Cantaloupe(CTLP) - 2022 Q2 - Quarterly Report

Part I - Financial Information This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, and cash flows, with detailed notes on accounting policies, acquisitions, debt, and equity Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, statements of shareholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, recent acquisitions, debt arrangements, and equity activities Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (Unaudited) - Key Figures ($ in thousands): | Item | December 31, 2021 | June 30, 2021 | Change | % Change | | :-------------------------------------- | :------------------ | :------------ | :----- | :------- | | Total Assets | $235,092 | $237,672 | $(2,580) | -1.09% | | Cash and cash equivalents | $76,309 | $88,136 | $(11,827) | -13.42% | | Inventory, net | $11,752 | $5,292 | $6,460 | 122.07% | | Goodwill | $66,656 | $63,945 | $2,711 | 4.24% | | Total Liabilities | $79,105 | $83,141 | $(4,036) | -4.85% | | Total Shareholders' Equity | $152,849 | $151,393 | $1,456 | 0.96% | - Total assets saw a slight decrease, primarily due to a reduction in cash and cash equivalents, while inventory significantly increased by 122.07% and goodwill increased by 4.24% due to the Yoke acquisition[7][9] - Total liabilities decreased by 4.85%, and total shareholders' equity experienced a modest increase of 0.96%[7][9] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations (Unaudited) - Key Figures ($ in thousands, except per share data): | Item | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | % Change | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | % Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Total Revenues | $51,091 | $38,285 | 33.4% | $96,871 | $75,162 | 28.9% | | Subscription and transaction fees | $41,188 | $33,214 | 24.0% | $81,812 | $66,322 | 23.4% | | Equipment sales | $9,903 | $5,071 | 95.3% | $15,059 | $8,840 | 70.4% | | Gross Profit | $15,990 | $12,301 | 30.0% | $30,865 | $26,541 | 16.3% | | Operating Loss | $(320) | $(2,582) | 87.6% | $(1,459) | $(6,220) | 76.5% | | Net Loss | $(468) | $(2,902) | 83.9% | $(1,760) | $(9,515) | 81.5% | | Basic and Diluted Net Loss Per Share | $(0.01) | $(0.04) | 75.0% | $(0.03) | $(0.15) | 80.0% | - The company demonstrated strong revenue growth, with total revenues increasing by 33.4% for the three months and 28.9% for the six months ended December 31, 2021, compared to the prior year[14] - This growth was primarily driven by significant increases in both subscription and transaction fees and equipment sales, leading to substantial reductions in operating loss and net loss, improving by over 75% for both periods[14] Condensed Consolidated Statements of Shareholders' Equity This section details changes in the company's equity accounts, including common stock, accumulated deficit, and total shareholders' equity Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - Key Figures ($ in thousands, except share data): | Item | December 31, 2021 | June 30, 2021 | Change | | :----------------------------------- | :------------------ | :------------ | :----- | | Common Shares Outstanding | 70,987,498 | 71,258,047 | (270,549) | | Common Stock Amount | $465,990 | $462,775 | $3,215 | | Accumulated Deficit | $(313,141) | $(311,382) | $(1,759) | | Total Shareholders' Equity | $152,849 | $151,393 | $1,456 | - Total shareholders' equity increased by $1.46 million from June 30, 2021, to December 31, 2021, primarily due to stock-based compensation and exercises, partially offset by the net loss for the period[17] - The accumulated deficit increased by $1.76 million[17] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures ($ in thousands): | Cash Flow Activity | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash (used in) provided by operating activities | $(4,247) | $(654) | $(3,593) | | Net cash used in investing activities | $(7,259) | $(959) | $(6,300) | | Net cash used in financing activities | $(321) | $(1,938) | $1,617 | | Net (decrease) increase in cash and cash equivalents | $(11,827) | $(3,551) | $(8,276) | | Cash and cash equivalents at end of period | $76,309 | $28,162 | $48,147 | - Net cash used in operating activities increased significantly to $4.25 million for the six months ended December 31, 2021, primarily due to increased inventory and reduction in accounts payable[22] - Net cash used in investing activities also rose substantially to $7.26 million, driven by the Yoke acquisition and increased property and equipment purchases[22] - Conversely, net cash used in financing activities decreased to $0.32 million due to lower debt repayments compared to the prior year's refinancing activities[22] Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, acquisitions, debt, and equity 1. BUSINESS Cantaloupe, Inc., formerly USA Technologies, Inc., is a digital payments and software services company providing end-to-end technology solutions for the unattended retail market - Company name changed from USA Technologies, Inc. to Cantaloupe, Inc., effective April 15, 2021, with common stock trading under 'CTLP' on NASDAQ[25] - Cantaloupe provides end-to-end technology solutions for the unattended retail market, including payments processing, inventory management, route logistics, and back-office management[26] - The COVID-19 pandemic continues to affect operations, but the company concluded no material impairments to goodwill, intangible assets, or long-lived assets as of December 31, 2021[27] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the basis of presentation for the unaudited interim financial statements, detailing changes in presentation, adoption of new accounting pronouncements, and evaluation of others - The company revised its operating expense presentation, disaggregating 'Selling, general, and administrative costs' into 'Sales and marketing,' 'Technology and product development,' and 'General and administrative costs' for increased transparency[33] - The revenue caption 'License and transaction fees' was revised to 'Subscription and transaction fees' to better describe the revenue stream and align with industry terminology[40] - Adopted ASC 326 (Credit Losses) on July 1, 2020, using a modified retrospective approach, shifting to an expected loss model for accounts and finance receivables[41] - Evaluating the impact of ASU 2020-04/2021-01 (Reference Rate Reform), ASU 2021-05 (Lessor Classification), and ASU 2020-06 (Debt and Equity Instruments) for future adoption[45][48][49] 3. LEASES The company's lease arrangements primarily consist of operating leases for office space, warehouses, and equipment, with lease liabilities and assets reported on the balance sheet Lease Balances ($ in thousands): | Item | December 31, 2021 | June 30, 2021 | | :----------------------------------- | :------------------ | :------------ | | Operating lease assets | $2,949 | $3,049 | | Total lease liabilities | $4,619 | $4,811 | Operating Lease Costs ($ in thousands): | Period | 2021 | 2020 | | :----------------------------------- | :--- | :--- | | Three months ended December 31 | $443 | $535 | | Six months ended December 31 | $885 | $1,064 | - Maturities of lease liabilities total $5.25 million, with $0.86 million due in the remainder of fiscal year 2022[52] 4. REVENUE Revenue is now disaggregated into 'Transaction fees' and 'Subscription fees' to provide greater transparency, with details on future performance obligations and contract liabilities - Revenue is disaggregated into 'Transaction fees' (percentage rate on volumes processed) and 'Subscription fees' (monthly service fees for cashless payments, rental programs, and Seed software services)[54] Disaggregated Revenue ($ in thousands): | Revenue Category | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Transaction fees | $26,775 | $20,454 | $53,195 | $40,131 | | Subscription fees | $14,413 | $12,760 | $28,617 | $26,191 | | Equipment sales | $9,903 | $5,071 | $15,059 | $8,840 | | Total Revenues | $51,091 | $38,285 | $96,871 | $75,162 | - Total transaction price allocated to future performance obligations is $36.30 million as of December 31, 2021, with $7.02 million expected to be recognized in 2022[59] 5. ACQUISITION In August 2021, Cantaloupe acquired certain assets and liabilities of Yoke Payments, a micro market payments company, to expand self-checkout offerings and integrate with existing platforms - Acquired Yoke Payments (Delicious Nutritious LLC) in August 2021 to extend self-checkout capabilities and integrate with Cantaloupe's inventory management and payment processing platforms[66][67] Yoke Acquisition Consideration and Allocation ($ in thousands): | Item | Amount | | :-------------------------------------- | :----- | | Cash Consideration | $2,966 | | Contingent Consideration Arrangement | $1,000 | | Total Consideration Transferred | $3,966 | | Identifiable Intangible Assets | $1,235 | | Goodwill | $2,710 | - Goodwill of $2.71 million recognized from the acquisition includes expected synergies and intangible assets not separately recognized, and is deductible for income tax purposes[72] 6. FINANCE RECEIVABLES Finance receivables primarily consist of devices financed under the QuickStart program and Seed platform, mostly structured as 60-month sales-type leases, with credit risk monitored by customer transaction revenue to lease payment ratio - Finance receivables are mainly non-cancellable sixty-month sales-type leases for devices under the QuickStart program and Seed platform[74] Total Finance Receivables, Net ($ in thousands): | Date | Amount | | :------------------ | :----- | | December 31, 2021 | $19,153 | | June 30, 2021 | $19,599 | - Credit risk is assessed by categorizing customers into 'high ratio' (adequate transaction processing volumes) and 'low ratio' (insufficient volumes) based on their gross sales to required monthly lease obligations[77][78] 7. LOSS PER SHARE CALCULATION The basic and diluted loss per share calculations are presented, showing a significant improvement in net loss per common share for both the three and six months ended December 31, 2021 Net Loss Per Common Share ($): | Period | 2021 | 2020 | | :----------------------------------- | :----- | :----- | | Three months ended December 31 | $(0.01) | $(0.04) | | Six months ended December 31 | $(0.03) | $(0.15) | - Approximately 4 million anti-dilutive shares were excluded from the diluted loss per share calculation for the three and six months ended December 31, 2021[86] 8. GOODWILL AND INTANGIBLES This section details the company's intangible assets and goodwill, noting an increase due to the Yoke acquisition and no impairment charges recognized during the reported periods Intangible Assets and Goodwill ($ in thousands): | Item | December 31, 2021 (Net) | June 30, 2021 (Net) | | :-------------------------- | :---------------------- | :-------------------- | | Brand and tradenames | $723 | $800 | | Developed technology | $4,004 | $4,049 | | Customer relationships | $14,879 | $15,143 | | Total Intangible Assets | $19,606 | $19,992 | | Goodwill | $66,656 | $63,945 | - Goodwill increased by $2.71 million due to the Yoke acquisition[88][90] - The company performs an annual goodwill impairment test on April 1 and recognized no impairment charges for the periods ended December 31, 2021 and 2020[88][90] - Amortization expense for intangible assets was $0.9 million for the three months and $1.6 million for the six months ended December 31, 2021[88] 9. DEBT AND OTHER FINANCING ARRANGEMENTS The company's debt primarily consists of the 2021 JPMorgan Credit Facility, including a secured revolving credit facility and a secured term facility, with details on interest expense, repayment terms, and financial covenants Debt and Other Financing Arrangements ($ in thousands): | Item | December 31, 2021 | June 30, 2021 | | :----------------------------------- | :------------------ | :------------ | | 2021 JPMorgan Credit Facility | $14,063 | $14,437 | | Total Debt, Net of Discounts | $13,972 | $14,319 | | Debt and other financing arrangements, noncurrent | $13,124 | $13,644 | Total Interest Expense ($ in thousands): | Period | 2021 | 2020 | | :----------------------------------- | :--- | :--- | | Three months ended December 31 | $475 | $596 | | Six months ended December 31 | $953 | $3,881 | - The 2021 JPMorgan Credit Facility includes a $5 million secured revolving credit facility and a $15 million secured term facility with a three-year maturity[96][97] - The interest rate is LIBOR or Prime Rate plus an applicable spread[96][97] - The company was in compliance with its financial covenants (adjusted quick ratio and total leverage ratio) as of December 31, 2021[99][100] 10. ACCRUED EXPENSES Accrued expenses include various liabilities such as sales tax reserve, compensation, operating lease liabilities, professional fees, and a contingent consideration arrangement related to the Yoke acquisition Accrued Expenses ($ in thousands): | Item | December 31, 2021 | June 30, 2021 | | :------------------------------------------ | :------------------ | :------------ | | Sales tax reserve | $17,635 | $17,099 | | Accrued compensation and related sales commissions | $3,225 | $4,233 | | Operating lease liabilities, current | $1,465 | $1,166 | | Accrued professional fees | $2,839 | $1,739 | | Contingent consideration arrangement for the Yoke acquisition | $1,000 | $0 | | Total Accrued Expenses | $28,721 | $26,460 | 11. INCOME TAXES The company recorded income tax provisions for the three and six months ended December 31, 2021, primarily related to uncertain tax positions and state taxes Provision for Income Taxes ($ in thousands): | Period | 2021 | 2020 | | :----------------------------------- | :--- | :--- | | Three months ended December 31 | $102 | $49 | | Six months ended December 31 | $191 | $89 | - The company maintains a full valuation allowance against its deferred tax assets and had a total unrecognized income tax benefit of $0.5 million as of December 31, 2021[106] 12. EQUITY This section details the company's equity compensation plans, including stock options and restricted stock units, outlining valuation methodologies, performance-based awards, and grants to consultants and executives Stock Option Valuation Assumptions (Six Months Ended December 31): | Assumption | 2021 | 2020 | | :----------------------------------- | :------------------ | :------------------ | | Expected volatility (percent) | 73.2% - 73.6% | 76.3% - 77.3% | | Weighted average expected life (years) | 4.5 | 4.5 | | Risk-free interest rate (percent) | 1.0% - 1.2% | 0.2% - 0.4% | | Number of options granted | 495,000 | 650,000 | | Weighted average grant date fair value | $5.72 | $4.69 | - Performance-based stock options for executives vest over three to four years, contingent on achieving specific stock price targets[111][112][113] - Compensation expense for these awards is estimated using a Monte Carlo simulation model[111][112][113] - Total expense recognized for common stock awards for the six months ended December 31, 2021, was $0.8 million, including grants of restricted stock units to consultants and executives[117] 13. COMMITMENTS AND CONTINGENCIES The company is involved in ordinary course litigation, cooperating with a Department of Justice subpoena, and has various operating lease obligations and significant purchase commitments for inventory - The company is a party to litigation and is cooperating fully with a subpoena from the U.S. Department of Justice regarding activities in prior financial reporting periods[118][119] - As of December 31, 2021, the company had firm commitments to purchase approximately $23 million in inventory over the next three years[121] 14. RELATED PARTY TRANSACTIONS Related party transactions include payments to a consulting firm for payments analytics, where a Board member serves as a strategic advisor, and consulting agreements with a significant shareholder involving grants of restricted stock units - The company pays a success fee to a consulting firm for payments analytics, where a Board member is a strategic advisor, with $0.8 million expense recognized for the six months ended December 31, 2021[122] - Consulting agreements with Hudson Executive Capital LP, a greater than 10% shareholder, resulted in grants of restricted stock units to consultants[115][123] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting strong revenue growth, operational improvements, strategic investments, and a significant reduction in net loss Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially[126] - Key risk factors include general economic conditions (COVID-19, supply chain, inflation), compliance with financial covenants, ability to raise funds, competition, customer retention, product acceptance, intellectual property, system disruptions, internal control weaknesses, and ongoing investigations[126] OVERVIEW OF THE COMPANY Cantaloupe, Inc. is a digital payments and software services company for the unattended retail market, offering comprehensive solutions for payments, inventory, logistics, and back-office management - Cantaloupe, Inc. (formerly USA Technologies, Inc.) is a digital payments and software services company for the unattended retail market, offering solutions for payments, inventory, logistics, and back-office management[129][130] Revenue Mix (Percentage of Total Revenues): | Revenue Type | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Subscription and transaction fees | 81% | 87% | 84% | 88% | | Equipment sales | 19% | 13% | 16% | 12% | - Customers obtain POS electronic payment devices through direct purchase, financing via the QuickStart Program (60-month sales-type leases), or renting via the JumpStart Program (typically 36-month agreements)[131] Second Quarter 2022 Highlights This section summarizes key achievements and strategic initiatives during the second quarter of fiscal year 2022, including customer and device growth, new partnerships, and product rollouts - Achieved 21,315 Active Customers and 1.12 million Active Devices on its service[133] - Partnered with HIVERY, a data-science company specializing in AI technology, to enhance merchandising for Seed customers using AI and Machine Learning[133] - Successfully rolled out ePort Engage devices, the next generation of digital touchscreen devices, and continued the promotional upgrade program for 2G and 3G devices to 4G LTE[133] COVID-19 Update This section provides an update on the ongoing impact of the COVID-19 pandemic on the company's business operations and financial performance - The COVID-19 pandemic, including new variants like Omicron, continues to affect business operations and financial performance, though no material impairments were concluded[134] - The company cannot reasonably estimate the longer-term repercussions of COVID-19 on its financial condition, results of operations, or cash flows due to potential uncertainty[135] QUARTERLY RESULTS OF OPERATIONS This section provides a detailed analysis of the company's financial performance for the quarter, including key operational metrics, revenues, gross profit, and operating expenses Metrics This section presents key operational metrics, including active devices, active customers, and transaction volumes, highlighting growth trends Key Operational Metrics: | Metric | December 31, 2021 | December 31, 2020 | % Change YoY | | :----------------------------------- | :------------------ | :------------------ | :----------- | | Active Devices (thousands) | 1,123 | 1,083 | 3.7% | | Active Customers | 21,315 | 18,304 | 16.5% | | Total Number of Transactions (millions) | 261.7 | 211.8 | 23.6% | | Total Dollar Volume of Transactions (millions) | 555.3 | 422.6 | 31.4% | - Total Dollar Volumes for the quarter ended December 31, 2021, were 31% higher compared to the average processing volumes for the quarter ended December 31, 2020[141] Revenues and Gross Profit (Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020) This section analyzes the company's revenues and gross profit for the three months ended December 31, 2021, compared to the same period in the prior year, highlighting growth drivers and margin changes Revenues and Gross Profit ($ in thousands): | Item | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Percent Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------- | | Total Revenues | $51,091 | $38,285 | 33.4% | | Subscription and transaction fees | $41,188 | $33,214 | 24.0% | | Equipment sales | $9,903 | $5,071 | 95.3% | | Total Costs of Sales | $35,101 | $25,984 | 35.1% | | Total Gross Profit | $15,990 | $12,301 | 30.0% | | Total Gross Margin | 31.3% | 32.1% | -0.8 pp | - Increase in subscription and transaction fees was driven by a 31% increase in total dollar volumes, macroeconomic recovery, and growth in Seed services[152] - Equipment sales surged by 95.3% due to increased shipments and customer focus on 4G device upgrades ahead of the 3G network discontinuation[153] Operating Expenses (Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020) This section details the changes in operating expenses for the three months ended December 31, 2021, compared to the prior year, including sales and marketing, technology, and general and administrative costs Operating Expenses ($ in thousands): | Category | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Percent Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------- | | Sales and marketing | $1,745 | $1,520 | 14.8% | | Technology and product development | $5,780 | $3,783 | 52.8% | | General and administrative expenses | $7,672 | $8,528 | (10.0)% | | Depreciation and amortization | $1,113 | $1,052 | 5.8% | | Total Operating Expenses | $16,310 | $14,883 | 9.6% | - Technology and product development expenses increased by $2.00 million (52.8%) due to investments in innovative technologies and strengthening the network platform[159] - General and administrative expenses decreased by $0.86 million (10.0%), primarily from a $0.6 million reduction in professional fees[160] Other Income (Expense), Net (Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020) This section analyzes changes in other income and expense, net, for the three months ended December 31, 2021, compared to the prior year, focusing on interest income and expense Other Income (Expense), Net ($ in thousands): | Item | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Percent Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------- | | Interest income | $445 | $325 | 36.9% | | Interest expense | $(475) | $(596) | (20.3)% | | Total other income (expense), net | $(46) | $(271) | 83.0% | - Interest income increased due to a larger finance receivables amount, while interest expense decreased due to a lower interest rate on the 2021 JPMorgan Credit Facility[162] Revenues and Gross Profit (Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020) This section analyzes the company's revenues and gross profit for the six months ended December 31, 2021, compared to the same period in the prior year, highlighting growth drivers and margin changes Revenues and Gross Profit ($ in thousands): | Item | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Percent Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------- | | Total Revenues | $96,871 | $75,162 | 28.9% | | Subscription and transaction fees | $81,812 | $66,322 | 23.4% | | Equipment sales | $15,059 | $8,840 | 70.4% | | Total Costs of Sales | $66,006 | $48,621 | 35.8% | | Total Gross Profit | $30,865 | $26,541 | 16.3% | | Total Gross Margin | 31.9% | 35.3% | -3.4 pp | - Subscription and transaction fees increased by 23.4%, driven by a 34% increase in total dollar volumes, exceeding pre-pandemic levels, and growth in Seed services[165] - Total gross margin decreased from 35.3% to 31.9%, primarily due to a change in revenue mix with higher transaction fees and an out-of-period adjustment of $0.8 million reducing prior period equipment costs[168] Operating Expenses (Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020) This section details the changes in operating expenses for the six months ended December 31, 2021, compared to the prior year, including sales and marketing, technology, and general and administrative costs Operating Expenses ($ in thousands): | Category | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Percent Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------- | | Sales and marketing | $4,084 | $3,119 | 30.9% | | Technology and product development | $11,169 | $6,997 | 59.6% | | General and administrative expenses | $14,936 | $20,525 | (27.2)% | | Depreciation and amortization | $2,135 | $2,120 | 0.7% | | Total Operating Expenses | $32,324 | $32,761 | (1.3)% | - General and administrative expenses decreased by $5.59 million, driven by a $2.9 million reduction in professional fees and a $1.8 million change related to a prior year network incident (including $0.7 million insurance recovery)[173][174] - Sales and marketing expenses increased by $0.97 million due to higher employee headcount to support business expansion[171] Other Income (Expense), Net (Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020) This section analyzes changes in other income and expense, net, for the six months ended December 31, 2021, compared to the prior year, focusing on interest income and expense Other Income (Expense), Net ($ in thousands): | Item | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Percent Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------- | | Interest income | $918 | $675 | 36.0% | | Interest expense | $(953) | $(3,881) | (75.4)% | | Total other income (expense), net | $(110) | $(3,206) | 96.6% | - The significant decrease in interest expense (75.4%) was primarily due to the recognition of $2.6 million in unamortized debt issuance costs and debt discount related to the repayment of the Antara Term Facility in the prior period[177] Non-GAAP Financial Measures - Adjusted EBITDA This section defines and reconciles Adjusted EBITDA, a non-GAAP measure used for financial and operational decision-making, to U.S. GAAP net loss - Adjusted EBITDA is a non-GAAP measure used for financial and operational decision-making, defined as U.S. GAAP net loss before interest income/expense, income tax, depreciation, amortization, stock-based compensation, and certain other infrequent/unusual losses/gains[178][179] Adjusted EBITDA Reconciliation ($ in thousands): | Item | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.S. GAAP net loss | $(468) | $(2,902) | $(1,760) | $(9,515) | | EBITDA | $1,031 | $(1,015) | $1,119 | $(3,046) | | Adjustments to EBITDA | $1,368 | $1,973 | $3,129 | $3,482 | | Adjusted EBITDA | $2,399 | $958 | $4,248 | $436 | - Adjusted EBITDA significantly increased to $2.40 million for the three months and $4.25 million for the six months ended December 31, 2021, reflecting improved operating performance[180] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's ability to generate and manage cash, detailing sources and uses of capital, and assessing its capacity to meet short-term and long-term obligations Sources and Uses of Cash This section outlines the primary sources of capital and potential liabilities, assessing the sufficiency of financial resources to fund operations - Primary capital sources include $76.31 million in cash and cash equivalents, cash from operating activities, and up to $5 million available on the 2021 JPMorgan Revolving Facility[182] - The company has estimated $17.6 million in potential sales tax and related interest and penalty liabilities as of December 31, 2021[183] - Management believes current financial resources are sufficient to fund operations for the next twelve months[183] Cash Flows This section provides a detailed breakdown of cash flows from operating, investing, and financing activities for the six months ended December 31, 2021 - Net cash used in operating activities was $4.25 million for the six months ended December 31, 2021, primarily due to a net loss and $10.1 million utilized by working capital accounts (e.g., increased inventory, reduced accounts payable)[186] - Net cash used in investing activities was $7.26 million, driven by the $2.97 million Yoke acquisition and $4.4 million in property and equipment purchases[188] - Net cash used in financing activities was $0.32 million, mainly for $0.4 million in repayments on the 2021 JPMorgan Credit Facility[190] CONTRACTUAL OBLIGATIONS This section states that there were no significant changes to contractual obligations during the reported period compared to the prior fiscal year - No significant changes to contractual obligations were reported during the six months ended December 31, 2021, compared to those disclosed in the Annual Report on Form 10-K for fiscal year ended June 30, 2021[193] CRITICAL ACCOUNTING POLICIES This section states that there were no significant changes to critical accounting policies during the reported period compared to the prior fiscal year - No significant changes to critical accounting policies were reported during the six months ended December 31, 2021, compared to those disclosed in the Annual Report on Form 10-K for fiscal year ended June 30, 2021[194] Recent Accounting Pronouncements This section directs readers to Note 2 for a description of recent accounting pronouncements and their potential impact - Refer to Note 2 - Summary of Significant Accounting Policies for a description of recent accounting pronouncements[195] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's exposures to market risk have not materially changed since June 30, 2021, with further details available in the Annual Report on Form 10-K - The company's exposures to market risk have not changed materially since June 30, 2021[196] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of December 31, 2021, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2021[199] - No changes in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2021, that materially affected or are reasonably likely to materially affect internal controls[200] Part II - Other Information This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, exhibits, and signatures Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 13 – Commitments and Contingencies in Part I, Item 1 of this Quarterly Report - Information on legal proceedings is incorporated by reference to Note 13 – Commitments and Contingencies[202] Item 1A. Risk Factors A discussion of the company's risk factors is incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended June 30, 2021, and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 - Risk factors are discussed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021, and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2021[203] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - Not Applicable (N/A)[205] Item 3. Defaults Upon Senior Securities There were no defaults on any senior securities, and the total liquidation preference for Series A Convertible Preferred Stock was $21.8 million as of December 31, 2021 - No defaults on any senior securities were reported[205] - The total liquidation preference, including accrued and unpaid dividends, on Series A Convertible Preferred Stock was $21.8 million as of December 31, 2021[205] Item 4. Mine Safety Disclosures There are no mine safety disclosures to report for the period - Not Applicable (N/A)[207] Item 5. Other Information There is no other information to report for the period - Not Applicable (N/A)[209] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL financial information - Includes Amended and Restated Articles of Incorporation, Second Amended and Restated Bylaws, Certifications of CEO and CFO (pursuant to Rule 13a-14(a) and 18 USC Section 1350), and Inline Extensible Business Reporting Language (iXBRL) financial information[211] Signatures The report is duly signed on behalf of Cantaloupe, Inc. by its Chief Executive Officer, Sean Feeney, and Chief Financial Officer, R. Wayne Jackson, on February 4, 2022 - The report was signed by Sean Feeney, Chief Executive Officer, and R. Wayne Jackson, Chief Financial Officer, on February 4, 2022[213][214]