Small-cap technology stocks are inherently volatile. This investment truism especially applies to the industry “disruptors” that we prefer for inclusion in the Radical Wealth Alliance portfolio. After all, the word “radical” is in the very name of the publication. No risk, no glory.

That said, before choosing any stock, we conduct rigorous due diligence to protect you from unwarranted danger, to strike an appropriate risk/reward balance.

Which brings me to Radical Wealth Alliance portfolio holding USA Technologies (NSDQ: USAT), a stock that I added to the portfolio on May 1, 2018.

USAT (market cap: $354.6 million) has put shareholders on a roller-coaster ride in recent weeks, spiking up and down according to the headlines. In response to frequent (and nervous) investor inquiries, I’ve repeatedly counseled patience and advised our followers to continue holding the stock until the dust settles.

Our patience has borne results. On Monday, January 14, USAT shares spiked nearly 17% on news that the company had finally taken concrete steps to resolve issues that were weighing on investor sentiment and the share price. This upward trajectory defied the headwinds of the broader market. The S&P 500 fell 0.5% on the same day, largely on concerns that economic growth is slowing in China.

USAT develops and provides cashless acceptance technologies, running on its ePort Connect service. This platform entails a suite of services designed for the self-serve, unattended market — e.g., vending machines, kiosks, and point-of-sale terminals.

USAT already is the supplier to every major payment platform. In addition to Mastercard, USAT has secured payment partnerships with Apple (NSDQ: AAPL), Visa (NYSE: V), Alphabet’s (NSDQ: GOOGL) Android Pay (Google), Samsung’s (OTC: SSNLF) Samsung Pay, and JPMorgan Chase’s (NYSE: JPM) Chase Pay.

USAT faces bright long-term prospects, but in recent months there have been bumps along the way. The company now appears to be back on track.

USA Technologies on Monday revealed several steps it intends to take to enhance corporate governance, after an audit committee investigation revealed that the company had “prematurely or inappropriately recognized revenue.” 

In an open letter to shareholders issued January 14, the management of Malvern, Pennsylvania-based USAT said the sums affected aren’t likely to exceed $5.5 million. Management also vowed that some revenue is expected to be recognized in future quarters. The investigation conducted by USAT’s audit committee further found that certain items had been recorded as expenses, such as the payment of marketing or servicing fees, but should be treated as contra-revenue items in earlier fiscal quarters. Management also noted that the audit continues and pledged full disclosure.

C-Suite Accountability

Acting upon the audit committee’s recommendations, USAT’s board of directors asserted that it intends to shake-up its C-Suite management team, add a chief operating officer and chief compliance officer, create a compliance committee on the board and split the roles of chairman and CEO. Stephen P. Herbert will remain as CEO; board member Albin Moschner was appointed non-executive chairman.

It’s the sort of decisive action that investors like to see when a company apparently runs afoul of regulators: investigate, fess-up, make executives accountable, and quickly move on.

USAT emphasized that it plans to soon file its annual report 10-K form for the fiscal year ending June 30, 2018, and the fiscal quarter ending Sept. 30, 2018.

An excerpt of USAT’s shareholder letter:

We look forward to providing you all with an update on our financial results as soon as we are able. As set forth in the Form 8-K, we are also determining whether or not a restatement is required in connection with any previously filed financial statements and our independent auditor continues to work towards completion of its audit review procedures.

USAT’s stock plunged by a third of its value on September 11, after the company warned that the release of its annual report would be delayed due to an internal audit. The news spooked Wall Street and sent investors running for the exits. Now that management has officially released the reasons for that audit, investors breathed a sigh of relief. So have we.

On October 2, Nasdaq notified USAT that it was not in compliance with the index’s listing rule because it had not filed its annual report. The company was given until Nov. 1 to submit a plan to Nasdaq to regain compliance. The plan was submitted Oct. 30 and USAT said the plan was accepted. Nasdaq granted an exception in which USAT is required to file its annual report and any delinquent quarterly report by March 12, 2019. Failure to do so would result in a notice of delisting, but we don’t expect this scenario to occur.

We’re still committed to USAT. We now await clarity over the matter, which should arrive in the company’s impending financial reports.