UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2020



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-33365

USA Technologies, Inc.

(Exact name of registrant as specified in its charter)



Pennsylvania						23-2679963
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 Deerfield Lane,

Suite 300,

Malvern,

Pennsylvania

19355

(Address of principal executive offices)

(Zip Code)

(~~610~~) (610) 989-0340

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name Of Each Exchange On Which Registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of ~~June 18,~~October 30, 2020 there were ~~64,557,336~~65,256,631 outstanding shares of Common Stock, no par value.

~~EXPLANATORY NOTE~~

On May 7, 2020, USA Technologies, Inc. (the “Company”, “We”, “USAT”, or “Our”) filed a Current Report on Form 8-K (the “Form 8-K”) with the U.S. Securities and Exchange Commission (the “Commission”) indicating its reliance on the 45-day extension provided by an order issued by the Commission under Section 36

Table of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) entitled Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder, dated March 4, 2020 (Release No. 34-88318), as modified and superseded by a new Commission order under Section 36 of the Exchange Act entitled Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, dated March 25, 2020 (Release No. 34-88465) (collectively, the “Order”). Specifically, the Company disclosed that it was unable to timely prepare and review the Quarterly Report due to circumstances related to COVID-19, including the remote working arrangements the Company has instituted for employees. These circumstances have impacted the Company’s ability to ensure information required to be disclosed in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management to allow for timely decisions regarding required disclosure. Therefore, due to COVID-19’s interference in the Company’s operations, the Company was unable to file the Original Form 10-Q on or prior to the original due date for the report. Consistent with the Company’s statements made in the Form 8-K, this Quarterly Report for the three months ended March 31, 2020, has been filed on June 24, 2020 (which was within the permitted timeframe of the Order).Contents

USA TECHNOLOGIES, INC.

TABLE OF CONTENTS

Table of Contents

Part I. Financial Information

Item 1. Consolidated Financial Statements

USA Technologies, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


($ in thousands)	March 31, 2020			June 30, 2019
($ in thousands, except share data)							($ in thousands, except share data)	September 30, 2020		June 30, 2020

Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	25,894		$	27,464		Cash and cash equivalents	$	34,690	$	31,713
Accounts receivable, less allowance of $6,952 and $4,866, respectively	18,418			21,906
Accounts receivable, less allowance of $7,313 and $7,676, respectively							Accounts receivable, less allowance of $7,313 and $7,676, respectively	19,175		17,273
Finance receivables, net	7,941			6,727			Finance receivables, net	7,356		7,468
Inventory, net	9,577			11,273			Inventory, net	7,005		9,128
Prepaid expenses and other current assets	2,319			1,558			Prepaid expenses and other current assets	1,545		1,782
Total current assets	64,149			68,928			Total current assets	69,771		67,364

Non-current assets:							Non-current assets:
Finance receivables due after one year, net	11,541			12,642
Finance receivables due after one year							Finance receivables due after one year	10,385		11,213
Other assets	2,075			2,099			Other assets	2,156		1,993
Property and equipment, net	8,293			9,590			Property and equipment, net	7,526		7,872
Operating lease right-of-use assets	5,903			—			Operating lease right-of-use assets	5,417		5,603
Intangibles, net	23,818			26,171			Intangibles, net	22,249		23,033
Goodwill	63,945			63,945			Goodwill	63,945		63,945
Total non-current assets	115,575			114,447			Total non-current assets	111,678		113,659

Total assets	$	179,724		$	183,375		Total assets	$	181,449	$	181,023

Liabilities, convertible preferred stock and shareholders’ equity							Liabilities, convertible preferred stock and shareholders’ equity
Current liabilities:							Current liabilities:
Accounts payable	$	24,592		$	27,584		Accounts payable	$	31,791	$	27,058
Accrued expenses	27,533			23,351			Accrued expenses	28,880		30,265
Finance lease obligations and current obligations under long-term debt	381			12,497			Finance lease obligations and current obligations under long-term debt	3,871		3,328
Income taxes payable	168			254
Deferred revenue	1,621			1,681			Deferred revenue	1,639		1,698
Total current liabilities	54,295			65,367			Total current liabilities	66,181		62,349

Long-term liabilities:							Long-term liabilities:
Deferred income taxes	86			71			Deferred income taxes	143		137
Finance lease obligations and long-term debt, less current portion	12,297			276			Finance lease obligations and long-term debt, less current portion	14,066		12,435
Operating lease liabilities, non-current	5,025			—			Operating lease liabilities, non-current	4,469		4,749
Accrued expenses, less current portion	450			100
Total long-term liabilities	17,858			447			Total long-term liabilities	18,678		17,321

Total liabilities	72,153			65,814			Total liabilities	84,859		79,670
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)
Convertible preferred stock:							Convertible preferred stock:
Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and outstanding, with liquidation preferences of $20,778 and $20,111 at March 31, 2020 and June 30, 2019, respectively	3,138			3,138
Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and outstanding, with liquidation preferences of $21,113 and $20,779 at September 30, 2020 and June 30, 2020, respectively							Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and outstanding, with liquidation preferences of $21,113 and $20,779 at September 30, 2020 and June 30, 2020, respectively	3,138		3,138
Shareholders’ equity:							Shareholders’ equity:
Preferred stock, no par value, 1,800,000 shares authorized, no shares issued	—			—
Common stock, no par value, 640,000,000 shares authorized, 64,448,957 and 60,008,481 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively	396,044			376,853
Preferred stock, 0 par value, 1,800,000 shares authorized, 0 shares issued							Preferred stock, 0 par value, 1,800,000 shares authorized, 0 shares issued	0		0
Common stock, 0 par value, 640,000,000 shares authorized, 65,252,965 and 65,196,882 shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively							Common stock, 0 par value, 640,000,000 shares authorized, 65,252,965 and 65,196,882 shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively	402,742		401,240
Accumulated deficit	(291,611		)	(262,430		)	Accumulated deficit	(309,290)		(303,025)
Total shareholders’ equity	104,433			114,423			Total shareholders’ equity	93,452		98,215
Total liabilities, convertible preferred stock and shareholders’ equity	$	179,724		$	183,375		Total liabilities, convertible preferred stock and shareholders’ equity	$	181,449	$	181,023

See accompanying notes.

Table of Contents

USA Technologies, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


														Three months ended
	Three months ended March 31,						Nine months ended March 31,							September 30,
($ in thousands, except per share data)	2020			2019			2020			2019			($ in thousands, except per share data)	2020		2019
Revenue:													Revenue:
License and transaction fees	$	34,961		$	31,515		$	105,324		$	89,919		License and transaction fees	$	33,108	$	34,609
Equipment sales	8,137			6,189			25,184			16,039			Equipment sales	3,769		8,750
Total revenue	43,098			37,704			130,508			105,958			Total revenue	36,877		43,359

Costs of sales:													Costs of sales:
Cost of services	22,244			20,307			66,912			58,141			Cost of services	19,336		22,089
Cost of equipment	9,856			7,444			28,420			17,371			Cost of equipment	3,301		9,854
Total costs of sales	32,100			27,751			95,332			75,512			Total costs of sales	22,637		31,943

Gross profit	10,998			9,953			35,176			30,446			Gross profit	14,240		11,416

Operating expenses:													Operating expenses:
Selling, general and administrative	20,069			11,156			56,876			31,537			Selling, general and administrative	16,780		17,196
Investigation and restatement expenses	—			1,408			4,303			13,122
Integration and acquisition costs	—			24			—			1,127
Investigation, proxy solicitation and restatement expenses													Investigation, proxy solicitation and restatement expenses	0		4,476
Depreciation and amortization	1,107			1,083			3,209			3,359			Depreciation and amortization	1,068		1,022
Total operating expenses	21,176			13,671			64,388			49,145			Total operating expenses	17,848		22,694

Operating loss	(10,178		)	(3,718		)	(29,212		)	(18,699		)	Operating loss	(3,608)		(11,278)

Other income (expense):													Other income (expense):
Interest income	411			348			988			1,245			Interest income	350		294
Interest expense	(683		)	(913		)	(1,981		)	(2,518		)	Interest expense	(3,315)		(465)
Change in fair value of derivative	1,070			—			1,070			—
Total other income (expense), net	798			(565		)	77			(1,273		)	Total other income (expense), net	(2,965)		(171)

Loss before income taxes	(9,380		)	(4,283		)	(29,135		)	(19,972		)	Loss before income taxes	(6,573)		(11,449)
Benefit (provision) for income taxes	85			(23		)	(46		)	(60		)
Provision for income taxes													Provision for income taxes	(40)		(59)

Net loss	(9,295		)	(4,306		)	(29,181		)	(20,032		)	Net loss	(6,613)		(11,508)
Preferred dividends	(334		)	(334		)	(668		)	(668		)	Preferred dividends	(334)		(334)
Net loss applicable to common shares	$	(9,629	)	$	(4,640	)	$	(29,849	)	$	(20,700	)	Net loss applicable to common shares	$	(6,947)	$	(11,842)
Net loss per common share													Net loss per common share
Basic	$	(0.15	)	$	(0.08	)	$	(0.48	)	$	(0.34	)	Basic	$	(0.11)	$	(0.20)
Diluted	$	(0.15	)	$	(0.08	)	$	(0.48	)	$	(0.34	)	Diluted	$	(0.11)	$	(0.20)
Weighted average number of common shares outstanding													Weighted average number of common shares outstanding
Basic	64,096,778			60,065,053			62,591,947			60,059,594			Basic	64,859,002		60,096,852
Diluted	64,096,778			60,065,053			62,591,947			60,059,594			Diluted	64,859,002		60,096,852

~~Reconciliation~~

Table of ~~Net Loss to Non-GAAP Net Loss~~

Contents

Three months ended March 31,
($ in thousands) 2020 2019
Net loss $ (9,295 ) $ (4,306 )
Non-GAAP adjustments:
Non-cash portion of income tax provision 5
5
Amortization expense 784
784
Stock-based compensation 421
421
Change in fair value of derivative (1,070 ) —
Litigation related professional fees 2,138
186
Investigation and restatement expenses —
1,408
Integration and acquisition costs —
24
Non-GAAP net loss $ (7,017 ) $ (1,478 )

~~As used herein, non-GAAP~~We define Adjusted EBITDA as net loss ~~represents GAAP net loss excluding costs or benefits relating to any non-cash portions of the Company’s~~before (i) interest income, ~~tax provision,~~(ii) interest expense, (iii) income taxes, (iv) depreciation, (v) amortization, (vi) stock-based compensation expense, ~~related to our acquisition-related intangibles,~~and (vii) non-recurring fees and charges that were incurred in connection with the ~~acquisition and integration of businesses, non-recurring fees and charges that were incurred in connection with the Audit Committee investigation~~2019 Investigation and financial statement restatement activities ~~class-action litigation or activist related expenses, changes in the fair value of our derivative, and stock-based compensation expense.~~

Non-GAAP net loss is a non-GAAP financial measure which is not required by or defined under GAAP. The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of the Company or net cash used in operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company’s net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of the Company’s profitability or net earnings. Management believes that non-GAAP net loss is an important measure of the Company’s business. Management uses the aforementioned non-GAAP measure to monitor and evaluate ongoing operating results and trends and to gain an understanding of our comparative operating performance. We believe that this non-GAAP financial measure serves as a useful metric for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors’ overall understanding of our current and future financial performance. Additionally, the Company utilizes non-GAAP net loss as a metric in its executive officer and management incentive compensation plans.

~~Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019~~

~~Revenue and Gross Profit~~

Nine months ended March 31,
Percent
Change
($ in thousands) 2020 2019
Revenue:
License and transaction fees $ 105,324
$ 89,919
17.1 %
Equipment sales 25,184
16,039
57.0 %
Total Revenue 130,508
105,958
23.2 %

Costs of sales:
Cost of services 66,912
58,141
15.1 %
Cost of equipment 28,420
17,371
63.6 %
Total costs of sales 95,332
75,512
26.2 %

Gross profit:
License and transaction fees 38,412
31,778
20.9 %
Equipment sales (3,236 ) (1,332 ) (142.9 )%
Total gross profit $ 35,176
$ 30,446
15.5 %

~~Revenue.~~ Total revenue increased $24.6 million for the nine months ended March 31, 2020 compared to the same period in 2019. The growth in total revenue resulted from a $15.4 million increase in license and transaction fee revenue for the nine months ended March 31, 2020 compared to the same period in 2019, mostly driven by the increase in connection count which generated an increase in license fee and processing fees, and a $9.1 million increase in equipment revenue for the nine months ended March 31, 2020 compared to the same period in 2019 driven primarily by the 120,000 new net connections delivered for the nine months ended March 31, 2020 compared to 98,000 new net connections delivered in the same period in 2019. This 22,000 increase in new net connections represents a 22 percent increase year over year.

~~Cost of sales.~~ Cost of sales increased $19.8 million for the nine months ended March 31, 2020 compared to the same period in 2019. The increase was driven by a $8.8 million increase in cost of services driven by an increase in transaction processing costs following the increase in transactions processed for the period and a $11.0 million increase in cost of equipment sales, resulting from higher shipments compared to the same period last year.

~~Gross margin.~~ Total gross margin decreased 1.8%, from 28.7% for the nine months ended March 31, 2019 to 27.0% for the nine months ended March 31, 2020. The decrease was driven primarily by a lower equipment margin resulting from a large equipment sale made to a strategic customer during the first three quarters of fiscal year 2020, reflecting our strategy of using equipment sales as an enabler for driving longer-term, higher margin license and transaction fees. License and transaction margin increased to 36.5% for the nine months ended March 31, 2020 compared to 35.3% for the same period in 2019.

~~Operating Expenses~~

Nine months ended March 31,
Percent
Change
Category ($ in thousands) 2020 2019
Selling, general and administrative expenses $ 56,876
$ 31,537
80.3 %
Investigation and restatement expenses 4,303
13,122
(67.2 )%
Integration and acquisition costs —
1,127
NM
Depreciation and amortization 3,209
3,359
(4.5 )%
Total operating expenses $ 64,388
$ 49,145
31.0 %

~~____________~~

~~NM — not meaningful~~

~~Selling, general and administrative expenses.~~ ~~Selling~~, general and administrative expenses increased approximately $25.3 million for the nine months ended March 31, 2020, as compared to the same period in 2019. This change was primarily driven by a $15.3

million increase in professional services costs primarily related to the Company's restatement project and related audit and legal activities that were not included in one-time costs, a $6.3 million increase in employment related costs, and a $2.6 million legal contingency accrual related to ongoing litigation.

~~Investigation and restatement expenses~~. Investigation and restatement expenses were incurred beginning in the first quarter of fiscal year 2019 through the second quarter of fiscal year 2020 in connection with the Audit Committee's investigation, the restatements of previously filed financial statements, bank consents, and the ongoing remediation of deficiencies in our internal control over financial reporting.

~~Integration and acquisition costs~~. The Company did not incur integration and acquisition costs for the nine months ended March 31, 2020. Integration and acquisition costs were $1.1 million for the nine months ended March 31, 2019 due to the completion of the Cantaloupe acquisition.

~~Depreciation and amortization.~~ ~~Depreciation and amortization expense was consistent with the same period in 2019.~~

~~Other Income (Expense), Net~~

Nine months ended March 31,
Percent
Change
($ in thousands) 2020 2019
Other income (expense):
Interest income $ 988
$ 1,245
(20.6 )%
Interest expense (1,981 ) (2,518 ) (21.3 )%
Change in fair value of derivative 1,070
—
NM
Total other income (expense), net $ 77
$ (1,273 ) (106.0 )%

~~____________~~

~~NM — not meaningful~~

~~Other income (expense), net~~. Other income (expense), net increased approximately $1.4 million for the nine months ended March 31, 2020 as compared to the same period in 2019. This change was primarily driven by the change in fair value of the Company's derivative related to the Antara debt.

~~Income Taxes~~

Nine months ended March 31,
Percent
Change
($ in thousands) 2020 2019
Provision for income taxes $ (46 ) $ (60 ) (23.3 )%

~~Income taxes.~~ ~~For the nine months ended March 31, 2020, a tax provision of $46 thousand was recorded which primarily relates to the Company's uncertain tax positions,~~ as well as state income and franchise taxes. As of March 31, 2020, the Company had a total unrecognized income tax benefit of $0.2 million. The Company is actively working with the tax authorities related to the majority of this uncertain tax position and it is reasonably possible that a majority of the uncertain tax position will be settled within the next 12 months. The provision is based upon actual loss before income taxes for the nine months ended March 31, 2020, as the use of an estimated annual effective income tax rate does not provide a reliable estimate of the income tax provision.proxy solicitation costs.

For the nine months ended March 31, 2019, a tax provision of $60 thousand was recorded which primarily relates to state income and franchise taxes. The provision is based upon actual loss before income taxes for the nine months ended March 31, 2019, as the use of an estimated annual effective income tax rate does not provide a reliable estimate of the income tax provision.

~~Reconciliation of Net Loss to Adjusted EBITDA~~

Nine months ended March 31,
($ in thousands) 2020 2019
Net loss $ (29,181 ) $ (20,032 )
Less: interest income (988 ) (1,245 )
Plus: interest expense 1,981
2,518
Plus: income tax provision 46
60
Plus: depreciation expense 2,840
3,530
Plus: amortization expense 2,353
2,369
EBITDA (22,949 ) (12,800 )
Plus: stock-based compensation 2,453
1,393
Less: change in fair value of derivative (1,070 ) —
Plus: litigation related professional expenses 3,367
289
Plus: investigation and restatement expenses 4,303
13,122
Plus: integration and acquisition costs —
1,127
Adjustments to EBITDA 9,053
15,931
Adjusted EBITDA $ (13,896 ) $ 3,131

As used herein, Adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, non-recurring fees and charges that were incurred in connection with the acquisition and integration of businesses, non-recurring fees and charges that were incurred in connection with the Audit Committee investigation and financial statement restatement activities, class action litigation and activist related expenses, changes in the fair value of our derivative, and stock-based compensation expense.

We have excluded ~~the non-cash expense,~~ stock-based compensation, as it does not reflect our cash-based operations. Consistent with the exclusion of debt interest expense from EBITDA, the debt-related derivative gain recorded for the third quarter was also excluded from adjusted EBITDA. We have excluded the non-recurring costs and expenses incurred in connection with business acquisitions in order to allow more accurate comparison of the financial results to historical operations. We have excluded the professional fees incurred in connection with the ~~class action litigation and the activist related matters as well as the~~ non-recurring costs and expenses related to the ~~Audit Committee investigation and~~2019 Investigation, financial statement restatement activities, and proxy solicitation costs because we believe that they represent charges that are not related to our operations.

Adjusted EBITDA is a non-GAAP financial measure which is not required by or defined under GAAP (Generally Accepted Accounting Principles). We use these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision making. The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including our net income or net loss or net cash used in operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with our net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of our profitability or net earnings. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance. Additionally, we utilize Adjusted EBITDA as a metric in our executive officer and management incentive compensation plans.


	Three months ended September 30,
($ in thousands)	2020		2019
Net loss	$	(6,613)	$	(11,508)
Less: interest income	(350)		(294)
Plus: interest expense	3,315		465
Plus: income tax provision	40		59
Plus: depreciation expense included in cost of sales for rentals	539		634
Plus: depreciation and amortization expense in operating expenses	1,068		1,022
EBITDA	(2,001)		(9,622)
Plus: stock-based compensation	1,509		290
Plus: investigation, proxy solicitation and restatement expenses	—		4,476
Adjustments to EBITDA	1,509		4,766
Adjusted EBITDA	$	(492)	$	(4,856)

~~Reconciliation of Net Loss to Non-GAAP Net Loss~~

Nine months ended March 31,
($ in thousands) 2020 2019
Net loss $ (29,181 ) $ (20,032 )
Non-GAAP adjustments:
Non-cash portion of income tax provision 15
14
Amortization expense 2,353
2,369
Stock-based compensation 2,453
1,393
Change in fair value of derivative (1,070 ) —
Litigation related professional fees 3,367
289
Investigation and restatement expenses 4,303
13,122
Integration and acquisition costs —
1,127
Non-GAAP net loss $ (17,760 ) $ (1,718 )

As used herein, non-GAAP net loss represents GAAP net loss excluding costs or benefits relating to any non-cash portions of the Company’s income tax provision, amortization expense related to our acquisition-related intangibles, non-recurring fees and charges that were incurred in connection with the acquisition and integration of businesses, non-recurring fees and charges that were incurred in connection with the Audit Committee investigation and financial statement restatement activities, class-action litigation or activist related expenses, changes in the fair value of our derivative, and stock-based compensation expense.

LIQUIDITY AND CAPITAL RESOURCES

Cash ~~used in~~provided by operating activities was ~~$17.6~~$5.2 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2020 compared to cash ~~used~~provided of ~~$25.7~~$0.2 million in the same period in ~~fiscal year 2019.~~the prior year. The change in cash provided by operating activities reflects net cash provided by a ~~change~~$4.9 million decrease in net ~~expense for~~loss and an increase in non-cash operating ~~activities~~expenses of ~~$1.7~~$4.5 million, ~~and~~offset by net cash ~~provided~~used by the change in various operating assets and liabilities of ~~$18.9~~$4.4 million. The change in operating assets and liabilities is primarily driven by the net cash used by the change of accounts receivable of ~~$8.4~~$4.8 million and change of ~~inventory~~accounts payable and accrued expenses of ~~$7.6~~$1.3 million.

Cash used in investing activities was ~~$1.7~~$0.5 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2020 compared to cash used of ~~$3.1~~$0.4 million in the same period in ~~fiscal~~the prior year, ~~2019, primarily driven by a decrease in equipment~~as purchases for ~~rental~~ equipment were relatively consistent compared to the same period last year.

Cash ~~provided by~~used in financing activities was ~~$17.7~~$1.7 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2020 compared to cash used of ~~$22.4~~$1.8 million in the same period in ~~fiscal year 2019. The change was primarily due~~the prior year. For the three months ended September 30, 2020, the Company paid $1.2 million as a prepayment penalty and commitment termination fee to ~~proceeds received from the Term Facility and equity financing provided by~~ Antara ~~offset by payments~~as part of ~~issuance fees for the Term Facility and~~ the repayment of the 2020 Antara Term ~~Loan~~Facility and ~~Revolving~~paid $0.5 million of debt issuance costs as a result of entering into the 2021 JPMorgan Credit ~~Facility.~~Facility (as defined below). For the three months ended September 30, 2019, the Company repaid the remaining principal balance of $1.5 million on the term loan pursuant to the Credit Agreement, dated November 9, 2017, among the Company, as borrower, its subsidiaries, as guarantors, and JPMorgan, as the lender and administrative agent for the lender.

Sources and Uses of Cash

Due to the Company's delay in filing its periodic reports, between September 28, 2018, and September 30, 2019, the Company entered into various agreements with JPMorgan Chase Bank, N.A. (“Lender”), to provide for the extension of the delivery of the

Company’s financial information and related compliance certificates required under the terms of the credit agreement which were required to be delivered to the Lender by no later than October 31, 2019. In connection with these agreements, the Company incurred extension fees due to the lender, totaling $0.2 million, between September 28, 2018 and September 30, 2019. Additionally, during the quarter ended March 31, 2019 the Company prepaid $20.0 million of the balance outstanding under the Term Loan. On September 30, 2019, the Company prepaid the remaining principal balance of the term loan of $1.5 million and agreed to permanently reduce the amount available under the Revolving Credit Facility to $10 million which represented the outstanding balance on the date thereof. On October 31, 2019, the Company repaid the outstanding balance on the Revolving Credit Facility.

Pursuant to a Stock Purchase Agreement dated October 9, 2019 between the Company and Antara Capital Master Fund LP (“Antara”), the Company sold to Antara 3,800,000 shares of the Company’s common stock at a price of $5.25 per share for gross proceeds of $19,950,000. Antara qualifies as an accredited investor under Rule 501 of the Securities Act of 1933, as amended (the "Act"), and the offer and sale of the shares was exempt from registration under Section 4(a)(2) of the Act. Antara agreed not to dispose of the shares for a period of 90 days from the closing date. In connection with the private placement, William Blair & Company, L.L.C. (“Blair”) acted as exclusive placement agent for the Company and received a cash placement fee of $1.2 million. In connection with the Stock Purchase Agreement, the Company also entered into a registration rights agreement with Antara, pursuant to which the Company agreed, at its expense, to file a registration statement under the Act with the Securities and Exchange Commission covering the resale of the shares by Antara. Subsequently, Antara and the Company agreed to terminate the obligation of the Company to register the shares in exchange for a payment of approximately $1.2 million by the Company to Antara which was made during the three months ended March 31, 2020.

On October 9, 2019, the Company also entered into a commitment letter (“Commitment Letter”) with Antara, pursuant to which Antara committed to extend to the Company a $30.0 million senior secured term loan facility (“Term Facility”). Upon the execution of the Commitment Letter, the Company paid to Antara a non-refundable commitment fee of $1.2 million. In connection with the Commitment Letter, Blair acted as exclusive placement agent for the Company and received a cash placement fee of $750,000. On October 31, 2019, the Company entered into a Financing Agreement with Antara to draw $15.0 million on the Term Facility and agreed to draw an additional $15.0 million at any time between July 31, 2020 and April 30, 2021, subject to the terms of the Financing Agreement. The outstanding amount of the draws under the Term Facility bear interest at 9.75% per annum, payable monthly in arrears. The proceeds of the initial draw were used to repay the outstanding balance of the revolving line of credit loan due to JPMorgan Chase Bank, N.A. in the amount of $10.1 million, including accrued interest payable, and to pay transaction expenses, and the Company intends to utilize the balance for working capital and general corporate purposes. The outstanding principal amount of the loan must be paid in full by no later than the maturity date of October 31, 2024.

We may prepay any principal amount outstanding on the Term Facility plus a prepayment premium of 5% (if prepaid on or prior to December 31, 2020), 3% (between January 1, 2021 - December 31, 2021), 1% (between January 1, 2022 - December 31, 2022) and 0% thereafter. Under the Term Facility we are subject to mandatory prepayments as a result of certain asset sales, insurance proceeds, issuances of disqualified capital stock, and issuances of debt. These mandatory prepayments are subject to the prepayment premium that applies to voluntary prepayments. We are also subject to annual mandatory prepayments ranging from 0% of excess cash flow to 75% of excess cash flow depending upon the consolidated total leverage ratio measured at the end of each fiscal year beginning with the fiscal year ending June 30, 2020. These mandatory prepayments are not subject to the aforementioned prepayment premium.

The Company is required to be in compliance with financial covenants related to the minimum fixed charge coverage ratio beginning with the fiscal quarter ending June 30, 2020, maximum capital expenditures beginning with the fiscal quarter ending December 31, 2019, and minimum consolidated EBITDA beginning with the fiscal year ending June 30, 2020. As of March 31, 2020, the Company was in compliance with its capital expenditures financial covenant.

The Company is evaluating its options with respect to the Financing Agreement, including all rights and remedies that may be available to it. Based upon the current financial forecast for the fourth quarter of fiscal year 2020, without a refinancing or modification of existing terms within the Term Facility, the Company anticipates that as of June 30, 2020, it is highly likely the Company will not be in compliance with the minimum fixed charge coverage ratio and the minimum consolidated EBITDA of its Term Facility. Unless the Commitment Letter is rescinded, amended, or replaced, noncompliance would represent an event of default under the Term Facility, and, following the request of the Required Lenders (as such term is defined in the Term Facility), all unpaid principal of $15.0 million and accrued interest to Antara would immediately become due, in addition to a $0.8 million prepayment premium. In addition, all of the Company's unamortized issuance costs and debt discount related to the Term Facility would be recognized upon repayment of the loan as interest expense in the period of repayment, which as of March 31, 2020 was $2.7 million.

As of June 30, 2019 the Company disclosed potential sales tax and related interest liabilities, which the Company estimated to be $18.2 million in the aggregate as of March 31, 2020. The Company has since engaged additional advisors to help evaluate such potential liabilities and the amount and timing of any such payments.

During the three months ended March 31, 2020, the Company reached a settlement of a shareholder class action lawsuit pending in federal court, and anticipates the payment of approximately $2.6 million toward that settlement in addition to amounts to be paid by the Company’s insurers. As discussed in Note 13, those amounts are contingent upon certain future events, but are expected to be paid during the next 12 months.

The Company has the following primary sources of capital available: (1) cash and cash equivalents on hand of ~~$25.9~~$34.7 million as of ~~March 31,~~September 30, 2020; (2) the cash which may be provided by operating activities; and (3) ~~an aggregate amount of $15~~up to $5 million ~~under the Term Facility~~available to be drawn ~~between July 31, 2020 and April 30,~~on the 2021 ~~as described above, if the Term~~JPMorgan Revolving Facility ~~were to be modified with similar draw terms.~~(as defined below). In addition, management has recently implemented efficiencies in working capital that are designed to increase our cash balances.

~~The~~In the three months ended September 30, 2020, the Company ~~is currently evaluating a variety of financing alternatives, including but not limited to negotiating modifications to~~entered into the ~~existing~~2021 JPMorgan Credit Agreement (as defined below) and repaid all amounts outstanding under the 2020 Antara Term Facility. The Company also paid $1.2 million to Antara for the commitment termination fee and prepayment premium, and paid $2.6 million towards the settlement of a shareholder class action lawsuit.

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The Company also has ~~received a communication from an investor that it will provide sufficient financing~~estimated and recorded for potential sales tax and related interest and penalty liabilities of $21.1 million in the ~~event~~aggregate as of September 30, 2020. The Company continues to evaluate these liabilities and the amount and timing of any such payments.

In the fourth quarter of fiscal year 2020, we received loan proceeds of approximately $3.1 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). We intend to use the PPP Loan in accordance with the provisions of the CARES Act. The loan bears a fixed interest rate of 1% over a two year term from the approval date of April 28, 2020. The application for these funds required the Company to, in good faith, certify that the current economic uncertainty caused by COVID-19 made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to take into account our current business activity and ~~Antara fail~~our ability to ~~agree~~access other sources of liquidity sufficient to ~~modifications~~support ongoing operations in a manner that is not significantly detrimental to the ~~existing Term Facility~~business. The receipt of these funds, and ~~other financing alternatives are not in place.~~ the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

The Company believes that its current financial resources ~~together with cash generated by operations and the financing available from the investor, if needed,~~ will be sufficient to fund its current twelve-month operating budget from the date of issuance of these consolidated financial ~~statements, alleviating any substantial doubt raised by~~statements.

CRITICAL ACCOUNTING POLICIES

As a result of the ~~potential breach~~July 1, 2020 adoption of Topic 326, the Company has updated the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~Term Facility with Antara.~~2020 Form 10-K as follows:

Allowances for Doubtful Accounts and Nonperforming Finance Receivables. We maintain lifetime expected loss allowances for doubtful accounts and nonperforming finance receivables based on historical experience of payment performance, current conditions of the customer, and reasonable and supportable economic forecasts of collectability for the asset’s entire expected life, which is generally less than one year for accounts receivable and five years for finance receivables. Historical loss experience is utilized as there have been no significant changes in the mix or risk characteristics of the receivable revenue streams used to calculate historical loss rates. Current conditions are analyzed at each measurement date to reassess whether our receivables continue to exhibit similar risk characteristics as the prior measurement date, and determine if the reserve calculation needs to be adjusted for new developments, such as a customer’s inability to meet its financial obligations. Reasonable and supportable macroeconomic trends also are incorporated into the analysis. Estimating the allowances therefore requires us to apply judgment in relying on historical customer payment experience, regularly analyzing the financial condition of our customers, and developing macroeconomic forecasts to adequately cover expected credit losses on our receivables. By nature, such estimates are highly subjective, and it is possible that the amount of receivables that we are unable to collect may be different than the amounts initially estimated in the allowances.

Recent Accounting Pronouncements

See Note 2 - Accounting Policies to the interim Condensed Consolidated Financial Statements for a description of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

~~We are exposed~~On August 14, 2020, the Company repaid all amounts outstanding under the 2020 Antara Term Facility and entered into a credit agreement with JPMorgan Chase Bank, N.A (the “2021 JPMorgan Credit Agreement”) for a $5 million secured revolving credit facility (the “2021 JPMorgan Revolving Facility”) and a $15 million secured term facility (the “2021 JPMorgan Secured Term Facility” and together with the 2021 JPMorgan Revolving Facility, the “2021 JPMorgan Credit Facility”). Through December 31, 2021, the applicable interest rate on the 2021 JPMorgan Credit Facility will be LIBOR plus 4.75%. An increase of 100 basis points in LIBOR would not have a material impact of on our interest expense or condensed consolidated financial statements.

Our other exposures to market risk ~~related to changes in interest rates on our cash investments, which earn a floating rate~~have not changed materially since June 30, 2020.

Table of interest. The uncertainty that exists with respect to the economic impact of the global coronavirus (COVID-19) pandemic has introduced significant volatility in the financial markets. We invest our excess cash in money market funds that we believe are highly liquid and marketable in the short term. These investments are not held for trading or other speculative purposes. Consequently, our exposure to market risks for interest rate changes related to our money market funds is not material. Contents

~~In addition, as described above under Item 1A - “Risk Factors”, there may be implications on our business with regard to the COVID-19.~~

~~Market risks related to fluctuations of foreign currencies are not material.~~

Item 4. Controls and Procedures.

(a) Disclosure Controls and Procedures

Our management evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness as of the end of the period covered by this Form 10-Q of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"). We maintain disclosure controls and procedures to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our chief executive officer and chief financial officer, has concluded that our disclosure controls and procedures were not effective as of the end of such period, as a result of the material ~~weaknesses~~weakness in our internal control over financial reporting, which are described in Item 9A. of our ~~2019~~2020 Form 10-K.

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(b) Changes in Internal Control over Financial Reporting

Other than the remediation ~~actions~~plan disclosed in Item 9A. of the ~~2019~~2020 Form 10-K for the material weakness identified in fiscal year 2020 related to the accounting impact of a non-routine and complex transaction, there were no changes in our internal controls over financial reporting that occurred during the quarter ended ~~March 31,~~September 30, 2020 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. As discussed in Item 9A. of our ~~2019~~2020 Form 10-K, we ~~have implemented a broad range of remedial procedures~~reinforced our existing internal control structure to ensure that one-time and unusual transactions are subject to timely and formal evaluation by senior finance and accounting leadership to ensure proper accounting treatment to address the material ~~weaknesses~~weakness in our internal control over financial reporting. ~~These remedial procedures entailed significant changes in our internal~~The material weakness cannot be considered remediated until the control ~~over financial reporting throughout~~has operated for a sufficient period of time and until management has concluded, through testing, that the ~~course~~control is operating effectively. We expect to remediate this material weakness by December 31, 2020.

Table of the fiscal year ended June 30, 2019 and were not complete as of March 31, 2020, and will continue through fiscal year 2020, with the goal to fully remediate all remaining material weaknesses by fiscal year end.Contents

Part II - Other Information

Item 1. Legal Proceedings.

~~Eastern District of Pennsylvania Consolidated Shareholder Class Actions~~

As previously reported, various putative shareholder class action complaints had been filed in the United States District Court for the District of New Jersey against the Company, its chief executive officer and chief financial officer at the relevant time, its directors at the relevant time, and the investment banks who served as underwriters in the May 2018 follow-on public offering of the Company (the “Underwriters”). These complaints alleged violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. These various actions were consolidatedThe information required by ~~the Court into one action (the “Consolidated Action”), and the Court granted the Motion to Transfer filed~~this Item is incorporated herein by ~~the Company and its former chief executive officer, and transferred the Consolidated Action~~reference to the ~~United States District Court for the Eastern District~~Notes to Condensed Consolidated Financial Statements, Note 13 – Commitments and Contingencies in Part I, Item 1, of ~~Pennsylvania, Docket No. 19-cv-04565. On November 20, 2019, Plaintiff filed an amended complaint, and defendants filed motions to dismiss~~this Quarterly Report on February 3, 2020. The Court has not yet ruled on the motions to dismiss. The parties participated in a private mediation on February 27, 2020 which resulted in a settlement. On May 29, 2020, the plaintiffs filed documents with the Court seeking preliminary approval of the settlement, with the defendants supporting approval of the settlement. On June 9, 2020, the Court granted preliminary approval of the settlement and issued a scheduling order for further action on the settlement. The settlement provides for a payment of $15.3 million which includes all administrative costs and plaintiff’s attorneys’ fees and expenses. The Company’s insurance carriers are anticipated to pay approximately $12.7 million towards the settlement and the Company is anticipated to pay approximately $2.6 million towards the settlement, which has been recorded as a liability in the accompanying condensed consolidated financial statements. Payments will not be distributed pursuant to the settlement until and unless an opt-out process is completed successfully and the Court grants final approval of the settlement. The Company expects but cannot assure that those events will occur later in the calendar year. Should the settlement not be approved the parties will resume litigation of the claims.Form 10-Q.

~~Chester County, Pennsylvania Class Action~~

As previously reported, a putative shareholder class action complaint was filed against the Company, its chief executive officer and chief financial officer at the relevant time, its directors at the relevant time, and the Underwriters, in the Court of Common Pleas, Chester County, Pennsylvania, Docket No. 2019-04821-MJ. The complaint alleged violations of the Securities Act of 1933, as amended. As also previously reported, on September 20, 2019 the Court granted the defendants’ Petition for Stay and stayed the Chester County action until the Consolidated Action reaches a final disposition. On October 18, 2019, plaintiff filed an appeal to the Pennsylvania Superior Court from the Order granting defendants’ Petition for Stay, Docket No. 3100 EDA 2019. On December 6, 2019, the Pennsylvania Superior Court issued an Order stating that the Stay Order does not appear to be final or otherwise appealable and directed plaintiff to show cause as to the basis of the Pennsylvania Superior Court’s jurisdiction. The plaintiff filed a Response to the Order to Show Cause on December 16, 2019, and the defendants filed an Application to Quash Appeal on December 26, 2019. On February 20, 2020, the Pennsylvania Superior Court quashed the appeal.

~~Subpoena~~

During the three months ended March 31, 2020, the Company responded to a subpoena received from the U.S. Department of Justice that sought records regarding Company activities that occurred during prior financial reporting periods, including restatements. The Company is cooperating fully with the agency’s queries.

~~HEC Master Fund LP Lawsuit~~

On November 15, 2019, HEC filed a lawsuit against the Company and its directors at the relevant time in the Court of Common Pleas of Chester County, Pennsylvania, Docket No. 2019-11640-MJ. The lawsuit alleged that the directors’ adoption of an amendment to the Company’s bylaws that prohibited shareholders from calling a special meeting of shareholders until the Company’s next annual meeting of shareholders, along with other efforts by the directors to prevent HEC from soliciting consents to call a special meeting of shareholders, constituted impermissible entrenchment and interference with the shareholder franchise in violation of Pennsylvania law. On November 22, 2019, the Court, with the consent of HEC and the Company, ordered the Company to call and hold its annual meeting of shareholders on or before April 30, 2020. The Court also ordered that the directors stand for election at the annual meeting in accordance with the bylaws and prohibited the board of directors from making further amendments of any kind to the bylaws prior to the annual meeting. Following the entry of that order, HEC voluntarily discontinued the lawsuit. On March 27, 2020, HEC moved to strike the discontinuance and hold the Company in contempt of the Court’s November 22, 2019 order. On April 26, 2020, the parties entered into a Letter Agreement pursuant to which HEC’s action was dismissed with prejudice.

~~HEC Master Fund LP Shareholder Demand~~

By letter dated February 12, 2020, HEC demanded that the Board of Directors investigate, remedy and commence proceedings against certain of the Company’s current and former officers and directors and other responsible parties for breach of fiduciary duties. The matters alleged to constitute breaches of duty related to the matters raised by HEC during the contest for the election of directors at the 2020 annual meeting. On April 26, 2020, the parties entered into a Letter Agreement pursuant to which HEC withdrew its shareholder demand for board action.

Item 1A. Risk ~~Factors.~~ Factors

~~Our results of operations may be adversely impacted by the COVID-19 pandemic depending on when the pandemic is contained.~~

~~The global spread~~For a discussion of the COVID-19 pandemic has created significant volatility, uncertainty and economic disruption on our business. Electronic payment transaction volume within unattended markets has decreased significantly sinceCompany’s risk factors, see the ~~pandemic accelerated~~information under the heading “Risk Factors” in the United States in March 2020, as government authorities have imposed forced closure of non-essential businesses and social distancing protocols, significantly reducing foot traffic to distributed assets containing our electronic payment solutions and reducing discretionary spending by consumers.

The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we are not able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; and the impact of the pandemic on economic activity and actions taken in response. Furthermore, even after containment measures are lifted there can be no assurance as to the time required to regain operations and sales at levels prior to the pandemic. There may also be increased marketplace consolidation as companies are challenged to respond to the COVID-19 impact.

A sustained downturn may also result in a decrease in the fair value of our goodwill or other intangible assets, causing them to exceed their carrying value. This may require us to recognize an impairment to those assets. The effects of the pandemic, including remote working arrangements for employees, may also impact our financial reporting systems and internal control over financial reporting, including our ability to ensure information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Further, the COVID-19 pandemic could decrease consumer spending, adversely affect demand for our technology and services, cause one or more of our customers and partners to file for bankruptcy protection or go out of business, cause one or more of our customers to fail to renew, terminate, or renegotiate their contracts, affect the ability of our sales team to travel to potential customers, impact expected spending from new customers and negatively impact collections of accounts receivable, all of which could adversely affect our business, results of operations and financial condition. Subsequent to March 31, 2020, in response to the outbreak, we have agreed to concessions regarding modifications to price and/or payment terms with certain customers who have been negatively impacted by COVID-19, and may negotiate additional concessions or other contract amendments regarding modifications to price and/or payment terms.

~~It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations or financial condition at this time.~~

Failure to comply with any of the covenants could result in an event of default which may accelerate our outstanding indebtedness or other obligations and have a material adverse impact on our business, liquidity position and financial position.

The Term Facility contains financial covenants requiring compliance with financial covenants related to the minimum fixed charge coverage ratio beginning with the fiscal quarter ending June 30, 2020, maximum capital expenditures beginning with the fiscal quarter ending December 31, 2019, and minimum consolidated EBITDA beginning with the fiscal year ending June 30, 2020. Based upon the current financial forecast for the fourth quarter of fiscal year 2020, without a refinancing, rescission of the Commitment Letter, or modification of existing terms within the Term Facility, the Company anticipates that as of June 30, 2020, it is highly likely the Company will not be in compliance with the minimum fixed charge coverage ratio and the minimum consolidated EBITDA of its Term Facility.

Without a refinancing or modification of existing terms within the Term Facility, noncompliance with the Commitment Letter’s covenants could have materially adverse impacts on the Company's financial condition and would represent an event of default under the Term Facility, and, following the request of the Required Lenders (as such term is defined in the Term Facility), all unpaid principal and accrued interest would immediately become due. We are currently evaluating our options with respect to the Financing Agreement, including all rights and remedies that may be available to us. There is no guarantee that we will be able to reach any agreement with our lenders under the Term Facility in relation to a potential breach of our minimum fixed charge coverage ratio and the minimum consolidated EBITDA, or otherwise maintain compliance with all applicable covenants under our financial arrangements.

A failure to comply with our covenants, including our minimum fixed charge coverage ratio and the minimum consolidated EBITDA under the Term Facility, if they are not modified, may result in an event of default and have a material adverse impact on our business, liquidity position and financial position. If we are subject to and unable to comply with such covenants, we may have to enter into another credit agreement or debt financing arrangements which may contain restrictive covenants or limitations on our ability to efficiently manage our balance sheet. If we decide to raise additional capital through an equity offering, such an offering would dilute existing holders of our common stock who do not participate in the offering.

We may not be entitled to forgiveness of our recently received Paycheck Protection Program Loan, and our application for the Paycheck Protection Program Loan could in the future be determined to have been impermissible.

Under the CARES Act, as amended in June 2020, loan forgiveness is generally available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the Covered Period, which is 8 weeks or 24 weeks (at the election of the Company) beginning on the date of the first disbursement of the PPP Loan. The amount of the PPP Loan eligible to be forgiven may be reduced in certain circumstances, including as a result of certain headcount or salary reductions. We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, and we cannot provide any assurance that we will be eligible for loan forgiveness, that we will apply for forgiveness, or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, the maintenance of our workforce, our need for additional funding to continue operations, and our ability to access alternative forms of capital in the current market environment to offset the effects of the COVID -19 pandemic. Following this analysis, we believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the CARES Act. The certification described above is subject to interpretation.

On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good-faith belief that given our circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have not been in compliance with these requirements or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties. Should we be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loan or otherwise, such audit or review could result in the diversion of management’s time and attention and the incurrence of additional costs. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

~~In addition to the other information set forth in this report, you should carefully consider the risks set forth in the risk factors described in Part I, Item 1A of the Company's June 30, 2019~~Company’s Annual Report on Form 10-K ~~which could materially affect our business, financial condition or future results. The risks described in our~~for the fiscal year ended June 30, ~~2019 Annual Report on Form 10-K are not~~2020, as supplemented by the ~~only risks we face. Additional risks and uncertainties not currently known~~amended risk factor set forth below.

Disruptions to usour systems, breaches in the security of transactions involving our products or ~~that we currently deem to be immaterial also may materially and~~services, or failure of our processing systems could adversely affect our ~~business,~~reputation and results of operations.

We rely on information technology and other systems to transmit financial ~~condition~~ information of consumers making cashless transactions and to provide accounting and inventory management services to our customers. As such, the information we transmit and/or ~~operating~~maintain is exposed to the ever-evolving threat of compromised security, in the form of a risk of potential breach, system failure, computer virus, cyber-attack or unauthorized or fraudulent use by consumers, customers, company employees, or employees of third party vendors. In addition, our processing systems may experience errors, interruptions, delays or damage from a number of causes, including, but not limited to, power outages, hardware, software and network failures, internal design, manual or usage errors, terrorism, workplace violence or wrongdoing, catastrophic events, natural disasters and severe weather conditions. The steps we take to deter and mitigate these risks, including annual validation of our compliance with the Payment Card Industry Data Security Standard, may not be successful, and any resulting compromise or loss of data or systems could adversely impact the marketplace acceptance of our products and services, and could result in significant remedial expenses to not only assess and repair any damage to our systems, but also to reimburse customers for losses that occur from service interruptions or the fraudulent use of confidential data. Additionally, we could become subject to significant fines, litigation, and loss of reputation, potentially impacting our financial results.

Further, substantially all of the cashless payment transactions handled by our network involve Visa U.S.A. Inc. (“Visa”) or MasterCard International Incorporated ("MasterCard"). If we fail to comply with the applicable standards or requirements of the Visa and MasterCard card associations relating to security, Visa or MasterCard could suspend or terminate our registration with them. The termination of our registration with them or any changes in the Visa or MasterCard rules that would impair our registration with them could require us to stop providing cashless payment services through our network. In such event, our business plan and/or competitive advantages in the market place would be materially adversely affected.

Item 3. Defaults Upon Senior Securities.

There were no defaults on any senior securities. On ~~February~~August 1, 2020, an additional $334 thousand of dividends were accrued on our cumulative Series A Convertible Preferred Stock. The total accrued and unpaid dividends on our Series A Convertible Preferred Stock as of ~~March 31,~~September 30, 2020 was ~~$20.8~~$21.1 million. The dividend accrual dates for our Preferred Stock are February 1 and August 1. The annual cumulative dividend on our Preferred Stock is $1.50 per share.

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Item 6. Exhibits.


Exhibit Number		Description

~~Exhibit~~ ~~Number~~ 3.1		~~Description~~

~~3.1~~	Amended and Restated Articles of Incorporation, as amended through May 29, 2020 ~~(Redline version)~~(incorporated by reference to Exhibit 3.1 to Form 8-K filed on June 3, 2020).

3.2		Amended and Restated Bylaws, as amended through May 4, 2020 (Redline version).

~~4.1~~	~~Amendment No. 1 to Rights Agreement, dated April 28, 2020, by and between USA Technologies and American Stock Transfer & Trust Company, LLC, as rights agent~~ (incorporated by reference to Exhibit ~~4.1~~3.2 to ~~the Current Report on~~ Form ~~8-K~~10-Q filed on ~~April 28,~~June 24, 2020) ~~(File No. 001-33365)~~.

10.1**4.1		~~Payment Solutions Agreement between the Company, First Data Merchant Services LLC and Wells Fargo Bank, N.A.,~~Warrant dated March ~~20, 2020 (portions~~29, 2016 in favor of ~~this exhibit were redacted pursuant to a confidential treatment request).~~

10.2*	~~Employment Agreement between the Company and Michael Wasserfuhr dated February 28, 2020.~~

10.3*	~~Employment Agreement between the Company and Glen E. Goold dated March 2, 2020.~~

10.4*	~~Employment Agreement between the Company and William T. Haines dated January 7, 2020.~~

10.5*	~~Employment Agreement dated February 28, 2020, by and between the Company and Donald W. Layden, Jr.(incorporated~~Heritage Bank of Commerce (incorporated by reference to Exhibit ~~10.1~~4.2 to ~~the Current Report on~~ Form ~~8-K~~10-K filed on ~~March 2, 2020) (File No. 001-33365)~~September 13, 2016).

10.6* 10.1†		~~First Amendment to Employment~~Non-Qualified Stock Option Agreement, dated ~~April 26,~~as of July 16, 2020, by and between USA Technologies, Inc. and ~~Donald W. Layden, Jr (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on April 27, 2020) (File No. 001-33365).~~

10.7*	~~Separation Agreement and Release, dated May 10, 2020, between USA Technologies, Inc. and Donald W. Layden, Jr.~~Jeff Vogt (incorporated by reference to Exhibit 10.1 to ~~the Current Report on~~ Form 8-K filed ~~on May 13,~~July 21, 2020) ~~(File No. 001-33365)~~.

10.8* 10.2†		Employment ~~Agreement, dated May 8, 2020, between USA Technologies, Inc. and Sean Feeney (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on May 13, 2020) (File No. 001-33365).~~

10.9*	Non-Qualified Stock Option Agreement, dated May 8, 2020, between USA Technologies, Inc. and Sean Feeney (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on May 13, 2020) (File No. 001-33365).

10.10*	~~First Amendment to the USA Technologies, Inc. 2018 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 26, 2020) (File No. 001-33365).~~

10.11*	Restricted Stock Unit Award Agreement, dated May 29, 2020, between USA Technologies, Inc. and Anant Agrawal (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 3, 2020) (File No. 001-33365).

~~10.12~~	~~Amendment to Registration Rights~~ Agreement, by and between ~~the Company~~R. Wayne Jackson and ~~Antara Capital Master Fund LP dated January 31,~~USA Technologies, Inc., effective as of August 10, 2020 (incorporated by reference to Exhibit 10.1 to ~~the Current Report on~~ Form 8-K filed ~~on February 6,~~August 14, 2020) ~~(File No. 001-33365)~~.



~~10.13~~ 10.3†						~~Letter~~Non-Qualified Stock Option Agreement, ~~dated April 26, 2020,~~ by and between R. Wayne Jackson and USA Technologies, Inc., dated as of August 10, 2020 (incorporated by reference to Exhibit 10.2 to Form 8-K filed August 14, 2020).

10.4						First Amendment to Independent Contractor Agreement, by and ~~Hudson Executive Capital LP~~between Eugene Cavanaugh and USA Technologies, Inc., dated as of August 10, 2020 (incorporated by reference to Exhibit 10.3 to Form 8-K filed August 14, 2020).

10.5						Credit Agreement by and among the Company, its subsidiaries, and JPMorgan Chase Bank, N.A., dated August 14, 2020 (incorporated by reference to Exhibit 10.7 to Form 10-K filed September 11, 2020).

10.6†						Offer Letter, by and between Scott Stewart and USA Technologies, Inc., dated as of August 6, 2020 (incorporated by reference to Exhibit 10.1 to ~~the Current Report on~~ Form 8-K filed on ~~April 27,~~September 18, 2020) ~~(File No.001-33365)~~.

~~31.1~~ 10.7†						Separation and Transition Agreement, by and between Glen Goold and USA Technologies, Inc., dated as of October 8, 2020 (incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 9, 2020).

31.1*						Certifications of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

~~31.2~~31.2*						Certifications of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

~~32.1~~32.1*						Certification of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~32.2*						Certification of the Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Table of Contents


101						The following financial information from our Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2020, filed with the SEC on ~~June 24,~~November 6, 2020, is formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(“iXBRL”): (1) the Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2020 and June 30, ~~2019,~~2020, (2) the Condensed Consolidated Statements of Operations for the three-month ~~and nine-month~~ periods ended ~~March 31,~~September 30, 2020 and 2019, (3) the Condensed Consolidated Statements of Shareholders’ Equity for the ~~nine-month~~three-month periods ended ~~March 31,~~September 30, 2020 and 2019, (4) the Condensed Consolidated Statements of Cash Flows for the ~~nine-month~~three-month periods ended ~~March 31,~~September 30, 2020 and 2019, and (5) the Notes to Consolidated Financial Statements.
*						~~Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 6 of this report.~~
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
**						~~Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).~~
101.SCH*						Inline XBRL Taxonomy Extension Schema

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase

104						The cover page from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 6, 2020, is formatted as Inline iXBRL and contained in Exhibit 101.

* Filed herewith.

† Management contract or compensatory plan or arrangement.

Table of Contents

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		USA TECHNOLOGIES, INC.

Date: November 6, 2020		~~USA TECHNOLOGIES, INC.~~

~~Date: June 24, 2020~~	/s/ Sean Feeney
		Sean Feeney
		Chief Executive Officer

Date: ~~June 24,~~November 6, 2020		/s/ ~~Michael Wasserfuhr~~R. Wayne Jackson
		~~Michael Wasserfuhr~~R. Wayne Jackson
		Chief Financial Officer


Part I - Financial Information

Item 1.			Condensed Consolidated Financial Statements

~~Part I - Financial Information~~

~~Item 1.~~	~~Condensed Consolidated Financial Statements~~

	Condensed Consolidated Balance Sheets (unaudited)	43

			Condensed Consolidated Statements of Operations (unaudited)	54

			Condensed Consolidated Statements of Shareholders’ Equity (unaudited)	65

			Condensed Consolidated Statements of Cash Flows (unaudited)	76

			Notes to Consolidated Financial Statements (unaudited)	87

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2823

Item 3.			Quantitative and Qualitative Disclosures About Market Risk	4232

Item 4.			Controls and Procedures	4232

Part II - Other Information

Item 1.			Legal Proceedings	4335

Item ~~1A.~~1 A .			Risk Factors	4435

Item 3.			Defaults Upon Senior Securities	4535

Item 6.			Exhibits	4635

			Signatures	4938


	Common Stock			Accumulated Deficit				Total					Common Stock				Accumulated Deficit			Total
($ in thousands)	Shares	Amount					($ in thousands)					Shares		Amount
Balance, June 30, 2018	59,998,811	$	375,436		$	(232,748	)			$	142,688
Cumulative effect adjustment for ASC 606 adoption	—	—		200				200
Balance, June 30, 2019											Balance, June 30, 2019		60,008,481		$	376,853		$	(262,430)		$	114,423
Stock based compensation	13,344	370		—				370			Stock based compensation		—		290		—			290
Net loss	—	—		(5,288		)		(5,288		)	Net loss		—		—		(11,508)			(11,508)
Balance, September 30, 2018	60,012,155	375,806		(237,836		)		137,970
Stock based compensation	1,563	557		—				557
Net loss	—	—		(10,438		)		(10,438		)
Balance, December 31, 2018	60,013,718	376,363		(248,274		)		128,089
Stock based compensation	5,720	337		—				337
Net loss	—	—		(4,306		)		(4,306		)
Balance, March 31, 2019	60,019,438	$	376,700	$	(252,580	)		$	124,120
Balance, September 30, 2019											Balance, September 30, 2019		60,008,481		$	377,143	$	(273,938)		$	103,205


								Three months ended
	Nine months ended March 31,							September 30,
($ in thousands)	2020			2019			($ in thousands)	2020		2019
OPERATING ACTIVITIES:							OPERATING ACTIVITIES:
Net loss	$	(29,181	)	$	(20,032	)	Net loss	$	(6,613)	$	(11,508)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:							Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Non-cash stock based compensation	2,453			1,393			Non-cash stock based compensation	1,509		290
Loss (gain) on disposal of property and equipment	88			(39		)
Gain on disposal of property and equipment							Gain on disposal of property and equipment	(3)		(15)
Non-cash interest and amortization of debt discount	1,040			286			Non-cash interest and amortization of debt discount	3,125		338
Bad debt expense	1,400			1,537			Bad debt expense	394		(110)
Provision for inventory reserve	(434		)	2,699			Provision for inventory reserve	802		574
Depreciation and amortization	5,193			5,899
Depreciation and amortization included in operating expenses							Depreciation and amortization included in operating expenses	1,068		1,022
Depreciation included in cost of sales for rentals							Depreciation included in cost of sales for rentals	539		634
Non-cash lease expense	1,398			—			Non-cash lease expense	269		491
Deferred income taxes	15			14			Deferred income taxes	5		5
Change in fair value of derivative	(1,070		)	—
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable	2,088			(6,288		)	Accounts receivable	(1,540)		3,286
Finance receivables	(113		)	(182		)	Finance receivables	531		(454)
Inventory	2,204			(5,349		)	Inventory	1,324		1,232
Prepaid expenses and other assets	(1,045		)	(1,545		)	Prepaid expenses and other assets	100		(412)
Accounts payable and accrued expenses	(414		)	(3,836		)	Accounts payable and accrued expenses	3,985		5,288
Operating lease liabilities	(1,102		)	—			Operating lease liabilities	(259)		(399)
Deferred revenue	(60		)	(316		)	Deferred revenue	(58)		(33)
Income taxes payable	(86		)	42
Net cash used in operating activities	(17,626		)	(25,717		)
Net cash provided by operating activities							Net cash provided by operating activities	5,178		229

INVESTING ACTIVITIES:							INVESTING ACTIVITIES:
Purchase of property and equipment, including rentals	(1,711		)	(3,156		)
Proceeds from sale of property and equipment, including rentals	33			103
Purchase of property and equipment							Purchase of property and equipment	(483)		(420)
Proceeds from sale of property and equipment							Proceeds from sale of property and equipment	8		30
Net cash used in investing activities	(1,678		)	(3,053		)	Net cash used in investing activities	(475)		(390)

FINANCING ACTIVITIES:							FINANCING ACTIVITIES:
Proceeds from long-term debt issuance by Antara	14,248			—
Proceeds from equity issuance by Antara	17,879			—
Repayment of revolving credit facility	(10,000		)	—
Proceeds from long-term debt issuance by JPMorgan Chase Bank, N.A., net of debt issuance costs							Proceeds from long-term debt issuance by JPMorgan Chase Bank, N.A., net of debt issuance costs	14,550		0
Repayment of finance lease obligations and long-term debt	(2,413		)	(22,313		)	Repayment of finance lease obligations and long-term debt	(15,101)		(1,763)
Payment of debt and equity issuance costs	(1,980		)	(135		)
Proceeds from exercise of common stock options	—			42			Proceeds from exercise of common stock options	25		0
Net cash provided by (used in) financing activities	17,734			(22,406		)
Payment of Antara prepayment penalty and commitment termination fee							Payment of Antara prepayment penalty and commitment termination fee	(1,200)		0
Net cash used in financing activities							Net cash used in financing activities	(1,726)		(1,763)

Net (decrease) increase in cash and cash equivalents	(1,570		)	(51,176		)	Net (decrease) increase in cash and cash equivalents	2,977		(1,924)
Cash and cash equivalents at beginning of year	27,464			83,964			Cash and cash equivalents at beginning of year	31,713		27,464
Cash and cash equivalents at end of period	$	25,894		$	32,788		Cash and cash equivalents at end of period	$	34,690	$	25,540

Supplemental disclosures of cash flow information:							Supplemental disclosures of cash flow information:
Interest paid in cash	$	940		$	2,321		Interest paid in cash	$	191	$	205
Income taxes paid in cash	$	25		$	12
Supplemental disclosures of noncash financing and investing activities:
Equipment and software acquired under finance lease	$	—		$	5



($ in thousands)	Three months ended March 31, 2020		Nine months ended March 31, 2020

Finance lease costs:
Amortization of ROU assets	$	25	$	79
Interest on lease assets	3		8
Operating lease costs*	515		1,970
Total	$	543	$	2,057



($ in thousands)	Nine months ended March 31, 2020

Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases	$	73
Operating cash flows from finance leases	9
Operating cash flows from operating leases	1,350

Non-cash activity
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	12
Operating lease liabilities	$	3,384



($ in thousands)	Classification	As of March 31, 2020

Assets
Operating leases	Operating lease right-of-use assets	$	5,903
Finance leases	Property and equipment, net	73

Liabilities
Current:
Operating leases	Accrued expenses	1,082
Finance leases	Finance lease obligations and current obligations under long-term debt	55

Non-current:
Operating leases	Operating lease liabilities, non-current	5,025
Finance leases	Finance lease obligations and long-term debt, less current portion	$	24



	~~Nine months ended March 31, 2020~~
~~Weighted-average remaining lease term (years)~~
~~Finance leases~~	~~1.4~~
~~Operating leases~~	~~5.4~~

~~Weighted-average discount rate~~
~~Finance leases~~	~~9.9~~	%
~~Operating leases~~	~~6.8~~	%



($ in thousands)	Operating Leases			Finance Leases
Remainder of 2020	$	384		$	27
2021	1,440			46
2022	1,461			16
2023	1,493			2
2024	1,030			1
Thereafter	1,520			—
Total lease payments	$	7,328		$	92
Less: Imputed interest	(1,221		)	(13		)
Present value of lease liabilities	$	6,107		$	79



($ in thousands)	Operating Leases		Capital Leases
2020	$	1,326	$	106
2021	1,151		34
2022	1,180		12
2023	1,208		1
2024	859		1
Thereafter	1,550		—
Total minimum lease payments	$	7,274	$	154
Less: interest			(14		)
Present value of minimum lease payments, net			140
Less: current obligations under capital leases			(106		)
Obligations under capital leases, noncurrent			$	34



($ in thousands)	Workforce reduction
Balance at July 1, 2019	$	175
Plus: additions	26
Less: cash payments	—
Balance at September 30, 2019	$	201
Plus: additions	9
Less: cash payments	(210		)
Balance at December 31, 2019	$	—



($ in thousands)
2020	$	4,977
2021	6,159
2022	5,513
2023	3,908
2024	1,957
Thereafter	79
Total amounts to be collected	22,593
Less: interest	(2,409		)
Less: allowance for nonperforming receivables	(702		)
Total finance receivables	$	19,482



	As of March 31, 2020
($ in thousands)	Gross		Accumulated Amortization			Net		Amortization Period
Intangible assets:
Non-compete agreements	$	2	$	(2	)	$	—	2 years
Brand and tradenames	1,695		(642		)	1,053		3 - 7 years
Developed technology	10,939		(4,649		)	6,290		5 - 6 years
Customer relationships	19,049		(2,574		)	16,475		10 - 18 years
Total intangible assets	$	31,685	$	(7,867	)	$	23,818

Goodwill	63,945		—			63,945		Indefinite

Total intangible assets & goodwill	$	95,630	$	(7,867	)	$	87,763



	As of June 30, 2019
($ in thousands)	Gross		Accumulated Amortization			Net		Amortization Period
Intangible assets:
Non-compete agreements	$	2	$	(2	)	$	—	2 years
Brand and tradenames	1,695		(470		)	1,225		3 - 7 years
Developed technology	10,939		(3,266		)	7,673		5 - 6 years
Customer relationships	19,049		(1,776		)	17,273		10 - 18 years
Total intangible assets	$	31,685	$	(5,514	)	$	26,171

Goodwill	63,945		—			63,945		Indefinite

Total intangible assets & goodwill	$	95,630	$	(5,514	)	$	90,116



	As of March 31,			As of June 30,
($ in thousands)	2020			2019

Term Facility	$	15,000		$	—
Revolving Credit Facility	—			10,000
Term Loan	—			1,458
Other, including finance lease obligations	423			1,323
Less: unamortized issuance costs and debt discount	(2,745		)	(8		)
Total	12,678			12,773
Less: debt and other financing arrangements, current	(381		)	(12,497		)
Debt and other financing arrangements, noncurrent	$	12,297		$	276



($ in millions)
Balance at October 31, 2019	$	1.5
Net change in fair value	—
Balance at December 31, 2019	1.5
Net change in fair value	(1.1		)
Balance at March 31, 2020	$	0.4



	Nine months ended March 31,
	2020			2019
Expected volatility (percent)	74.6% - 90.1%			58.4% - 70.9%
Expected life (years)	3.5 - 4.5			4.5
Expected dividends	0.0		%	0.0		%
Risk-free interest rate (percent)	1.4% - 1.6%			2.23% - 2.91%
Number of options granted	340,760			420,000
Weighted average exercise price	$	6.85		$	8.52
Weighted average grant date fair value	$	6.84		$	4.27


($ in thousands)	Three months ended September 30, 2020	Three months ended September 30, 2019

Operating lease costs*	529	701


	Three months ended September 30, 2020
Weighted-average remaining lease term (years)
Operating leases	5.0

Weighted-average discount rate
Operating leases	6.8	%


($ in thousands)	Operating Leases
Remainder of 2021	$	1,083
2022	1,461
2023	1,493
2024	1,030
2025	627
Thereafter	893
Total lease payments	$	6,587
Less: Imputed interest	(1,021)
Present value of lease liabilities	$	5,566


($ in thousands)	As of September 30, 2020

Remainder of 2021	$	9,215
2022	10,940
2023	8,808
2024	4,751
2025 and thereafter	1,660
Total	$	35,374


	Leases by Origination
($ in thousands)	Up to 1 Year Ago		Between 1 and 2 Years Ago		Between 2 and 3 Years Ago		Between 3 and 4 Years Ago		Between 4 and 5 Years Ago		More than 5 Years Ago		Total
Current	$	4,680	$	4,013	$	4,986	$	3,073	$	248	$	18	$	17,018
30 days and under	24		51		102		11		0		0		188
31-60 days	5		8		31		10		1		0		55
61-90 days	26		29		64		13		2		0		134
Greater than 90 days	82		164		519		100		31		9		905
Total finance receivables	$	4,817	$	4,265	$	5,702	$	3,207	$	282	$	27	$	18,300


($ in thousands)
2021	$	8,563
2022	5,607
2023	4,447
2024	2,675
2025	1,126
Thereafter	44
Total amounts to be collected	22,462
Less: interest	(3,603)
Less: allowance for nonperforming receivables	(559)
Total finance receivables	$	18,300


	As of June 30, 2020
($ in thousands)	Gross		Accumulated Amortization		Net		Amortization Period
Intangible assets:
Non-compete agreements	$	2	$	(2)	$	0	2 years
Brand and tradenames	1,695		(699)		996		3 - 7 years
Developed technology	10,939		(5,110)		5,829		5 - 6 years
Customer relationships	19,049		(2,841)		16,208		10 - 18 years
Total intangible assets	$	31,685	$	(8,652)	$	23,033

Goodwill	63,945		—		63,945		Indefinite

Total intangible assets & goodwill	$	95,630	$	(8,652)	$	86,978


	As of September 30,		As of June 30,
($ in thousands)	2020		2020

2020 Antara Term Facility	$	0	$	15,000
2021 JPMorgan Credit Facility	15,000		0
Other, including finance lease obligations	3,258		3,358
Less: unamortized issuance costs and debt discount	(321)		(2,595)
Total	17,937		15,763
Less: debt and other financing arrangements, current	(3,871)		(3,328)
Debt and other financing arrangements, noncurrent	$	14,066	$	12,435


	Three months ended September 30,				Percent Change
($ in thousands, except per share data)	2020		2019
Revenue	$	36,877	$	43,359	(15.0)	%
Cost of sales	22,637		31,943		(29.1)	%
Gross profit	14,240		11,416		24.7	%
Operating expenses	17,848		22,694		(21.4)	%
Operating loss	(3,608)		(11,278)		(68.0)	%
Other expense, net	(2,965)		(171)		1,633.9	%
Provision for income taxes	(40)		(59)		(32.2)	%
Net loss	(6,613)		(11,508)		(42.5)	%
Net loss per common share - diluted	$	(0.11)	$	(0.20)	(45.0)	%


	As of and for the three months ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Connections:
Gross new connections	22,000			39,000			37,000			45,000			49,000
Net new connections	15,000			31,000			34,000			40,000			46,000
Total connections	1,335,000			1,320,000			1,289,000			1,255,000			1,215,000
Customers:
New customers added	700			700			1,100			900			900
Total customers	23,700			23,000			22,300			21,200			20,300
Volumes:
Total number of transactions (millions)	201.9			167.7			237.3			243.4			232.7
Total volume (millions)	$	406.3		$	329.1		$	462.7		$	476.4		$	461.2
Financing structure of connections:
JumpStart	3.0		%	6.2		%	1.4		%	4.3		%	3.4		%
QuickStart & all others (a)	97.0		%	93.8		%	98.6		%	95.7		%	96.6		%
Total	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%


a)	~~Includes credit sales with standard trade receivable terms.~~



	Nine months ended March 31,				Percent Change
Category ($ in thousands)	2020		2019		Percent Change
Selling, general and administrative expenses	$	56,876	$	31,537	80.3	%
Investigation and restatement expenses	4,303		13,122		(67.2	)%
Integration and acquisition costs	—		1,127		NM
Depreciation and amortization	3,209		3,359		(4.5	)%
Total operating expenses	$	64,388	$	49,145	31.0	%