CANTALOUPE, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - USA TECHNOLOGIES, INC 8-K 11-9-2016 - CANTALOUPE, INC.	form8k.htm

Exhibit 99.1

USA USA Technologies Announces First Quarter Fiscal Year 2017 Results

MALVERN, Pa. – Nov. 9, 2016 – 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 first quarter ended September 30, 2016.

First Quarter Financial Highlights:

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Total quarterly revenue of $21.6 million, a year-over-year increase of 30%

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448,000 connections to ePort service, representing a year-over-year increase of 28%

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Added 350 customers to achieve record 11,400 total customers compared to 10,275 as of a year ago, a year-over-year increase of 11%

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Quarterly record license and transaction fee revenue of $16.4 million, a year-over-year increase of 27%

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Ended the quarter with $18.2 million in cash

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Quarterly GAAP net loss of $2.5 million, primarily attributable to the $1.5 million increase in the fair value of the warrant liabilities, as well the $1.7 million dollar increase in professional services included in SG&A related to SOX 404 compliance, internal audit, and audit of our financial statements driven primarily by our status as a first time accelerated filer which required an audit of our annual SOX 404 assessment

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Quarterly Non-GAAP net loss of $1.0 million

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Quarterly Adjusted EBITDA of $0.7 million

First Quarter Financial Highlights, Connections & Transaction Data:

	As of and for the three months ended September 30,
(Connections and $'s in thousands, transactions in millions, eps is not rounded)	2016			2015			Change			% Change
Revenues:
License and transaction fees	$	16,365		$	12,925		$	3,440			27	%
Equipment Sales		5,223			3,675			1,548			42	%
Total revenues	$	21,588		$	16,600		$	4,988			30	%

License and transaction fee margin		31.3	%		32.6	%		-1.3	%		-4	%

Equipment sales gross margin		20.0	%		22.5	%		-2.5	%		-11	%

Overall Gross Margin		28.6	%		30.4	%		-1.8	%		-6	%

Operating income/(loss)	$	(950	)	$	112		$	(1,062	)		-948	%

Net income/(loss)	$	(2,464	)	$	360		$	(2,824	)		-784	%

Net income (loss) per common shares - basic	$	(0.07	)	$	-		$	(0.07	)		-700	%

Net income (loss) per common shares - diluted	$	(0.07	)	$	(0.01	)	$	(0.06	)		600	%

Net New Connections		19			16			3			19	%

Total Connections (at period end)		448			349			99			28	%

Total Number of Transactions (millions)		95			69			26			38	%

Transaction Volume (millions)	$	183		$	127		$	56			44	%

Adjusted EBITDA	$	663		$	1,751		$	(1,088	)		-62	%

Non-GAAP net income (loss)	$	(955	)	$	61		$	(1,016	)		-1666	%

“USA Technologies continued its strong connection and revenue growth and is executing in the market to drive cashless and mobile payments to self-service retail locations,” said Stephen P. Herbert, USA Technologies’ chairman and chief executive officer. “As we move further into our fiscal year, we expect to see both continued top line growth and expanding profitability as we drive wider adoption of our ePort Connect service to vending, kiosks, and other unattended retail locations. Our customers continue to see compelling economics which underpins their decisions to upgrade 100% of their locations to our technology. Further, as the market advances we expect our ePort Interactive Service, which enables a more robust consumer experience and yields improved performance at the location, to expand market share.”

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, November 9, 2016.

To participate in the conference call, please dial (866) 393-1608 approximately 10 minutes prior to the call. International callers should dial (224) 357-2194. Please reference conference ID # 8492228.

A live webcast of the conference call will be available at http://usat.client.shareholder.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 9, 2016 until 11:30 a.m. Eastern Time on November 12, 2016 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 8492228. 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 improve cash flows from operations; whether USAT’s 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:

Statements of Operations for the 3 Months Ended September 30, 2016 and 2015

Five Quarter Select Key Performance Indicators

Comparative Balance Sheets as of September 30, 2016 and June 30, 2016

Five Quarter Statements of Operations and Adjusted EBITDA

Five Quarter Selling, General, & Administrative Expenses

Five Quarter Condensed Balance Sheets

Five Quarter Statements of Cash Flows

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

(A)	Statement of Operations for the 3 Months Ended September 30, 2016 and 2015

	For the three months ended September 30,
($ in thousands, except shares and per share data)	2016			% of Sales			2015			% of Sales			Change			% Change

Revenues:
License and transaction fees	$	16,365			75.8	%	$	12,925			77.9	%	$	3,440			27	%
Equipment sales		5,223			24.2	%		3,675			22.1	%		1,548			42	%
Total revenues		21,588			100.0	%		16,600			100.0	%		4,988			30	%

Costs of sales/revenues:
Cost of services		11,243			68.7	%		8,705			67.4	%		2,538			29	%
Cost of equipment		4,178			80.0	%		2,848			77.5	%		1,330			47	%
Total costs of sales/revenues		15,421			71.4	%		11,553			69.6	%		3,868			33	%

Gross profit		6,167			28.6	%		5,047			30.4	%		1,120			22	%

Operating expenses:
Selling, general and administrative		6,909			32.0	%		4,796			28.9	%		2,113			44	%
Depreciation and amortization		208			1.0	%		139			0.8	%		69			50	%
Total operating expenses		7,117			33.0	%		4,935			29.7	%		2,182			44	%

Operating income (loss)		(950	)		-4.4	%		112			0.7	%		(1,062	)		-948	%

Other income (expense):
Interest income		73			0.3	%		51			0.3	%		22			43	%
Interest expense		(212	)		-1.0	%		(119	)		-0.7	%		(93	)		78	%
Change in fair value of warrant liabilities		(1,490	)		-6.9	%		343			2.1	%		(1,833	)		-534	%
Total other income (expense), net		(1,629	)		-7.5	%		275			1.7	%		(1,904	)		-692	%

Income (loss) before provision for income taxes		(2,579	)		-11.9	%		387			2.3	%		(2,966	)		-766	%
Benefit (provision) for income taxes		115			0.5	%		(27	)		-0.2	%		142			-526	%

Net income (loss)		(2,464	)		-11.4	%		360			2.2	%		(2,824	)		-784	%
Cumulative preferred dividends		(334	)		-1.5	%		(334	)		-2.0	%		-			0	%
Net income (loss) applicable to common shares	$	(2,798	)		-13.0	%	$	26			0.2	%	$	(2,824	)		-10862	%

Net earnings (loss) per common share - basic	$	(0.07	)				$	-					$	(0.07	)		-700	%
Net earnings (loss) per common share - diluted	$	(0.07	)				$	(0.01	)				$	(0.06	)		600	%

Basic weighted average number of common shares outstanding		38,488,005						35,848,395						2,639,610			7	%
Diluted weighted average number of common shares outstanding		38,488,005						36,487,879						2,000,126			5	%

(B)	Five Quarter Select Key Performance Indicators

	As of and for the three months ended
	September 30, 2016			June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015
Connections:
Gross New Connections		22,000			33,000			34,000			23,000			20,000
% from Existing Customer Base		86	%		83	%		91	%		89	%		86	%
Net New Connections		19,000			28,000			32,000			20,000			16,000
Total Connections		448,000			429,000			401,000			369,000			349,000

Customers:
New Customers Added		350			300			125			350			675
Total Customers		11,400			11,050			10,750			10,625			10,275

Volumes:
Total Number of Transactions (millions)		95			89			82			76			69
Transaction Volume (millions)	$	183		$	169		$	151		$	138		$	126

Financing Structure of Connections:
JumpStart		7.7	%		6.5	%		7.4	%		10.1	%		13.8	%
QuickStart & All Others *		92.3	%		93.5	%		92.6	%		89.9	%		86.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

*Includes credit sales with standard trade receivable terms

(C)	Comparative Balance Sheets September 30, 2016 to June 30, 2016

($ in thousands)	September 30, 2016			June 30, 2016			Change			% Change
Assets
Current assets:
Cash	$	18,198		$	19,272		$	(1,074	)		-6	%
Accounts receivable, less allowance		5,840			4,899			941			19	%
Finance receivables		3,349			3,588			(239	)		-7	%
Inventory, net		4,264			2,031			2,233			110	%
Prepaid expenses and other current assets		1,439			987			452			46	%
Deferred income taxes		2,271			2,271			-			0	%
Total current assets		35,361			33,048			2,313			7	%

Finance receivables, less current portion		3,962			3,718			244			7	%
Other assets		163			348			(185	)		-53	%
Property and equipment, net		9,570			9,765			(195	)		-2	%
Deferred income taxes		25,568			25,453			115			0	%
Intangibles, net		754			798			(44	)		-6	%
Goodwill		11,703			11,703			-			0	%
Total assets	$	87,081		$	84,833		$	2,248			3	%

Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	8,693		$	12,354		$	(3,661	)		-30	%
Accrued expenses		3,912			3,458			454			13	%
Line of credit, net		7,258			7,119			139			2	%
Current obligations under long-term debt		834			629			205			33	%
Income taxes payable		8			18			(10	)		-56	%
Warrant liabilities		-			3,739			(3,739	)		100	%
Deferred gain from sale-leaseback transactions		685			860			(175	)		-20	%
Total current liabilities		21,390			28,177			(6,787	)		-24	%
Long-term liabilities
Long-term debt, less current portion		1,517			1,576			(59	)		-4	%
Accrued expenses, less current portion		11			15			(4	)		-27	%
Deferred gain from sale-leaseback transactions, less current portion		-			40			(40	)		-100	%
Total long-term liabilities		1,528			1,631			(103	)		-6	%
Total liabilities		22,918			29,808			(6,890	)		-23	%

Shareholders' equity:
Preferred stock, no par value		3,138			3,138			-			0	%
Common stock, no par value		244,996			233,394			11,602			5	%
Accumulated deficit		(183,971	)		(181,507	)		(2,464	)		1	%
Total shareholders' equity		64,163			55,025			9,138			17	%
Total liabilities and shareholders' equity	$	87,081		$	84,833		$	2,248			3	%

Net working capital	$	13,971		$	4,871		$	9,100			187	%

(D)	Five Quarter Statement of Operations and Adjusted EBITDA

($ in thousands)	For the three months ended
	September 30, 2016			% of Sales			June 30, 2016			% of Sales			March 31, 2016			% of Sales			December 31, 2015			% of Sales			September 30, 2015			% of Sales
Revenues:
License and transaction fees	$	16,365			75.8	%	$	15,263			69.6	%	$	14,727			72.3	%	$	13,674			73.9	%	$	12,925			77.9	%
Equipment Sales		5,223			24.2	%		6,681			30.4	%		5,634			27.7	%		4,829			26.1	%		3,675			22.1	%
Total revenue		21,588			100.0	%		21,944			100.0	%		20,361			100.0	%		18,503			100.0	%		16,600			100.0	%

Costs of sales/revenues:
License and transaction fees		11,243			68.7	%		10,614			69.5	%		9,703			65.9	%		9,067			66.3	%		8,705			67.4	%
Equipment sales		4,178			80.0	%		5,547			83.0	%		4,986			88.5	%		3,953			81.9	%		2,848			77.5	%
Total costs of sales/revenues		15,421			71.4	%		16,161			73.6	%		14,689			72.1	%		13,020			70.4	%		11,553			69.6	%

Gross Profit:
License and transaction fees		5,122			31.3	%		4,649			30.5	%		5,024			34.1	%		4,607			33.7	%		4,220			32.6	%
Equipment sales		1,045			20.0	%		1,134			17.0	%		648			11.5	%		876			18.1	%		827			22.5	%
Total gross profit		6,167			28.6	%		5,783			26.4	%		5,672			27.9	%		5,483			29.6	%		5,047			30.4	%

Operating expenses:
Selling, general and administrative		6,909			32.0	%		6,721			30.6	%		6,094			29.9	%		4,762			25.7	%		4,796			28.9	%
Depreciation		208			1.0	%		208			0.9	%		173			0.8	%		127			0.7	%		139			0.8	%
Impairment of intangible asset		-			0.0	%		432			2.0	%		-			0.0	%		-			0.0	%		-			0.0	%
Total operating expenses		7,117			33.0	%		7,361			33.5	%		6,267			30.8	%		4,889			26.4	%		4,935			29.7	%

Operating income (loss)		(950	)		-4.4	%		(1,578	)		-7.2	%		(595	)		-2.9	%		594			3.2	%		112			0.7	%

Other income (expense):
Interest income		73			0.3	%		182			0.8	%		67			0.3	%		20			0.1	%		51			0.3	%
Other income		-			0.0	%		-			0.0	%		-			0.0	%		-			0.0	%		-			0.0	%
Interest expense		(212	)		-1.0	%		(197	)		-0.9	%		(180	)		-0.9	%		(104	)		-0.6	%		(119	)		-0.7	%
Change in fair value of warrant liabilities		(1,490	)		-6.9	%		18			0.1	%		(4,805	)		-23.6	%		(1,230	)		-6.6	%		343			2.1	%
Total other income (expense), net		(1,629	)		-7.5	%		3			0.0	%		(4,918	)		-24.2	%		(1,314	)		-7.1	%		275			1.7	%

Loss before provision for income taxes		(2,579	)		-11.9	%		(1,575	)		-7.2	%		(5,513	)		-27.1	%		(720	)		-3.9	%		387			2.3	%
Benefit (provision) for income taxes		115			0.5	%		703			3.2	%		93			0.5	%		(154	)		-0.8	%		(27	)		-0.2	%

Net income (loss)		(2,464	)		-11.4	%		(872	)		-4.0	%		(5,420	)		-26.6	%		(874	)		-4.7	%		360			2.2	%

Less interest income		(73	)		-0.3	%		(182	)		-0.8	%		(67	)		-0.3	%		(20	)		-0.1	%		(51	)		-0.3	%
Plus interest expenses		212			1.0	%		197			0.9	%		180			0.9	%		104			0.6	%		119			0.7	%
Plus income tax expense		(115	)		-0.5	%		(703	)		-3.2	%		(93	)		-0.5	%		154			0.8	%		27			0.2	%
Plus depreciation expense		1,257			5.8	%		1,272			5.8	%		1,190			5.8	%		1,323			7.2	%		1,350			8.1	%
Plus amortization expense		44			0.2	%		44			0.2	%		44			0.2	%		-			0.0	%		-			0.0	%
Plus (less) change in fair value of warrant liabilities		1,490			6.9	%		(18	)		-0.1	%		4,805			23.6	%		1,230			6.6	%		(343	)		-2.1	%
Plus stock-based compensation		211			1.0	%		198			0.9	%		142			0.7	%		237			1.3	%		272			1.6	%
Plus intangible asset impairment		-			0.0	%		432			2.0	%		-			0.0	%		-			0.0	%		-			0.0	%
Plus VendScreen non-recurring charges		101			0.5	%		258			1.2	%		461			2.3	%		106			0.6	%		-			0.0	%
Plus litigation related professional fees		-			0.0	%		-			0.0	%		105			0.5	%		-			0.0	%		-			0.0	%
Adjusted EBITDA	$	663			3.1	%	$	626			2.9	%	$	1,347			6.6	%	$	2,260			12.2	%	$	1,734			10.4	%

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

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

	Three months ended
($ in thousands)	September 30, 2016			% of SG&A			June 30, 2016			% of SG&A			March 31, 2016			% of SG&A			December 31, 2015			% of SG&A			September 30, 2015			% of SG&A

Salaries and benefit costs	$	3,129			45.3	%	$	3,050			45.4	%	$	2,760			45.4	%	$	2,786			58.6	%	$	2,685			56.0	%
Marketing related expenses		329			4.8	%		635			9.4	%		362			5.9	%		335			7.0	%		333			6.9	%
Professional services		2,520			36.5	%		1,533			22.8	%		1,152			18.9	%		839			17.6	%		782			16.3	%
Bad debt expense		97			1.4	%		470			7.0	%		505			8.3	%		239			5.0	%		236			4.9	%
Premises, equipment and insurance costs		499			7.2	%		555			8.3	%		460			7.5	%		347			7.3	%		399			8.3	%
Research and development expenses		124			1.8	%		123			1.8	%		131			2.1	%		37			0.8	%		191			4.0	%
VendScreen non-recurring charges		101			1.5	%		258			3.8	%		461			7.6	%		106			2.2	%		17			0.4	%
Litigation related professional fees		33			0.5	%		51			0.8	%		105			1.7	%		-			0.0	%		-			0.0	%
Other expenses		77			1.1	%		46			0.7	%		158			2.6	%		73			1.5	%		153			3.2	%
Total SG&A expenses	$	6,909			100	%	$	6,721			100	%	$	6,094			100	%	$	4,762			100	%	$	4,796			100	%

Total Revenue	$	21,588					$	21,944					$	20,361					$	18,503					$	16,600
SG&A expenses as a percentage of revenue		32.0	%					30.6	%					29.9	%					25.7	%					28.9	%

(F)	Five Quarter Condensed Balance Sheets

($ in thousands)	September 30, 2016		June 30, 2016		March 31, 2016			December 31, 2015		September 30, 2015

Assets
Current assets:
Cash	$	18,198	$	19,272	$	14,901		$	14,809	$	11,592
Accounts receivable, less allowance		5,840		4,899		8,345			6,976		6,448
Finance receivables		3,349		3,588		1,677			1,503		946
Inventory, net		4,264		2,031		2,341			2,849		3,718
Other current assets		3,710		3,258		2,336			2,160		1,883
Total current assets		35,361		33,048		29,600			28,297		24,587

Finance receivables, less current portion		3,962		3,718		3,042			2,435		3,525
Other assets		163		348		337			326		342
Property and equipment, net		9,570		9,765		10,584			10,856		11,890
Deferred income taxes		25,568		25,453		25,701			25,607		25,761
Goodwill and intangibles		12,457		12,501		12,976			8,095		8,095
Total assets	$	87,081	$	84,833	$	82,240		$	75,616	$	74,200

Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	12,605	$	15,812	$	15,368		$	9,992	$	11,615
Line of credit, net		7,258		7,119		6,980			7,000		4,000
Warrant Liabilities		-		3,739		5,964			-		-
Other current liabilities		1,527		1,507		1,485			1,384		1,497
Total current liabilities		21,390		28,177		29,797			18,376		17,112
Long-term liabilities
Total long-term liabilities		1,528		1,631		2,016			3,945		3,116
Total liabilities		22,918		29,808		31,813			22,321		20,228

Shareholders' equity:
Total shareholders' equity		64,163		55,025		50,427			53,295		53,972
Total liabilities and shareholders' equity	$	87,081	$	84,833	$	82,240		$	75,616	$	74,200

Total current assets	$	35,361	$	33,048	$	29,600		$	28,297	$	24,587
Total current liabilities		21,390		28,177		29,797			18,376		17,112
Net working capital	$	13,971	$	4,871	$	(197	)	$	9,921	$	7,475

(G)	Five Quarter Statements of Cash Flows

	Three months ended
($ in thousands)	September 30, 2016			June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015
OPERATING ACTIVITIES:
Net (loss) income	$	(2,464	)	$	(872	)	$	(5,420	)	$	(874	)	$	360
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		211			198			142			237			272
Gain on disposal of property and equipment		-			(110	)		(15	)		(41	)		(1	)
Non-cash interest and amortization of debt discount		105			13			-			-			-
Bad debt expense		97			470			506			238			236
Depreciation		1,257			1,272			1,190			1,323			1,350
Amortization of intangible assets		44			43			44			-			-
Impairment of intangible asset		-			432			-			-			-
Change in fair value of warrant liabilities		1,490			(18	)		4,805			1,230			(343	)
Deferred income taxes, net		(115	)		(748	)		(93	)		154			27
Recognition of deferred gain from sale-leaseback transactions		(215	)		(215	)		(215	)		(215	)		(215	)
Changes in operating assets and liabilities:
Accounts receivable		(1,038	)		2,977			(1,872	)		(767	)		38
Finance receivables		(5	)		(2,587	)		(154	)		533			(583	)
Inventory		(2,223	)		(82	)		250			649			219
Prepaid expenses and other assets		(224	)		(397	)		(160	)		(254	)		48
Accounts payable		(3,661	)		329			4,154			(1,623	)		(1,044	)
Accrued expenses		486			115			1,166			(13	)		(2	)
Income taxes payable		(10	)		453			-			(70	)		-
Net change in operating assets and liabilities		(6,675	)		808			3,384			(1,545	)		(1,324	)
Net cash provided (used) by operating activities		(6,265	)		1,273			4,328			507			362

INVESTING ACTIVITIES:
Purchase and additions of intangible assets, property and equipment		(168	)		(207	)		(164	)		(118	)		(49	)
Purchase of property for rental program		(642	)		-			-			-			-
Proceeds from sale of property and equipment		-			265			19			101			4
Cash paid for assets acquired from VendScreen		-			-			(5,625	)		-			-
Net cash provided by (used in) investing activities		(810	)		58			(5,770	)		(17	)		(45	)

FINANCING ACTIVITIES:
Cash used for the retirement of common stock		(31	)		(173	)		-			(40	)		-
Proceeds from exercise of common stock warrants		6,193			3,237			1,652			-			29
Proceeds (payments) from line of credit		-			138			33			3,000			-
Repayment of long-term debt		(161	)		(162	)		(151	)		(233	)		(128	)
Net cash provided by (used in) financing activities		6,001			3,040			1,534			2,727			(99	)

Net increase (decrease) in cash		(1,074	)		4,371			92			3,217			218
Cash at beginning of period		19,272			14,901			14,809			11,592			11,374
Cash at end of period	$	18,198		$	19,272		$	14,901		$	14,809		$	11,592

Supplemental disclosures of cash flow information:
Interest paid in cash	$	87		$	147		$	191		$	107		$	106
Depreciation expense allocated to cost of services	$	1,072		$	1,139		$	1,051		$	1,186		$	1,199
Reclass of rental program property to inventory, net	$	(11	)	$	415		$	347		$	777		$	(279	)
Prepaid items financed with debt	$	54		$	-		$	-		$	-		$	103
Warrant issuance for debt discount	$	-		$	-		$	52		$	-		$	-
Debt financing cost financed with debt	$	-		$	-		$	79		$	-		$	-
Equipment and software acquired under capital lease	$	254		$	-		$	409		$	-		$	35
Disposal of property and equipment	$	-		$	555		$	189		$	238		$	99

(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)	September 30, 2016			June 30, 2016			March 31, 2015			December 31, 2015			September 30, 2015

Net income (loss)	$	(2,464	)	$	(872	)	$	(5,420	)	$	(874	)	$	360
Non-GAAP adjustments:
Non-cash portion of income tax provision		(115	)		(792	)		(38	)		224			27
Change in fair value of warrant adjustment		1,490			(18	)		4,805			1,230			(343	)
VendScreen non-recurring charges		101			258			461			106			-
Litigation related professional fees		33			51			105			-			-
Non-GAAP net income (loss)	$	(955	)	$	(1,373	)	$	(87	)	$	686		$	44

Net income (loss)	$	(2,464	)	$	(872	)	$	(5,420	)	$	(874	)	$	360
Cumulative preferred dividends		(334	)		-			(334	)		-			(334	)
Net income (loss) applicable to common shares	$	(2,798	)	$	(872	)	$	(5,754	)	$	(874	)	$	26

Non-GAAP net income (loss)	$	(955	)	$	(1,373	)	$	(87	)	$	686		$	44
Cumulative preferred dividends		(334	)		-			(334	)		-			(334	)
Non-GAAP net income (loss) applicable to common shares	$	(1,289	)	$	(1,373	)	$	(421	)	$	686		$	(290	)

Net earnings (loss) per common share - basic	$	(0.07	)	$	(0.02	)	$	(0.16	)	$	(0.02	)	$	-
Non-GAAP net earnings (loss) per common share - basic	$	(0.03	)	$	(0.04	)	$	(0.01	)	$	0.02		$	(0.01	)
Basic weighted average number of common shares outstanding		38,488,005			37,325,681			36,161,626			35,909,933			35,848,395

Net earnings (loss) per common share - diluted	$	(0.07	)	$	(0.02	)	$	(0.16	)	$	(0.02	)	$	(0.01	)
Non-GAAP net earnings (loss) per common share - diluted	$	(0.03	)	$	(0.04	)	$	(0.01	)	$	0.02		$	(0.01	)
Diluted weighted average number of common shares outstanding		38,488,005			37,325,681			36,161,626			35,909,933			36,487,879

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

Discussion of Non-GAAP Financial Measures:

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

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

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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