CANTALOUPE, INC. - Quarter Report: 2014 September (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

 

 

	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 140, Malvern, Pennsylvania				19355
(Address of principal executive offices)				(Zip Code)

 

	(610) 989-0340
(Registrant’s telephone number, including area code)

 

 

 

 

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

 

 

 

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Part I - Financial Information
Item 1.		Consolidated Financial Statements (Unaudited)
		Consolidated Balance Sheets – September 30, 2014 and June 30, 2014		3
		Consolidated Statements of Operations – Three months ended September 30, 2014 and 2013		4
		Consolidated Statement of Shareholders’ Equity – Three months ended September 30, 2014		5
		Consolidated Statements of Cash Flows – Three months ended September 30, 2014 and 2013		6
		Notes to Consolidated Financial Statements		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		23
Item 4.		Controls and Procedures		23
Part II - Other Information
Item 3.		Defaults Upon Senior Securities		23
Item 6.		Exhibits		23
		Signatures		24

 

 

		September 30,				June 30,
		2014				2014
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	10,916,078			$	9,072,320
Accounts receivable, less allowance for uncollectible accounts of $129,000 and $63,000, respectively			2,444,748				2,683,579
Finance receivables			279,216				119,793
Inventory			2,629,361				1,486,777
Prepaid expenses and other current assets			376,823				363,367
Deferred income taxes			907,691				907,691
Total current assets			17,553,917				14,633,527
Finance receivables, less current portion			948,833				352,794
Other assets			382,563				190,703
Property and equipment, net			17,780,294				21,138,580
Deferred income taxes			26,713,803				26,353,330
Intangibles, net			432,100				432,100
Goodwill			7,663,208				7,663,208
Total assets		$	71,474,718			$	70,764,242
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		$	7,632,643			$	7,753,911
Accrued expenses			1,779,037				1,915,799
Line of credit			5,000,000				5,000,000
Current obligations under long-term debt			207,383				172,911
Income taxes payable			-				21,021
Deferred gain from sale-leaseback transactions			860,390				380,895
Total current liabilities			15,479,453				15,244,537
Long-term liabilities:
Long-term debt, less current portion			222,907				249,865
Accrued expenses, less current portion			137,045				186,174
Warrant liabilities			275,157				585,209
Deferred gain from sale-leaseback transactions, less current portion			1,545,641				761,790
Total long-term liabilities			2,180,750				1,783,038
Total liabilities			17,660,203				17,027,575
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 $17,022,682 and $16,690,456, respectively)			3,138,056				3,138,056
Common stock, no par value: Authorized shares- 640,000,000 Issued and outstanding shares- 35,637,706 and 35,514,685, respectively			224,349,001				224,210,197
Accumulated deficit			(173,672,542	)			(173,611,586	)
Total shareholders’ equity			53,814,515				53,736,667
Total liabilities and shareholders’ equity		$	71,474,718			$	70,764,242

See accompanying notes.

 

 

		Three months ended
		September 30,
		2014				2013
Revenues:
License and transaction fees		$	10,156,222			$	8,507,044
Equipment sales			2,096,380				1,616,014
Total revenues			12,252,602				10,123,058
Cost of services			7,251,107				5,409,463
Cost of equipment			1,866,257				1,130,824
Gross profit			3,135,238				3,582,771
Operating expenses:
Selling, general and administrative			3,632,487				3,295,344
Depreciation and amortization			169,403				158,509
Total operating expenses			3,801,890				3,453,853
Operating income (loss)			(666,652	)			128,918
Other income (expense):
Interest income			10,082				13,526
Interest expense			(74,911	)			(60,976	)
Change in fair value of warrant liabilities			310,052				219,097
Total other income, net			245,223				171,647
Income (loss) before benefit (provision) for income taxes			(421,429	)			300,565
Benefit (provision) for income taxes			360,473				(6,911	)
Net income (loss)			(60,956	)			293,654
Cumulative preferred dividends			(332,226	)			(332,226	)
Net loss applicable to common shares		$	(393,182	)		$	(38,572	)
Net loss per common share (basic and diluted)		$	(0.01	)		$	-
Weighted average number of common shares outstanding (basic and diluted)			35,586,455				33,324,295
See accompanying notes.

 

 

		Series A
		Convertible
		Preferred Stock								Common Stock								Accumulated
		Shares				Amount				Shares				Amount				Deficit				Total
Balance, June 30, 2014			442,968			$	3,138,056				35,514,685			$	224,210,197			$	(173,611,586	)		$	53,736,667
Issuance of fully-vested shares of common stock to employees and directors and vesting of shares under the 2011 Stock Incentive Plan			-				-				10,002				604				-				604
Issuance of fully-vested shares of common stock to employees and directors and vesting of shares under the 2012 Stock Incentive Plan			-				-				57,682				9,273				-				9,273
Issuance of fully-vested shares of common stock to employees and directors and vesting of shares under the 2013 Stock Incentive Plan			-				-				55,337				76,681				-				76,681
Charges incurred under the 2014 Stock Option Incentive Plan			-				-				-				52,246				-				52,246
Net loss			-				-				-				-				(60,956	)			(60,956	)
Balance, September 30, 2014			442,968			$	3,138,056				35,637,706			$	224,349,001			$	(173,672,542	)		$	53,814,515
See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Age Analysis of Past Due Finance Receivables
As of September 30, 2014
(unaudited)

 

As of September 30, 2014, the Company and the Bank entered into a Ninth Amendment (“Ninth Amendment”) to the Loan and Security Agreement to change the definition of Adjusted EBITDA for the quarter ended September 30, 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the three months ended September 30, 2014, the Company recorded compensation expense of $24,930 related to the stock options granted to the executive officers of the company in August 2014 under the 2014 Stock Option Incentive Plan.

 

 

 

 

 

 

 

 

9. COMMITMENTS AND CONTINGENCIES

 

 

 

 

The following table summarizes the changes in deferred gain for the three months ended September 30, 2014 from the sale-leaseback transactions:

 

 

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

2015 STI PLAN

 

 

 

 

 

LITIGATION

 

 

10. SUBSEQUENT EVENTS

 

 

 

 

  

 

 

 

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general economic, market or business conditions;

 

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the ability of the Company to raise funds in the future through sales of securities or debt financing 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 current or future customers purchase, lease, rent or utilize ePort devices or our other products in the future at levels currently anticipated by our Company, including appropriate diversification resulting from sources other than our JumpStart Program;

 

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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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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 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 are derived;

 

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

 

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the ability of the Company to obtain widespread commercial acceptance of its products and service offerings such as ePort QuickConnect, mobile payment and loyalty and prepaid programs;

 

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whether any patents issued to the Company will provide the Company with any competitive advantages or adequate protection for its products, or would be challenged, invalidated or circumvented by others;

 

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the ability of our products and services to avoid unauthorized hacking or credit card fraud;

 

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whether our suppliers would increase their prices, reduce their output or change their terms of sale; and

 

●

the ability of the Company to operate without infringing the proprietary rights of others.

 

 

 

 

 

 

 

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Recurring license and transaction fee revenue up 19% to $10.2 million; and

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Total connections to its ePort Connect service base as of September 30, 2014 up 27% as compared to September 30, 2013.

 

 

 

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Adding 10,000 net connections to our service, consisting of 13,000 new connections to our ePort Connect service in the quarter, offset by 3,000 deactivations, compared to 3,000 net connections added in the same quarter of fiscal 2013;

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As of September 30, 2014, the Company had approximately 276,000 connections to the ePort Connect service compared to approximately 217,000 connections to the ePort Connect service as of September 30, 2013, an increase of 59,000 connections, or 27%;

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Increases in the number of small-ticket, credit/debit transactions and dollars handled for the quarter ended September 30, 2014 of 26% and 31%, respectively, compared to the same period a year ago; and

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ePort Connect customer base grew 41% from September 30, 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit Number		Description
10.1		Ninth Amendment to Loan and Security Agreement dated as of September 30, 2014, between the Company and Avidbank Corporate Finance, a division of Avidbank
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.