,372			$	(175,215	)		$	53,295

(J) Reconciliation of Net 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)			December 31,				September 30,				June 30,				March 31,				December 31,
(unaudited)			2015				2015				2015				2015				2014
Net income (loss)			$	(874	)		$	360			$	(201	)		$	(567	)		$	(261	)
Non-GAAP adjustments:
Non-cash portion of income tax provision				224				27				72				121				402
Fair value of warrant adjustment				1,230				(343	)			(263	)			1,101				(135	)
Due Diligence/ Acquisition Costs				106				-				-				-				-
Non-GAAP net income (loss)			$	686			$	44			$	(392	)		$	655			$	6
Net income (loss)			$	(874	)		$	360			$	(201	)		$	(567	)		$	(261	)
Cumulative preferred dividends				-				(332	)			-				(332	)			-
Net income (loss) applicable to common shares			$	(874	)		$	28			$	(201	)		$	(899	)		$	(261	)
Non-GAAP net income (loss)			$	686			$	44			$	(392	)		$	655			$	6
Cumulative preferred dividends				-				(332	)			-				(332	)			-
Non-GAAP net income (loss) applicable to common shares			$	686			$	(288	)		$	(392	)		$	323			$	6
Net earnings (loss) per common share - basic			$	(0.02	)		$	-			$	(0.01	)		$	(0.03	)		$	(0.01	)
Non-GAAP net earnings (loss) per common share - basic			$	0.02			$	(0.01	)		$	(0.01	)		$	0.01			$	-
Basic weighted average number of common shares outstanding				35,828,776				35,788,199				35,716,603				35,687,650				35,657,519
Net earnings (loss) per common share - diluted			$	(0.02	)		$	(0.01	)		$	(0.01	)		$	(0.03	)		$	(0.01	)
Non-GAAP net earnings (loss) per common share - diluted			$	0.02			$	(0.01	)		$	(0.01	)		$	0.01			$	-
Diluted weighted average number of common shares outstanding				35,828,776				36,427,683				35,716,603				35,687,650				35,657,519
See discussion of Non-GAAP financial measures later in this document

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 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 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 represents GAAP net income (loss) excluding costs or benefits relating to any adjustment for fair value of warrant liabilities, non-cash portions of the Company's income tax benefit (provision), and nonrecurring professional service fees recorded in SG&A that were incurred in connection with the VendScreen transaction. 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) and non-GAAP net earnings (loss) per common share - diluted are important measures of USAT'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 these non-GAAP financial measures serve as useful metrics 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 financial measures and our reconciliations, enhance investors' overall understanding of our current and future financial performance.

Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, nonrecurring professional service fees recorded in SG&A that were incurred in connection with the VendScreen transaction, 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 USAT's operations. We have excluded the non-cash expense, stock-based compensation, as it does not reflect the cash-based operations of USAT. We have excluded the nonrecurring professional service fees incurred in connection with the VendScreen transaction in order to allow more accurate comparisons of the financial results to historical operations. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance and liquidity, and because it allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

F-USAT

View source version on businesswire.com: http://www.businesswire.com/news/home/20160212005183/en/

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

Source: USA Technologies, Inc.

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