Notes to Consolidated Financial Statements
1. BUSINESS
USA Technologies, Inc. (the “Company”,
“We”, “USAT”, or “Our”) was incorporated in the Commonwealth of Pennsylvania in January 1992.
We are a provider of technology-enabled solutions and value-added services that facilitate electronic payment transactions primarily
within the unattended Point of Sale (“POS”) market. We are a leading provider in the small ticket, beverage and food
vending industry and are expanding our solutions and services to other unattended market segments, such as amusement, commercial
laundry, kiosk and others. Since our founding, we have designed and marketed systems and solutions that facilitate electronic
payment options, as well as telemetry Internet of Things (“IoT”) and machine-to-machine (“M2M”) services,
which include the ability to remotely monitor, control, and report on the results of distributed assets containing our electronic
payment solutions. Historically, these distributed assets have relied on cash for payment in the form of coins or bills, whereas,
our systems allow them to accept cashless payments such as through the use of credit or debit cards or other emerging contactless
forms, such as mobile payment. All of our customers are located in North America.
2. ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the consolidated financial
statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ
from those estimates.
CASH
The Company maintains its cash in bank
deposit accounts, which may exceed federally insured limits at times.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR
DOUBTFUL ACCOUNTS
Accounts
receivable include amounts due to the Company for sales of equipment, other amounts due from customers, merchant service receivables,
and unbilled amounts due from customers, net of the allowance for uncollectible accounts.
The Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, including from
a shortfall in the customer transaction fund flow from which the Company would normally collect amounts due.
The allowance is determined through an
analysis of various factors including the aging of the accounts receivable, the strength of the relationship with the customer,
the capacity of the customer transaction fund flow to satisfy the amount due from the customer, an assessment of collection costs
and other factors. The allowance for doubtful accounts receivable is management’s best estimate as of the respective reporting
date. The Company writes off accounts receivable against the allowance when management determines the balance is uncollectible
and the Company ceases collection efforts. Management believes that the allowance recorded is adequate to provide for its estimated
credit losses.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
FINANCE RECEIVABLES
The Company offers extended payment terms
to certain customers for equipment sales under its Quick Start Program. In accordance with the Financial Accounting Standards
Board Accounting Standards Codification® (“ASC”) Topic 840, “Leases”, agreements under the Quick Start
Program qualify for sales-type lease accounting. Accordingly, the future minimum lease payments are classified as finance receivables
in the Company’s consolidated balance sheets. Finance receivables or Quick Start leases are generally for a sixty month
term. Finance receivables are carried at their contractual amount and charged off against the allowance for credit losses when
management determines that recovery is unlikely and the Company ceases collection efforts. The Company recognizes a portion of
the note or lease payments as interest income in the accompanying consolidated financial statements based on the effective interest
rate method.
INVENTORY, Net
Inventory consists of finished goods and
packaging materials. The Company’s inventory is stated at the lower of cost (average cost basis) or market.
PROPERTY AND EQUIPMENT, Net
Property and equipment are recorded at
cost. Property and equipment are depreciated on the straight-line basis over the estimated useful lives of the related assets.
Leasehold improvements are amortized on the straight-line basis over the lesser of the estimated useful life of the asset or the
respective lease term.
GOODWILL AND INTANGIBLE ASSETS
The Company’s intangible assets
include goodwill, trademarks, non-compete agreements, brand, developed technology and customer relationships.
The Company’s trademarks with an
indefinite economic life are not being amortized. The trademarks, not subject to amortization, are related to the EnergyMiser
asset group and consist of four trademarks. The Company tests indefinite-life intangible assets for impairment using a two-step
process. The first step screens for potential impairment, while the second step measures the amount of impairment. The Company
uses a relief from royalty analysis to complete the first step in this process. Testing for impairment is to be done at least
annually and at other times if events or circumstances arise that indicate that impairment may have occurred. The Company has
selected April 1 as its annual test date for its indefinite-lived intangible assets. The Company concluded there was no impairment
of trademarks during the fiscal years ended June 30, 2015 and 2014, respectively. During the fourth quarter of the fiscal year
ended June 30, 2016, the fair value of the trademarks were determined to have inconsequential value based on the “relief
from royalty” methodology. This assessment resulted in an impairment write-down during the fourth fiscal quarter of $432
thousand, which is included in “Impairment of intangible asset” in the Consolidated Statement of Operations for the
fiscal year ended June 30, 2016. (See Note 7 Goodwill and Intangible Assets for details.)
USA Technologies,
Inc.
Notes to Consolidated
Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
Goodwill represents the excess of cost
over fair value of the net assets purchased in acquisitions. The Company accounts for goodwill in accordance with ASC 350, “Intangibles
– Goodwill and Other”. Under ASC 350, goodwill is not amortized to earnings, but instead is subject to periodic testing
for impairment. Testing for impairment is to be done at least annually and at other times if events or circumstances arise that
indicate that impairment may have occurred. The Company has selected April 1 as its annual test date. The Company has concluded
there has been no impairment of goodwill during the fiscal years ended June 30, 2016, 2015 and 2014, respectively.
LONG-LIVED ASSETS
In accordance with ASC 360, “Impairment
or Disposal of Long-Lived Assets”, the Company reviews its definite lived long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amount of an asset or group
of assets exceeds its net realizable value, the asset will be written down to its fair value. In the period when the plan of sale
criteria of ASC 360 are met, definite lived long-lived assets are reported as held for sale, depreciation and amortization cease,
and the assets are reported at the lower of carrying value or fair value less costs to sell. The Company has concluded that the
carrying amount of definite lived long-lived assets is recoverable as of June 30, 2016 and 2015.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements and Disclosures
(“Topic 820”): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 amends certain disclosure requirements
of Subtopic 820-10. This ASU provides additional disclosures for transfers in and out of Levels 1 and 2 and for activity in Level
3. This ASU also clarifies certain other existing disclosure requirements including level of desegregation and disclosures around
inputs and valuation techniques.
The Company’s financial assets and
liabilities are accounted for in accordance with ASC 820 “Fair Value Measurement.” Under ASC 820 the Company uses
inputs from the three levels of the fair value hierarchy to measure its financial assets and liabilities. The three levels are
as follows:
Level 1- Inputs are unadjusted quoted
prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2- Inputs are other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest
rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation
or other means (market corroborated inputs).
Level 3- Inputs are unobservable and reflect
the Company’s assumptions that market participants would use in pricing the asset or liability. The Company develops these
inputs based on the best information available.
The Company’s financial instruments,
principally accounts receivable, short-term finance receivables, prepaid expenses and other assets, accounts payable and accrued
expenses, are carried at cost which approximates fair value due to the short-term maturity of these instruments. The fair value
of the Company’s obligations under its long-term debt agreements and the long-term portion of its finance receivables approximate
their carrying value as such instruments are at market rates currently available to the Company.
CONCENTRATION OF RISK
S
Financial instruments that subject the
Company to a concentration of credit risk consist principally of cash and accounts and finance receivables. The Company maintains
cash with various financial institutions where accounts may exceed federally insured limits at times. Approximately 18%, 35% and
22% of the Company’s trade accounts and finance receivables at June 30, 2016, 2015 and 2014, respectively, were concentrated
with one customer.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
Concentration of revenues with customers
subject the Company to operating risks. Approximately 16%, 21% and 26% of the Company’s license and transaction processing
revenues for the years ended June 30, 2016, 2015 and 2014, respectively, were concentrated with one customer. Approximately 28%
and 17% of the Company’s equipment sales revenue were concentrated with one customer for the years ended June 30, 2016 and
2015, respectively, with no concentrations for the year ended June 30, 2014. The Company’s customers are principally located
in the United States.
REVENUE RECOGNITION
Revenue from the sale or QuickStart lease
of equipment is recognized on the terms of free-on-board shipping point. Activation fee revenue, if applicable, is recognized
when the Company’s cashless payment device is initially activated for use on the Company network. Transaction processing
revenue is recognized upon the usage of the Company’s cashless payment and control network. License fees for access to the
Company’s devices and network services are recognized on a monthly basis. In all cases, revenue is only recognized when
persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable,
and collection of the resulting receivable is reasonably assured. The Company estimates an allowance for product returns at the
date of sale and license and transaction fee refunds on a monthly basis.
ePort hardware is available to
customers under the QuickStart program pursuant to which the customer would enter into a five-year non-cancelable lease with
either the Company or a third-party leasing company for the devices. The Company qualifies for sales type lease accounting.
Accordingly, the company recognizes a portion of lease payments as interest income. At the end of the lease period,
the customer would have the option to purchase the device at its residual value.
EQUIPMENT RENTAL
The Company offers its customers a rental
program for its ePort devices, the JumpStart program (“JumpStart”). JumpStart terms are typically 36 months
and are cancellable with thirty to sixty days’ written notice. In accordance with ASC 840, “Leases”, the Company
classifies the rental agreements as operating leases, with service fee revenue related to the leases included in license and transaction
fees in the Consolidated Statements of Operations. Cost for the JumpStart revenues, which consists of depreciation expense on
the JumpStart equipment, is included in cost of services in the Consolidated Statements of Operations. ePort equipment utilized
by the JumpStart program is included in property and equipment, net on the Consolidated Balance Sheet.
WARRANTY COSTS
The Company generally warrants its products
for one to three years. Warranty costs are estimated and recorded at the time of sale based on historical warranty experience,
if available. These costs are reviewed and adjusted, if necessary, periodically throughout the year.
SHIPPING AND HANDLING
Shipping and handling fees billed to our
customers in connection with sales are recorded as revenue. The costs incurred for shipping and handling of our product are recorded
as cost of equipment.
ADVERTISING
Advertising costs are expensed as incurred.
Advertising expense was $0.3 million, $0.2 million, and $0.2 million in the fiscal years ended June 30, 2016, 2015, and 2014,
respectively.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are
expensed as incurred. Research and development expenses, which are included in selling, general and administrative expenses
in the Consolidated Statements of Operations, were approximately $1.4 million, $1.5 million and $1.0 million, for the years ended
June 30, 2016, 2015, and 2014, respectively. Our research and development initiatives focus on adding features and functionality
to our system solutions through the development and utilization of our processing and reporting network and new technology.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING FOR EQUITY AWARDS
In accordance with ASC 718 the cost of
employee services received in exchange for an award of equity instruments is based on the grant-date fair value of the award and
allocated over the requisite service period of the award.
Litigation Costs
From time to time, we are involved in
litigation, claims, contingencies and other legal matters. We record a charge equal to at least the minimum estimated liability
for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial
statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial
statement and (ii) the range of the loss can be reasonably estimated. We expense legal costs, including those legal costs expected
to be incurred in connection with a loss contingency, as incurred.
INCOME TAXES
The Company follows the provisions of
FASB ASC 740, Accounting for Uncertainty in Income Taxes,
which
provides detailed guidance for the financial
statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial
statements. Tax
positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the
adoption of ASC 740 and in subsequent periods.
Income taxes are computed using the asset
and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for
estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets
is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence,
it is more likely than not such benefits will be realized. The Company recognizes interest and penalties, if any, related to uncertain
tax positions in selling, general and administrative expenses. No interest or penalties related to uncertain tax positions were
accrued or incurred during the years ended June 30, 2016, 2015, and 2014.
The Company files income tax returns in
the United States federal jurisdiction and various state jurisdictions. The tax years ended June 30, 2013 through June 30, 2016
remain open to examination by taxing jurisdictions to which the Company is subject. As of June 30, 2016, the Company did not have
any income tax examinations in process.
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per share are calculated
by dividing net income (loss) applicable to common shares by the weighted average common shares outstanding for the period. Diluted
earnings (loss) per share are calculated by dividing net income (loss) applicable to common shares by the weighted average common
shares outstanding for the period plus the dilutive effects of common stock equivalents unless the effects of such common stock
equivalents are anti-dilutive. For the years ended June 30, 2016, 2015 and 2014 no effect for common stock equivalents was considered
in the calculation of diluted earnings (loss) per share because their effect was anti-dilutive.
The consolidated financial statements
included in this Form 10-K reflect additional shares of common stock and preferred stock that had been issued and outstanding
in prior periods but were not reflected as such in previous consolidated financial statements as explained in Note 19. The basic
and diluted weighted average number of common shares outstanding for the years ended June 30, 2015 and 2014 have been adjusted
to reflect the additional number of shares pertaining to each of those years. The foregoing adjustments in basic and diluted weighted
common shares outstanding did not affect the previously reported net loss per common share-basic or diluted for the year ended
June 30, 2015. The previously reported net income per common share-basic and diluted for the year ended June 30, 2014 was decreased
from $.78 to $.77 as a result of the foregoing adjustments.
SOFTWARE DEVELOPMENT COSTS
Costs incurred during the preliminary
project along with post-implementation stages of internal use computer software development and costs incurred to maintain existing
product offerings are expensed as incurred. The capitalization and ongoing assessment of recoverability of development costs require
considerable judgment by management with respect to certain external factors, including, but not limited to, technological and
economic feasibility and estimated economic life. At June 30, 2016, the Company had $137 thousand in capitalized software
development which is being amortized over a period of three years.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
OTHER COMPREHENSIVE INCOME
ASC 220, “Comprehensive Income”,
prescribes the reporting required for comprehensive income and items of other comprehensive income. Entities having no items of
other comprehensive income are not required to report on comprehensive income. The Company has no items of other comprehensive
income for its years ended June 30, 2016, 2015 or 2014.
RECENT ACCOUNTING PRONOUCEMENTS
The Company is evaluating whether the
effects of the following recent accounting pronouncements or any other recently issued, but not yet effective accounting standards,
will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
In May 2014, the Financial Accounting
Standards Board issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU was amended by ASU No. 2015-14,
issued in August 2015, which deferred the original effective date by one year. The new guidance provides a single model for entities
to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance.
The new standard also requires expanded qualitative and quantitative disclosures about the nature, timing and uncertainty of revenue
and cash flows rising from contracts with customers. The ASU is now effective for fiscal years, and interim reporting periods
within those years, beginning with the year ending June 30, 2019.
In
June 2014, the Financial Accounting Standards Board issued ASU 2014-12 Compensation - Stock Compensation (Topic 718); Accounting
for share-based payments when the terms of the award provide that a performance target could be achieved after the requisite service
period. Under the new guidance an entity will not record compensation expense related to an award until it becomes probable that
the performance target will be met. This pronouncement will be effective for the Company beginning with the year ending June 30,
2017.
In April 2015, the Financial Accounting
Standards Board issued ASU 2015-03 Interest - Imputation of Interest (Subtopic 835-30): Simplifying the presentation of debt issuance
costs. This standard is part of FASB’s simplification initiative which has as its objective to identify, evaluate, and improve
areas where cost and complexity can be reduced while maintaining or improving the usefulness of the information for users. The
Company adopted this pronouncement for the year ended June 30, 2016.
In July 2015, the Financial Accounting
Standards Board issued ASU 2015-11 Inventory (Topic 330): Simplifying the measurement of inventory. This standard is part of FASB’s
simplification initiative which has as its objective to identify, evaluate, and improve areas where cost and complexity can be
reduced while maintaining or improving the usefulness of the information for users. This pronouncement will be effective for the
Company beginning with the year ending June 30, 2018.
In September 2015, the Financial Accounting
Standards Board issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments". ASU 2015-16 eliminates
the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. ASU 2015-16
will be effective for the Company beginning with the quarter ending September 30, 2016. Since this standard is prospective, the
impact of ASU 2015-16 on the Company's financial condition, results of operations and cash flows will depend upon the nature of
any measurement period adjustments identified in future periods.
In November 2015, the Financial Accounting
Standards Board issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"), which
will require entities to present all deferred tax liabilities and assets as noncurrent on the balance sheet instead of separating
deferred taxes into current and noncurrent amounts. The standard will be effective for the Company beginning with the quarter
ending September 30, 2017. Early application is permitted. The standard can be applied either prospectively to all deferred tax
liabilities and assets or retrospectively to all periods presented.
In February 2016, the Financial Accounting
Standards Board issued ASU 2016-02 “Leases” (Topic 842). Under the new guidance, those leases classified as operating
leases under previous GAAP, will be recognized on our consolidated balance sheet as liabilities with corresponding right-of-use
assets. This pronouncement will be effective for the Company beginning with the year ending June 30, 2018.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
In March 2016, the Financial Accounting
Standards Board issued ASU 2016-09 Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting. The new guidance simplifies several aspects of accounting and presentation for share-bases compensation. This pronouncement
will be effective for the Company beginning with the year ending June 30, 2018.
In August 2016, the Financial Accounting
Standards Board issued ASU 2016-15 Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments (Topic 230).
This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This
pronouncement will be effective for the Company beginning with the year ending June 30, 2018.
There are three amendments to ASU 2014-09
issued in 2016. They are ASU 2016-08, issued in March 2016 Revenue from Contracts with Customers (Topic 606) Principal versus
Agent Considerations which clarifies those relationships with the customer, ASU 2016-10, issued in April 2016 Revenue from Contracts
with Customers (Topic 606), Identifying Performance Obligations and Licensing, what is the entity’s obligations to its customer
and what is the customer’s entitlement in the license agreements and ASU 2016-12, issued in April 2016 Revenue from Contracts
with Customers (Topic 606), Narrow Scope Improvements and Practical Expedients, guidance on assessing collectability, presentation
of sales taxes, noncash consideration, and completed contract modifications at transition. These amendments to ASU 2014-09 are
now effective for fiscal years, and interim reporting periods within those years, beginning with the year ending June 30,
2019.
RECLASSIFICATION
As reported in the Company’s Form
10-Q for the quarter ended September 30, 2015, commencing with the September 30, 2015 financial statements, the Company changed
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 moves these amounts to accounts receivable and allowance
for bad debt.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
($ in thousands)
|
|
June 30, 2015 Balances
|
|
Consolidated Balance Sheet Line Items
|
|
As previously
reported
|
|
|
Reclassification
|
|
|
As reclassified
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable, net of allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
·Reclassification of balances included in accounts payable
to accounts receivable
|
|
|
|
|
|
$
|
2,114
|
|
|
|
|
|
·Reclassification of the allowance for doubtful
accounts in accounts payable
|
|
|
|
|
|
|
(815
|
)
|
|
|
|
|
|
|
$
|
4,672
|
|
|
$
|
1,299
|
|
|
$
|
5,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
·Reclassification of the allowance for doubtful
accounts in accounts payable
|
|
$
|
(494
|
)
|
|
$
|
(815
|
)
|
|
$
|
(1,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
·Reclassification of balances included in accounts payable to accounts
receivable
|
|
|
|
|
|
$
|
2,114
|
|
|
|
|
|
·Reclassification of the allowance for doubtful
accounts in accounts payable
|
|
|
|
|
|
|
(815
|
)
|
|
|
|
|
|
|
$
|
9,243
|
|
|
$
|
1,299
|
|
|
$
|
10,542
|
|
Accordingly, the respective balances for
all prior periods presented in these financial statements were reclassified in order to be consistent with and comparable to the
accounting classification of these items in our June 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. The details of the reclassification of the consolidated balance sheets were disclosed in the Company’s
Form 10-Q for the quarter ended September 30, 2015. The consolidated statements of cash flows amounts are presented in the table
below:
($ in thousands)
|
|
For the fiscal year ended June 30, 2015
|
|
Consolidated Statement of Cash Flow Line Items
|
|
As previously
reported
|
|
|
Reclassification
|
|
|
As reclassified
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
·Reclassification of cash provided
by and included in accounts payable to accounts receivable
|
|
$
|
(2,517
|
)
|
|
$
|
(22
|
)
|
|
$
|
(2,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
·Reclassification of cash used in and included
in accounts payable to accounts receivable
|
|
$
|
919
|
|
|
$
|
22
|
|
|
$
|
941
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
2. ACCOUNTING POLICIES (CONTINUED)
($ in thousands)
|
|
For the fiscal year ended June 30, 2014
|
|
Consolidated Statement of Cash Flow Line Items
|
|
As previously
reported
|
|
|
Reclassification
|
|
|
As reclassified
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
·Reclassification of cash provided
by and included in accounts payable to accounts receivable
|
|
$
|
(157
|
)
|
|
$
|
(47
|
)
|
|
$
|
(204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
·Reclassification of cash used in and included
in accounts payable to accounts receivable
|
|
$
|
413
|
|
|
$
|
47
|
|
|
$
|
460
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
3. ACQUISITION
VENDSCREEN, INC.
On January 15,
2016, the Company executed an Asset Purchase Agreement with VendScreen, Inc. (“VendScreen”), a Portland, Oregon based
developer of vending industry cashless payment technology, by which it acquired substantially all of VendScreen’s assets
and assumed specified liabilities, for a cash payment of $5.625 million. The purchase price was funded using $2.625 million in
cash, and the balance of $3.0 million from a term loan which was converted from a line of credit.
This acquisition expands the Company’s
capability with interactive media (touchscreen) and content delivery through VendScreen’s cloud-based content delivery platform,
device platform and products, customer base, vendor management system (VMS) integration, and consumer product information including
nutritional data. In addition to new technology and services, the acquisition adds a West Coast operational footprint, with former
VendScreen employees able to offer expanded customer services, sales and technical support. On the date of the acquisition, VendScreen
had approximately 150 customers with approximately 6,000 connections. Of those 150 customers approximately 50% are new customers
of USAT.
The following table summarizes the preliminary
purchase price allocation to reflect the fair values of the assets acquired and liabilities assumed at the date of acquisition.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
3. ACQUISITION (CONTINUED)
($ in thousands)
|
|
|
|
|
|
|
|
Consideration:
|
|
|
|
|
Fair value of total consideration paid in cash
|
|
$
|
5,625
|
|
|
|
|
|
|
Acquisition / non-recurring acquisition expenses:
|
|
$
|
842
|
|
|
|
|
|
|
Recognized amounts of identifiable assets acquired and liabilities assumed:
|
|
|
|
|
|
|
|
|
|
Financial Assets:
|
|
|
|
|
Accounts receivable
|
|
$
|
3
|
|
Finance receivables
|
|
|
628
|
|
Other current assets
|
|
|
20
|
|
Deferred income taxes
|
|
|
18
|
|
|
|
|
669
|
|
|
|
|
|
|
Property, plant & equipment
|
|
|
81
|
|
|
|
|
|
|
Identifiable intangible assets:
|
|
|
|
|
Developed technology
|
|
|
639
|
|
Customer relationships
|
|
|
149
|
|
Brand
|
|
|
95
|
|
Noncompete agreements
|
|
|
2
|
|
Fair value of intangible assets
|
|
|
885
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
Accrued liabilities
|
|
|
(50
|
)
|
|
|
|
|
|
Total identifiable net assets
|
|
|
1,585
|
|
|
|
|
|
|
Goodwill
|
|
|
4,040
|
|
|
|
|
|
|
Total Fair Value
|
|
$
|
5,625
|
|
Of the $885 thousand of acquired intangible
assets, $639 thousand was assigned to Developed Technology that is subject to amortization over 5 years, $149 thousand was assigned
to Customer Relationships which are subject to amortization over 10 years; $2 thousand was assigned to a non-compete agreement
that is subject to amortization over 2 years, and $95 thousand was assigned to the Brand that is subject to amortization over
3 years. All of the intangible assets are amortizable for income tax purposes.
VendScreen has been included in the
accompanying consolidated financial statements of the Company since the date of acquisition. The $842 thousand of acquisition
/ non-recurring expenses consists of non-recurring expenses incurred in connection with the acquisition and integration of
the VendScreen business and were included in SG&A expenses during the 1 year ended June 30, 2016.
The acquired business contributed net
revenues of $1.2 million during the fiscal year ended June 30, 2016. ASC No. 2010-29 requires the disclosure of additional information
including the amounts of earnings of the acquiree since the acquisition date included in the consolidated income statement, and
the revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred
at the beginning of the prior annual reporting period (supplemental pro forma information). The disclosure of such information
was impractical and is not provided as (1) the acquiree had been integrated into the Company’s operation such that discreet
financial information of the acquiree could not be determined, and (2) the financial records of the acquiree were not adequate
to allow the preparation of supplemental pro forma information.
4. EARNINGS PER SHARE CALCULATION
The calculation of basic earnings per
share (“eps”) and diluted earnings per share is presented below:
|
|
Year Ended June 30
|
|
($ in thousands, except per share data)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic and diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(6,806
|
)
|
|
$
|
(1,089
|
)
|
|
$
|
27,531
|
|
Preferred dividends
|
|
|
(668
|
)
|
|
|
(668
|
)
|
|
|
(668
|
)
|
Net income (loss) available to common shareholders
|
|
$
|
(7,474
|
)
|
|
$
|
(1,757
|
)
|
|
$
|
26,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share
- Weighted average shares
outstanding
|
|
|
36,309,047
|
|
|
|
35,719,211
|
|
|
|
34,667,769
|
|
Effect of dilutive potential common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
341,790
|
|
Denominator for diluted earnings per share
- Adjusted weighted average shares outstanding
|
|
|
36,309,047
|
|
|
|
35,719,211
|
#
|
|
|
35,009,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.21
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
(0.21
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.77
|
|
Antidilutive shares excluded from the calculation of diluted
earnings per share were 1,168,689, 252,827 and 98,497 for the years ended June 30, 2016, 2015 and 2014, respectively.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
5. FINANCE RECEIVABLES
Finance receivables consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Total finance receivables
|
|
$
|
7,306
|
|
|
$
|
4,639
|
|
Less current portion
|
|
|
3,588
|
|
|
|
941
|
|
Non-current portion of finance receivables
|
|
$
|
3,718
|
|
|
$
|
3,698
|
|
Credit quality indicators consist of the
following:
Credit Quality Indicators
Credit risk profile based on payment activity:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
7,174
|
|
|
$
|
4,619
|
|
Nonperforming
|
|
|
132
|
|
|
|
20
|
|
Total
|
|
$
|
7,306
|
|
|
$
|
4,639
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
5. FINANCE RECEIVABLES (CONTINUED)
Age Analysis of Past Due Finance Receivables
As of June 30, 2016
|
|
31 – 60
|
|
|
61 – 90
|
|
|
Greater than
|
|
|
|
|
|
|
|
|
Total
|
|
($ in thousands)
|
|
Days Past
Due
|
|
|
Days Past
Due
|
|
|
90 Days Past
Due
|
|
|
Total Past
Due
|
|
|
Current
|
|
|
Finance
Receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QuickStart Leases
|
|
$
|
98
|
|
|
$
|
31
|
|
|
$
|
3
|
|
|
$
|
132
|
|
|
$
|
7,174
|
|
|
$
|
7,306
|
|
Age Analysis of Past Due Finance
Receivables
As of June 30, 2015
|
|
31 – 60
|
|
|
61 – 90
|
|
|
Greater than
|
|
|
|
|
|
|
|
|
Total
|
|
($ in thousands)
|
|
Days Past
Due
|
|
|
Days Past
Due
|
|
|
90 Days Past
Due
|
|
|
Total Past
Due
|
|
|
Current
|
|
|
Finance
Receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QuickStart Leases
|
|
$
|
-
|
|
|
$
|
16
|
|
|
$
|
5
|
|
|
$
|
21
|
|
|
$
|
4,618
|
|
|
$
|
4,639
|
|
Finance receivables
due for each of the fiscal years following June 30, 2016 are as follows:
($ in thousands)
|
|
|
|
|
|
|
|
2017
|
|
$
|
3,588
|
|
2018
|
|
|
1,246
|
|
2019
|
|
|
1,246
|
|
2020
|
|
|
944
|
|
2021 and beyond
|
|
|
282
|
|
|
|
$
|
7,306
|
|
6. PROPERTY AND EQUIPMENT, net
Property and equipment, at cost, consist
of the following:
|
|
Useful
|
|
June 30, 2016
|
|
($ in thousands)
|
|
Lives
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
Computer equipment and software
|
|
3-7 years
|
|
$
|
5,506
|
|
|
$
|
(4,374
|
)
|
|
$
|
1,132
|
|
Property and equipment used for rental program
|
|
5 years
|
|
|
26,648
|
|
|
|
(18,246
|
)
|
|
|
8,402
|
|
Furniture and equipment
|
|
3-7 years
|
|
|
874
|
|
|
|
(654
|
)
|
|
|
220
|
|
Leasehold improvements
|
|
Lesser of life or lease term
|
|
|
575
|
|
|
|
(564
|
)
|
|
|
11
|
|
|
|
|
|
$
|
33,603
|
|
|
$
|
(23,838
|
)
|
|
$
|
9,765
|
|
|
|
Useful
|
|
June 30, 2015
|
|
($ in thousands)
|
|
Lives
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
Computer equipment and purchased software
|
|
3-7 years
|
|
$
|
4,670
|
|
|
$
|
(4,017
|
)
|
|
$
|
653
|
|
Property and equipment used for rental program
|
|
5 years
|
|
|
26,469
|
|
|
|
(14,476
|
)
|
|
|
11,993
|
|
Furniture and equipment
|
|
3-7 years
|
|
|
723
|
|
|
|
(572
|
)
|
|
|
151
|
|
Leasehold improvements
|
|
Lesser of life or lease term
|
|
|
575
|
|
|
|
(503
|
)
|
|
|
72
|
|
|
|
|
|
$
|
32,437
|
|
|
$
|
(19,568
|
)
|
|
$
|
12,869
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
6. PROPERTY AND EQUIPMENT, net (CONTINUED)
Assets under capital leases totaled approximately
$2.6 million and $2.1 million as of June 30, 2016 and 2015, respectively. Capital lease amortization of approximately $271 thousand,
$349 thousand and $305 thousand, is included in depreciation expense for the years ended June 30, 2016, 2015, and 2014, respectively.
7. GOODWILL AND INTANGIBLE ASSETS
Amortization expense relating to all acquired
intangible assets was approximately $87 thousand, $0 and $22 thousand during each of the years ended June 30, 2016, 2015 and 2014,
respectively. Intangible asset balances consisted of the following:
|
|
Beginning
|
|
|
Year ended June 30, 2016
|
|
|
Ending
|
|
|
|
($ in thousands)
|
|
Balance
|
|
|
Additions/
|
|
|
|
|
|
Balance
|
|
|
Amortization
|
|
|
July 1, 2015
|
|
|
Adjustments
|
|
|
Amortization
|
|
|
June 30, 2016
|
|
|
Period
|
Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks - Indefinite
|
|
$
|
432
|
|
|
$
|
(432
|
)(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Indefinite
|
Non-compete agreements
|
|
|
-
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
2 years
|
Brand
|
|
|
-
|
|
|
|
95
|
|
|
|
(16
|
)
|
|
|
79
|
|
|
3 years
|
Developed technology
|
|
|
-
|
|
|
|
639
|
|
|
|
(63
|
)
|
|
|
576
|
|
|
5 years
|
Customer relationships
|
|
|
-
|
|
|
|
149
|
|
|
|
(7
|
)
|
|
|
142
|
|
|
10 years
|
Total Intangible Assets
|
|
$
|
432
|
|
|
$
|
453
|
|
|
$
|
(87
|
)
|
|
$
|
798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
7,663
|
|
|
|
4,040
|
|
|
|
-
|
|
|
|
11,703
|
|
|
Indefinite
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Intangible Assets & Goodwill
|
|
$
|
8,095
|
|
|
$
|
4,493
|
|
|
$
|
(87
|
)
|
|
$
|
12,501
|
|
|
|
|
|
Beginning
|
|
|
Year ended June 30, 2015
|
|
|
Ending
|
|
|
|
($ in thousands)
|
|
Balance
|
|
|
Additions/
|
|
|
|
|
|
Balance
|
|
|
Amortization
|
|
|
July 1, 2014
|
|
|
Adjustments
|
|
|
Amortization
|
|
|
June 30, 2015
|
|
|
Period
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks - Indefinite
|
|
$
|
432
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
432
|
|
|
Indefinite
|
Total Intangible Assets
|
|
$
|
432
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
7,663
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,663
|
|
|
Indefinite
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,095
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,095
|
|
|
|
|
(1)
|
The Company’s test for impairment
of its indefinite-lived trademarks consists of the trademarks: 1) VendingMiser, 2) CoolerMiser,
3) PlugMiser and 4) SnackMiser. As a result of its testing in fiscal years ended June
30, 2015 and 2014 the Company determined that no impairment had occurred. In the testing
in fiscal year 2016, the Company determined that the sum of the expected discounted cash
flows attributable to the trademarks was less than its carrying value of $432 thousand,
and that an impairment write-down was required. The fair
value of the trademarks was determined by a method known as “relief from royalty”,
in which the fair value is determined by reference to the amount of royalty income the
intangible would generate if it were licensed in an arm’s-length transaction. The
essential assumptions in a valuation via an income approach are as follows:
|
USA Technologies,
Inc.
Notes to Consolidated
Financial Statements
7. GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
|
·
|
The related
dollar sales volume;
|
|
·
|
The percentage
royalty on sales;
|
|
·
|
The adjustment
for taxes;
|
|
·
|
The remaining
useful economic life;
|
|
·
|
The percentage
return on investment; and,
|
|
·
|
The tax amortization
benefit.
|
During the fourth quarter of
the fiscal year ended June 30, 2016, the fair value of the trademarks was determined to have inconsequential value based on the
“relief from royalty” methodology. This assessment resulted in an impairment write-down during the fourth fiscal quarter
of $432 thousand, which is included in “Impairment of intangible asset” in the Consolidated Statement of Operations
for the fiscal year ended June 30, 2016.
At June 30, 2016, amortizable intangible asset balances were:
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
|
|
|
|
|
|
|
|
|
|
|
Non-compete agreements
|
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
Brand
|
|
|
95
|
|
|
|
(16
|
)
|
|
$
|
79
|
|
Developed Technology
|
|
|
639
|
|
|
|
(63
|
)
|
|
$
|
576
|
|
Customer Relationships
|
|
|
149
|
|
|
|
(7
|
)
|
|
$
|
142
|
|
|
|
$
|
885
|
|
|
$
|
(87
|
)
|
|
$
|
798
|
|
There were no amortizable intangible assets at June 30, 2015.
Estimated annual amortization expense for amortizable
intangible assets is as follows:
2017
|
|
$
|
175
|
|
2018
|
|
|
175
|
|
2019
|
|
|
159
|
|
2020
|
|
|
143
|
|
2021
|
|
|
79
|
|
Thereafter
|
|
|
67
|
|
|
|
$
|
798
|
|
USA Technologies,
Inc.
Notes to Consolidated
Financial Statements
8. ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Accrued compensation and related sales commissions
|
|
$
|
1,268
|
|
|
$
|
673
|
|
Accrued professional fees
|
|
|
809
|
|
|
|
301
|
|
Accrued taxes and filing fees
|
|
|
795
|
|
|
|
505
|
|
Advanced customer billings
|
|
|
236
|
|
|
|
390
|
|
Accrued rent
|
|
|
2
|
|
|
|
75
|
|
Accrued other
|
|
|
363
|
|
|
|
213
|
|
|
|
|
3,473
|
|
|
|
2,157
|
|
Less current portion
|
|
|
(3,458
|
)
|
|
|
(2,108
|
)
|
|
|
$
|
15
|
|
|
$
|
49
|
|
9. LINE OF CREDIT
On January 15, 2016, the Company and Avidbank
Corporate Finance, a division of Avidbank (“Avidbank”) entered into a Fifteenth Amendment (the “Amendment”)
to the Loan and Security Agreement (as amended, the “Avidbank Loan Agreement”) previously entered into between them.
The Avidbank Loan Agreement provided for a secured asset-based revolving line of credit facility (the “Avidbank Line of
Credit”) of up to $7.0 million. The outstanding balance of the amounts advanced under the Avidbank Line of Credit bear interest
at 2% above the prime rate as published in
The Wall Street Journal
or five percent (5%), whichever is higher. Avidbank
also made a three-year term loan to the Company in the principal amount of $3.0 million (the “Term Loan”). The Term
Loan was used by the Company to repay to Avidbank an advance that had been made to the Company under the Avidbank Line of Credit
in December 2015, and which had been used by the Company to pay for the VendScreen business. The Term Loan provides that interest
only is payable monthly during year one, interest and principal is payable monthly during years two and three, and all outstanding
principal and accrued interest is due and payable on the third anniversary of the Term Loan. The Term Loan bears interest at an
annual rate equal to 1.75% above the prime rate as published from time to time by
The Wall Street Journal
, or five percent
(5%), whichever is higher. The Amendment increased the amount available under the Avidbank Line of Credit to $7.5 million less
the amount then outstanding under the Term Loan.
On March 29, 2016, the Company entered
into a Loan and Security Agreement and other ancillary documents (the “Heritage Loan Documents”) with Heritage Bank
of Commerce (“Heritage Bank”), providing for a secured asset-based revolving line of credit in an amount of up to
$12.0 million (the “Heritage Line of Credit”).
The Company utilized approximately $7.0
million under the Heritage Line of Credit to satisfy the existing Avidbank Line of Credit and related Term Loan, and approximately
$80 thousand under the Heritage Line of Credit to pay closing fees, recorded as a debt discount, of Heritage Bank. The amount
of advances remaining available to the Company under the Heritage Line of Credit as of June 30, 2016 was approximately $4.8 million.
The Heritage Loan Documents provide that
the aggregate amount of advances under the Heritage Line of Credit shall not exceed the lesser of (i) $12.0 million, or (ii) eighty-five
percent (85%) of license and transaction fee revenue (as is reflected as such in the Company’s consolidated statement of
operations) for the preceding three (3) calendar months.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
9. LINE OF CREDIT (CONTINUED)
The outstanding daily balance of the amounts
advanced under the Heritage Line of Credit will bear interest at 2.25% above the prime rate as published from time to time in
The Wall Street Journal
. At June 30, 2016, this prime rate was 3.50%. Interest is payable by the Company to Heritage Bank
on a monthly basis.
The Heritage Line of Credit and the Company’s
obligations under the Heritage Loan Documents are secured by substantially all of the Company’s assets, including its intellectual
property.
The maturity date of the Heritage Line
of Credit is March 29, 2017. At the time of maturity, all outstanding advances under the Heritage Line of Credit as well as any
unpaid interest are due and payable. Prior to maturity of the Heritage Line of Credit, the Company may prepay amounts due under
the Heritage Line of Credit without penalty, and subject to the terms of the Heritage Loan Documents, may re-borrow any such amounts.
The Heritage Loan Documents contain customary
representations and warranties and affirmative and negative covenants applicable to the Company. The Heritage Loan Documents also
require the Company to achieve a minimum Adjusted EBITDA, as defined in the Heritage Loan Documents, measured on a quarterly basis.
The Heritage Loan Documents also require that the number of the Company’s connections as of the end of each fiscal quarter
shall not decrease by more than five percent as compared to the number of the Company’s connections as of the end of the
immediately prior fiscal quarter. As of June 30, 2016, the Company was not in compliance with the minimum Adjusted EBITDA provision
of the debt covenant. The Company received a waiver from its bank for the covenant default.
The Heritage Loan Documents also contain
customary events of default, including, among other things, payment defaults, breaches of covenants, and bankruptcy and insolvency
events, subject to grace periods in certain instances. Upon an event of default, Heritage Bank may declare all of the outstanding
obligations of the Company under the Heritage Line of Credit and Heritage Loan Documents to be immediately due and payable, and
exercise any other rights provided for under the Heritage Loan Documents, including foreclosing on the collateral securing the
Heritage Loan Documents. In connection with the Heritage Loan Documents, the Company issued to Heritage Bank warrants to purchase
up to 23,978 shares of common stock of the Company at an exercise price of $5.00 per share. The warrants are exercisable at any
time through March 29, 2021 subject to earlier termination in the event of a business combination (as defined in the Heritage
Loan Documents).
The fair value of the warrants of $52
thousand was charged against the current obligation under the line of credit and amortized as interest expense on a straight-line
basis over 12 months. The Black-Sholes method was used to calculate fair value of the warrants.
The balance due on the Heritage line of
credit was $7.2 million at June 30, 2016 and the balance due on the Avidbank line of credit was $4.0 million at June 30, 2015.
As of June 30, 2016, $4.8 million was available under our line of credit.
|
|
For year ended
|
|
($ in thousands)
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Principal balance at period-end
|
|
$
|
7,217
|
|
|
$
|
4,000
|
|
Unamortized discount
|
|
|
(98
|
)
|
|
|
-
|
|
Line of credit, net
|
|
$
|
7,119
|
|
|
$
|
4,000
|
|
Maximum amount outstanding at any month end
|
|
$
|
7,217
|
|
|
$
|
5,000
|
|
Average balance outstanding during the period
|
|
$
|
4,959
|
|
|
$
|
4,100
|
|
Weighted-average interest rate:
|
|
|
|
|
|
|
|
|
As of the period-end
|
|
|
5.8
|
%
|
|
|
5.3
|
%
|
Paid during the period
|
|
|
5.5
|
%
|
|
|
5.3
|
%
|
Interest expense on the Line of Credit
was approximately $260 thousand, $211 thousand and $221 thousand during each of the years ended June 30, 2016, 2015 and 2014 respectively.
USA Technologies,
Inc.
Notes to Consolidated
Financial Statements
10. LONG-TERM DEBT
ASSIGNMENT OF QUICKSTART LEASES
In February and May 2015, the Company
assigned its interest in certain finance receivables (various 60 month QuickStart leases) to third-party finance companies in
exchange for cash and the assumption of financing obligations in the aggregate of $1.8 million and $304 thousand, respectively.
These assignment transactions contain recourse provisions for the Company which requires the proceeds from the assignment to be
treated as long-term debt. The financing obligations range in rate from 9.4% to 9.5%.
CAPITAL LEASE OBLIGATIONS
The Company periodically enters into capital
lease obligations to finance certain office and network equipment for use in its daily operations. During the year periods ended
June 30, 2016, 2015 and 2014, the Company entered into capital lease obligations of $444 thousand, $108 thousand and $325 thousand,
respectively. The interest rates on these obligations ranged from approximately 5.6% to 9.0%. The lease terms range from 2 to
5 years. The value of the acquired equipment is included in property and equipment and depreciated over the applicable estimated
useful lives accordingly.
The balance of long-term debt as of June 30, 2016 and June
30, 2015 are shown in the table below.
|
|
June 30,
|
|
|
June 30,
|
|
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Assignment of QuickStart Leases
|
|
$
|
1,600
|
|
|
$
|
1,994
|
|
Capital lease obligations
|
|
|
605
|
|
|
|
338
|
|
|
|
$
|
2,205
|
|
|
$
|
2,332
|
|
Less current portion
|
|
|
629
|
|
|
|
478
|
|
|
|
$
|
1,576
|
|
|
$
|
1,854
|
|
The maturities of long-term debt
for each of the fiscal years following June 30, 2016 are as follows:
($ in thousands)
|
|
|
|
|
|
|
|
2017
|
|
$
|
629
|
|
2018
|
|
|
625
|
|
2019
|
|
|
588
|
|
2020
|
|
|
358
|
|
2021
|
|
|
5
|
|
|
|
$
|
2,205
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the fair value hierarchy
described in Note 2, the following table shows the fair value of the Company’s financial instruments that are required to
be measured at fair value as of June 30, 2016 and 2015:
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability, 2.2 million warrants exercisable at $2.6058 from
September 17, 2011 through September 17, 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,739
|
|
|
$
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015
|
|
|
Level
1
|
|
|
|
Level
2
|
|
|
|
Level
3
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability, 3.9 million warrants exercisable at $2.6058 from September 17,
2011 through September 17, 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
978
|
|
|
$
|
978
|
|
As of June 30, 2016 and June 30, 2015,
the Company held no Level 1 or Level 2 financial instruments.
As of June 30, 2016 and 2015 fair values
of the Company’s Level 3 financial instrument totaled $3,739 million and $978 thousand for 2.2 million and 3.9 million warrants,
respectively. The level 3 financial instrument consists of common stock warrants issued by the company in March 2011, which include
features requiring liability treatment of the warrants. The fair value of warrants issued March 2011 to purchase shares of the
Company's common stock is based on valuations performed by an independent third party valuation firm. The fair value was determined
using proprietary valuation models using the quality of the underlying securities of the warrants, restrictions on the warrants
and security underlying the warrants, time restrictions and precedent sale transactions completed on the secondary market or in
other private transactions. There were no transfer of assets or liabilities between level 1, level 2, or level 3 during the years
ended June 30, 2016 and 2015.
|
|
For Year Ended
|
|
($ in thousands)
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(978
|
)
|
|
$
|
(585
|
)
|
Increase due to change in fair value of warrant liabilities
|
|
|
(5,674
|
)
|
|
|
(393
|
)
|
Reduction due to warrant exercises
|
|
|
2,913
|
|
|
|
-
|
|
Ending balance
|
|
$
|
(3,739
|
)
|
|
$
|
(978
|
)
|
12. WARRANTS
All warrants outstanding as of June 30, 2016 were exercisable.
The following table shows exercise prices and expiration dates for warrants outstanding as of June 30, 2016:
|
|
Exercise
|
|
|
|
Warrants
|
|
Price
|
|
|
Expiration
|
Outstanding
|
|
Per Share
|
|
|
Date
|
2,376,675
|
|
$
|
2.61
|
|
|
September 18, 2016
|
45,000
|
|
$
|
2.10
|
|
|
December 31, 2017
|
23,978
|
|
$
|
5.00
|
|
|
March 29, 2021
|
2,445,653
|
|
|
|
|
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
12. WARRANTS (CONTINUED)
Warrant activity for the years ended June 30, 2016, 2015, and
2014 was as follows:
|
|
Warrants
|
|
Outstanding at June 30, 2013
|
|
|
7,361,708
|
|
Issued
|
|
|
-
|
|
Exercised
|
|
|
(2,090,226
|
)
|
Expired
|
|
|
(962,482
|
)
|
Outstanding at June 30, 2014
|
|
|
4,309,000
|
|
Issued
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Expired
|
|
|
-
|
|
Outstanding at June 30, 2015
|
|
|
4,309,000
|
|
Issued
|
|
|
23,978
|
|
Exercised
|
|
|
(1,887,325
|
)
|
Expired
|
|
|
-
|
|
Outstanding at June 30, 2016
|
|
|
2,445,653
|
|
On May 12, 2010, in conjunction with a
public offering, the Company issued warrants to purchase 2.8 million shares of Common Stock, exercisable at $1.13 per share at
any time prior to December 31, 2013. During the year ended June 30, 2014, 2.1 million of these warrants were exercised at $1.13
per share for cash proceeds of $2.4 million. Warrants to purchase 59 thousand shares of Common Stock expired unexercised on December
31, 2013.
In conjunction with this public offering, the Company also issued to the placement agent warrants to purchase
165,207 and 15,717 shares of Common Stock, exercisable at $1.13 per share at any time prior to May 12, and July 7, 2013, respectively.
During the year ended June 30, 2013 the placement agent elected cashless exercises of 36,186 warrants resulting in the issuance
of 17,094 shares of Common Stock and exercised warrants to purchase 13,216 shares of Common Stock at $1.13 per share for cash proceeds
of $14,934. Warrants to purchase 1,258 shares of Common Stock expired unexercised in May 2013.
On March 17, 2011, in conjunction with
a private placement offering the Company issued warrants to purchase up to 4.3 million shares of Common Stock, exercisable at
$2.6058 per share. The 4.3 million warrants are exercisable from September 18, 2011 through September 17, 2016. During the year
ended June 30, 2016, approximately 1.9 million warrants were exercised under this offering for cash proceeds of approximately
$4.92 million. The balance of exercisable warrants as of June 30, 2016 is 2.4 million.
3.9 million of the warrants issued under
this private placement offering contain a provision that if a Fundamental Transaction occurs, notably a change in control, the
warrant holder may require the Company to pay the Black-Scholes calculated value of the then unexercised warrant to the warrant
holder in cash. As such the Company has recorded a liability of $3.7 million and $978 thousand at June 30, 2016 and 2015, respectively,
for the estimated fair value of the warrants in its Consolidated Balance Sheet (see Note 11-Fair Value of Financial Instruments).
Period to period changes in the fair value of these warrants are reflected through income.
In conjunction with the Loan
and Security agreement (Note 9 – Line of Credit) and as a condition of the Bank entering into the First Amendment,
the Company issued to the Bank warrants to purchase up to 45 thousand shares of Common Stock of the Company. The
warrants are exercisable at any time prior to December 31, 2017 at an exercise price of $2.10 per share. Upon issuance, the
fair value of the warrants was $55 thousand using a Black Scholes model, which was recorded as prepaid interest and included
in other assets on the Consolidated Balance Sheet, and was amortized as non-cash interest expense over the remaining term of
the Line of Credit as amended in January 2013. Non-cash interest of $2 thousand was recognized for the year ended June 30,
2014 relating to these warrants. As of June 30, 2016 none of these warrants have been exercised.
On March 29, 2016, the Company entered into a Loan and Security Agreement with a secondary bank (Note 9 –
Line of Credit), providing a secured asset-based revolving line of credit in an amount of up to $12 million. In conjunction with
the Loan and Security Agreement the company issued to the bank warrants to purchase up to 24 thousand shares of Common Stock of
the Company. The warrants are exercisable at any time prior to March 29, 2021 at an exercise price of $5.00 per share. At the time
of issuance the fair value of the warrants was estimated at $52 thousand using a Black Scholes model. This was recorded as a contra
-debt item and is included in the line of credit on the Consolidated Balance Sheet, and is being amortized as a non-cash interest
expense over the remaining term of the Line of Credit. Non-cash interest expense of $13 thousand has been recognized for the year
ending June 30, 2016 related to this warrant.
13. INCOME TAXES
The Company has significant deferred tax
assets, a substantial amount of which result from operating loss carryforwards. The Company routinely evaluates its ability to
realize the benefits of these assets to determine whether it is more likely than not that such benefit will be realized. In periods
prior to the year ended June 30, 2014, the Company’s evaluation of its ability to realize the benefit from its deferred
tax assets resulted in a full valuation allowance against such assets. Based upon earnings performance that the Company had achieved
along with the belief that such performance will continue into future years, the Company determined during the year ended June
30, 2014 that it was more likely than not that a substantial portion of its deferred tax assets would be realized with approximately
$64 million of its operating loss carryforwards being utilized to offset corresponding future years’ taxable income resulting
in a reduction in its valuation allowances recorded in prior years.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
13. INCOME TAXES (CONTINUED)
In addition to considering recent
periods’ performance, the evaluation of the amount of deferred tax assets expected to be realized involves forecasting
the amount of taxable income that will be generated in future years. The number of connections added in a service year is a
key metric which, in the Company’s recurring revenue service model, becomes an important ingredient in driving future
growth and earnings. The Company has forecasted future results using estimates that management believes to be achievable. With respect to its forecasts, the Company also has taken into account several industry analysts who have
projected that demand for technology and services similar to the Company’s will continue to grow in the markets the
Company serves.
If in future periods the Company demonstrates
its ability to grow taxable income in excess of the forecasts it has used, it will re-evaluate the need to keep some, or all,
of the remaining valuation allowances of approximately $23 million on its deferred tax assets.
The benefit (provision) for income taxes
for the years ended June 30, 2016, 2015 and 2014 is comprised of the following:
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(7
|
)
|
|
$
|
(58
|
)
|
|
$
|
(21
|
)
|
State
|
|
|
(38
|
)
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
|
(45
|
)
|
|
|
(64
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
407
|
|
|
|
365
|
|
|
|
20,970
|
|
State
|
|
|
253
|
|
|
|
(590
|
)
|
|
|
6,306
|
|
|
|
|
660
|
|
|
|
(225
|
)
|
|
|
27,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
615
|
|
|
$
|
(289
|
)
|
|
$
|
27,255
|
|
The provision for income taxes for the
year ended June 30, 2015 includes $396 thousand for the state and federal income tax effects of a decrease in the applicable state
tax rate used to tax effect deferred tax assets caused by a state income tax law change.
A reconciliation of the benefit (provision)
for income taxes for the years ended June 30, 2016, 2015 and 2014 to the indicated benefit (provision) based on income (loss)
before benefit (provision) for income taxes at the federal statutory rate of 34% is as follows:
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Indicated benefit (provision) at federal statutory rate of 34%
|
|
$
|
2,523
|
|
|
$
|
272
|
|
|
$
|
(94
|
)
|
Effects of permanent differences
|
|
|
(2,040
|
)(A)
|
|
|
(215
|
)
|
|
|
(8
|
)
|
State income taxes, net of federal benefit
|
|
|
199
|
|
|
|
(410
|
)
|
|
|
(18
|
)
|
Income tax credits
|
|
|
70
|
|
|
|
40
|
|
|
|
-
|
|
Changes related to prior years
|
|
|
-
|
|
|
|
187
|
|
|
|
-
|
|
Changes in valuation allowances
|
|
|
(137
|
)
|
|
|
(163
|
)
|
|
|
27,375
|
|
|
|
$
|
615
|
|
|
$
|
(289
|
)
|
|
$
|
27,255
|
|
|
(A)
|
Increase in the effects of permanent differences due to the
tax effect of the change in fair value of warrant liabilities in 2016
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
13. INCOME TAXES (CONTINUED)
At June 30, 2016 the Company had federal
operating loss carryforwards of approximately $162 million to offset future taxable income expiring through approximately 2036.
The timing and extent to which the Company can utilize operating loss carryforwards in any year may be limited by provisions of
the Internal Revenue Code regarding changes in ownership of corporations (i.e. IRS Code Section 382). The changes in ownership
limitations under IRS Code Section 382 have had the effect of limiting the maximum amount of operating loss carryforwards as of
June 30, 2016 available for use to offset future years’ taxable income to approximately $124 million. Those operating loss
carryforwards start to expire June 30, 2022.
The net deferred tax assets arose primarily
from net operating loss carryforwards, as well as the use of different accounting methods for financial statement and income tax
reporting purposes as follows:
|
|
June 30,
|
|
($ in thousands)
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
46,691
|
|
|
$
|
46,919
|
|
Asset reserves
|
|
|
1,713
|
|
|
|
792
|
|
Deferred research and development costs
|
|
|
1,356
|
|
|
|
1,009
|
|
Intangibles
|
|
|
539
|
|
|
|
606
|
|
Deferred gain on assets under sale-leaseback transaction
|
|
|
331
|
|
|
|
632
|
|
Stock-based compensation
|
|
|
377
|
|
|
|
224
|
|
Other
|
|
|
379
|
|
|
|
437
|
|
|
|
|
51,386
|
|
|
|
50,619
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
(528
|
)
|
|
|
(492
|
)
|
Intangibles and goodwill
|
|
|
-
|
|
|
|
(84
|
)
|
Deferred tax assets, net
|
|
|
50,858
|
|
|
|
50,043
|
|
Valuation allowance
|
|
|
(23,134
|
)
|
|
|
(22,997
|
)
|
Deferred tax assets (liabilties), net of allowance
|
|
|
27,724
|
|
|
|
27,046
|
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
2,271
|
|
|
|
1,258
|
|
Deferred tax assets (liabilties), non-current
|
|
$
|
25,453
|
|
|
$
|
25,788
|
|
14. STOCK BASED COMPENSATION PLANS
The Company has three active stock based
compensation plans at June 30, 2016 as shown in the table below:
Date Approved
|
|
Name of Plan
|
|
Type of Plan
|
|
Authorized
Shares
|
|
June 2013
|
|
2013 Stock Incentive Plan
|
|
Stock
|
|
|
500,000
|
|
June 2014
|
|
2014 Stock Option Incentive Plan
|
|
Stock Options
|
|
|
750,000
|
|
June 2015
|
|
2015 Equity Incentive Plan
|
|
Stock & Stock Options
|
|
|
1,250,000
|
|
|
|
|
|
|
|
|
2,500,000
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
14. STOCK BASED COMPENSATION PLANS
(CONTINUED)
As of June 30, 2016, the Company had reserved
shares of Common Stock for future issuance for the following:
Exercise of Common Stock Warrants
|
|
|
2,445,653
|
|
Conversions of Preferred Stock and cumulative Preferred Stock dividends
|
|
|
99,999
|
|
Issuance under 2013 Stock Incentive Plan
|
|
|
162,330
|
|
Issuance under 2014 Stock Option Incentive Plan
|
|
|
737,215
|
|
Issuance under 2015 Stock Incentive Plan
|
|
|
1,250,000
|
|
Issuance to former Chief Executive
Officer upon the occurrence of a USA Transaction
|
|
|
140,000
|
|
Total shares reserved for future issuance
|
|
|
4,835,197
|
|
STOCK OPTIONS
The Company estimates the grant date fair
value of the stock options it grants using a Black-Scholes valuation model. The Company’s assumption for expected volatility
is based on its historical volatility data related to market trading of its own common stock. The Company bases its assumptions
for expected life of the new stock option grants on the life of the option granted, and if relevant, its analysis of the historical
exercise patterns of its stock options. The dividend yield assumption is based on dividends expected to be paid over the expected
life of the stock option. The risk-free interest rate assumption is determined by using the U.S. Treasury rates of the same period
as the expected option term of each stock option.
|
|
Year Ended
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
June 30, 2014
|
|
Expected volatility
|
|
|
59-66%
|
|
|
|
78-79%
|
|
|
|
79%
|
|
Expected life
|
|
|
4.5 years
|
|
|
|
7 years
|
|
|
|
7 years
|
|
Expected dividends
|
|
|
0.00%
|
|
|
|
0.00%
|
|
|
|
0.00%
|
|
Risk-free interest rate
|
|
|
1.46-1.49%
|
|
|
|
1.59-2.04%
|
|
|
|
2.22%
|
|
The 2014 Stock Option Incentive Plan was
approved in June 2014 therefore there was no stock based compensation expense related to stock options for the years ended June
30, 2014. Stock based compensation related to stock options for the years ended June 30, 2016 and June 30, 2015 was $338 and $370
thousand respectively. Unrecognized compensation related to stock option grants as of June 30, 2016 and June 30, 2015 was $167
thousand and $297 thousand respectively.
The following table provides information
about outstanding options:
|
|
For the Twelve Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
Shares
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
|
Shares
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
|
Shares
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
Outstanding options, beginning of period
|
|
|
538,888
|
|
|
$
|
1.32
|
|
|
|
120,000
|
|
|
$
|
1.49
|
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
199,586
|
|
|
$
|
1.63
|
|
|
|
438,888
|
|
|
$
|
1.30
|
|
|
|
120,000
|
|
|
$
|
1.49
|
|
Forfeited
|
|
|
(95,000
|
)
|
|
$
|
1.80
|
|
|
|
(20,000
|
)
|
|
$
|
1.49
|
|
|
|
-
|
|
|
|
-
|
|
Excercised
|
|
|
(33,333
|
)
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding options, end of period
|
|
|
610,141
|
|
|
$
|
1.35
|
|
|
|
538,888
|
|
|
$
|
1.33
|
|
|
|
120,000
|
|
|
$
|
1.49
|
|
The following table provides
information related to options as of June 30, 2016:
|
|
Options Outstanding
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Options Outstanding
|
|
Remaining Contractual Life
|
|
Shares Exercisable
|
|
Remaining Contractual Life
|
|
Weighted Average Exercise Price
|
|
$1.62 to $1.68
|
|
75,000
|
|
5.51
|
|
25,002
|
|
5.51
|
|
1.65
|
|
$1.80
|
|
295,555
|
|
5.16
|
|
195,555
|
|
5.16
|
|
1.8
|
|
$2.05
|
|
100,000
|
|
4.97
|
|
66,670
|
|
4.97
|
|
2.05
|
|
$2.09
|
|
10,000
|
|
5.58
|
|
3,333
|
|
5.58
|
|
2.09
|
|
$2.75
|
|
25,000
|
|
5.77
|
|
8,333
|
|
5.77
|
|
2.75
|
|
$2.94
|
|
75,000
|
|
6.53
|
|
-
|
|
-
|
|
-
|
|
$3.38
|
|
29,586
|
|
6.06
|
|
-
|
|
-
|
|
-
|
|
|
|
610,141
|
|
5.42
|
|
298,893
|
|
5.17
|
|
1.87
|
|
The following table provides information
about unvested options:
|
|
For the Twelve Months
Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
Shares
|
|
|
Weighted
Average Grant
Date Fair
Value
|
|
|
Shares
|
|
|
Weighted
Average Grant
Date Fair
Value
|
|
|
Shares
|
|
|
Weighted
Average Grant
Date Fair
Value
|
|
Unvested options, beginning of period
|
|
|
505,553
|
|
|
$
|
1.32
|
|
|
|
120,000
|
|
|
$
|
1.49
|
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
199,586
|
|
|
$
|
1.63
|
|
|
|
438,888
|
|
|
$
|
1.30
|
|
|
|
120,000
|
|
|
$
|
1.49
|
|
Vested
|
|
|
(298,891
|
)
|
|
$
|
1.31
|
|
|
|
(33,335
|
)
|
|
$
|
1.49
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(95,000
|
)
|
|
$
|
1.80
|
|
|
|
(20,000
|
)
|
|
$
|
1.49
|
|
|
|
-
|
|
|
|
-
|
|
Unvested options, end of period
|
|
|
311,248
|
|
|
$
|
1.39
|
|
|
|
505,553
|
|
|
$
|
1.32
|
|
|
|
120,000
|
|
|
$
|
1.49
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
14. STOCK BASED COMPENSATION PLANS (CONTINUED)
The
following table provides information about options outstanding and exercisable options:
|
|
As of June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
Options
Outstanding
|
|
|
Exercisable
Options
|
|
|
Options
Outstanding
|
|
|
Exercisable
Options
|
|
|
Options
Outstanding
|
|
|
Exercisable
Options
|
|
Number
|
|
|
610,141
|
|
|
|
298,893
|
|
|
|
538,888
|
|
|
|
33,335
|
|
|
|
120,000
|
|
|
|
-
|
|
Weighted average exercise price
|
|
$
|
2.07
|
|
|
$
|
1.87
|
|
|
$
|
1.86
|
|
|
$
|
2.05
|
|
|
$
|
2.05
|
|
|
|
-
|
|
Aggregate intrinsic value
|
|
$
|
1,341,828
|
|
|
$
|
717,343
|
|
|
$
|
451,177
|
|
|
$
|
21,668
|
|
|
$
|
7,200
|
|
|
|
-
|
|
Weighted average contractual term
|
|
$
|
5.42
|
|
|
|
5.17
|
|
|
|
6.21
|
|
|
|
5.97
|
|
|
|
6.97
|
|
|
|
-
|
|
Share price as of June 30
|
|
$
|
4.27
|
|
|
$
|
4.27
|
|
|
$
|
2.70
|
|
|
$
|
2.70
|
|
|
$
|
2.11
|
|
|
$
|
2.11
|
|
STOCK GRANTS
A summary of the status of the Company’s
nonvested common shares as of June 30, 2016, 2015, and 2014, and changes during the years then ended is presented below:
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2013
|
|
|
97,146
|
|
|
$
|
1.52
|
|
Granted
|
|
|
10,000
|
|
|
|
2.17
|
|
Vested
|
|
|
(55,001
|
)
|
|
|
1.62
|
|
Forfeited, Director changes
|
|
|
(3,334
|
)
|
|
|
0.94
|
|
Forfeited, Employee shares not earned
|
|
|
(5,000
|
)
|
|
|
1.52
|
|
Nonvested at June 30, 2014
|
|
|
43,811
|
|
|
$
|
1.59
|
|
Granted
|
|
|
155,927
|
|
|
|
2.00
|
|
Vested
|
|
|
(181,134
|
)
|
|
|
1.89
|
|
Nonvested at June 30, 2015
|
|
|
18,604
|
|
|
$
|
1.88
|
|
Granted
|
|
|
131,558
|
|
|
|
3.04
|
|
Vested
|
|
|
(21,664
|
)
|
|
|
2.70
|
|
Nonvested at June 30, 2016
|
|
|
128,498
|
|
|
$
|
2.97
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
15. PREFERRED STOCK
The authorized Preferred Stock may be
issued from time to time in one or more series, each series with such rights, preferences or restrictions as determined by the
Board of Directors. As of June 30, 2016 each share of Series A Preferred Stock is convertible into 0.194 of a share of Common
Stock and each share of Series A Preferred Stock is entitled to 0.194 of a vote on all matters on which the holders of Common
Stock are entitled to vote. Series A Preferred Stock provides for an annual cumulative dividend of $1.50 per share, payable when,
and if declared by the Board of Directors, to the shareholders of record in equal parts on February 1 and August 1 of each year.
Any and all accumulated and unpaid cash dividends on the Series A Preferred Stock must be declared and paid prior to the declaration
and payment of any dividends on the Common Stock.
The Series A Preferred Stock may be called
for redemption at the option of the Board of Directors for a price of $11.00 per share plus payment of all accrued and unpaid
dividends. No such redemption has occurred as of June 30, 2016. In the event of any liquidation as defined in the Company’s
Articles of Incorporation, the holders of shares of Series A Preferred Stock issued shall be entitled to receive $10.00 for each
outstanding share plus all cumulative unpaid dividends. If funds are insufficient for this distribution, the assets available
will be distributed ratably among the preferred shareholders. The Series A Preferred Stock liquidation preference as of June 30,
2016 and 2015 is as follows:
($ in thousands)
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
For Shares outstanding at $10.00 per share
|
|
$
|
4,451
|
|
|
$
|
4,451
|
|
Cumulative unpaid dividends
|
|
|
13,657
|
|
|
|
12,989
|
|
|
|
$
|
18,108
|
|
|
$
|
17,440
|
|
Cumulative unpaid dividends are convertible into common shares
at $1,000 per common share at the option of the shareholder. During the years ended June 30, 2016, 2015 and 2014, no shares of
Preferred Stock nor cumulative preferred dividends were converted into shares of common stock.
16. RETIREMENT PLAN
The Company’s 401(k) Plan (the “Retirement
Plan”) allows employees who have completed six months of service to make voluntary contributions up to a maximum of 100%
of their annual compensation, as defined in the Retirement Plan. The Company may, in its discretion, make a matching contribution,
a profit sharing contribution, a qualified non-elective contribution, and/or a safe harbor 401(k) contribution to the Retirement
Plan. The Company must make an annual election, at the beginning of the plan year, as to whether it will make a safe harbor contribution
to the plan. In fiscal years 2016, 2015 and 2014, the Company elected and made a safe harbor matching contributions of 100% of
the participant’s first 3% and 50% of the next 2% of compensation deferred into the Retirement Plan. The Company’s
safe harbor contributions for the years ended June 30, 2016, 2015 and 2014 approximated $189 thousand, $192 thousand and
$168 thousand, respectively.
17. RELATED PARTY TRANSACTIONS
There were no related party transactions
during the years ended June 30, 2016, 2015 and 2014.
18. COMMITMENTS AND CONTINGENCIES
SALE AND LEASEBACK TRANSACTIONS
In June 2014, the Company and a third
party finance company, entered into six Sale Leaseback Agreements (the “Sale Leaseback Agreements” or a “Sale
Leaseback Agreement”) pursuant to which a third-party finance company purchased ePort equipment owned by the Company and
used by the Company in its JumpStart Program. As of June 30, 2014, a third-party finance company completed the purchase from the
Company, the ePort equipment under the first two of the Sale Leaseback Agreements.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
18. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In the quarter ended September 2014, a
third-party finance company completed the purchase from the Company of the ePort equipment described in the last four of the Sale
Leaseback Agreements. Upon the completion of the sale under these agreements, the Company computed a gain on the sale of its ePort
equipment, which is deferred and will be amortized in proportion to the related gross rental charged to expense over the lease
terms in accordance with the FASB topic ASC 840-40, “Sale Leaseback Transactions”. The computed gain on the sale will
be recognized ratably over the 36-month term and charged as a reduction to the Company’s JumpStart rent expense included
in costs of services in the Company’s Consolidated Statement of Operations. The Company is accounting for the Sale Leaseback
as an operating lease and is obligated to pay to Varilease a base monthly rental for this equipment during the 36-month lease term.
The future lease payment obligations under these agreements are included in the table at the bottom of this note.
Upon the completion of the sales, the Company
computed gains on the sale of its ePort equipment as follows:
($ in thousands)
|
|
Year ended June 30,
|
|
|
|
2015
|
|
Rental equipment sold, cost
|
|
$
|
3,873
|
|
Rental equipment sold, accumulated depreciation upon sale
|
|
|
(331
|
)
|
Rental equipment sold, net book value
|
|
|
3,542
|
|
Proceeds from sale
|
|
|
4,994
|
|
Gain on sale of rental equipment
|
|
$
|
1,452
|
|
In accordance with the FASB topic ASC 840-40,
“Sale Leaseback Transactions”, any gain shall be deferred and shall be amortized in proportion to the related gross
rental charged to expense over the lease term. The computed gain on the sale will be recognized ratably over the 36 month term
and charged as a reduction to the Company’s JumpStart rent expense included in costs of services in the Company’s Consolidated
Statement of Operations. For the years ended June 30, 2016 and 2015 the Company recognized gains as follows:
($ in thousands)
|
|
Year ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
$
|
1,760
|
|
|
$
|
1,142
|
|
Gain on sale of rental equipment
|
|
|
-
|
|
|
|
1,452
|
|
Recognition of deferred gain
|
|
|
(860
|
)
|
|
|
(834
|
)
|
Ending balance
|
|
|
900
|
|
|
|
1,760
|
|
Less current portion
|
|
|
860
|
|
|
|
860
|
|
Non-current portion of deferred gain
|
|
$
|
40
|
|
|
$
|
900
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
18. COMMITMENTS AND CONTINGENCIES (CONTINUED)
OTHER LEASES
Other lease commitments include leases
for its operations from various facilities. The Company leases space located in Malvern, Pennsylvania for its principal executive
office and used for general administrative functions, sales activities, product development, and customer support. In April 2016,
the Company entered into a Third Amendment to Office Space Lease (the “Third Amendment”) which amended certain terms
of its existing lease (the “Lease”) for its Malvern, Pennsylvania executive offices consisting of approximately 17,249
square feet located on the first floor of the building (the “Current Premises”). The Third Amendment provides that
the Company will relocate from the Current Premises to new offices located on the third floor of the building (the “New Offices”)
consisting of approximately 17,689 square feet. Substantially all of the improvements to the New Offices will be constructed by
the landlord at the landlord’s cost and expense. When the New Offices are substantially completed, the Company would relocate
from the Current Premises to the New Premises (the “New Premises Commencement Date”). The Third Amendment provides
that the term of the Lease is extended from the prior expiration date of April 30, 2016 until seven years following July 1, 2016
(the” New Premises Commencement Date”). The Company’s monthly base rent for the Premises will increase from approximately
$32 thousand to $36 thousand on the New Premises Commencement Date, and will increase each year thereafter up to a maximum monthly
base rent of approximately $41 thousand. The Third Amendment also grants to the Company the option to extend the term of the Lease
for an additional five year period with a minimum of one year advance notice prior to the expiration of the initial term, and provides
certain rights of first offer on additional space located on the third floor of the building. The straight-line rent expense for
this office is approximately $38 thousand per month for the duration of the lease.
The Company leases space in Malvern, Pennsylvania
for its product warehousing and shipping support. In March 2016, the Company extended its lease from March 1, 2016 through February
29, 2019. The lease includes monthly rental payments of $5 thousand. Beginning in March 2016 the straight-line rent expense for
this operations site is approximately $5 thousand per month for the duration of the lease period.
The Company leases
space in Portland, Oregon related to its VendScreen acquisition. The current lease consists of approximately 9,319 square feet.
The lease includes monthly rental payments of $20 thousand and will terminate on September 30, 2016. The Company is currently negotiating
a new lease for space related to this facility.
Rent expense under operating leases was
approximately $479 thousand, $354 thousand and $372 thousand during the years ended June 30, 2016, 2015, and 2014, respectively.
SUMMARY OF LEASE OBLIGATIONS
Future minimum lease payments for fiscal years subsequent to
June 30, 2016 under non-cancellable operating leases and capital leases are as follows:
|
|
Operating Leases
|
|
|
Other Operating
|
|
|
Total Operating
|
|
|
Capital
|
|
($ in thousands)
|
|
from Sale Leaseback
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
$
|
2,641
|
|
|
$
|
552
|
|
|
$
|
3,193
|
|
|
$
|
299
|
|
2018
|
|
|
138
|
|
|
|
503
|
|
|
|
641
|
|
|
|
236
|
|
2019
|
|
|
-
|
|
|
|
498
|
|
|
|
498
|
|
|
|
142
|
|
2020
|
|
|
-
|
|
|
|
459
|
|
|
|
459
|
|
|
|
-
|
|
2021
|
|
|
-
|
|
|
|
468
|
|
|
|
468
|
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
|
|
963
|
|
|
|
963
|
|
|
|
-
|
|
Total minimum lease payments
|
|
$
|
2,779
|
|
|
$
|
3,443
|
|
|
$
|
6,222
|
|
|
$
|
677
|
|
Less Amount Representing interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
Present Value of net minimum lease payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
605
|
|
Less Current obligations under capital leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255
|
|
Obligations under capital leases, less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
350
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
18. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
As previously reported, on October 1, 2015,
a purported class action was filed in the United States District Court for the Eastern District of Pennsylvania against the Company
and its executive officers alleging violations under the Securities Exchange Act of 1934. On December 15, 2015, the court appointed
a lead plaintiff, and on January 18, 2016, the plaintiff filed an amended complaint that set forth the same causes of action and
requested substantially the same relief as the original complaint. On February 1, 2016, the Company filed a motion to dismiss the
amended complaint. On April 11, 2016, the Court held oral argument on the Company’s motion, and on April 14, 2016, the Court
issued an order granting the Company’s motion to dismiss the amended complaint without leave to amend. On May 13, 2016, the
plaintiff appealed the Court’s order to the United States Court of Appeals for the Third Circuit.
On August 16, 2016, the plaintiff filed
a Motion For Relief From Final Judgment with the District Court seeking an order modifying the District Court’s April 14,
2016 order dismissing the complaint, and permitting the plaintiff to now file an amended complaint due to alleged newly discovered
evidence. By Order dated September 6, 2016, the District Court found that the Motion raised a substantial issue, and directed the
plaintiff to notify the Court of Appeals thereof. On September 7, 2016, the plaintiff so notified the Court of Appeals. It is anticipated
that the Court of Appeals will remand the case to the District Court pending the District Court’s ruling on the Motion. The
Company’s response to the Motion is due by no later than September 15, 2016. The Company believes that the Motion has no
merit and intends to vigorously oppose the Motion.
By
letter dated December 7, 2015, a purported shareholder of the Company demanded that the Board of Directors investigate, remedy
and commence proceedings against certain of the Company’s current and former officers and directors for breach of fiduciary
duties in connection with the material weakness in its internal controls over financial reporting which were more fully described
in the Company’s Form 10-K for the fiscal year ended June 30, 2015 (the “2015 Form 10-K”). In response to the
demand letter, the Board of Directors formed a special litigation committee (“the SLC”) consisting of Joel Brooks and
William Reilly, Jr., in order to investigate and evaluate the demand letter. On June 1, 2016, and before the SLC had concluded
its investigation, the purported shareholder filed a purported derivative action on behalf of the Company in the Chester County,
Pennsylvania, Court of Common Pleas, against certain current and former officers and Directors. The complaint alleges that the
defendants breached their fiduciary duties relating to the material weakness in internal controls reported in the 2015 Form 10-K.
The complaint seeks unspecified damages against the defendants and certain equitable relief. On July 15, 2016 the SLC issued its
report (
the “SLC Report”) which, among
other things, concluded that the none of the current or former officers or Directors had breached their fiduciary duties, that
it was not in the best interests of the Company to pursue the pending shareholder derivative action, and that the Company request
the Court to dismiss the action in its entirety. On August 1, 2016, the Board of Directors of the Company adopted all of the conclusions
and recommendations set forth in the SLC Report. On August 16, 2016, the Company filed with the Court a Motion to Dismiss the shareholder
derivative complaint. As of the date hereof, the court has not ruled on the Motion to Dismiss.
The ultimate outcome of these matters cannot
be determined at this time. The Company believes that it has meritorious defenses to such claims and is defending them vigorously,
and has not recorded a provision for the ultimate outcome of these matters in its financial statements.
USA Technologies, Inc.
Notes to Consolidated Financial Statements
19. REVISIONS OF PREVIOUSLY REPORTED CONSOLIDATED FINANCIAL
STATEMENTS
The consolidated financial statements included
in this Form 10-K reflect additional shares of common stock and preferred stock that had been issued and outstanding in prior periods
but were not reflected as such in previous consolidated financial statements. The additional shares primarily consisted of unvested
shares of common stock awarded to officers and directors pursuant to the Company’s equity compensation plans.
The Consolidated Statement of Shareholders’
Equity has been adjusted to reflect these additional common and preferred shares as of June 30, 2013. The June 30, 2015 Consolidated
Balance Sheet has also been adjusted to reflect these additional shares; and the liquidation preference of preferred stock as of
such date has been increased by $85 thousand.
The cumulative preferred dividends and
the basic and diluted weighted average number of common shares outstanding in the Consolidated Statements of Operations for the
fiscal years ended June 30, 2015 and 2014 have also been adjusted. The foregoing adjustments in basic and diluted weighted common
shares outstanding did not affect the previously reported net income (loss) per common share-basic or diluted for the fiscal year
ended June 30, 2015. For the fiscal year ended June 30, 2014 net income per common share-basic and diluted decreased from $.78
to $.77.
Revised Consolidated Statements of Operations
($ in thousands)
|
|
Year ended June 30, 2014
|
|
|
|
As previously
reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred dividends
|
|
$
|
(664
|
)
|
|
$
|
(4
|
)
|
|
$
|
(668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
26,867
|
|
|
$
|
(4
|
)
|
|
$
|
26,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per common share basic
|
|
$
|
0.78
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per common share diluted
|
|
$
|
0.78
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding
|
|
|
34,613,497
|
|
|
|
54,272
|
|
|
|
34,667,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding
|
|
|
34,613,497
|
|
|
|
396,062
|
|
|
|
35,009,559
|
|
($ in thousands)
|
|
Year ended June 30, 2015
|
|
|
|
As previously
reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred dividends
|
|
$
|
(664
|
)
|
|
$
|
(4
|
)
|
|
$
|
(668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
(1,753
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average number of common shares outstanding
|
|
|
35,663,386
|
|
|
|
55,825
|
|
|
|
35,719,211
|
|
Revised Consolidated Statements of Equity
($ in thousands)
|
|
Year ended June 30, 2014
|
|
Common Shares
|
|
As previously
reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Stock Incentive Plan
|
|
|
6,668
|
|
|
|
(3,334
|
)
|
|
|
3,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Stock Incentive Plan
|
|
|
51,667
|
|
|
|
(51,667
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 Stock Incentive Plan
|
|
|
-
|
|
|
|
158,505
|
|
|
|
158,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 Stock Incentive Plan
|
|
|
131,203
|
|
|
|
(75,393
|
)
|
|
|
55,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of common stock
|
|
|
(49,311
|
)
|
|
|
(3,334
|
)
|
|
|
(52,645
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2014
|
|
|
35,514,685
|
|
|
|
87,438
|
|
|
|
35,602,123
|
|
|
|
Year ended June 30, 2015
|
|
Common Shares
|
|
As previously
reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Stock Incentive Plan
|
|
|
10,002
|
|
|
|
(10,002
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 Stock Incentive Plan
|
|
|
88,991
|
|
|
|
(55,293
|
)
|
|
|
33,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 Stock Incentive Plan
|
|
|
165,463
|
|
|
|
(5,722
|
)
|
|
|
159,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 Stock Incentive Plan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of common stock
|
|
|
(31,899
|
)
|
|
|
-
|
|
|
|
(31,899
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2015
|
|
|
35,747,242
|
|
|
|
16,421
|
|
|
|
35,763,663
|
|
USA Technologies, Inc.
Notes to Consolidated Financial Statements
20. UNAUDITED QUARTERLY DATA
|
|
UNAUDITED
|
|
YEAR ENDED JUNE 30, 2016
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
16,600
|
|
|
$
|
18,503
|
|
|
$
|
20,361
|
|
|
$
|
21,944
|
|
|
$
|
77,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
5,047
|
|
|
$
|
5,483
|
|
|
$
|
5,672
|
|
|
$
|
5,783
|
|
|
$
|
21,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
112
|
|
|
$
|
594
|
|
|
$
|
(595
|
)
|
|
$
|
(1,578
|
)
|
|
$
|
(1,467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
360
|
|
|
$
|
(874
|
)
|
|
$
|
(5,420
|
)
|
|
$
|
(872
|
)
|
|
$
|
(6,806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred dividends
|
|
$
|
(334
|
)
|
|
$
|
-
|
|
|
$
|
(334
|
)
|
|
$
|
-
|
|
|
$
|
(668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
26
|
|
|
$
|
(874
|
)
|
|
$
|
(5,754
|
)
|
|
$
|
(872
|
)
|
|
$
|
(7,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,848,395
|
|
|
|
35,909,933
|
|
|
|
36,161,626
|
|
|
|
37,325,681
|
|
|
|
36,309,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
36,487,879
|
|
|
|
35,909,933
|
|
|
|
36,161,626
|
|
|
|
37,325,681
|
|
|
|
36,309,047
|
|
|
|
UNAUDITED
|
|
YEAR ENDED JUNE 30, 2015
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
12,253
|
|
|
$
|
12,821
|
|
|
$
|
15,358
|
|
|
$
|
17,645
|
|
|
$
|
58,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
3,135
|
|
|
$
|
3,733
|
|
|
$
|
5,146
|
|
|
$
|
4,809
|
|
|
$
|
16,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(667
|
)
|
|
$
|
51
|
|
|
$
|
731
|
|
|
$
|
(355
|
)
|
|
$
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(61
|
)
|
|
$
|
(261
|
)
|
|
$
|
(567
|
)
|
|
$
|
(200
|
)
|
|
$
|
(1,089
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred dividends
|
|
$
|
(334
|
)
|
|
$
|
-
|
|
|
$
|
(334
|
)
|
|
$
|
-
|
|
|
$
|
(668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
(395
|
)
|
|
$
|
(261
|
)
|
|
$
|
(901
|
)
|
|
$
|
(200
|
)
|
|
$
|
(1,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,651,732
|
|
|
|
35,716,848
|
|
|
|
35,747,979
|
|
|
|
35,761,370
|
|
|
|
35,719,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
35,651,732
|
|
|
|
35,716,848
|
|
|
|
35,747,979
|
|
|
|
36,206,934
|
|
|
|
35,719,211
|
|