SEC Filing | Cantaloupe, Inc.

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 12, 2015

USA TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	001-33365	23‑2679963
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

100 Deerfield Lane, Suite 140

Malvern, Pennsylvania 19355

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: 610-989-0340

n/a

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.

Results of Operations and Financial Condition

On November 12, 2015, USA Technologies, Inc. (the “Company”), issued a press release reporting financial results for the fiscal quarter ended September 30, 2015, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01.

Financial Statements and Exhibits

Exhibit 99.1

Press Release of the Company dated November 12, 2015

SIGNATURES

Pursuant to the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	USA TECHNOLOGIES, INC.

Dated: November 13, 2015	By:	/s/ Stephen P. Herbert
		Stephen P. Herbert,
		Chairman and Chief Executive Officer

Index to Exhibits

Exhibit No.	Description of Exhibit

99.1	Press Release of the Company dated November 12, 2015

Exhibit 99.1

USA Technologies Announces First Quarter Fiscal Year 2016 Results

MALVERN, Pa. – Nov. 12, 2015 – 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 the first quarter fiscal year ended September 30, 2015.

First Quarter Financial Highlights:

Total revenue of $16.6 million, a year-over-year increase of 35%

349,000 connections to ePort service, a year-over-year increase of 26%

Record 10,275 customers compared to 7,900 in the same quarter last year

Record license and transaction fee revenue of $12.9 million, a year-over-year increase of 27%

License and transaction fees gross margins increased to 33% from 29% in the prior year

Equipment gross margins increased to 23% from 11% in the prior year

Adjusted EBITDA of $1.7 million, a year-over-year increase of 85%

Achieved positive free cash flow* for third 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.)

First Quarter Financial Highlights & Transaction Data:

	Three months ended, unless noted September 30,
(Connections and $'s in thousands, except per share data)	2015			2014			# Change			% Change


Revenues:
License and transaction fees	$	12,925		$	10,156		$	2,769			27	%
Equipment sales		3,675			2,096			1,579			75	%
Total revenues	$	16,600		$	12,252		$	4,348			35	%

License and transaction fees gross margin		32.6	%		28.6	%		4.0	%		14.0	%

Equipment sales gross margin		22.5	%		11.0	%		11.5	%		104.5	%

Operating income (loss)	$	112		$	(666	)	$	778		NC

Adjusted EBITDA	$	1,734		$	946		$	788			83	%

Net income (loss)	$	360		$	(61	)	$	421		NC

Net earnings (loss) per common share - diluted	$	(0.01	)	$	(0.01	)	NC			NC

Net New Connections		16			10			6			60	%

Total Connections (at period end)		349			276			73			26	%

Total Number of Transactions		68,800			48,700			20,100			41	%

Transaction Volume	$	126,400		$	89,200		$	37,200			42	%

“The growing number of transactions and transaction volume, in addition to the growing number of USAT customers, indicate that we are capitalizing on the cashless payment trend and delivering on our strategic initiatives,” said Stephen P. Herbert, USA Technologies’ chairman and chief executive officer. “Many of our largest customers are moving to connect 100% of their machines to USAT’s ePort Connect technology incentivized by our Premium Support Service, the latest product offering which provides customers with a cross-functional service model to realize the impact of USAT’s ePort Connect technology on their business, including increased awareness and accelerated adoption of cashless payments.”

Fiscal 2016 Outlook

For full year fiscal 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 tomorrow, November 13, 2015.

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 # 70551888.

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 November 13, 2015 until 11:59 p.m. Eastern Time on November 16, 2015 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 70551888. 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 been granted 87 patents; 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 earnings or taxable income of USAT; the incurrence by us 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 the proprietary 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; 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:

Comparative Income Statement For 3 Months Ended September 30, 2015 and September 30, 2014

Five Quarter Select Key Performance Indicators

Comparative Condensed Balance Sheets September 30, 2015 to June 30, 2015

Five Quarter Statement of Operations and Adjusted EBITDA

Five Quarter Selling, General, & Administrative Expenses

Five Quarter Condensed Balance Sheet

Five Quarter Condensed Statement of Cash Flows

Consolidated Statement of Shareholders’ Equity

Reconciliation of Net Loss to Non-GAAP Net Income (Loss) and Net Earnings Loss Per Common Share - Diluted to Non-GAAP Net Earnings (Loss) Per Common Share – Diluted

NEW ACCOUNTING CLASSIFICATION

The Company is changing 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 is more appropriate now, as the uncollected customer accounts have been outstanding for longer time periods and are larger in the aggregate than when the accounting process was established many years ago.

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 September 30, 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 3 Months Ended September 30, 2015 and September 30, 2014

($ in thousands, except share and per share data)	For the three months ended September 30,
(unaudited)	2015			% of Sales			2014			% of Sales			Change			% Change

Revenues:
License and transaction fees	$	12,925			77.9	%	$	10,156			82.9	%	$	2,769			27.3	%
Equipment sales		3,675			22.1	%		2,096			17.1	%		1,579			75.3	%
Total revenues		16,600			100.0	%		12,252			100.0	%		4,348			35.5	%

Costs of sales/revenues:
Cost of services		8,705			67.4	%		7,251			71.4	%		1,454			20.1	%
Cost of equipment		2,848			77.5	%		1,866			89.0	%		982			52.6	%
Total costs of sales/revenues		11,553			69.6	%		9,117			74.4	%		2,436			26.7	%

Gross profit:
License and transaction fees		4,220			32.6	%		2,905			28.6	%		1,315			45.3	%
Equipment sales		827			22.5	%		230			11.0	%		597			259.4	%
Total gross profit		5,047			30.4	%		3,135			25.6	%		1,912			61.0	%

Operating expenses:
Selling, general and administrative		4,796			28.9	%		3,632			29.6	%		1,164			32.0	%
Depreciation		139			0.8	%		169			1.4	%		(30	)		-17.8	%
Total operating expenses		4,935			29.7	%		3,801			31.0	%		1,134			29.8	%
Operating income (loss)		112			0.7	%		(666	)		-5.4	%		778			-116.8	%

Other income (expense):
Interest income		51			0.3	%		10			0.1	%		41			410.0	%
Interest expense		(119	)		-0.7	%		(75	)		-0.6	%		(44	)		58.7	%
Change in fair value of warrant liabilities		343			2.1	%		310			2.5	%		33			10.6	%
Total other income, net		275			1.7	%		245			2.0	%		30			12.2	%

Income (loss) before (benefit) provision for income taxes		387			2.3	%		(421	)		-3.4	%		808			-191.9	%
Benefit (provision) for income taxes		(27	)					360						(387	)		-107.5	%

Net income (loss)		360			2.2	%		(61	)		-0.5	%		421			-690.2	%
Cumulative preferred dividends		(332	)		-2.0	%		(332	)		-2.7	%		-			0.0	%
Net income (loss) applicable to common shares	$	28			0.2	%	$	(393	)		-3.2	%	$	421			-107.1	%
Net earnings (loss) per common share - basic	$	-					$	(0.01	)				$	0.01			-100.0	%
Basic weighted average number of common shares outstanding		35,788,199						35,586,455						201,744			0.6	%
Net loss per common share - diluted	$	(0.01	)				$	(0.01	)				$	0.00			-9.4	%
Diluted weighted average number of common shares outstanding		36,427,683						35,586,455						841,228			2.4	%

Adjusted EBITDA	$	1,734			10.4	%	$	946			7.7	%	$	788			83.3	%

Non-GAAP net income (loss) applicable to common shares	$	(288	)		-6.8	%	$	(1,072	)		-8.7	%	$	784			-73.1	%

(B)	Five Quarter Select Key Performance Indicators:

(unaudited)		Three months ended
		September 30, 2015			June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014
Connections:
Gross New Connections		20,000			34,000			24,000			14,000			13,000
% from Existing Customer Base		86	%		89	%		82	%		82	%		84	%
Net New Connections		16,000			31,000			14,000			12,000			10,000
Total Connections		349,000			333,000			302,000			288,000			276,000

Customers:
New Customers Added		675			675			475			550			600
Total Customers		10,275			9,600			8,925			8,450			7,900

Volumes:
Total Number of Transactions (millions)		68.8			62.2			54.8			51.0			48.7
Transaction Volume ($millions)	$	126.4		$	112.8		$	97.7		$	89.3		$	89.2

Financing Structure of Connections:
JumpStart		10.2	%		6.0	%		11.3	%		14.4	%		22.7	%
QuickStart & All Others *		89.8	%		94.0	%		88.7	%		85.6	%		77.3	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

*Includes credit sales with standard trade receivable terms

(C)	Comparative Condensed Balance Sheets September 30, 2015 to June 30, 2015

($ in thousands) (unaudited)		September 30, 2015			June 30, 2015			$ Change			% Change

Assets
Current assets:
Cash		$	11,592		$	11,374		$	218			2	%
Accounts receivable, less allowance	*		6,448			5,971			477			8	%
Finance receivables			946			941			5			1	%
Inventory			3,718			4,216			(498	)		-12	%
Deferred income taxes			1,258			1,258			-			0	%
Prepaid expenses and other current assets			625			574			51			9	%
Total current assets			24,587			24,334			253			1	%

Finance receivables, less current portion			3,525			3,698			(173	)		-5	%
Property and equipment, net			11,890			12,869			(979	)		-8	%
Goodwill and intangbiles			8,095			8,095			-			0	%
Deferred income taxes			25,761			25,788			(27	)		0	%
Other assets			342			350			(8	)		-2	%
Total assets		$	74,200		$	75,134		$	(934	)		-1	%

Liabilities and shareholders' equity
Current liabilities:
Accounts payable	*	$	9,498		$	10,542		$	(1,044	)		-10	%
Accrued expenses			2,117			2,108			9			0	%
Line of credit			4,000			4,000			-			0	%
Current obligations under long-term debt			583			478			105			22	%
Income taxes payable			54			54			-			0	%
Deferred gain from sale-leaseback transactions			860			860			-			0	%
Total current liabilities			17,112			18,042			(930	)		-5	%
Long-term liabilities
Long-term debt, less current portion			1,758			1,854			(96	)		-5	%
Accrued expenses, less current portion			38			49			(11	)		-22	%
Warrent liabilities			635			978			(343	)		-35	%
Deferred gain from sale-leaseback transactions, less current portion			685			900			(215	)		-24	%
Total long-term liabilities			3,116			3,781			(665	)		-18	%
Total liabilities			20,228			21,823			(1,595	)		-7	%

Shareholders' equity:
Preferred stock, no par value			3,138			3,138			-			0	%
Common stock, no par value			225,175			224,874			301			0	%
Accumulated deficit			(174,341	)		(174,701	)		360			0	%
Total shareholders' equity			53,972			53,311			661			1	%
Total liabilities and shareholders' equity		$	74,200		$	75,134		$	(934	)		-1	%

Total current assets		$	24,587		$	24,334		$	253			1	%
Total current liabilities			17,112			18,042			(930	)		-5	%
Net working capital		$	7,475		$	6,292		$	1,183			19	%

* Accounts receivable, net of allowance for uncollectible accounts and accounts payable have increased by the following amounts due to reclassifications		$	-		$	1,299

(D)	Five Quarter Statement of Operations and Adjusted EBITDA

($'s in thousands)	For the three months ending
(unaudited)	September 30, 2015			% of Sales			June 30, 2015			% of Sales			March 31, 2015			% of Sales			December 31, 2014			% of Sales			September 30, 2014			% of Sales
Revenues:
License and transaction fees	$	12,925			77.9	%	$	11,938			67.7	%	$	11,060			72.0	%	$	10,480			81.7	%	$	10,156			82.9	%
Equipment Sales		3,675			22.1	%		5,708			32.3	%		4,298			28.0	%		2,341			18.3	%		2,096			17.1	%
Total revenue		16,600			100.0	%		17,646			100.0	%		15,358			100.0	%		12,822			100.0	%		12,252			100.0	%

Costs of sales/revenues:
License and transaction fees		8,705			67.4	%		7,863			65.9	%		7,157			64.7	%		7,158			68.3	%		7,251			71.4	%
Equipment sales		2,848			77.5	%		4,975			87.2	%		3,055			71.1	%		1,930			82.4	%		1,866			89.0	%
Total costs of sales/revenues		11,553			69.6	%		12,838			72.8	%		10,213			57.9	%		9,088			51.5	%		9,117			51.7	%

Gross Profit:
License and transaction fees		4,220			32.6	%		4,075			34.1	%		3,903			35.3	%		3,323			31.7	%		2,905			28.6	%
Equipment sales		827			22.5	%		733			12.8	%		1,243			28.9	%		412			17.6	%		230			11.0	%
Total gross profit		5,047			30.4	%		4,808			27.2	%		5,145			33.5	%		3,734			29.1	%		3,134			25.6	%

Operating expenses:
Selling, general and administrative		4,796			28.9	%		5,009			28.4	%		4,280			27.9	%		3,530			27.5	%		3,632			29.6	%
Depreciation		139			0.8	%		156			0.9	%		135			0.9	%		152			1.2	%		169			1.4	%
Total operating expenses		4,935			29.7	%		5,165			29.3	%		4,415			28.7	%		3,682			28.7	%		3,801			31.0	%

Operating income (loss)		112			0.7	%		(357	)		-2.0	%		731			4.8	%		51			0.4	%		(666	)		-5.4	%

Other income (expense):
Interest income		51			0.3	%		42			0.3	%		26			0.2	%		4			0.0	%		10			0.1	%
Other income		-			0.0	%		52			0.3	%		-			0.0	%		-			0.0	%		-			0.0	%
Interest expense		(119	)		-0.7	%		(92	)		-0.6	%		(85	)		-0.5	%		(49	)		-0.3	%		(75	)		-0.5	%
Change in fair value of warrant liabilities		343			2.1	%		263			1.6	%		(1,101	)		-6.6	%		135			0.8	%		310			1.9	%
Total other income (expense), net		275			1.7	%		265			1.5	%		(1,160	)		-7.6	%		90			0.7	%		245			2.0	%

Income (loss) before (benefit) provision for income taxes		387			2.3	%		(92	)		-0.5	%		(429	)		-2.8	%		141			1.1	%		(421	)		-3.4	%
Benefit (provision) for income taxes		(27	)		-0.2	%		(109	)		-0.6	%		(138	)		-0.9	%		(402	)		-3.1	%		360			2.9	%

Net income (loss)		360			2.2	%		(201	)		-1.1	%		(567	)		-3.7	%		(261	)		-2.0	%		(61	)		-0.5	%


Less interest income		(51	)		-0.3	%		(42	)		-0.3	%		(26	)		-0.2	%		(4	)		0.0	%		(10	)		-0.1	%
Plus interest expenses		119			0.7	%		92			0.6	%		85			0.5	%		49			0.3	%		75			0.5	%
Plus income tax expense (benefit)		27			0.2	%		109			0.7	%		138			0.8	%		402			2.4	%		(360	)		-2.2	%
Plus depreciation expense		1,350			8.1	%		1,381			8.3	%		1,433			8.6	%		1,444			8.7	%		1,473			8.9	%
Less change in fair value of warrant liabilities		(343	)		-2.1	%		(263	)		-1.6	%		1,101			6.6	%		(135	)		-0.8	%		(310	)		-1.9	%
Plus stock-based compensation		272			1.6	%		175			1.1	%		216			1.3	%		186			1.1	%		139			0.8	%
Adjusted EBITDA	$	1,734			10.4	%	$	1,251			7.1	%	$	2,380			15.5	%	$	1,681			13.1	%	$	946			7.7	%

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

(E)	Five Quarter Selling, General, & Administrative Expenses

	Three months ended
($ in thousands) (unaudited)	September 30, 2015			% of SG&A			June 30, 2015			% of SG&A			March 30, 2015			% of SG&A			December 31 2014			% of SG&A			September 30, 2014			% of SG&A

Salaries and benefit costs	$	2,685			56.0	%	$	2,295			45.8	%	$	2,533			59.2	%	$	2,131			60.4	%	$	2,204			60.7	%
Marketing related expenses		333			6.9	%		580			11.6	%		184			4.3	%		215			6.1	%		247			6.8	%
Professional services		799			16.7	%		844			16.8	%		708			16.5	%		460			13.0	%		498			13.7	%
Bad debt expense		236			4.9	%		497			9.9	%		303			7.1	%		141			4.0	%		159			4.4	%
Premises, equipment and insurance costs		399			8.3	%		475			9.5	%		372			8.7	%		370			10.5	%		402			11.0	%
Research and development expenses		191			4.0	%		154			3.1	%		96			2.2	%		115			3.3	%		50			1.4	%
Other expenses		153			3.2	%		164			3.3	%		84			2.0	%		98			2.8	%		72			2.0	%
Total SG&A expenses	$	4,796			100	%	$	5,009			100	%	$	4,280			100	%	$	3,530			100	%	$	3,632			100	%

SG&A expenses as a percentage of revenue		28.9	%					28.4	%					27.9	%					27.5	%					29.6	%

(F)	Five Quarter Condensed Balance Sheet and Other Data

($ in thousands) (unaudited)		September 30, 2015		June 30, 2015		March 31, 2015		December 31, 2014			September 30, 2014

Assets
Current assets:
Cash		$	11,592	$	11,374	$	8,475	$	6,734		$	10,916
Accounts receivable, less allowance	*		6,448		5,971		5,245		4,591			3,798
Finance receivables			946		941		750		363			279
Inventory			3,718		4,216		4,241		3,448			2,629
Other current assets			1,883		1,832		1,322		1,495			1,285
Total current assets			24,587		24,334		20,033		16,631			18,907

Finance receivables, less current portion			3,525		3,698		3,505		1,643			949
Prepaid expenses and other assets			342		350		423		411			383
Property and equipment, net			11,890		12,869		13,574		16,451			17,780
Deferred income taxes			25,761		25,788		26,169		26,290			26,714
Goodwill and intangibles			8,095		8,095		8,095		8,095			8,095
Total assets		$	74,200	$	75,134	$	71,799	$	69,521		$	72,828

Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses	*	$	11,615	$	12,650	$	9,044	$	8,945		$	10,764
Line of credit			4,000		4,000		4,000		4,000			5,000
Other current liabilities			1,497		1,392		1,294		1,064			1,068
Total current liabilities			17,112		18,042		14,338		14,009			16,832
Long-term liabilities
Total long-term liabilities			3,116		3,781		4,134		1,834			2,181
Total liabilities			20,228		21,823		18,472		15,843			19,013

Shareholders' equity:
Total shareholders' equity			53,972		53,311		53,327		53,678			53,815
Total liabilities and shareholders' equity		$	74,200	$	75,134	$	71,799	$	69,521		$	72,828

Total current assets		$	24,587	$	24,334	$	20,033	$	16,631		$	18,907
Total current liabilities			17,112		18,042		14,338		14,009			16,832
Net working capital		$	7,475	$	6,292	$	5,695	$	2,622		$	2,075

* Accounts receivable, net of allowance for uncollectible accounts and accounts payable have increase by the following amounts due to reclassifications		$	-	$	1,299	$	1,842	$	1,832		$	1,353

Net cash provided by (used in) operating activities		$	362	$	2,680	$	65	$	(3,039	)	$	(1,405	)
Purchase of property for rental program			-		-		-		-			(1,642	)
Free cash flow		$	362	$	2,680	$	65	$	(3,039	)	$	237

(G)	Five Quarter Condensed Statement of Cash Flows

	Three months ended
($ in thousands)	September 30, 2015			June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014
(unaudited)

OPERATING ACTIVITIES:
Net income (loss)	$	360		$	(201	)	$	(567	)	$	(261	)	$	(61	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Charges incurred in connection with share-based compensation		272			175			216			186			139
Gain on disposal of property and equipment		(1	)		(4	)		(6	)		(4	)		(3	)
Bad debt expense		236			497			303			141			159
Depreciation		1,350			1,381			1,433			1,444			1,473
Change in fair value of warrant liabilities		(343	)		(263	)		1,101			(135	)		(310	)
Deferred income taxes, net		27			31			121			423			(361	)
Gain on sale of finance receivables		-			(52	)		-			-			-
Recognition of deferred gain from sale-leaseback transactions		(215	)		(215	)		(215	)		(215	)		(188	)
Changes in operating assets and liabilities:
Accounts receivable		(713	)		(1,223	)		(984	)		(842	)		5
Finance receivables		168			(332	)		(2,249	)		(778	)		(756	)
Inventory		219			(639	)		651			(805	)		(1,138	)
Prepaid expenses and other current assets		48			(97	)		151			(247	)		(111	)
Accounts payable		(1,044	)		3,491			(141	)		(1,859	)		(46	)
Accrued expenses		(2	)		93			234			(87	)		(186	)
Income taxes payable		-			37			17			-			(21	)
Net change in operating assets and liabilities		(1,324	)		1,330			(2,321	)		(4,618	)		(2,253	)

Net cash provided by (used in) operating activities		362			2,680			65			(3,039	)		(1,405	)

INVESTING ACTIVITIES:
Purchase of property and equipment		(49	)		(6	)		(4	)		(19	)		(31	)
Purchase of property for rental program		-			-			-			-			(1,642	)
Proceeds from sale of rental equipment under sale-leaseback transaction		-			-			-			-			4,994
Proceeds from sale of property and equipment		4			8			19			11			24

Net cash provided by (used in) investing activities		(45	)		2			16			(8	)		3,345

FINANCING ACTIVITIES:
Net proceeds from the issuance (retirement) of common stock and exercise of common stock warrants		29			-			-			(62	)		-
Excess tax benefits from share-based compensation		-			10			-			-			-
Net Proceeds (retirement) of Debt		(128	)		207			1,660			(1,073	)		(96	)

Net cash provided by (used in) financing activities		(99	)		217			1,660			(1,135	)		(96	)

Net increase (decrease) in cash		218			2,899			1,741			(4,182	)		1,844

Cash at beginning of period		11,374			8,475			6,734			10,916			9,072

Cash at end of period	$	11,592		$	11,374		$	8,475		$	6,734		$	10,916

Supplemental disclosures of cash flow information:
Depreciation expense allocated to cost of services	$	1,199		$	1,252		$	1,289		$	1,283		$	1,295
Reclass of rental program property to (from) inventory, net	$	(279	)	$	(719	)	$	1,374		$	14		$	4

(H)	Consolidated Statement of Shareholders’ Equity

(unaudited)	Series A Convertible Preferred Stock				Common Stock				Accumulated
($ in thousands)	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		-		-		25,976		157		-			157
2014 Stock Option Incentive Plan		-		-		-		115		-			115
Net income		-		-		-		-		360			360

Balance, September 30, 2015		442,968	$	3,138		35,784,218	$	225,175	$	(174,341	)	$	53,972

(I)	Reconciliation of Net Loss to Non-GAAP Net Income (Loss) and Net Earnings Loss Per Common Share - Diluted to Non-GAAP Net Earnings (Loss) Per Common Share – Diluted

	Three months ended
(unaudited) ($ in thousands)	September 30, 2015			June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014

Net income (loss)	$	360		$	(201	)	$	(567	)	$	(261	)	$	(61	)
Non-GAAP adjustments:
Non-cash portion of income tax provision/benefit		27			72			121			402			(369	)
Fair value of warrant adjustment		(343	)		(263	)		1,101			(135	)		(310	)
Non-GAAP net income (loss)	$	44		$	(392	)	$	655		$	6		$	(740	)

Net income (loss)	$	360		$	(201	)	$	(567	)	$	(261	)	$	(61	)
Cumulative preferred dividends		(332	)		-			(332	)		-			(332	)
Net income (loss) applicable to common shares	$	28		$	(201	)	$	(899	)	$	(261	)	$	(393	)

Non-GAAP net income (loss)	$	44		$	(392	)	$	655		$	6		$	(740	)
Cumulative preferred dividends		(332	)		-			(332	)		-			(332	)
Non-GAAP net income (loss) applicable to common shares	$	(288	)	$	(392	)	$	323		$	6		$	(1,072	)

Net earnings (loss) per common share - basic	$	-		$	(0.01	)	$	(0.03	)	$	(0.01	)	$	(0.01	)
Non-GAAP net earnings (loss) per common share - basic	$	(0.01	)	$	(0.01	)	$	0.01		$	-		$	(0.03	)
Basic weighted average number of common shares outstanding		35,788,199			35,716,603			35,687,650			35,657,519			35,586,455

Net earnings (loss) per common share - diluted	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.01	)	$	(0.01	)
Non-GAAP net earnings (loss) per common share - diluted	$	(0.01	)	$	(0.01	)	$	0.01		$	-		$	(0.03	)
Diluted weighted average number of common shares outstanding		36,427,683			35,716,603			35,687,650			35,657,519			35,586,455

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 below.

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 are 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 below 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 and non-cash portions of the Company’s income tax benefit (provision).

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.

Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, 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 USAT's operations. We have excluded the non-cash expense, stock-based compensation, as it does not reflect the cash-based operations of USAT. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance and liquidity, and because it is less susceptible to variances in actual performance resulting from depreciation and amortization and non-cash charges for changes in fair value of warrant liabilities and stock-based compensation expense.

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.

Investor Contact:

Mike Bishop

The Blueshirt Group

Tel: +1 415-217-4968

mike@blueshirtgroup.com

Source: USA Technologies, Inc.

F-USAT