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

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8-K - 8-K - CANTALOUPE, INC.	form8k.htm

Exhibit 99.1

USA Technologies Announces Third Quarter Fiscal Year 2017 Results

Achieved $100 Million Revenue Run-Rate, and 500,000 Connection Goals

MALVERN, Pa. – May 9, 2017 – USA Technologies, Inc. (NASDAQ:USAT) (“USAT”), a premier payment technology service provider of integrated cashless and mobile transactions in the self-service retail market, today reported results for its third quarter ended March 31, 2017.

Third Quarter Financial Highlights:

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Total quarterly record revenue of $26.5 million, a year-over-year increase of 30% marking the 30^th consecutive quarter of growth

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504,000 connections to ePort service, representing a year-over-year increase of 26%

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Added 500 customers to achieve record 12,400 total customers compared to 10,750 as of a year ago, a year-over-year increase of 15%

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Quarterly record license and transaction fee revenue of $17.5 million, a year-over-year increase of 19%

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Operating income of $419,000

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Ended the quarter with $17.8 million in cash

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Quarterly GAAP net income of $136,000

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Quarterly Non-GAAP net income of $345,000

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Quarterly Adjusted EBITDA of $1.9 million

Third Quarter and YTD Financial Highlights, Connections & Transaction Data:

	As of and for the three months ended March 31,
(Connections and $'s in thousands, transactions in millions, eps is not rounded)	2017			2016			Change			% Change
Revenues:
License and transaction fees	$	17,459		$	14,727		$	2,732			18.6	%
Equipment sales		9,001			5,634			3,367			59.8	%
Total revenues	$	26,460		$	20,361		$	6,099			30.0	%

License and transaction fee margin		32.0	%		34.1	%		(2.1	%)

Equipment sales gross margin		11.6	%		11.5	%		0.1	%

Overall Gross Margin		25.0	%		27.9	%		(2.9	%)

Operating income/(loss)	$	419		$	(595	)	$	1,014			170.4	%

Net income/(loss)	$	136		$	(5,420	)	$	5,556			102.5	%

Net loss per common shares - basic and diluted	$	(0.00	)	$	(0.16	)	$	0.16			100.0	%

Net cash provided by (used in) operating activities	$	848		$	4,328		$	(3,480	)		(80.4	%)

Net New Connections		35,000			32,000			3,000			9.4	%

Total Connections (at period end)		504,000			401,000			103,000			25.7	%

Total Number of Transactions (millions)		104.9			82.0			22.9			27.9	%

Transaction Volume (millions)	$	202.5		$	151.0		$	51.5			34.1	%

Adjusted EBITDA	$	1,862		$	1,347		$	515			38.2	%

Non-GAAP net income	$	345		$	(87	)	$	432			496.6	%

	As of and for the nine months ended March 31,
(Connections and $'s in thousands, transactions in millions, eps is not rounded)	2017			2016			Change			% Change
Revenues:
License and transaction fees	$	50,463		$	41,326		$	9,137			22.1	%
Equipment sales		19,341			14,138			5,203			36.8	%
Total revenues	$	69,804		$	55,464		$	14,340			25.9	%

License and transaction fee margin		31.6	%		33.5	%		(1.9	%)

Equipment sales gross margin		16.4	%		16.6	%		(0.2	%)

Overall Gross Margin		27.4	%		29.2	%		(1.8	%)

Operating (loss)/income	$	(297	)	$	111		$	(408	)		(367.6	%)

Net loss	$	(2,095	)	$	(5,934	)	$	3,839			64.7	%

Net loss per common shares - basic and diluted	$	(0.07	)	$	(0.18	)	$	0.11			61.1	%

Net cash provided by (used in) operating activities	$	(4,295	)	$	5,197		$	(9,492	)		(182.7	%)

Net New Connections		75,000			68,000			7,000			10.3	%

Total Connections (at period end)		504,000			401,000			103,000			25.7	%

Total Number of Transactions (millions)		300.2			227.2			73.0			32.1	%

Transaction Volume (millions)	$	577.3		$	415.7		$	161.6			38.9	%

Adjusted EBITDA	$	4,297		$	5,358		$	(1,061	)		(19.8	%)

Non-GAAP net (loss) income	$	(369	)	$	660		$	(1,029	)		(155.9	%)

“USA Technologies has marked another record revenue quarter, while also achieving our 3 year revenue and connection goals. We continue to drive our payment and consumer engagement solutions into the rapidly evolving unattended retail market as we help our operator customers improve each location’s performance,” said Stephen P. Herbert, USA Technologies’ chairman and chief executive officer. “We are leveraging our flexible platform with third party offerings and our own ePort Interactive service to deepen the relationship with customers and provide even more value from each connection, while simultaneously expanding our distribution network.”

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, May 9, 2017.

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 # 8462087.

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 May 9, 2017 until 11:30 a.m. Eastern Time on May 12, 2017 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 8462087. 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® Connect, ePort® Interactive, QuickConnect, an API Web service for developers, and MORE., a customizable loyalty program. USA Technologies has 77 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; the ability of the Company to sell to third party lenders all or a portion of our finance receivables; the ability of a sufficient number of our customers to utilize third party financing companies under our QuickStart program in order to improve our net cash used by operating activities; 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 or successful; 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 and 9 Months Ended March 31, 2017 and 2016

Five Quarter Select Key Performance Indicators

Comparative Balance Sheets as of March 31, 2017 and June 30, 2016

Five Quarter Statements of Operations and Adjusted EBITDA

Five Quarter and YTD 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 Income/(Loss) Per Common Share – Basic and Diluted to Non-GAAP Net Income/(Loss) Per Common Share – Basic and Diluted

(A)	Statement of Operations for the 3 Months and 9 Months Ended March 31, 2017 and 2016

	For the three months ended March 31,
($ in thousands, except shares and per share data)	2017			% of Sales			2016			% of Sales			Change			% Change

Revenues:
License and transaction fees	$	17,459			66.0	%	$	14,727			72.3	%	$	2,732			18.6	%
Equipment sales		9,001			34.0	%		5,634			27.7	%		3,367			59.8	%
Total revenues		26,460			100.0	%		20,361			100.0	%		6,099			30.0	%

Costs of sales/revenues:
Cost of services		11,876			68.0	%		9,703			65.9	%		2,173			22.4	%
Cost of equipment		7,959			88.4	%		4,986			88.5	%		2,973			59.6	%
Total costs of sales/revenues		19,835			75.0	%		14,689			72.1	%		5,146			35.0	%

Gross profit		6,625			25.0	%		5,672			27.9	%		953			16.8	%

Operating expenses:
Selling, general and administrative		5,947			22.5	%		6,094			29.9	%		(147	)		(2.4	%)
Depreciation and amortization		259			1.0	%		173			0.8	%		86			49.7	%
Total operating expenses		6,206			23.5	%		6,267			30.8	%		(61	)		(1.0	%)

Operating income (loss)		419			1.6	%		(595	)		(2.9	%)		1,014			(170.4	%)

Other income (expense):
Interest income		114			0.4	%		67			0.3	%		47			70.1	%
Interest expense		(188	)		(0.7	%)		(180	)		(0.9	%)		(8	)		(4.4	%)
Change in fair value of warrant liabilities		—			0.0	%		(4,805	)		(23.6	%)		4,805			100.0	%
Total other expense, net		(74	)		(0.3	%)		(4,918	)		(24.2	%)		4,844			(98.5	%)

Income (loss) before income taxes		345			1.3	%		(5,513	)		(27.1	%)		5,858			106.3	%
(Provision) benefit for income taxes		(209	)		(0.8	%)		93			0.5	%		(302	)		323.8	%

Net income (loss)		136			0.5	%		(5,420	)		(26.6	%)		5,556			102.5	%
Cumulative preferred dividends		(334	)		(1.3	%)		(334	)		(1.6	%)		—			0.0	%
Net loss applicable to common shares	$	(198	)		(0.7	%)	$	(5,754	)		(28.3	%)	$	5,556			96.6	%

Net loss per common share - basic and diluted	$	(0.00	)				$	(0.16	)				$	0.16			100.0	%

Basic and diluted weighted average number of common shares outstanding		40,327,697						36,161,626						4,166,071			11.5	%

	For the nine months ended March 31,
($ in thousands, except shares and per share data)	2017			% of Sales			2016			% of Sales			Change			% Change

Revenues:
License and transaction fees	$	50,463			72.3	%	$	41,326			74.5	%	$	9,137			22.1	%
Equipment sales		19,341			27.7	%		14,138			25.5	%		5,203			36.8	%
Total revenues		69,804			100.0	%		55,464			100.0	%		14,340			25.9	%

Costs of sales/revenues:
Cost of services	$	34,508			68.4	%	$	27,475			66.5	%		7,033			25.6	%
Cost of equipment		16,170			83.6	%		11,787			83.4	%		4,383			37.2	%
Total costs of sales/revenues		50,678			72.6	%		39,262			70.8	%		11,416			29.1	%

Gross profit		19,126			27.4	%		16,202			29.2	%		2,924			18.0	%

Operating expenses:
Selling, general and administrative		18,649			26.7	%		15,652			28.2	%		2,997			19.1	%
Depreciation and amortization		774			1.1	%		439			0.8	%		335			76.3	%
Total operating expenses		19,423			27.8	%		16,091			29.0	%		3,332			20.7	%

Operating (loss) income		(297	)		(0.4	%)		111			0.2	%		(408	)		(367.6	%)

Other income (expense):
Interest income		387			0.6	%		138			0.2	%		249			180.4	%
Interest expense		(601	)		(0.9	%)		(403	)		(0.7	%)		(198	)		(49.1	%)
Change in fair value of warrant liabilities		(1,490	)		(2.1	%)		(5,692	)		(10.3	%)		4,202			73.8	%
Total other expense, net		(1,704	)		(2.4	%)		(5,957	)		(10.7	%)		4,253			71.4	%

(Loss) before income taxes		(2,001	)		(2.9	%)		(5,846	)		(10.5	%)		3,845			65.8	%
Provision for income taxes		(94	)		(0.1	%)		(88	)		(0.2	%)		(6	)		(6.8	%)

Net loss		(2,095	)		(3.0	%)		(5,934	)		(10.7	%)		3,839			64.7	%
Cumulative preferred dividends		(668	)		(1.0	%)		(668	)		(1.2	%)		—			0.0	%
Net loss applicable to common shares		(2,763	)		(4.0	%)		(6,602	)		(11.9	%)	$	3,839			58.2	%

Net loss per common share - basic and diluted		(0.07	)					(0.18	)				$	0.11			62.1	%

Basic and diluted weighted average number of common shares outstanding		39,703,690						35,972,633						3,731,057			10.4	%

(B)	Five Quarter Select Key Performance Indicators

	As of and for the three months ended
	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Connections:
Gross New Connections		40,000			25,000			22,000			33,000			34,000
% from Existing Customer Base		88	%		80	%		86	%		83	%		91	%
Net New Connections		35,000			21,000			19,000			28,000			32,000
Total Connections		504,000			469,000			448,000			429,000			401,000

Customers:
New Customers Added		500			500			350			300			125
Total Customers		12,400			11,900			11,400			11,050			10,750

Volumes:
Total Number of Transactions (millions)		104.9			100.1			95.1			89.3			82.1
Transaction Volume (millions)	$	202.5		$	191.5		$	183.4		$	169.0		$	151.0

Financing Structure of Connections:
JumpStart		8.6	%		6.8	%		7.7	%		6.5	%		7.4	%
QuickStart & All Others *		91.4	%		93.2	%		92.3	%		93.5	%		92.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

*Includes credit sales with standard trade receivable terms

(C)	Comparative Balance Sheets March 31, 2017 and June 30, 2016

($ in thousands)	March 31, 2017			June 30, 2016			Change			% Change
Assets
Current assets:
Cash and Cash Equivalents	$	17,780		$	19,272		$	(1,492	)		(7.7	%)

Accounts receivable, less allowance for doubtful accounts of $2,851 and $2,814, respectively		6,734			4,899			1,835			37.5	%
Finance receivables, less allowance for credit losses of $25 and $0, respectively		2,057			3,588			(1,531	)		(42.7	%)
Inventory, net		4,147			2,031			2,116			104.2	%
Prepaid expenses and other current assets		1,628			987			641			64.9	%
Deferred income taxes		2,271			2,271			—			—
Total current assets		34,617			33,048			1,569			4.7	%

Finance receivables, less current portion		7,548			3,718			3,830			103.0	%
Other assets		137			348			(211	)		(60.6	%)
Property and equipment, net		9,173			9,765			(592	)		(6.1	%)
Deferred income taxes		25,359			25,453			(94	)		(0.4	%)
Intangibles, net		666			798			(132	)		(16.5	%)
Goodwill		11,492			11,703			(211	)		(1.8	%)
Total assets	$	88,992		$	84,833		$	4,159			4.9	%

Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	11,529		$	12,354		$	(825	)		(6.7	%)
Accrued expenses		3,111			3,458			(347	)		(10.0	%)
Line of credit, net		7,021			7,119			(98	)		(1.4	%)
Current obligations under long-term debt		786			629			157			25.0	%
Income taxes payable		—			18			(18	)		(100.0	%)
Warrant liabilities		—			3,739			(3,739	)		(100.0	%)
Deferred gain from sale-leaseback transactions		255			860			(605	)		(70.3	%)
Total current liabilities		22,702			28,177			(5,475	)		(19.4	%)

Long-term liabilities
Long-term debt, less current portion		1,239			1,576			(337	)		(21.4	%)
Accrued expenses, less current portion		52			15			37			246.7	%
Deferred gain from sale-leaseback transactions, less current portion		—			40			(40	)		(100.0	%)
Total long-term liabilities		1,291			1,631			(340	)		(20.8	%)
Total liabilities		23,993			29,808			(5,815	)		(19.5	%)

Shareholders' equity:
Preferred stock, no par value		3,138			3,138			—			0.0	%
Common stock, no par value		245,463			233,394			12,069			5.2	%
Accumulated deficit		(183,602	)		(181,507	)		(2,095	)		(1.2	%)
Total shareholders' equity		64,999			55,025			9,974			18.1	%
Total liabilities and shareholders' equity	$	88,992		$	84,833		$	4,159			4.9	%

Net working capital	$	11,915		$	4,871		$	7,044			144.6	%

(D)	Five Quarter Statement of Operations and Adjusted EBITDA

	For the three months ended
($ in thousands) (unaudited)	March 31, 2017			% of Sales			December 31, 2016			% of Sales			September 30, 2016			% of Sales			June 30, 2016			% of Sales			March 31 2016			% of Sales
Revenues:
License and transaction fees	$	17,459			66.0	%	$	16,639			76.5	%	$	16,365			75.8	%	$	15,263			69.6	%	$	14,727			72.3	%
Equipment sales		9,001			34.0	%		5,117			23.5	%		5,223			24.2	%		6,681			30.4	%		5,634			27.7	%
Total revenue		26,460			100.0	%		21,756			100.0	%		21,588			100.0	%		21,944			100.0	%		20,361			100.0	%

Costs of sales/revenues:
License and transaction fees		11,876			68.0	%		11,389			68.4	%		11,243			68.7	%		10,614			69.5	%		9,703			65.9	%
Equipment sales		7,959			88.4	%		4,033			78.8	%		4,178			80.0	%		5,547			83.0	%		4,986			88.5	%
Total costs of sales/revenues		19,835			75.0	%		15,422			70.9	%		15,421			71.4	%		16,161			73.6	%		14,689			72.1	%

Gross Profit:
License and transaction fees		5,583			32.0	%		5,250			31.6	%		5,122			31.3	%		4,649			30.5	%		5,024			34.1	%
Equipment sales		1,042			11.6	%		1,084			21.2	%		1,045			20.0	%		1,134			17.0	%		648			11.5	%
Total gross profit		6,625			25.0	%		6,334			29.1	%		6,167			28.6	%		5,783			26.4	%		5,672			27.9	%

Operating expenses:
Selling, general and administrative		5,947			22.5	%		5,793			26.6	%		6,909			32.0	%		6,721			30.6	%		6,094			29.9	%
Depreciation		259			1.0	%		307			1.4	%		208			1.0	%		208			0.9	%		173			0.8	%
Impairment of intangible asset		—			0.0	%		—			0.0	%		—			0.0	%		432			2.0	%		—			0.0	%
Total operating expenses		6,206			23.5	%		6,100			28.0	%		7,117			33.0	%		7,361			33.5	%		6,267			30.8	%

Operating income (loss)		419			1.6	%		234			1.1	%		(950	)		-4.4	%		(1,578	)		-7.2	%		(595	)		-2.9	%

Other income (expense):
Interest income		114			0.4	%		200			0.9	%		73			0.3	%		182			0.8	%		67			0.3	%
Other income		—			0.0	%		—			0.0	%		—			0.0	%		—			0.0	%		—			0.0	%
Interest expense		(188	)		-0.7	%		(201	)		-0.9	%		(212	)		-1.0	%		(197	)		-0.9	%		(180	)		-0.9	%
Change in fair value of warrant liabilities		—			0.0	%		—			0.0	%		(1,490	)		-6.9	%		18			0.1	%		(4,805	)		-23.6	%
Total other (expense) income , net		(74	)		-0.3	%		(1	)		0.0	%		(1,629	)		-7.5	%		3			0.0	%		(4,918	)		-24.2	%

Income (loss) before provision for income taxes		345			1.3	%		233			1.1	%		(2,579	)		-11.9	%		(1,575	)		-7.2	%		(5,513	)		-27.1	%
(Provision) benefit for income taxes		(209	)		-0.8	%		—			0.0	%		115			0.5	%		703			3.2	%		93			0.5	%

Net income (loss)		136			0.5	%		233			1.1	%		(2,464	)		-11.4	%		(872	)		-4.0	%		(5,420	)		-26.6	%

Less interest income		(114	)		-0.4	%		(200	)		-0.9	%		(73	)		-0.3	%		(182	)		-0.8	%		(67	)		-0.3	%
Plus interest expenses		188			0.7	%		201			0.9	%		212			1.0	%		197			0.9	%		180			0.9	%
Plus income tax expense		209			0.8	%		—			0.0	%		(115	)		-0.5	%		(703	)		-3.2	%		(93	)		-0.5	%
Plus depreciation expense		1,165			4.4	%		1,220			5.6	%		1,257			5.8	%		1,272			5.8	%		1,190			5.8	%
Plus amortization expense		45			0.2	%		43			0.2	%		44			0.2	%		44			0.2	%		44			0.2	%
Plus (less) change in fair value of warrant liabilities		—			0.0	%		—			0.0	%		1,490			6.9	%		(18	)		-0.1	%		4,805			23.6	%
Plus stock-based compensation		233			0.9	%		233			1.1	%		211			1.0	%		198			0.9	%		142			0.7	%
Plus intangible asset impairment		—			0.0	%		—			0.0	%		—			0.0	%		432			2.0	%		—			0.0	%
Plus VendScreen non-recurring charges		—			0.0	%		8			0.0	%		101			0.5	%		258			1.2	%		461			2.3	%
Plus litigation related professional fees		—			0.0	%		—			0.0	%		33			0.2	%					0.0	%		105			0.5	%
Adjusted EBITDA	$	1,862			7.0	%	$	1,738			8.0	%	$	696			3.2	%	$	626			2.9	%	$	1,347			6.6	%

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

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

	Three months ended
($ in thousands)	March 31, 2017			% of SG&A			December 31, 2016			% of SG&A			September 30, 2016			% of SG&A			June 30, 2016			% of SG&A			March 31, 2016			% of SG&A
Salaries and benefit costs	$	3,060			51.5	%	$	2,849			49.2	%	$	3,129			45.3	%	$	3,050			45.4	%	$	2,760			45.4	%
Marketing related expenses		569			9.6	%		578			10.0	%		329			4.8	%		635			9.4	%		362			5.9	%
Professional services		1,472			24.8	%		1,213			20.9	%		2,520			36.5	%		1,533			22.8	%		1,152			18.9	%
Bad debt expense		127			2.0	%		352			6.1	%		97			1.3	%		470			7.0	%		505			8.3	%
Premises, equipment and insurance costs		482			8.1	%		498			8.6	%		499			7.2	%		555			8.3	%		460			7.5	%
Research and development expenses		95			1.6	%		173			3.0	%		124			1.8	%		123			1.8	%		131			2.1	%
VendScreen non-recurring charges		—			0.0	%		8			0.1	%		101			1.5	%		258			3.8	%		461			7.6	%
Litigation related professional fees		—			0.0	%		—			0.0	%		33			0.5	%		51			0.8	%		105			1.7	%
Other expenses		142			2.4	%		122			2.1	%		77			1.1	%		46			0.7	%		158			2.6	%
Total SG&A expenses	$	5,947			100	%	$	5,793			100	%	$	6,909			100	%	$	6,721			100	%	$	6,094			100	%
Total Revenue	$	26,460					$	21,756					$	21,588					$	21,944					$	20,361
SG&A expenses as a percentage of revenue		22.5	%					26.6	%					32.0	%					30.6	%					29.9	%

	Nine months ended
($ in thousands)	March 31, 2017			% of SG&A			March 31, 2016			% of SG&A

Salaries and benefit costs	$	9,038			48.5	%	$	8,231			52.6	%
Marketing related expenses		1,476			7.9	%		1,030			6.6	%
Professional services		5,205			27.9	%		2,773			17.7	%
Bad debt expense		576			3.1	%		980			6.3	%
Premises, equipment and insurance costs		1,479			7.9	%		1,206			7.7	%
Research and development expenses		392			2.1	%		359			2.3	%
VendScreen non-recurring charges		109			0.6	%		584			3.7	%
Litigation related professional fees		33			0.2	%		105			0.7	%
Other expenses		341			1.8	%		384			2.4	%
Total SG&A expenses	$	18,649			100.0	%	$	15,652			100.0	%

Total Revenue	$	69,804					$	55,464
SG&A expenses as a percentage of revenue		26.7	%					28.2	%

(F)	Five Quarter Condensed Balance Sheets

($ in thousands) (unaudited)	March 31, 2017		December 31, 2016		September 30 2016		June 30, 2016		March 31, 2016

Assets
Current assets:
Cash and Cash Equivalents	$	17,780	$	18,034	$	18,198	$	19,272	$	14,901

Accounts receivable, less allowance for doubtful accounts of $2,851 and $2,814, respectively		6,734		6,796		5,840		4,899		8,345
Finance receivables, less allowance for credit losses		2,057		1,442		3,349		3,588		1,677
Inventory, net		4,147		4,786		4,264		2,031		2,341
Other current assets		1,628		1,764		1,439		987		1,060
Deferred Income Taxes		2,271		2,271		2,271		2,271		1,276
Total current assets		34,617		35,093		35,361		33,048		29,600

Finance receivables, less current portion		7,548		3,956		3,962		3,718		3,042
Other assets		137		145		163		348		337
Property and equipment, net		9,173		9,433		9,570		9,765		10,584
Deferred income taxes		25,359		25,568		25,568		25,453		25,701
Intangibles, Net		666		711		754		798		1,273
Goodwill		11,492		11,492		11,703		11,703		11,703
Total assets	$	88,992	$	86,398	$	87,081	$	84,833	$	82,240

Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	14,640	$	12,002	$	12,605	$	15,812	$	15,368
Line of credit, net		7,021		7,078		7,258		7,119		6,980
Warrant Liabilities		-		-		-		3,739		5,964
Other current liabilities		1,041		1,242		1,527		1,507		1,485
Total current liabilities		22,702		20,322		21,390		28,177		29,797
Long-term liabilities
Total long-term liabilities		1,291		1,446		1,528		1,631		2,016
Total liabilities		23,993		21,768		22,918		29,808		31,813

Shareholders' equity:
Total shareholders' equity		64,999		64,630		64,163		55,025		50,427
Total liabilities and shareholders' equity	$	88,992	$	86,398	$	87,081	$	84,833	$	82,240

Total current assets	$	34,617	$	35,093	$	35,361	$	33,048	$	29,600
Total current liabilities		22,702		20,322		21,390		28,177		29,797
Net working capital	$	11,915	$	14,771	$	13,971	$	4,871	$	(197	)

(G)	Five Quarter Statements of Cash Flows

	Three months ended
($ in thousands)	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
OPERATING ACTIVITIES:
Net (loss) income	$	136		$	233		$	(2,464	)	$	(872	)	$	(5,420	)
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		233			233			211			198			142
Gain on disposal of property and equipment		(28	)		(31	)		—			(110	)		(15	)
Amortization of deferred financing fees		72			(79	)		105			13			—
Bad debt expense		127			352			97			470			506
Depreciation		1,165			1,220			1,257			1,272			1,190
Amortization of intangible assets		45			43			44			43			44
Impairment of intangible asset		—			—			—			432			—
Change in fair value of warrant liabilities		—			—			1,490			(18	)		4,805
Deferred income taxes, net		209			—			(115	)		(748	)		(93	)
Recognition of deferred gain from sale-leaseback transactions		(216	)		(215	)		(215	)		(215	)		(215	)
Changes in operating assets and liabilities:
Accounts receivable		(41	)		(1,309	)		(1,038	)		2,977			(1,660	)
Finance receivables		(4,232	)		2,125			(5	)		(2,587	)		(366	)
Inventory		647			(467	)		(2,223	)		(82	)		250
Prepaid expenses and other assets		136			(318	)		(224	)		(397	)		(160	)
Accounts payable		2,441			397			(3,661	)		329			4,154
Accrued expenses		160			(1,061	)		486			115			1,166
Income taxes payable		(6	)		(1	)		(10	)		453			—
Net change in operating assets and liabilities		(895	)		(634	)		(6,675	)		808			3,384
Net cash provided (used) by operating activities		848			1,122			(6,265	)		1,273			4,328

INVESTING ACTIVITIES:
Purchase and additions of property and equipment		(183	)		(441	)		(168	)		(207	)		(164	)
Purchase of property for rental program		(691	)		(693	)		(642	)		—			—
Proceeds from sale of property and equipment		44			61			—			265			19
Cash paid for assets acquired from VendScreen		—			—			—			—			(5,625	)
Net cash provided by (used in) investing activities		(830	)		(1,073	)		(810	)		58			(5,770	)

FINANCING ACTIVITIES:
Cash used for the retirement of common stock		—			—			(31	)		(173	)		—
Payment of deferred financing costs		(90	)		—			—			—			—
Proceed from exercise of common stock warrants		—			—			6,193			3,237			1,652
Proceed (payments) from line of credit, net		—			—			—			138			33
Repayment of long-term debt		(182	)		(213	)		(161	)		(162	)		(151	)
Net cash (used in) provided by financing activities		(272	)		(213	)		6,001			3,040			1,534

Net (decrease) increase in cash		(254	)		(164	)		(1,074	)		4,371			92
Cash at beginning of period		18,034			18,198			19,272			14,901			14,809
Cash at end of period	$	17,780		$	18,034		$	18,198		$	19,272		$	14,901

Supplemental disclosures of cash flow information:
Interest paid in cash	$	59		$	382		$	87		$	147		$	191
Income taxes paid by cash	$	—		$	—		$	—		$	501		$	—
Depreciation expense allocated to cost of services	$	950		$	967		$	1,072		$	1,139		$	1,051
Reclass of rental program property to inventory, net	$	8		$	(55	)	$	(11	)	$	415		$	347
Prepaid items financed with debt	$	—		$	—		$	54		$	—		$	—
Equipment and property acquired under capital lease	$	54		$	18		$	254		$	—		$	409
Disposal of property and equipment	$	87		$	570		$	—		$	555		$	189
Fair value of common stock warrants at issuance recorded as a debt discount	$	—		$	—		$	—		$	—		$	52
Debt financing cost financed with debt	$	—		$	—		$	—		$	—		$	79

Additional supplements not added

(H)	Five Quarter Reconciliation of Net Income/(Loss) to Non-GAAP Net Income (Loss) and Net Income/(Loss) Per Common Share – Basic and Diluted to Non-GAAP Net Income/(Loss) Per Common Share – Basic and Diluted

	Three months ended
($ in thousands) (unaudited)	March 31, 2017			December 31, 2016		September 30, 2016			June 30, 2016			March 31, 2016

Net income (loss)	$	136		$	233	$	(2,464	)	$	(872	)	$	(5,420	)
Non-GAAP adjustments:
Non-cash portion of income tax provision		209			-		(115	)		(792	)		(38	)
Change in fair value of warrant adjustment		-			-		1,490			(18	)		4,805
VendScreen non-recurring charges		-			8		101			258			461
Litigation related professional fees		-			-		33			51			105
Non-GAAP net income (loss)	$	345		$	241	$	(955	)	$	(1,373	)	$	(87	)

Net income (loss)	$	136		$	233	$	(2,464	)	$	(872	)	$	(5,420	)
Cumulative preferred dividends		(334	)		-		(334	)		-			(334	)
Net (loss) income applicable to common shares	$	(198	)	$	233	$	(2,798	)	$	(872	)	$	(5,754	)

Non-GAAP net income (loss)	$	345		$	241	$	(955	)	$	(1,373	)	$	(87	)
Cumulative preferred dividends		(334	)		-		(334	)		-			(334	)
Non-GAAP net income (loss) applicable to common shares	$	11		$	241	$	(1,289	)	$	(1,373	)	$	(421	)

Net earnings (loss) per common share - basic and diluted	$	(0.00	)	$	0.01	$	(0.07	)	$	(0.02	)	$	(0.16	)
Non-GAAP net earnings (loss) per common share - basic and diluted	$	0.00		$	0.01	$	(0.03	)	$	(0.04	)	$	(0.01	)
Basic weighted average number of common shares outstanding		40,327,697			40,308,934		38,488,005			37,325,681			36,161,626
Diluted weighted average number of common shares outstanding		40,327,697			40,730,712		38,488,005			37,325,681			36,161,626

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 special litigation committee investigation described in our Form 10-K for the 2016 fiscal year. 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, 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 EBITDA 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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