CANTALOUPE, INC. - Quarter Report: 2010 September (Form 10-Q)

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

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

Pennsylvania	23-2679963
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 Deerfield Lane, Suite 140, Malvern, Pennsylvania	19355
(Address of principal executive offices)	(Zip Code)

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o
Smaller reporting company x

 

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		PAGE  NO.
Part I - Financial Information
Item 1.	Condensed Financial Statements (Unaudited)
	Consolidated Balance Sheets – September 30, 2010 and June 30, 2010	3
	Consolidated Statements of Operations – Three months ended September 30, 2010 and 2009	4
	Consolidated Statement of Shareholders’ Equity – Three months ended September 30, 2010	5
	Consolidated Statements of Cash Flows – Three months ended September 30, 2010 and 2009	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15
Part II - Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 6.	Exhibits	17
	Signatures	18

		September 30,				June 30,
		2010				2010
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	5,467,381			$	7,604,324
Accounts receivable, less allowance for uncollectible accounts of $32,000 and $41,000, respectively			1,896,529				2,048,421
Finance receivables			193,576				242,452
Inventory, net			3,102,162				2,633,971
Prepaid expenses and other current assets			772,466				847,344
Total current assets			11,432,114				13,376,512
Finance receivables, less current portion			276,393				339,341
Property and equipment, net			4,818,789				4,511,889
Intangibles, net			3,552,053				3,810,653
Goodwill			7,663,208				7,663,208
Other assets			183,090				146,821
Total assets		$	27,925,647			$	29,848,424
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$	4,550,912			$	4,570,730
Accrued expenses			1,862,775				1,869,367
Current obligations under long-term debt			374,081				344,652
Total current liabilities			6,787,768				6,784,749
Long-term debt, less current portion			196,133				251,503
Total liabilities			6,983,901				7,036,252
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value: Authorized shares- 1,800,000
Series A convertible preferred- Authorized shares 900,000; Issued and outstanding shares- 444,468 and 444,468, respectively (liquidation preference of $14,412,874 and $14,079,523, respectively)			3,148,676				3,148,676
Common stock, no par value: Authorized shares- 640,000,000; Issued and outstanding shares-25,910,608 and 25,497,155, respectively			209,974,740				209,958,552
Accumulated deficit			(192,181,670	)			(190,295,056	)
Total shareholders’ equity			20,941,746				22,812,172
Total liabilities and shareholders’ equity		$	27,925,647			$	29,848,424

		Three months ended
		September 30,
		2010				2009
Revenues:
Equipment sales		$	1,096,193			$	1,937,407
License and transaction fees			3,344,472				1,890,229
Total revenues			4,440,665				3,827,636
Cost of equipment			648,898				1,309,356
Cost of services			2,436,200				1,488,157
Cost of sales			3,085,098				2,797,513
Gross profit			1,355,567				1,030,123
Operating expenses:
Selling, general and administrative			2,913,298				3,565,778
Depreciation and amortization			341,541				385,066
Total operating expenses			3,254,839				3,950,844
Operating loss			(1,899,272	)			(2,920,721	)
Other income (expense):
Interest income			25,310				14,938
Interest expense			(12,652	)			(20,416	)
Total other income (expense), net			12,658				(5,478	)
Net loss			(1,886,614	)			(2,926,199	)
Cumulative preferred dividends			(333,351	)			(382,703	)
Loss applicable to common shares		$	(2,219,965	)		$	(3,308,902	)
Loss per common share (basic and diluted)		$	(0.09	)		$	(0.17	)
Weighted average number of common shares outstanding (basic and diluted)			25,842,604				19,819,926

		Series A Convertible Preferred Stock				Common Stock				Accumulated Deficit				Total
Balance, June 30, 2010		$	3,148,676			$	209,958,552			$	(190,295,056	)		$	22,812,172
Issuance of 261,953 shares of common stock at $0.90 per share less issuance costs of $227,672							8,085								8,085
Issuance of 1,500 fully-vested shares of common stock to employees and vesting of shares granted under the 2008 Stock Incentive Plan							8,103								8,103
Issuance of 150,000 shares of common stock to Lincoln Park Capital							-
Net loss											(1,886,614	)			(1,886,614	)
Balance, September 30, 2010		$	3,148,676			$	209,974,740			$	(192,181,670	)		$	20,941,746

 

		Three months ended
		September 30,
		2010				2009
Operating activities
Net loss		$	(1,886,614	)		$	(2,926,199	)
Adjustments to reconcile net loss to net cash used in operating activities:
Charges incurred in connection with the vesting and issuance of common stock for employee compensation			8,103				40,574
Charges incurred in connection with the Long-term Equity Incentive Program			61,303				77,258
Bad debt expense			8,316				15,970
Amortization			258,600				258,600
Depreciation, $183,365 and $27,066 of which is allocated to cost of services for the three months ended September 30, 2010 and 2009			266,306				153,532
Loss on disposal of property and equipment			10,380				-
Changes in operating assets and liabilities:
Accounts receivable			143,576				(89,225	)
Finance receivables			111,824				(583,642	)
Inventory			(961,778	)			(28,293	)
Prepaid expenses and other assets			132,920				199,099
Accounts payable			(19,818	)			(288,603	)
Accrued expenses			(67,895	)			344,315
Net cash used in operating activities			(1,934,777	)			(2,826,614	)
Investing activities
Purchase of property and equipment, net			(89,999	)			(24,015	)
Net cash used in investing activities			(89,999	)			(24,015	)
Financing activities
Net proceeds from the issuance (retirement) of common stock			8,085				13,035,942
Payments for the retirement of preferred stock			-				(48,272	)
Repayment of long-term debt			(120,252	)			(194,834	)
Net cash provided by (used in) financing activities			(112,167	)			12,792,836
Net increase (decrease) in cash and cash equivalents			(2,136,943	)			9,942,207
Cash and cash equivalents at beginning of period			7,604,324				6,748,262
Cash and cash equivalents at end of period		$	5,467,381			$	16,690,469
Supplemental disclosures of cash flow information:
Prepaid insurance financed with long-term debt		$	94,311			$	85,991
Cash paid for interest		$	13,472			$	19,751
Equipment acquired under capital lease		$	-			$	17,337
Disposal of Property Plant and Equipment		$	140,931			$	-
Reclass of inventory to fixed assets for rental units		$	493,587			$	-

 
 

		September 30				June 30
		2010				2010
		(unaudited)
Accrued compensation and sales commissions		$	775,388			$	922,741
Accrued professional fees			249,394				374,288
Accrued taxes and filing fees			218,200				222,249
Advanced customer billings			230,516				55,773
Accrued share-based payment liability			104,474				43,171
Accrued other			284,803				251,145
		$	1,862,775			$	1,869,367

		September 30				June 30
		2010				2010
		(unaudited)
Capital lease obligations		$	217,998			$	280,261
Loan agreements			352,216				315,894
Total long-term debt			570,214				596,155
Less current portion			374,081				344,652
Non-current portion of long-term debt		$	196,133			$	251,503

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general economic, market or business conditions;

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the ability of the Company to generate sufficient sales to generate operating profits, or to sell products at a profit;

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the ability of the Company to raise funds in the future through sales of securities;

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whether the Company is able to enter into binding agreements with third parties to assist in product or network development;

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the ability of the Company to commercialize its developmental products, or if actually commercialized, to obtain commercial acceptance thereof;

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the ability of the Company to compete with its competitors to obtain market share;

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the ability of our Company to receive reductions from the credit card companies of transaction processing charges in the future;

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the ability of our Company to obtain reduced pricing from its manufacturers for its ePort devices in the future as currently anticipated by our Company;

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whether our Company’s customers lease or purchase ePort devices or our other products at levels currently anticipated by our Company;

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whether the Company’s customers participate in the Jump Start program at levels currently anticipated by the Company;

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the ability of the Company to obtain sufficient funds through operations or otherwise to repay its debt obligations, or to fund development and marketing of its products;

●

the ability of the Company to satisfy its trade obligations included in accounts payable and accrued liabilities;

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the ability of the Company to predict or estimate its future quarterly or annual revenues and expenses given the developing and unpredictable market for its products and the lack of established revenues;

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the ability of the Company to reduce its cash-based SG&A expenses for the quarter ending December 31, 2010 to the levels anticipated and to maintain such levels during the remainder of the 2011 fiscal year;

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the ability of the Company to retain key customers from whom a significant portion of its revenues is derived;

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the ability of a key customer to reduce or delay purchasing products from the Company; and

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as a result of the slowdown in the economy and/or the tightening of the capital and credit markets, our customers may modify, delay or cancel plans to purchase our products or services, and suppliers may increase their prices, reduce their output or change their terms of sale.

Net loss		$	(1,886,614	)
Less interest income			(25,310	)
Plus interest expense			12,652
Plus income tax expense			--
Plus depreciation expense			266,306
Plus amortization expense			258,600
EBITDA		$	(1,374,366	)

Period		Total number of shares				Average price paid per share				Total number of shares purchased as part of publicly announced plans or programs				Approximate dollar value of shares that yet may be purchased under the plans or programs
July 1 through July 31, 2010: Series A Convertible Preferred Stock			1,200	(1)		$	5.29				-				-
Total, Preferred			1,200			$	5.29				-				-

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

	USA TECHNOLOGIES, INC.
Date:  November 10, 2010	/s/ George R. Jensen, Jr.
	George R. Jensen, Jr., Chairman and
	Chief Executive Officer
Date:  November 10, 2010	/s/ David M. DeMedio
	David M. DeMedio,
	Chief Financial Officer