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
   
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:
 
A. Comparative Income Statement For 3 Months Ended September 30, 2015 and September 30, 2014
 
B. Five Quarter Select Key Performance Indicators
 
C. Comparative Condensed Balance Sheets September 30, 2015 to June 30, 2015
 
D. Five Quarter Statement of Operations and Adjusted EBITDA
 
E. Five Quarter Selling, General, & Administrative Expenses
 
F. Five Quarter Condensed Balance Sheet
 
G. Five Quarter Condensed Statement of Cash Flows
 
H. Consolidated Statement of Shareholders’ Equity
 
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
 
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
 

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