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

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x	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 – March 31, 2010 and June 30, 2009	3
	Consolidated Statements of Operations – Three and Nine months ended March 31, 2010 and 2009	4
	Consolidated Statement of Shareholders’ Equity – Nine months ended March 31, 2010	5
	Consolidated Statements of Cash Flows – Nine months ended March 31, 2010 and 2009	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4T.	Controls and Procedures	18
Part II - Other Information
Item 1.	Legal proceedings	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	20
Item 6.	Exhibits	21
	Signatures	22

		March 31,				June 30,
		2010				2009
Assets		(Unaudited)
Current assets:
Cash and cash equivalents		$	7,620,612			$	6,748,262
Accounts receivable, less allowance for uncollectible accounts of $93,000 and $42,000, respectively			2,199,555				1,468,052
Finance receivables			289,112				212,928
Inventory, net			2,318,432				1,671,226
Prepaid expenses and other current assets			864,501				1,078,026
Total current assets			13,292,212				11,178,494
Finance receivables, less current portion			396,623				121,624
Property and equipment, net			3,631,356				2,081,909
Intangibles, net			4,069,253				4,845,053
Goodwill			7,663,208				7,663,208
Other assets			172,558				90,090
Total assets		$	29,225,210			$	25,980,378
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$	3,880,970			$	3,794,691
Accrued expenses			1,574,419				1,393,356
Current obligations under long-term debt			318,902				494,850
Total current liabilities			5,774,291				5,682,897
Long-term debt, less current portion			305,712				325,209
Total liabilities			6,080,003				6,008,106
Commitments and contingencies (Note 7)
Shareholders’ equity:
Preferred stock, no par value:
Authorized shares- 1,800,000
Series A convertible preferred- Authorized shares 900,000;
Issued and outstanding shares- 469,615 and 510,270, respectively (liquidation preference of $14,924,128 and $15,451,307, respectively)			3,326,717				3,614,554
Common stock, no par value:
Authorized shares- 640,000,000;
Issued and outstanding shares-22,728,201 and 15,423,022, respectively			207,977,707				194,948,693
Accumulated deficit			(188,159,217	)			(178,590,975	)
Total shareholders’ equity			23,145,207				19,972,272
Total liabilities and shareholders’ equity		$	29,225,210			$	25,980,378

		Three months ended								Nine months ended
		March 31,								March 31,
		2010				2009				2010				2009
Revenues:
Equipment sales		$	1,280,214			$	883,318			$	4,914,674			$	4,166,927
License and transaction fees			2,413,312				1,425,614				6,377,326				4,207,113
Total revenues			3,693,526				2,308,932				11,292,000				8,374,040
Cost of equipment			738,431				608,943				3,128,666				2,939,529
Cost of services			1,659,500				1,108,805				4,828,222				3,274,789
Cost of sales			2,397,931				1,717,748				7,956,888				6,214,318
Gross profit			1,295,595				591,184				3,335,112				2,159,722
Operating expenses:
Selling, general and administrative			3,200,739				3,755,245				11,623,882				11,971,078
Depreciation and amortization			395,598				381,388				1,181,029				1,188,420
Total operating expenses			3,596,337				4,136,633				12,804,911				13,159,498
Operating loss			(2,300,742	)			(3,545,449	)			(9,469,799	)			(10,999,776	)
Other income (expense):
Interest income			9,226				38,700				36,863				263,237
Interest expense			(18,622	)			(23,804	)			(48,758	)			(76,942	)
Total other income (expense), net			(9,396	)			14,896				(11,895	)			186,295
Net loss			(2,310,138	)			(3,530,553	)			(9,481,694	)			(10,813,481	)
Cumulative preferred dividends			(352,436	)			(382,703	)			(735,139	)			(772,997	)
Loss applicable to common shares		$	(2,662,574	)		$	(3,913,256	)		$	(10,216,833	)		$	(11,586,478	)
Loss per common share (basic and diluted)		$	(.12	)		$	(0.26	)		$	(0.47	)		$	(0.76	)
Weighted average number of common shares outstanding (basic and diluted)			22,730,828				15,345,492				21,752,580				15,236,442

		Series A Convertible Preferred Stock				Common Stock				Accumulated Deficit				Total
Balance, June 30, 2009		$	3,614,554			$	194,948,693			$	(178,590,975	)		$	19,972,272
Issuance of 7,285,792 shares of common stock at $2.00 per share less issuance costs of $1,613,425							12,958,159								12,958,159
Issuance of 24,500 fully-vested shares of common stock to employees and vesting of shares granted under the 2008 Stock Incentive Plan							80,523								80,523
Retirement of 5,113 shares of common stock							(9,668	)							(9,668	)
Retirement of 40,655 shares of preferred stock			(287,837	)							(86,548	)			(374,385	)
Net loss			-				-				(9,481,694	)			(9,481,694	)
Balance, March 31, 2010		$	3,326,717			$	207,977,707			$	(188,159,217	)		$	23,145,207

		Nine months ended
		March 31,
		2010				2009
Operating activities
Net loss		$	(9,481,694	)		$	(10,813,481	)
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			80,523				1,114,671
Charges incurred (reduced) in connection with the Long-term Equity Incentive Program			69,353				(375,866	)
Bad debt expense			47,815				40,552
Amortization			775,800				781,779
Depreciation, $113,913 and $64,201 of which is allocated to cost of services for the nine months ended March 31, 2010 and 2009			519,142				470,842
Changes in operating assets and liabilities:
Accounts receivable			(779,318	)			1,675,914
Finance receivables			(351,183	)			357,542
Inventory			(2,164,017	)			(11,162	)
Prepaid expenses and other assets			217,048				304,444
Accounts payable			86,279				(901,231	)
Accrued expenses			111,710				265,055
Net cash used in operating activities			(10,868,542	)			(7,090,941	)
Investing activities
Purchase of property and equipment, net			(339,441	)			(170,447	)
Net proceeds from redemption/sale of available-for-sale securities			-				6,875,000
Net cash provided by (used in) investing activities			(339,441	)			6,704,553
Financing activities
Net proceeds from the issuance (retirement) of common stock			12,948,491				(364,597	)
Payments for the (retirement) of preferred stock			(374,385	)			(88,048	)
Proceeds from issuance of long-term debt			7,500				-
Repayment of long-term debt			(501,273	)			(691,403	)
Net cash provided by (used in) financing activities			12,080,333				(1,144,048	)
Net increase (decrease) in cash and cash equivalents			872,350				(1,530,436	)
Cash and cash equivalents at beginning of period			6,748,262				9,970,691
Cash and cash equivalents at end of period		$	7,620,612			$	8,440,255
Supplemental disclosures of cash flow information:
Prepaid insurance financed with long-term debt		$	85,991			$	225,785
Prepaid maintenance contracts financed with long-term debt		$	-			$	37,429
Cash paid for interest		$	51,792			$	78,230
Equipment acquired under capital lease		$	17,337			$	424,612
Equipment acquired under long-term debt		$	195,000			$	-
Reclass of inventory to fixed assets for rental units		$	1,516,811			$	-

See accompanying notes.

		March 31				June 30
		2010				2009
		(unaudited)
Notes receivable		$	52,528			$	334,552
Lease receivables			633,207				-
Total finance receivables			685,735				334,552
Less current portion			289,112				212,928
Non-current portion of finance receivables		$	396,623			$	121,624

		March 31				June 30
		2010				2009
		(unaudited)
Accrued compensation and sales commissions		$	593,062			$	318,792
Accrued proxy costs and legal settlement			10,830				-
Accrued professional fees, exclusive of proxy costs			359,021				439,759
Accrued taxes and filing fees			219,470				206,875
Advanced customer billings			100,455				101,942
Accrued share-based payment liability			69,353				-
Accrued other			222,228				325,988
		$	1,574,419			$	1,393,356

		March 31				June 30
		2010				2009
		(unaudited)
Capital lease obligations		$	337,724			$	580,383
Loan agreements			286,890				239,676
Total long-term debt			624,614				820,059
Less current portion			318,902				494,850
Non-current portion of long-term debt		$	305,712			$	325,209

 

 

 

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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 the Company to receive reductions from the credit card companies of transaction processing charges in the future as anticipated by the Company;

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the ability of the Company to obtain reduced pricing from its manufacturers for its e-Port devices in the future as anticipated by the Company;

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whether the Company’s customers purchase or lease e-Port devices in the future 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;

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the ability of the Company to obtain approval of its pending patent applications;

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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 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.

Period			Total number of shares (1)		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 (2)
January 1 through January 31, 2010: Series A Convertible Preferred Stock			18,742		$ 8.95			18,742		$ 219,525
March 1 through March 31, 2010: Series A Convertible Preferred Stock			300		$ 8.50			300		$ 216,975
Total, Preferred			19,042		$ 8.94			19,042		$ 216,975

 

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:  May 3, 2010	/s/ George R. Jensen, Jr.
	George R. Jensen, Jr., Chairman and
	Chief Executive Officer
Date:  May 3, 2010	/s/ David M. DeMedio
	David M. DeMedio,
	Chief Financial Officer

 

 

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