CANTALOUPE, INC. - Quarter Report: 2012 September (Form 10-Q)

 

 

Part I - Financial Information
Item 1.	Condensed Financial Statements (Unaudited)
	Consolidated Balance Sheets – September 30, 2012 and June 30, 2012	3
	Consolidated Statements of Operations – Three months ended September 30, 2012 and 2011	4
	Consolidated Statement of Shareholders’ Equity – Three months ended September 30, 2012	5
	Consolidated Statements of Cash Flows – Three months ended September 30, 2012 and 2011	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
Part II - Other Information
Item 3.	Defaults Upon Senior Securities	19
Item 6.	Exhibits	20
	Signatures	21

 

 

		September 30,				June 30,
		2012				2012
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	6,203,703			$	6,426,645
Accounts receivable, less allowance for uncollectible accounts of $19,000 and $25,000, respectively			2,366,750				2,441,941
Finance receivables			139,039				206,649
Inventory			1,185,917				2,511,748
Prepaid expenses and other current assets			603,893				555,823
Total current assets			10,499,302				12,142,806
Finance receivables, less current portion		$	372,977			$	336,198
Property and equipment, net			13,037,458				11,800,108
Intangibles, net			1,010,853				1,196,453
Goodwill			7,663,208				7,663,208
Other assets			81,247				80,884
Total assets		$	32,665,045			$	33,219,657
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$	6,020,991			$	6,136,443
Accrued expenses			1,933,093				3,342,456
Line of credit			1,337,779				-
Current obligations under long-term debt			483,934				466,056
Total current liabilities			9,775,797				9,944,955
Long-term liabilities:
Long-term debt, less current portion			210,642				262,274
Accrued expenses, less current portion			384,158				426,241
Deferred tax liabilities			19,520				12,599
Warrant liabilities, non-current			455,433				918,566
Total long-term liabilities			1,069,753				1,619,680
Total liabilities			10,845,550				11,564,635
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- 442,968 (liquidation preference of $15,693,778 and $15,361,552, respectively)			3,138,056				3,138,056
Common stock, no par value: Authorized shares- 640,000,000 Issued and outstanding shares-  32,741,732  and 32,510,069, respectively			220,638,660				220,513,327
Accumulated deficit			(201,957,221	)			(201,996,361	)
Total shareholders’ equity			21,819,495				21,655,022
Total liabilities and shareholders’ equity		$	32,665,045			$	33,219,657

 

		Three months ended
		September 30,
		2012				2011
Revenues:
License and transaction fees		$	6,906,356			$	5,419,663
Equipment sales			1,483,921				1,286,085
Total revenues			8,390,277				6,705,748
Cost of services			4,192,360				3,761,577
Cost of equipment			1,053,636				895,135
Gross profit			3,144,281				2,049,036
Operating expenses:
Selling, general and administrative			3,215,125				3,468,070
Depreciation and amortization			343,388				403,232
Total operating expenses			3,558,513				3,871,302
Operating loss			(414,232	)			(1,822,266	)
Other income (expense):
Interest income			20,166				17,867
Interest expense			(23,006	)			(11,164	)
Change in fair value of warrant liabilities			463,133				1,736,609
Total other income (expense), net			460,293				1,743,312
Income (loss) before provision for income taxes			46,061				(78,954	)
Provision for income taxes			(6,921	)			-
Net income (loss)			39,140				(78,954	)
Cumulative preferred dividends			(332,226	)			(332,226	)
Loss applicable to common shares		$	(293,086	)		$	(411,180	)
Loss per common share (basic and diluted)		$	(0.01	)		$	(0.01	)
Weighted average number of common shares outstanding (basic and diluted)			32,518,230				32,288,638

 

 

 

		Series A
		Convertible
		Preferred Stock								Common Stock								Accumulated
		Shares				Amount				Shares				Amount				Deficit				Total
Balance, June 30, 2012			442,968			$	3,138,056				32,510,069			$	220,513,327			$	(201,996,361	)		$	21,655,022
Issuance of fully-vested shares of common stock to employees and directors and vesting of shares under the 2010 Stock Incentive Plan											500				15,644								15,644
Issuance of fully-vested shares of common stock to employees and directors and vesting of shares under the 2011 Stock Incentive Plan											59,165				64,689								64,689
Issuance of fully-vested shares of common stock to employees and directors and vesting of shares under the 2012 Stock Incentive Plan											171,998				45,000								45,000
Net income			-				-				-				-				39,140				39,140
Balance, September 30, 2012			442,968			$	3,138,056				32,741,732			$	220,638,660			$	(201,957,221	)		$	21,819,495

 

 

		Three months ended
		September 30,
		2012				2011
OPERATING ACTIVITIES:
Net income (loss)		$	39,140			$	(78,954	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Charges incurred in connection with the vesting and issuance of common stock for employee and director compensation			125,333				240,453
Charges reduced for change in fair value of warrants			(463,133	)			(1,736,609	)
Depreciation, $676,218 and $418,493, respectively, of which is allocated to cost of services			834,006				563,125
Amortization			185,600				258,600
Bad debt recoveries, net			(6,129	)			(22,056	)
Provision for deferred tax liability			6,921				-
Changes in operating assets and liabilities:
Accounts receivable			81,320				187,501
Finance receivables			30,831				(43,791	)
Inventory			1,331,390				160,798
Prepaid expenses and other assets			79,629				48,339
Accounts payable			(115,452	)			(656,552	)
Accrued expenses			(1,451,446	)			582,357
Net cash provided by (used in) operating activities			678,010				(496,789	)
INVESTING ACTIVITIES:
Purchase of property and equipment			(1,525	)			(60,348	)
Purchase of property for rental program, net			(2,075,390	)			(1,234,608	)
Net cash used in investing activities			(2,076,915	)			(1,294,956	)
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock			-				10,010
Proceeds from line of credit			1,337,779				-
Repayment of long-term debt			(161,816	)			(109,839	)
Net cash provided by (used in) financing activities			1,175,963				(99,829	)
Net decrease in cash and cash equivalents			(222,942	)			(1,891,574	)
Cash and cash equivalents at beginning of year			6,426,645				12,991,511
Cash and cash equivalents at end of period		$	6,203,703			$	11,099,937
Supplemental disclosures of cash flow information:
Cash paid for interest		$	26,150			$	11,708
Equipment and software acquired under capital lease		$	-			$	495,955
Prepaid insurance financed with debt		$	128,062			$	90,372
Disposal of property and equipment		$	-			$	20,407
Reclass of rental program property to inventory		$	5,559			$	-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		September 30,				June 30,
		2012				2012
		(unaudited)
Total finance receivables		$	512,016			$	542,847
Less current portion			139,039				206,649
Non-current portion of finance receivables		$	372,977			$	336,198

 

 

 

 

 

		Leases
Performing		$	512,016
Nonperforming			-
Total		$	512,016

 

 

		31 – 60				61 – 90				Greater than												Total
		Days Past				Days Past				90 Days				Total Past								Finance
		Due				Due				Past Due				Due				Current				Receivables
Leases		$	-			$	2,300			$	-			$	2,300			$	509,716			$	512,016
Total		$	-			$	2,300			$	-			$	2,300			$	509,716			$	512,016

 

 

 

		September 30,				June 30,
		2012				2012
		(unaudited)
Accrued compensation and related sales commissions		$	437,264			$	767,926
Accrued professional fees			226,048				482,664
Accrued taxes and filing fees			642,751				663,078
Advanced customer billings			334,264				311,767
Accrued proxy contest and litigation costs			121,530				992,520
Accrued rent			265,363				278,862
Accrued other			290,031				271,880
		$	2,317,251			$	3,768,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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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 conduct operations at a profit;

 

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the ability of the Company to raise funds in the future through sales of securities in order to sustain its operations if an unexpected or unusual event would occur;

 

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

 

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whether the Company’s customers purchase or rent ePort devices or our other products in the future at levels currently anticipated by our Company, including our JumpStart Program;

 

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whether the Company’s customers continue to operate or commence operating ePorts received under the JumpStart Program or otherwise at levels currently anticipated by the Company;

 

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whether the Company’s customers continue to utilize the Company’s transaction processing and related services, as our customer agreements are generally cancelable by the customer on thirty to sixty days’ notice;

 

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whether the significant increase in the interchange fees charged by Visa and MasterCard for small ticket debit card transactions effective October 1, 2011, would adversely affect our business, including our revenues, gross profits, and anticipated future connections to our network;

 

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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 satisfy its trade obligations included in accounts payable and accrued expenses;

 

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the incurrence by us of any unanticipated or unusual non-operating expenses, such as in connection with a proxy contest, which would require us to divert our cash resources from achieving our business plan;

 

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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;

 

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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;

 

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whether the actions of the former CEO of the Company which resulted in his separation from the Company in October 2011 or the Securities and Exchange Commission’s investigation would have a material adverse effect on the future financial results or condition of 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.

 

 

 

Any forward-looking statement made by us in this Form 10-Q speaks only as of the date of this Form 10-Q. Unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

 

 

 

 

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Total revenue up 25%;

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Recurring license and transaction fee revenue up 27%; and

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Gross profit dollars up 53%.

 

 

 

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Margin improvement of approximately 8 percentage points to 39% gross margins for the first quarter fiscal 2013 compared to 31% a year ago.

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Increases in the number of small-ticket, credit/debit transactions and dollars handled in the first quarter of 16% and 19%, respectively, compared to the same period a year ago; and,

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64% growth in ePort Connect customers from the prior year first quarter, including 425 new customers in the fiscal 2013 first quarter, for 3,725 customers at September 30, 2012.

 

 

Compared to a quarter a year ago, overall net connections to the ePort Connect service remained flat at 10,000 connections quarter over quarter, due to fewer kiosk-related connections (that utilize the ePort SDK) and third party hardware connections during the September 30, 2012 quarter compared to the September 30, 2011 quarter.

 

 

 

 

 

 

 

 

 

 

 

 

		Three months ended
		September 30,
		2012				2011
Net income (loss)		$	39,140			$	(78,954	)
Less interest income			(20,166	)			(17,867	)
Plus interest expense			23,006				11,164
Plus income tax expense			6,921				-
Plus depreciation expense			834,006				563,125
Plus amortization expense			185,600				258,600
Less change in fair value of warrant liabilities			(463,133	)			(1,736,609	)
Plus stock-based compensation			125,333				240,453
Adjusted EBITDA		$	730,707			$	(760,088	)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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SIGNATURES

 

 

	USA TECHNOLOGIES, INC.
Date: November 13, 2012	/s/ Stephen P. Herbert
	Stephen P. Herbert,
	Chief Executive Officer
Date: November 13, 2012	/s/ David M. DeMedio
	David M. DeMedio
	Chief Financial Officer

 

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