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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from _________ to _________                         
Commission file number 001-33365
https://cdn.kscope.io/be8a6313753a7f7b49c9f11ef9d23d10-ctlp-20210930_g1.jpg
Cantaloupe, Inc.
_______________________________________________________________
(Exact name of registrant as specified in its charter)
Pennsylvania23-2679963
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
100 Deerfield Lane,Suite 300,Malvern,Pennsylvania19355
(Address of principal executive offices)(Zip Code)
(610) 989-0340
_______________________________________________________________
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName Of Each Exchange On Which Registered
Common Stock, no par valueCTLPThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of October 31, 2021 there were 70,968,164 outstanding shares of Common Stock, no par value.



Table of Contents
Cantaloupe, Inc.
TABLE OF CONTENTS



Table of Contents
Part I. Financial Information
Item 1. Consolidated Financial Statements
Cantaloupe, Inc.
Condensed Consolidated Balance Sheets

($ in thousands, except share data)September 30, 2021 (Unaudited)June 30,
2021
Assets
Current assets:
Cash and cash equivalents$82,511 $88,136 
Accounts receivable, net24,184 27,470 
Finance receivables, net8,031 7,967 
Inventory, net9,537 5,292 
Prepaid expenses and other current assets2,293 2,414 
Total current assets126,556 131,279 
Non-current assets:
Finance receivables due after one year, net10,832 11,632 
Property and equipment, net6,722 5,570 
Operating lease right-of-use assets3,240 3,049 
Intangibles, net20,923 19,992 
Goodwill66,194 63,945 
Other assets2,474 2,205 
Total non-current assets110,385 106,393 
Total assets$236,941 $237,672 
Liabilities, convertible preferred stock and shareholders’ equity
Current liabilities:
Accounts payable$36,153 $36,775 
Accrued expenses26,207 26,460 
Current obligations under long-term debt662 675 
Deferred revenue1,720 1,763 
Total current liabilities64,742 65,673 
Long-term liabilities:
Deferred income taxes185 179 
Long-term debt, less current portion13,477 13,644 
Operating lease liabilities, non-current3,535 3,645 
Total long-term liabilities17,197 17,468 
Total liabilities81,939 83,141 
Commitments and contingencies (Note 13)
Convertible preferred stock:
Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and outstanding, with liquidation preferences of $21,781 and $21,447 at September 30, 2021 and June 30, 2021, respectively
3,138 3,138 
Shareholders’ equity:
Preferred stock, no par value, 1,800,000 shares authorized
  
Common stock, no par value, 640,000,000 shares authorized, 70,959,182 and 71,258,047 shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively
464,537 462,775 
Accumulated deficit(312,673)(311,382)
Total shareholders’ equity151,864 151,393 
Total liabilities, convertible preferred stock and shareholders’ equity$236,941 $237,672 
See accompanying notes.
3

Table of Contents
Cantaloupe, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended
September 30,
($ in thousands, except per share data)20212020
Revenues:
Subscription and transaction fees$40,625 $33,108 
Equipment sales5,155 3,769 
Total revenues45,780 36,877 
Costs of sales:
Cost of subscription and transaction fees26,024 19,336 
Cost of equipment sales4,880 3,301 
Total costs of sales30,904 22,637 
Gross profit14,876 14,240 
Operating expenses:
Sales and marketing2,339 1,599 
Technology and product development5,389 3,214 
General and administrative7,264 11,997 
Depreciation and amortization1,022 1,068 
Total operating expenses16,014 17,878 
Operating loss(1,138)(3,638)
Other income (expense):
Interest income473 350 
Interest expense(478)(3,285)
Other income (expense)(59) 
Total other income (expense), net(64)(2,935)
Loss before income taxes(1,202)(6,573)
Provision for income taxes(89)(40)
Net loss(1,291)(6,613)
Preferred dividends(334)(334)
Net loss applicable to common shares$(1,625)$(6,947)
Net loss per common share
Basic and diluted$(0.02)$(0.11)
Weighted average number of common shares outstanding used to compute net loss per share applicable to common shares
Basic and diluted71,175,927 64,859,002 
See accompanying notes.
4

Table of Contents
Cantaloupe, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)

Three Month Period Ended September 30, 2021
Common StockAccumulated
Deficit
Total
($ in thousands, except share data)SharesAmount
Balance, June 30, 202171,258,047 $462,775 $(311,382)$151,393 
Stock-based compensation and exercises (net)20,958 1,762 — 1,762 
Retirement of common stock(319,823)— — — 
Net loss— — (1,291)(1,291)
Balance, September 30, 202170,959,182 464,537 (312,673)151,864 

Three Month Period Ended September 30, 2020
Common StockAccumulated
Deficit
Total
($ in thousands, except share data)SharesAmount
Balance, June 30, 202065,196,882 $401,240 $(303,025)$98,215 
Impact of adoption of ASC 326— — 348 348 
Stock-based compensation and exercises (net)56,083 1,502 — 1,502 
Net loss— — (6,613)(6,613)
Balance, September 30, 202065,252,965 402,742 (309,290)93,452 
See accompanying notes.
5

Table of Contents
Cantaloupe, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
September 30,
($ in thousands)20212020
Cash flows from operating activities:
Net loss$(1,291)$(6,613)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock based compensation1,762 1,509 
Amortization of debt issuance costs and discounts39 3,125 
Provision for expected losses412 394 
Provision for inventory reserve(370)802 
Depreciation and amortization included in operating expenses1,022 1,068 
Depreciation included in costs of sales for rental equipment264 539 
Other(186)271 
Changes in operating assets and liabilities:
Accounts receivable2,991 (1,540)
Finance receivables635 531 
Inventory(3,875)1,324 
Prepaid expenses and other assets(148)100 
Accounts payable and accrued expenses(2,239)3,985 
Operating lease liabilities153 (259)
Deferred revenue(43)(58)
Net cash (used in) provided by operating activities(874)5,178 
Cash flows from investing activities:
Cash paid for acquisition(2,900) 
Purchase of property and equipment(1,641)(483)
Proceeds from sale of property and equipment 8 
Net cash used in investing activities(4,541)(475)
Cash flows from financing activities:
Proceeds from long-term debt issuance by JPMorgan Chase Bank, N.A., net of debt issuance costs 14,550 
Repayment of long-term debt(210)(15,101)
Proceeds from exercise of common stock options 25 
Payment of Antara prepayment penalty and commitment termination fee (1,200)
Net cash used in financing activities(210)(1,726)
Net (decrease) increase in cash and cash equivalents(5,625)2,977 
Cash and cash equivalents at beginning of year88,136 31,713 
Cash and cash equivalents at end of period$82,511 $34,690 
Supplemental disclosures of cash flow information:
Interest paid in cash$187 $191 
See accompanying notes.
6

Table of Contents
Cantaloupe, Inc.
Condensed Notes to Consolidated Financial Statements
(Unaudited)
1. BUSINESS

Cantaloupe, Inc. (“Cantaloupe” or the “Company”), previously known as USA Technologies, Inc., is organized under the laws of the Commonwealth of Pennsylvania. On March 29, 2021, USA Technologies, Inc. filed Articles of Amendment to its Amended and Restated Articles of Incorporation with the Pennsylvania Department of State to effect a change of the Company’s name from “USA Technologies, Inc.” to “Cantaloupe, Inc.,” effective as of April 15, 2021. On April 19, 2021, the Company’s common stock, no par value per share (the “Common Stock”), began trading on the NASDAQ Global Select Market under the ticker symbol “CTLP” and the Company’s Series A Convertible Preferred Stock, no par value per share, began trading on the OTC Markets’ Pink Open Market under the trading symbol, “CTLPP”.

Cantaloupe is a digital payments and software services company that provides end-to-end technology solutions for the unattended retail market. We are transforming the unattended retail world by offering a solution for payments processing, as well as one that handles inventory management, pre-kitting, route logistics, warehouse and back-office management. Our enterprise-wide platform is designed to increase consumer engagement and sales revenue through digital payments, digital advertising and customer loyalty programs, while providing retailers with control and visibility over their operations and inventory. As a result, customers ranging from vending machine companies to operators of micro-markets, car wash and electric vehicle charging stations, commercial laundry, kiosks, amusements and more, can run their businesses more proactively, predictably, and competitively.

COVID-19 Update

The Company, its employees, and its customers operate in geographic locations (primarily the United States) in which its business operations and financial performance continues to be affected by the COVID-19 pandemic. However, as businesses, schools, and other organizations re-open and continue through an economic recovery, the Company has seen increased foot traffic to distributed assets containing our electronic payments solutions. The Company continues to monitor for potential impacts of COVID-19 as new variants emerge and could lead to a resurgence of the virus. Such impacts to our financial statements include, but are not limited to, the impairment of goodwill and intangible assets, impairment of long-lived assets including operating lease right-of-use assets, property and equipment and allowance for doubtful accounts for accounts and finance receivables. We have concluded that there are no material impairments as a result of our evaluation. Where applicable, we have incorporated judgments and estimates of the expected impact of COVID-19 in the preparation of the financial statements based on information currently available. These judgments and estimates may change, as new events develop and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements and therefore should be read in conjunction with the Company’s June 30, 2021 Annual Report on Form 10-K.

All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. Operating results for the three months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2022. Actual results could differ from estimates. The balance sheet at June 30, 2021 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Certain prior period amounts have been reclassified to conform with current year presentation.

The Company operates as one operating segment because its chief operating decision maker, who is the Chief Executive Officer, reviews its financial information on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance.
7

Table of Contents
Condensed Consolidated Statement of Operations: operating expenses presentation

Beginning in the first quarter of fiscal year 2022, the Company revised its presentation of operating expenses within its Condensed Consolidated Statement of Operations by disaggregating the previously disclosed Selling, general, and administrative costs into Sales and marketing, Technology and product development, and General and administrative costs. The updated presentation is intended to provide additional transparency to the readers of the financial statements and better align the Company’s financial performance with how management views and monitors business operations and makes strategic decisions. Prior period amounts for fiscal year 2021 have been reclassified to conform with current year presentation.

Below is a brief description of the various categories within Operating expenses:

Sales and marketing: Sales and marketing expenses consists primarily of our sales and marketing team personnel costs which include non-capitalized wages, bonuses, stock-based compensation, sales commissions, severance costs, benefits, and employer taxes. In addition, this category includes fees paid for advertising, trade shows and external consultants who assist in outreach initiatives designed to build brand awareness and showcase the value of our products and services to our opportunity markets.

Technology and product development: Technology and product development expenses consists primarily of our technology and product team personnel costs and fees paid to external consultants relating to innovating and maintaining our portfolio of products and services and strengthening our network environment and platform. These costs include but are not limited to engineering, platform and software development, fees for software licenses, contract labor and other technology and product related items.

General, and administrative: General and administrative expenses consists primarily of our customer support, business operations, finance, legal, human resources and other administrative personnel costs and fees paid to external consultants for these respective departments. In addition, this category includes rent and occupancy costs and other miscellaneous costs incurred in the course of operating the business.

Depreciation and amortization: No changes made to the accounting policies or previously reported amounts included within the Company’s June 30, 2021 Annual Report on Form 10-K for this category. Depreciation expense on our property and equipment, excluding property and equipment used for rentals, and amortization expense on our intangible assets are included within the Depreciation and amortization caption in the Consolidated Statements of Operations.

The presentation changes described above did not impact total operating expenses, operating loss, net loss or net loss per common share.

Below are excerpts from the Condensed Consolidated Statement of Operations for each quarter of fiscal year 2021 before and after the revisions:
Revised presentation:Three months ended
Year ended
 

June 30, 2021
($ in thousands)September 30, 2020December 31, 2020March 31, 2021June 30, 2021
Sales and marketing$1,599 $1,520 $1,754 $2,062 $6,935 
Technology and product development3,214 3,783 4,425 4,513 15,935 
General and administrative11,997 8,528 7,552 7,677 35,754 
Depreciation and amortization1,068 1,052 991 996 4,107 
Total operating expenses$17,878 $14,883 $14,722 $15,248 $62,731 

As previously reported:Three months ended
Year ended


June 30, 2021
($ in thousands)September 30, 2020December 31, 2020March 31, 2021June 30, 2021
Selling, general, and administrative$16,810 $13,831 $13,731 $14,252 $58,624 
Depreciation and amortization1,068 1,052 991 996 4,107 
Total operating expenses$17,878 $14,883 $14,722 $15,248 $62,731 

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Condensed Consolidated Statement of Operations: updated caption

Beginning in the first quarter of fiscal year 2022, the Company revised the previously reported revenue caption of License and transaction fees to Subscription and transaction fees within its Condensed Consolidated Statement of Operations to provide a more accurate description of the revenue stream and align with commonly used terminology by industry participants. No changes were made to the revenue recognition accounting policies or previously reported amounts included within the Company’s June 30, 2021 Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

Measurement of Credit Losses on Financial Statements

The Company adopted "Financial Instruments - Credit Losses" (Topic 326) on July 1, 2020 using the modified retrospective approach through an adjustment to retained earnings, and began calculating our allowance for accounts and finance receivables under an expected loss model rather than an incurred loss model.

The following table represents a roll forward of the allowance for doubtful accounts for accounts and finance receivables for the
three months ending September 30, 2021:
Three months ended September 30, 2021
($ in thousands)Accounts ReceivableFinance Receivable
Beginning balance of allowance as of June 30, 2021$6,614 $1,109 
Provision for expected losses312 100 
Balance at September 30, 2021$6,926 $1,209 


ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

On July 1, 2021, the Company adopted ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. The adoption of this accounting standard did not materially impact the Company’s condensed consolidated financial statements.

Accounting Pronouncements To Be Adopted

The Company is evaluating whether the effects of the following recent accounting pronouncements, or any other recently issued but not yet effective accounting standards, will have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

Reference Rate Reform

In March 2020 and January 2021, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2021-01, “Reference Rate Reform: Scope”, respectively. Together, the ASUs provide temporary optional expedients and exceptions for applying U.S. GAAP guidance on contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company’s exposure to LIBOR includes our revolving credit facility and secured term facility with JPMorgan Chase Bank, N.A., which uses LIBOR as a reference rate. However, these facilities provide for an alternative rate of interest if LIBOR is discontinued. These optional expedients and exceptions are effective beginning March 12, 2020 through December 31, 2022 and adoption is permitted at any time in the effective period. The Company is currently evaluating and assessing the impact these accounting standards will have on its condensed consolidated financial statements and related disclosures and if it will elect these optional standards.

Lessor Classification

In July 2021, the FASB issued ASU 2021-05, “Lessors – Certain Leases with Variable Lease Payments” which requires lessors to classify leases as operating leases if they have variable lease payments that do not depend on an index or rate and would have
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selling losses if they were classified as sales-type or direct financing leases. ASU 2021-05 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. We plan to adopt this pronouncement for our fiscal year beginning July 1, 2022. The Company is currently evaluating and assessing the impact this accounting standard will have on its condensed consolidated financial statements.

Accounting for Debt and Equity Instruments

In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies accounting for convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related earnings per share (EPS) guidance. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. We plan to adopt this pronouncement for our fiscal year beginning July 1, 2022. The Company is currently evaluating and assessing the impact this accounting standard will have on its condensed consolidated financial statements.

3. LEASES

Lessee Accounting
The Company has operating leases for office space, warehouses, and office equipment. At September 30, 2021, the Company has the following balances recorded in the balance sheet related to its lease arrangements:
($ in thousands)Balance Sheet ClassificationAs of September 30, 2021As of June 30, 2021
Assets:Operating lease right-of-use assets$3,240 $3,049 
Liabilities:
CurrentAccrued expenses$1,430 $1,166 
Long-termOperating lease liabilities, non-current3,535 3,645 
Total lease liabilities$4,965 $4,811 

Components of lease cost are as follows:
($ in thousands)Three months ended September 30, 2021Three months ended September 30, 2020
Operating lease costs*442 529 
* Includes short-term lease and variable lease costs, which are not material.


Supplemental cash flow information and non-cash activity related to our leases are as follows:

($ in thousands)Three months ended September 30, 2021Three months ended September 30, 2020
Supplemental cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities$480 $346 
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities$471 $ 




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Maturities of lease liabilities by fiscal year for our leases are as follows:
($ in thousands)Operating
Leases
2022$1,287 
20231,758 
20241,029 
2025707 
2026628 
Thereafter265 
Total lease payments$5,674 
Less: Imputed interest(709)
Present value of lease liabilities$4,965 

Lessor Accounting

Property and equipment used for the operating lease rental program consisted of the following:
($ in thousands)September 30,
2021
June 30,
2021
Cost$26,664 26,753 
Accumulated depreciation(24,626)(24,487)
Net$2,038 $2,266 

The Company’s net investment in sales-type leases (carrying value of lease receivables) and the future minimum amounts to be collected on these lease receivables as of September 30, 2021 are disclosed within Note 6 - Finance Receivables.

4. REVENUE

Disaggregated Revenue

Beginning in the first quarter of fiscal year 2022, the Company disaggregates Subscription and transaction fees presented on the Condensed Consolidated Statement of Operations to Transaction fees and Subscription fees categories (described below) as this additional disclosure provides greater visibility into the Company's revenue streams and better aligns the Company’s financial performance including how management views and monitors business operations and makes strategic decisions.
Transaction fees: The Company charges its customers a transaction fee generally calculated as a percentage rate on volumes processed through our payment devices.
Subscription fees: Subscription fees are primarily comprised of the monthly service fee charged to our customers for our cashless payment services, service fees originated through our rental program and Seed software services that include inventory management, route logistics optimization, warehouse and accounting management, and responsive merchandising.

Based on similar operational characteristics, the Company's revenue is disaggregated as follows:

Three months ended September 30,
($ in thousands)20212020
Transaction fees$26,421 $19,677 
Subscription fees14,204 13,431 
Subscription and transaction fees$40,625 $33,108 
Equipment sales5,155 3,769 
Total revenues$45,780 $36,877 

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Disaggregation of revenues for the previously reported quarters for fiscal year-ended June 30, 2021 utilizing the above described methodology is presented as follows:
Three months ended

Year ended

June 30, 2021
($ in thousands)September 30, 2020December 31, 2020March 31, 2021June 30, 2021
Transaction fees$19,677 $20,454 $21,002 $24,365 $85,498 
Subscription fees13,431 12,760 13,684 13,869 53,744 
Subscription and transaction fees$33,108 $33,214 $34,686 $38,234 $139,242 
Equipment sales3,769 5,071 8,074 10,783 27,697 
Total revenues$36,877 $38,285 $42,760 $49,017 $166,939 


Transaction Price Allocated to Future Performance Obligations

In determining the transaction price allocated to future performance obligations, we do not include non-recurring charges. Further, we apply the practical expedient to not consider arrangements with an original expected duration of one year or less, which are primarily month-to-month rental agreements. The majority of our contracts have a contractual term of between 36 and 60 months based on implied and explicit termination penalties. These amounts will be converted into revenue in future periods as work is performed, primarily based on the services provided or at delivery and acceptance of products, depending on the applicable accounting method for the services or products being delivered.

The following table reflects the estimated fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:
($ in thousands)As of September 30, 2021
2022$10,133 
202311,892 
20247,775 
20254,092 
20262,199 
Thereafter143 
Total$36,234 

Contract Liabilities

The Company’s contract liability (i.e., deferred revenue) balances are as follows:
Three months ended September 30,Three months ended September 30,
($ in thousands)20212020
Deferred revenue, beginning of the period$1,763 $1,698 
Deferred revenue, end of the period1,720 1,639 
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$95 $93 

The change in the contract liability balances period-over-period is primarily the result of timing difference between the Company’s satisfaction of a performance obligation and payment from the customer.




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Contract Costs

At September 30, 2021, the Company had net capitalized costs to obtain contracts of $0.4 million included in Prepaid expenses and other current assets and $2.0 million included in Other noncurrent assets on the Condensed Consolidated Balance Sheet. At June 30, 2021, the Company had net capitalized costs to obtain contracts of $0.4 million included in Prepaid expenses and other current assets and $2.0 million included in Other noncurrent assets on the Condensed Consolidated Balance Sheet. None of these capitalized contract costs were impaired.

During the three months ended September 30, 2021, amortization of capitalized contract costs was $0.2 million. During the three months ended September 30, 2020, amortization of capitalized contract costs was $0.1 million.

5. ACQUISITION

In August 2021, we completed the acquisition of certain assets and liabilities of Delicious Nutritious LLC, doing business as Yoke Payments (“Yoke”), a micro market payments company. The acquisition of Yoke was accounted for as a business combination using the acquisition method of accounting which includes the results of operations of the acquired business from the date of acquisition. The purchase price of the acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values using primarily Level 3 inputs under ASC Topic 820, Fair Value Measurement, with the residual of the purchase price recorded as goodwill.

Through the acquisition, Yoke’s point of sale platform will now extend its offering to provide self-checkout while seamlessly integrating with Cantaloupe’s inventory management and payment processing platforms. We plan to differentiate ourselves by providing a single platform to manage consumer and operational aspects of micro markets, while also integrating multiple service providers for flexibility and ultimate ease to our customers.

The consideration transferred for the acquisition includes payments of $3 million in cash at the close of the transaction and $1 million in deferred cash payment due on or before July 30, 2022 based on the achievement of certain sales growth targets. As of the date of the acquisition and as of September 30, 2021, we expect to pay the entire deferred cash payment and we have accrued a contingent consideration liability of $1 million which is included within Accrued expenses in our Condensed Consolidated Balance Sheet.

Additionally in connection with the acquisition, the Company will issue common stock to the former owners of Yoke based on the achievement of certain sales growth targets for software licenses through July 31, 2024 and continued employment as of the respective measurement dates. The accounting treatment for these awards in the context of the business combination is to recognize the awards as a post-combination expense and were not included in the purchase price. We will begin recognizing compensation expense for these awards over the requisite service period when it becomes probable that the performance condition would be satisfied pursuant to ASC 718. At each reporting date, we assess the probability of achieving the sales targets and fulfilling the performance condition. As of September 30, 2021, we determined that it is not probable that the performance condition would be satisfied and, accordingly, have not recognized compensation expense related to these awards for the fiscal quarter ended September 30, 2021.

The following table summarizes the total consideration paid for Yoke, total net assets acquired, identifiable assets and goodwill recognized at the acquisition date:

($ in thousands)Amount
Consideration
Cash $3,000 
Contingent consideration arrangement$1,000 
Fair value of total consideration transferred$4,000 
Recognized amounts of identifiable assets
Total net assets acquired$66 
Identifiable intangible assets$1,685 
Total identifiable net assets$1,751 
Goodwill$2,249 
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Amounts allocated to identifiable intangible assets included $1.3 million related to developed technology, $0.3 million related to customer relationships, and $0.1 million related to other intangible assets. The fair value of the acquired developed technology was determined using a multi-period excess earnings method. The fair value of the acquired customer relationships was determined using the with-and-without method which estimates the value using the cash flow impact in a scenario where the customer relationships are not in place. The recognized intangible assets will be amortized on a straight-line basis over the estimated useful lives of the respective assets.

Goodwill of $2.2 million arising from the acquisition includes the expected synergies between Yoke and the Company and intangible assets that do not qualify for separate recognition at the time of acquisition. The goodwill, which is deductible for income tax purposes, was assigned to the Company’s only reporting unit.

The above allocation of the purchase price is provisional and is still subject to change within the measurement period. The final allocation of the purchase price is expected to be completed as soon as practicable, but no later than one year from the date of the acquisition. Pro forma financial information of the acquisition is not presented due to the immaterial impact of the financial results of Yoke in the Company's Consolidated Financial Statements.


6. FINANCE RECEIVABLES

The Company's finance receivables consist of financed devices under the QuickStart program and devices contractually associated with the Seed platform. Predominately all of the Company’s finance receivables agreements are classified as non-cancellable sixty-month sales-type leases. As of September 30, 2021 and June 30, 2021, finance receivables consist of the following:
($ in thousands)September 30,
2021
June 30,
2021
Current finance receivables, net$8,031 $7,967 
Finance receivables due after one year, net10,832 11,632 
Total finance receivables, net of allowance of $1,209 and $1,109, respectively
$18,863 $19,599 

We collect lease payments from customers primarily as part of the flow of funds from our transaction processing service. Balances are considered past due if customers do not have sufficient transaction revenue to cover the monthly lease payment by the end of the monthly billing period. The Company routinely monitors customer payment performance and uses prior payment performance as a measure to assess the capability of the customer to repay contractual obligations of the lease agreements as scheduled. On an as-needed basis, qualitative information may be taken into consideration if new information arises related to the customer’s ability to repay the lease.

Credit risk for these receivables is continuously monitored by management and reflected within the allowance for finance receivables by aggregating leases with similar risk characteristics into pools that are collectively assessed. Because the Company’s lease contracts generally have similar terms, customer characteristics around transaction processing volume and sales were used to disaggregate the leases. Our key credit quality indicator is the amount of transaction revenue we process for each customer relative to their lease payment due, as we consider this customer characteristic to be the strongest predictor of the risk of customer default. Customers with low processing volume or with transaction sales that are insufficient to cover the lease payment are considered to be at a higher risk of customer default.

Customers are pooled based on their ratio of gross sales to required monthly lease obligations. We categorize outstanding receivables into two categories: high ratio customers (customers who have adequate transaction processing volumes sufficient to cover monthly fees) and low ratio customers (customers that do not consistently have adequate transaction processing volumes sufficient to cover monthly fees). Using these two categories, we performed an analysis of historical write-offs to calculate reserve percentages by aging buckets for each category of customer.








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At September 30, 2021, the gross lease receivable by current payment performance on a contractual basis and year of origination consisted of the following:

Leases by Origination
($ in thousands)Up to 1 Year AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
Current$6,673 $2,831 $4,689 $2,602 $1,583 $22 $18,400 
30 days and under14 44 80 86 3 1 228 
31-60 days4 8 35 3 3  53 
61-90 days14 27 63 49 5  158 
Greater than 90 days102 147 460 439 46 39 1,233 
Total finance receivables$6,807 $3,057 $5,327 $3,179 $1,640 $62 $20,072 

At June 30, 2021, the gross lease receivable by current payment performance on a contractual basis and year of origination consisted of the following:
Leases by Origination
($ in thousands)Up to 1 Year AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
Current$6,736 $3,970 $3,942 $3,081 $1,358 $31 $19,118 
30 days and under19 67 90 93 11 1 281 
31-60 days4 9 22 2 1  38 
61-90 days10 42 66 54 10  182 
Greater than 90 days46 69 490 419 54 11 1,089 
Total finance receivables$6,815 $4,157 $4,610 $3,649 $1,434 $43 $20,708 

At September 30, 2021, credit quality indicators by year of origination consisted of the following:

Leases by Origination
($ in thousands)Up to 1 Year AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
High ratio customers$6,338 $2,747 $4,624 $2,423 $1,477 $16 $17,625 
Low ratio customers469 310 703 756 163 46 2,447 
Total finance receivables$6,807 $3,057 $5,327 $3,179 $1,640 $62 $20,072 


At June 30, 2021, credit quality indicators by year of origination consisted of the following:

Leases by Origination
($ in thousands)Up to 1 Year AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
High ratio customers$6,415 $3,824 $3,793 $2,920 $1,290 $24 $18,266 
Low ratio customers400 333 817 729 144 19 2,442 
Total finance receivables$6,815 $4,157 $4,610 $3,649 $1,434 $43 $20,708 


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The following table represents a rollforward of the allowance for finance receivables for the three months ending September 30, 2021 and 2020:
Three months ended September 30,Three months ended September 30,
($ in thousands)20212020
Balance at June 30$1,109 $150 
Impact of adoption of ASC 326*— 409 
Provision for expected losses100  
Balance at September 30$1,209 $559 
* The Company adopted Financial Instruments - Credit Losses (Topic 326) on July 1, 2020.

Cash to be collected on our performing finance receivables due for each of the fiscal years are as follows:
($ in thousands)
2022$9,408 
20235,794 
20243,925 
20252,467 
20261,129 
Thereafter66 
Total amounts to be collected22,789 
Less: interest(2,717)
Less: allowance for receivables(1,209)
Total finance receivables$18,863 

7. LOSS PER SHARE CALCULATION

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the
period. Diluted earnings per share, applicable only to years ended with reported income, is computed by dividing net income by the weighted average number of common shares outstanding during the period plus the dilutive effect of outstanding stock options and restricted stock-based awards using the treasury stock method. The calculation of basic and diluted loss per share is
presented below:
Three months ended
September 30,
($ in thousands, except per share data)20212020
Numerator for basic and diluted loss per share
Net loss$(1,291)$(6,613)
Preferred dividends(334)(334)
Net loss applicable to common shareholders(1,625)(6,947)
Denominator for basic loss per share - Weighted average shares outstanding
71,175,927 64,859,002 
Effect of dilutive potential common shares  
Denominator for diluted loss per share - Adjusted weighted average shares outstanding
71,175,927 64,859,002 
Basic and diluted loss per share$(0.02)$(0.11)
Anti-dilutive shares excluded from the calculation of diluted loss per share were 4,212,024 for the three months ended September 30, 2021 and 2,534,225 for the three months ended September 30, 2020.

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8. GOODWILL AND INTANGIBLES

Intangible asset balances and goodwill consisted of the following:
As of September 30, 2021
($ in thousands)GrossAccumulated
Amortization
NetAmortization
Period
Intangible assets:
Brand and tradenames$1,705 $(899)$806 
3 - 7 years
Developed technology12,269 (7,320)4,949 
5 - 6 years
Customer relationships19,339 (4,171)15,168 
10 - 18 years
Total intangible assets$33,313 $(12,390)$20,923 
Goodwill66,194 — 66,194 Indefinite
As of June 30, 2021
($ in thousands)GrossAccumulated
Amortization
NetAmortization
Period
Intangible assets:
Brand and tradenames1,640 (840)800 
3 - 7 years
Developed technology10,939 (6,890)4,049 
5 - 6 years
Customer relationships19,049 (3,906)15,143 
10 - 18 years
Total intangible assets$31,628 $(11,636)$19,992 
Goodwill63,945 — 63,945 Indefinite

During the three months ended September 30, 2021, The Company recognized $2.2 million in goodwill and $1.7 million in newly acquired intangible assets in association with the Yoke acquisition as referenced in Note 5 - Acquisition.

For the three months ended September 30, 2021 and September 30, 2020, there was $0.8 million for each respective period in amortization expense related to intangible assets that was recognized. 

The Company performs an annual goodwill impairment test on April 1 and more frequently if events and circumstances indicate that the asset might be impaired. The Company has determined that there is a single reporting unit for purposes of testing goodwill for impairment. During the three months ended September 30, 2021, the Company did not recognize any impairment charges related to goodwill.

9. DEBT AND OTHER FINANCING ARRANGEMENTS

The Company's debt and other financing arrangements as of September 30, 2021 and June 30, 2021 consisted of the following:
As of September 30,As of June 30,
($ in thousands)20212021
2021 JPMorgan Credit Facility14,250 14,437 
Other obligations90 113 
Less: unamortized issuance costs and debt discount(201)(231)
Total14,139 14,319 
Less: debt and other financing arrangements, current(662)(675)
Debt and other financing arrangements, noncurrent$13,477 $13,644 




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Details of interest expense presented on the Condensed Consolidated Statements of Operations are as follows:
Three months ended
September 30,
($ in thousands)20212020
2020 Antara Term Facility$ $2,779 
2021 JPMorgan Credit Facility230 172 
Other interest expense248 334 
Total interest expense$478 $3,285 

JPMorgan Chase Bank Credit Agreement

On August 14, 2020, the Company repaid all amounts outstanding under the $30.0 million senior secured term loan facility (“2020 Antara Term Facility”) with Antara Capital Master Fund LP (“Antara”) and entered into a credit agreement (the “2021 JPMorgan Credit Agreement”) with JPMorgan Chase Bank, N.A (“JPMorgan”).

The 2021 JPMorgan Credit Agreement provides for a $5 million secured revolving credit facility (the “2021 JPMorgan Revolving Facility”) and a $15 million secured term facility (the “2021 JPMorgan Secured Term Facility” and together with the 2021 JPMorgan Revolving Facility, as amended, the “2021 JPMorgan Credit Facility”), which includes an uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $5 million. In connection with the consummation of the 2021 JPMorgan Credit Agreement, the Company repaid all amounts outstanding under the 2020 Antara Term Facility. The Company recognized $2.8 million of interest expense related to the 2020 Antara Term Facility during the fiscal quarter ended September 30, 2020, including the recognition of $2.6 million of unamortized issuance costs and debt discount as interest expense, reflecting the difference between the carrying value of the 2020 Antara Term Facility and the amount due upon repayment.

The 2021 JPMorgan Credit Facility has a three year maturity, with interest determined, at the Company’s option, on a base rate of LIBOR or Prime Rate plus an applicable spread tied to the Company’s total leverage ratio and having ranges between 2.75% and 3.75% for Prime rate loans and between 3.75% and 4.75% for LIBOR rate loans. In the event of default, the interest rate may be increased by 2.00%. The 2021 JPMorgan Credit Facility carries a commitment fee of 0.50% per annum on the unused portion. From August 14, 2020 through March 2, 2021, the applicable interest rate was Prime Rate plus 3.75%. On March 2, 2021, the Company entered into an amendment (the “First Amendment”) to the 2021 JPMorgan Credit Facility lowering the interest rate charged to the Company. In conjunction with the First Amendment, the Company elected to convert its loans to a Eurodollar borrowing which is subject to a LIBOR based interest rate. As of September 30, 2021, the applicable interest rate for the 2021 JPMorgan Secured Term Facility is a base rate of 0.75% and a spread of 4.25% for a total applicable interest rate of 5%.

Principal payments are due in quarterly installments of $187,500 beginning December 31, 2020 through September 30, 2022 for a total annual repayment of $750,000 and total repayment over the period of $1.5 million. Beginning December 31, 2022 through June 30, 2023, principal payments are due in quarterly installments of $375,000 for a total repayment over the period of $1.1 million. The remaining unpaid principal amounts are due at the maturity date of the 2021 JPMorgan Credit Facility.

The Company’s obligations under the 2021 JPMorgan Credit Facility are secured by first priority security interests in substantially all of the assets of the Company. The 2021 JPMorgan Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including a financial covenant requiring the Company to maintain an adjusted quick ratio of not less than 2.75 to 1.00 beginning January 1, 2021, and not less than 3.00 to 1.00 beginning April 1, 2021, and a financial covenant requiring the Company to maintain, as of the end of each of its fiscal quarters commencing with the fiscal quarter ended December 31, 2021, a total leverage ratio of not greater than 3.00 to 1.00.

The Company was in compliance with its financial covenants as of September 30, 2021.

Term Facility with Antara

On October 9, 2019, the Company entered into a commitment letter with Antara, pursuant to which Antara committed to extend to the Company a $30.0 million senior secured term loan facility ("2020 Antara Term Facility"). On October 9, 2019, the Company also sold shares of the Company’s common stock to Antara at a price below market value. Since the 2020 Antara Term Facility and equity issuance were negotiated in contemplation of each other and executed within a short period of time,
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the Company evaluated the debt and equity financing as a combined arrangement, and estimated the fair values of the debt and equity components to allocate the proceeds, net of the registration rights agreement liability on a relative fair value basis between the debt and equity components. The non-lender fees incurred to establish the debt and equity financing arrangement were allocated to the debt and equity components on a relative fair value basis and capitalized on the Company’s balance sheet. The 2020 Antara Term Facility agreement also contained a mandatory prepayment feature that was determined to be an embedded derivative, requiring bifurcation and fair value recognition for the derivative liability.

On August 14, 2020, the Company repaid all amounts outstanding under the 2020 Antara Term Facility and entered into the 2021 JPMorgan Credit Agreement described above. The Company de-recognized $2.6 million of unamortized debt issuance costs and debt discount associated with the 2020 Antara Team Facility during the three months ended September 30, 2020.
10.