USA Technologies Announces Fourth Quarter and Fiscal Year 2016 Results

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 [phone] approximately 10 minutes prior to the call. International callers should dial [phone]. 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 [phone] (domestic dial-in) or [phone] (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