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 ~~December~~March 31, ~~2017~~

2024


☐			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

Cantaloupe, Inc.

~~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 300, Malvern, Pennsylvania~~

101 Lindenwood Drive

Malvern,

Pennsylvania

19355

(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 Class	Trading Symbol	Name Of Each Exchange On Which Registered
Common Stock, no par value	CTLP	The 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 Web site, 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 filer

◻

☐

Accelerated filer

☒

☑

Non-accelerated filer ~~(Do not check if a smaller reporting company)~~

◻

☐

Smaller 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 ~~February 2, 2018~~May 6, 2024, there were ~~53,623,143~~72,809,713 outstanding shares of Common Stock, no par ~~value, outstanding.~~

value.

Table of Contents

~~USA TECHNOLOGIES, INC.~~

Cantaloupe, Inc.

TABLE OF CONTENTS


Part I - Financial Information

Item 1.	Condensed Consolidated Financial Statements ~~(unaudited)~~

	Condensed Consolidated Balance Sheets - March 31, 202 4 (unaudited) and June 30, 2023		3 3

	Condensed Consolidated Statements of Operations - Three and Nine Months ended Ma r ch 31, 202 4 and 202 3 (unaudited)		4 4

	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Nine Months ended March 31, 202 4 and 202 3 (unaudited)				5

	Condensed Consolidated ~~Statement~~Statements of Convertible Preferred Stock and Shareholders’ Equity - Three and Nine Months ended March 31, 202 4 and 202 3 (unaudited)		6 5

	Condensed Consolidated Statements of Cash Flows - Nine Months ended March 31, 202 4 and 202 3 (unaudited)		7 6

	Notes to Condensed Consolidated Financial Statements (unaudited)		8 7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25 20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40 32

Item 4.	Controls and Procedures		40 33

Part II - Other Information

Item 1.	Legal Proceedings		42

Item 1A.	Risk Factors		42

Item 6.2.	~~Exhibits~~	Unregistered Sales of Equity Securities and Use of Proceeds 33		42

Item 3.	Defaults Upon Senior Securities		42

Item 4.	Mine Safety Disclosures		42

Item 5.	Other Information		42

Item 6.	Exhibits		43

	Signatures		44 34

Table of Contents

Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements

~~USA Technologies,~~

Cantaloupe, Inc.

Condensed Consolidated Balance Sheets

December 31,

June 30,
($ in thousands, except shares)

2017

2017

(unaudited)

(audited)
Assets

Current assets:

Cash and cash equivalents

$
15,386

$
12,745
Accounts receivable, less allowance of $3,740 and $3,149, respectively

15,472

7,193
Finance receivables, less allowance of $49 and $19, respectively

5,517

11,010
Inventory

11,215

4,586
Prepaid expenses and other current assets

1,971

968
Total current assets

49,561

36,502

Non-current assets:

Finance receivables, less current portion

11,215

8,607
Other assets

1,120

687
Property and equipment, net

12,622

12,111
Deferred income taxes

14,774

27,670
Intangibles, net

30,910

622
Goodwill

64,449

11,492
Total non-current assets

135,090

61,189

Total assets

$
184,651

$
97,691

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable

$
23,775

$
16,054
Accrued expenses

6,798

4,130
Line of credit, net

—

7,036
Capital lease obligations and current obligations under long-term debt

5,121

3,230
Income taxes payable

6

10
Deferred revenue

595

—
Deferred gain from sale-leaseback transactions

198

239
Total current liabilities

36,493

30,699

Long-term liabilities:

Revolving credit facility

10,000

—
Capital lease obligations and long-term debt, less current portion

23,874

1,061
Accrued expenses, less current portion

65

53
Deferred gain from sale-leaseback transactions, less current portion

49

100
Total long-term liabilities

33,988

1,214

Total liabilities

$
70,481

$
31,913

Commitments and contingencies (Note 13)

Shareholders’ equity:

Preferred stock, no par value, 1,800,000 shares authorized, no shares issued

—

—
Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and outstanding, with liquidation preferences of $19,109 and $18,775 at December 31, 2017 and June 30, 2017, respectively

3,138

3,138
Common stock, no par value, 640,000,000 shares authorized, 53,619,898 and 40,331,645 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively

307,053

245,999
Accumulated deficit

(196,021)

(183,359)
Total shareholders’ equity

114,170

65,778
Total liabilities and shareholders’ equity

$
184,651

$
97,691


($ in thousands, except share data)	March 31, 2024 (Unaudited)		June 30, 2023

Assets
Current assets:
Cash and cash equivalents	$	50,197	$	50,927
Accounts receivable, net	43,324		30,162
Finance receivables, net	5,781		6,668
Inventory, net	37,364		31,872
Prepaid expenses and other current assets	8,327		3,754
Total current assets	144,993		123,383

Non-current assets:
Finance receivables due after one year, net	11,041		13,307
Property and equipment, net	30,320		25,281
Operating lease right-of-use assets	8,164		2,575
Intangibles, net	26,687		27,812
Goodwill	94,008		92,005
Other assets	4,688		5,249
Total non-current assets	174,908		166,229

Total assets	$	319,901	$	289,612

Liabilities, convertible preferred stock, and shareholders’ equity
Current liabilities:
Accounts payable	$	64,128	$	52,869
Accrued expenses	24,824		26,276
Current obligations under long-term debt	1,450		882
Deferred revenue	1,893		1,666
Total current liabilities	92,295		81,693

Long-term liabilities:
Deferred income taxes	409		275
Long-term debt, less current portion	36,647		37,548
Operating lease liabilities, non-current	9,035		2,504
Total long-term liabilities	46,091		40,327

Total liabilities	138,386		122,020
Commitments and contingencies (Note 15)
Convertible preferred stock:
Series A convertible preferred stock, 900,000 shares authorized, 385,782 issued and outstanding, with liquidation preferences of $22,722 and $22,144 at March 31, 2024 and June 30, 2023, respectively	2,720		2,720
Shareholders’ equity:

Common stock, no par value, 640,000,000 shares authorized, 72,799,266 and 72,664,464 shares issued and outstanding at March 31, 2024 and June 30, 2023, respectively	481,467		477,324
Accumulated deficit	(302,665)		(312,452)
Accumulated other comprehensive loss	(7)		—
Total shareholders’ equity	178,795		164,872

Total liabilities, convertible preferred stock, and shareholders’ equity	$	319,901	$	289,612

See accompanying ~~notes.~~

notes to condensed consolidated financial statements.

Table of Contents

~~USA Technologies,~~Cantaloupe, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

Three months ended

Six months ended

December 31,

December 31,
($ in thousands, except shares and per share data)

2017

2016

2017

2016
Revenues:

License and transaction fees

$
22,853

$
16,639

$
42,797

$
33,004
Equipment sales

9,653

5,117

15,326

10,340
Total revenues

32,506

21,756

58,123

43,344

Costs of sales:

Cost of services

14,362

11,389

27,688

22,632
Cost of equipment

8,943

4,033

14,033

8,211
Total costs of sales

23,305

15,422

41,721

30,843

Gross profit

9,201

6,334

16,402

12,501

Operating expenses:

Selling, general and administrative

8,329

5,785

15,075

12,593
Integration and acquisition costs

3,335

8

4,097

109
Depreciation and amortization

737

307

982

515
Total operating expenses

12,401

6,100

20,154

13,217

Operating (loss) income

(3,200)

234

(3,752)

(716)

Other income (expense):

Interest income

251

200

331

273
Interest expense

(494)

(201)

(703)

(413)
Change in fair value of warrant liabilities

-

-

-

(1,490)
Total other expense, net

(243)

(1)

(372)

(1,630)

(Loss) income before income taxes

(3,443)

233

(4,124)

(2,346)
(Provision) benefit for income taxes

(9,073)

-

(8,605)

115

Net (loss) income

(12,516)

233

(12,729)

(2,231)
Preferred dividends

-

-

(334)

(334)
Net (loss) income applicable to common shares

$
(12,516)

$
233

$
(13,063)

$
(2,565)
Net (loss) income per common share

Basic

(0.24)

0.01

(0.26)

(0.07)
Diluted

(0.24)

0.01

(0.26)

(0.07)
Weighted average number of common shares outstanding

Basic

52,150,106

40,308,934

49,861,735

39,398,469
Diluted

52,150,106

40,730,712

49,861,735

39,398,469


	Three months ended				Nine months ended
	March 31,				March 31,
($ in thousands, except share and per share data)	2024		2023		2024		2023
Revenues:
Subscription and transaction fees	$	59,207	$	51,245	$	170,371	$	147,252
Equipment sales	8,690		9,111		25,568		32,216
Total revenues	67,897		60,356		195,939		179,468

Costs of sales:
Cost of subscription and transaction fees	32,926		29,577		96,539		90,149
Cost of equipment sales	8,064		7,886		23,849		33,823
Total costs of sales	40,990		37,463		120,388		123,972

Gross profit	26,907		22,893		75,551		55,496

Operating expenses:
Sales and marketing	5,747		3,154		14,256		8,888
Technology and product development	4,916		4,594		12,115		16,757
General and administrative	8,552		7,041		29,493		25,179
Investigation, proxy solicitation and restatement expenses, net of insurance recoveries	—		(1,000)		—		(453)
Integration and acquisition expenses	907		—		1,078		2,787
Depreciation and amortization	2,493		2,364		7,976		5,029
Total operating expenses	22,615		16,153		64,918		58,187

Operating income (loss)	4,292		6,740		10,633		(2,691)

Other income (expense):
Interest income from cash and leases	495		540		1,505		1,985
Interest income (expense) from debt and tax liabilities	162		(263)		(1,947)		(1,258)
Other expense, net	(209)		(13)		(158)		(112)
Total other income (expense), net	448		264		(600)		615

Income (loss) before income taxes	4,740		7,004		10,033		(2,076)
Provision for income taxes	(84)		(56)		(246)		(123)

Net income (loss)	4,656		6,948		9,787		(2,199)
Preferred dividends	(289)		(289)		(578)		(623)
Net income (loss) applicable to common shares	$	4,367	$	6,659	$	9,209	$	(2,822)

Net earnings (loss) per common share
Basic	$	0.06	$	0.09	$	0.13	$	(0.04)
Diluted	0.06		0.09		0.12		(0.04)

Weighted average number of common shares outstanding used to compute net earnings (loss) per share applicable to common shares
Basic	72,851,498		72,491,373		72,770,582		71,771,135
Diluted	74,068,437		72,866,221		74,054,820		71,771,135

See accompanying ~~notes.~~

notes to condensed consolidated financial statements.

Table of Contents

~~USA Technologies,~~

Cantaloupe, Inc.

Condensed Consolidated ~~Statement~~Statements of ~~Shareholders’ Equity~~

~~(Unaudited)~~

Series A

Convertible

Preferred Stock

Common Stock

Accumulated

($ in thousands, except shares)

Shares

Amount

Shares

Amount

Deficit

Total
Balance, June 30, 2017

445,063

$
3,138

40,331,645

$
245,999

$
(183,359)

$
65,778
Issuance of common stock in relation to public offering, net of offering costs incurred of $3,237 (a)

—


—

9,583,332


39,888


—


39,888
Issuance of common stock as merger consideration(b)

—

—

3,423,367

19,810

—

19,810
Stock based compensation

—


—

281,554


1,356


—


1,356
Excess tax benefit from stock plans(c)

—


—

—


—


67


67
Net loss

—


—

—


—


(12,729)


(12,729)
Balance, December 31, 2017

445,063

$
3,138

53,619,898

$
307,053

$
(196,021)

$
114,170

^(a)

~~Refer to Note 12 regarding the public offering issued during July 2017.~~

Comprehensive Income (Loss)

^(b)

~~Refer to Note 3 regarding the business acquisition executed during November 2017.~~

(Unaudited)

^(c)

~~Refer to Note 2 regarding the adoption of ASU 2016-09.~~

~~See accompanying notes.~~


	Three months ended				Nine months ended
	March 31,				March 31,
($ in thousands)	2024		2023		2024		2023
Net income (loss)	$	4,656	$	6,948	$	9,787	$	(2,199)

Foreign currency translation adjustments	17		—		(7)		—
Other comprehensive income (loss)	17		—		(7)		—
Total comprehensive income (loss)	$	4,673	$	6,948	$	9,780	$	(2,199)

Table of Contents

~~USA Technologies,~~Cantaloupe, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Shareholders’ Equity

(Unaudited)

Three and Nine Months Ended March 31, 2024


	Convertible Preferred Stock			Common Stock			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
($ in thousands, except share data)	Shares	Amount		Shares	Amount
Balance, June 30, 2023	385,782	$	2,720	72,664,464	$	477,324	$	(312,452)	$	—	$	164,872
Stock-based compensation	—	—		20,801	1,934		—		—		1,934

Exercise of stock options	—	—		10,000	74		—		—		74
Net income	—	—		—	—		2,007		—		2,007

Balance, September 30, 2023	385,782	2,720		72,695,265	479,332		(310,445)		—		168,887
Stock-based compensation	—	—		43,793	1,109		—		—		1,109

Other comprehensive loss	—	—		—	—		—		(24)		(24)
Net income	—	—		—	—		3,124		—		3,124
Balance, December 31, 2023	385,782	2,720		72,739,058	480,441		(307,321)		(24)		173,096
Stock-based compensation	—	—		55,208	1,004		—		—		1,004
Exercise of stock options	—	—		5,000	22		—		—		22
Other comprehensive income	—	—		—	—		—		17		17
Net income	—	—		—	—		4,656		—		4,656
Balance, March 31, 2024	385,782	$	2,720	72,799,266	$	481,467	$	(302,665)	$	(7)	$	178,795

Three and Nine Months Ended March 31, 2023


	Convertible Preferred Stock			Common Stock			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity
($ in thousands, except share data)	Shares	Amount		Shares	Amount
Balance, June 30, 2022	445,063	$	3,138	71,188,053	$	469,918	$	(313,085)	$	—	$	156,833
Stock-based compensation	—	—		30,077	1,318		—		—		1,318
Repurchase of Series A convertible preferred stock	(59,281)	(418)		—	(1,733)		—		—		(1,733)
Net loss	—	—		—	—		(8,574)		—		(8,574)

Balance, September 30, 2022	385,782	2,720		71,218,130	469,503		(321,659)		—		147,844
Stock-based compensation	—	—		3,919	160		—		—		160
Common stock issued for acquisition	—	—		1,240,920	3,942		—		—		3,942
Net loss	—	—		—	—		(573)		—		(573)
Balance, December 31, 2022	385,782	2,720		72,462,969	473,605		(322,232)		—		151,373
Stock-based compensation	—	—		46,292	1,410		—		—		1,410
Net income	—	—		—	—		6,948		—		6,948
Balance, March 31, 2023	385,782	$	2,720	72,509,261	$	475,015	$	(315,284)	$	—	$	159,731

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Cantaloupe, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six months ended

December 31,
($ in thousands)

2017

2016
OPERATING ACTIVITIES:

Net loss

$
(12,729)

$
(2,231)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Non-cash stock based compensation

1,356

445
Gain on disposal of property and equipment

(83)

(31)
Non-cash interest and amortization of debt discount

86

26
Bad debt expense

291

450
Depreciation and amortization

3,476

2,564
Change in fair value of warrant liabilities

-

1,490
Excess tax benefits

67

-
Deferred income taxes, net

8,537

(115)
Recognition of deferred gain from sale-leaseback transactions

(93)

(430)
Changes in operating assets and liabilities:

Accounts receivable

(5,290)

(2,347)
Finance receivables

7,958

2,119
Inventory

(5,822)

(2,689)
Prepaid expenses and other current assets

(606)

(542)
Accounts payable and accrued expenses

6,950

(3,840)
Income taxes payable

40

(12)
Net cash provided by (used in) operating activities

4,138

(5,143)

INVESTING ACTIVITIES:

Purchase of property and equipment, including rentals

(1,767)

(1,944)
Proceeds from sale of property and equipment, including rentals

157

61
Cash used for Cantaloupe acquisition

(65,181)

-
Net cash used in investing activities

(66,791)

(1,883)

FINANCING ACTIVITIES:

Cash used in retirement of common stock

-

(31)
Proceeds from exercise of common stock warrants

-

6,193
Payment of debt issuance costs

(445)

-
Proceeds from issuance of long-term debt

25,100

-
Proceeds from revolving credit facility

10,000

-
Issuance of common stock in public offering, net

39,888

-
Repayment of capital lease obligations and long-term debt

(9,249)

(374)
Net cash provided by financing activities

65,294

5,788

Net increase (decrease) in cash and cash equivalents

2,641

(1,238)
Cash and cash equivalents at beginning of year

12,745

19,272
Cash and cash equivalents at end of period

$
15,386

$
18,034

Supplemental disclosures of cash flow information:

Interest paid in cash

$
557

$
469
Income taxes paid in cash (refund), net

$
-

$
-
Supplemental disclosures of noncash financing and investing activities:

Equity issued in connection with Cantaloupe Acquisition

$
19,810

$
-
Equipment and software acquired under capital lease

$
227

$
272


	Nine months ended
	March 31,
($ in thousands)	2024		2023
Cash flows from operating activities:
Net income (loss)	$	9,787	$	(2,199)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock based compensation	4,047		2,889
Amortization of debt issuance costs and discounts	93		87
Provision for expected losses	3,423		1,823
Provision for inventory reserve	92		25
Depreciation and amortization included in operating expenses	7,976		5,029
Depreciation included in cost of subscription and transaction fees for rental equipment	1,137		852
Non-cash lease expense	1,070		(429)
Deferred income taxes	134		72
Other	527		363
Changes in operating assets and liabilities:
Accounts receivable	(16,471)		9,589
Finance receivables	3,038		(653)
Inventory	(5,584)		(8,245)
Prepaid expenses and other assets	(3,762)		(746)
Accounts payable and accrued expenses	8,455		(2,868)
Operating lease liabilities	(655)		183
Deferred revenue	174		1
Net cash provided by operating activities	13,481		5,773

Cash flows from investing activities:
Acquisition of business, net of cash acquired	(4,750)		(35,855)
Capital expenditures	(9,175)		(12,634)

Net cash used in investing activities	(13,925)		(48,489)

Cash flows from financing activities:


Proceeds from long-term debt	—		25,000
Repayment of long-term debt	(389)		(580)
Contingent consideration paid for acquisition	—		(1,000)
Proceeds from exercise of common stock options	96		—
Repurchase of Series A Convertible Preferred Stock	—		(2,153)
Net cash (used in) provided by financing activities	(293)		21,267

Effect of currency exchange rate changes on cash and cash equivalents	7		—

Net decrease in cash and cash equivalents	(730)		(21,449)
Cash and cash equivalents at beginning of year	50,927		68,125
Cash and cash equivalents at end of period	$	50,197	$	46,676

Supplemental disclosures of cash flow information:
Interest paid in cash	$	2,628	$	1,869
Income taxes paid in cash	$	142	$	44
Common stock issued in business combination	$	—	$	3,942

See accompanying ~~notes.~~

notes to condensed consolidated financial statements.

Table of Contents

~~USA Technologies,~~Cantaloupe, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. BUSINESS

~~USA Technologies,~~

Cantaloupe, Inc. ~~(the “Company”~~, ~~“We”, “USAT”, or “Our”) was incorporated in~~is organized under the laws of the Commonwealth of ~~Pennsylvania in January 1992.~~Pennsylvania. We are a ~~provider of technology-enabled~~digital payments and software services company that provides end-to-end technology solutions for self-service commerce. We offer a single platform for self-service commerce which includes integrated payments processing and ~~value-added services~~software solutions that ~~facilitate electronic payment transactions~~handle inventory management, pre-kitting, route logistics, warehouse and back-office management. Our enterprise-wide platform is designed to increase consumer engagement ~~services primarily within the unattended Point of Sale (“POS”) market. We are a leading provider in the small ticket, beverage~~ and ~~food vending industry~~sales revenue through digital payments, digital advertising and are expanding our solutions and services to other unattended market segments, such as amusement, commercial laundry, kiosk and others. Since our founding, we have designed and marketed systems and solutions that facilitate electronic payment options, as well as telemetry Internet of Things (“IoT”) and machine-to-machine (“M2M”) services, which include the ability to remotely monitor,customer loyalty programs, while providing retailers with control and report on the results of distributed assets containing our electronic payment solutions. Historically, these distributed assets have relied on cash for payment in the form of coins or bills, whereas, our systems allow themvisibility over their operations and inventory. Our customers range from vending machine companies to accept cashless payments such as through the use of credit or debit cards or other emerging contactless forms, such as mobile payment. The connection to the ePort Connect Platform also enables consumer loyalty programs, national rewards programs and digital content, including advertisements and product information to be delivered at the point of sale.

On November 9, 2017, the Company acquired all of the outstanding equity interests of Cantaloupe Systems, Inc. (“Cantaloupe”), pursuant to the Agreement and Plan of Merger (“Merger Agreement”). Cantaloupe is a premier provider of cloud and mobile solutions for vending, micro markets, and office coffee service. The acquisition expanded the Company’s existing platform to become an end-to-end enterprise platform integrating Cantaloupe’s Seed Cloud which provides cloud and mobile solutions for dynamic route scheduling, automated pre-kitting, responsive merchandising, inventory management, warehouse and accounting management, as well as cashless vending. The combined companies complete the value chain for customers by providing both top-line revenue generating services as well as bottom line business efficiency services to help operators of ~~unattended~~micro-markets and smart retail, ~~machines run their business better. The combination also marries~~laundromats, metered parking terminals, amusement and entertainment venues, IoT services and more.

Cantaloupe, Inc. and its consolidated subsidiaries are referred to herein collectively as "Cantaloupe," the ~~data-rich Seed system with USAT’s consumer benefits, providing operators with valuable consumer data that results in customized experiences. In addition to new technology~~"Company," "we," "our" or "us," unless the context requires otherwise.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and ~~services, due to Cantaloupe’s existing customer base, the acquisition expands the Company’s footprint into new global markets.~~

~~INTERIM FINANCIAL INFORMATION~~

Preparation

The accompanying unaudited condensed consolidated financial statements of ~~USA Technologies, Inc.~~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, 2023 Annual Report on Form ~~10-K for the year ended June 30, 2017.~~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 and six months ended December 31, 2017~~interim periods presented are not necessarily indicative of the results that may be expected for the ~~year ending June 30, 2018.~~ entire fiscal year.

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.

We translate the result of operations of our foreign subsidiaries using average exchange rates for each period, whereas balance sheet accounts are translated using exchange rates at ~~June 30, 2017 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~~end of ~~America.~~

~~BASIS OF PRESENTATION~~

Certain reclassifications of prior year’s data have been made to conform to current year’s presentation. As disclosed in Note 3, the Company incurred integration and acquisition expenses during the current period and deemed it appropriate to have such costs individually captioned within the statement of operations. Accordingly, the Company retrospectively reclassified integration and acquisition costs incurred in the corresponding periods from the previous fiscal year to conform to the current period’s presentation.

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~~2. ACCOUNTING POLICIES~~

~~RECENT ACCOUNTING PRONOUNCEMENTS~~

~~Accounting pronouncements adopted in fiscal year 2018~~

In January 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2017-04 ("ASU 2017-04"), which eliminates Step 2 from the goodwill impairment test. Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of aeach reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04period. The resulting translation adjustment is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We early adopted ASU 2017-04 for impairment tests to be performed on testing dates after July 1, 2017, which did not impact our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting, which modifies the accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when stock awards vest or are settled. In addition, cash flows related to excess tax benefits are to be separately classified as an operating activity apart from other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s vested shares for tax withholding purposes without triggering liability accounting, and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a ~~financing activity~~component of other comprehensive income (loss) and is included in accumulated comprehensive income (loss) within equity in our condensed consolidated balance sheets. Gains and losses on transactions denominated in currencies other than the ~~statement of cash flows. The Company adopted this standard as of July 1, 2017.~~

~~The primary impact of adoption was the recognition of excess tax benefits~~functional currency are generally included in ~~the Company's provision for~~determining net income taxes which is applied prospectively starting July 1, 2017 in accordance with the guidance. Adoption of the new standard resulted in the recognition of $16 thousand of excess tax benefits in the Company's provision for income taxes for the six months ended December 31, 2017. Through June 30, 2017 excess tax benefits were reflected as a reduction of deferred tax assets via reducing actual operating loss carryforwards because such benefits had not reduced income taxes payable. Under the new standard the treatment of excess tax benefits changed and the cumulative excess tax benefits as of June 30, 2017 amounting to $67 thousand were credited to accumulated deficit.

~~The adoption of ASU No. 2016-09 did not impact our statement of cash flows for~~period. For the three and ~~six~~nine months ended ~~December~~March 31, ~~2016.~~

~~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 consolidated financial position, results of operations or cash flows.

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts~~2024 and 2023, our transaction gains and losses were insignificant.

Reclassification

Beginning with Customers (Topic 606) (“the New Standard”).” This ASU was amended by ASU No. 2015-14, issued in August 2015, which deferred the original effective date by one year. The new guidance provides a single model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The new standard also requires expanded qualitative and quantitative disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is now effective for fiscal years, and interim reporting periods within those years, beginning with the year ending June 30, 2019.

The Company’s project plan includes a three-phase approach to implementing this standard update. The Company is currently evaluating the impact of the potential changes identified by its initial phase one assessment work which included internal surveys of the business, holding revenue recognition workshops with sales and business unit finance leadership, and reviewing a representative sample of revenue arrangements across the business to initially identify a set of applicable qualitative revenue recognition changes related to the new standard update. During the quarter, the Company completed an acquisition of Cantaloupe and has commenced the phase one assessment of the recently acquired business.

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The objectives for the second phase of the project will be to establish and document key accounting policies and assess disclosures, business process and control impacts resulting from the New Standard. New policies and procedures identified during phase two will be applied to both historical Company revenue streams and those of the recently acquired business to ensure compliance with the New Standard. Lastly, the objectives of phase three will comprise effectively implementing the new standard update and embedding the new accounting treatment into the Company’s business processes and controls to support the financial reporting requirements. Phase three is expected to be completed in the fourth quarter of fiscal year ~~2018.~~

~~The~~2023, the Company ~~is still evaluating~~presented convertible preferred stock on its consolidated statements of shareholders’ equity and changed the ~~impact that the New Standard will have on the Company’s consolidated financial statements and will be unable to quantify its impact until the third phase~~name of the ~~project has~~statement to consolidated statements of convertible preferred stock and shareholders’ equity accordingly.Prior period amounts have been ~~completed. The standard is expected~~reclassified to ~~impact~~conform to the ~~Company’s revenue recognition processes, primarily in the areas of the allocation of contract revenues. An entity can elect~~current period presentation.

Recently Issued Accounting Pronouncements

ASU 2023-09, Income Taxes (Topic 740): Improvements to apply the guidance under one of the following two methods: (i) retrospectively to each prior reporting period presented – referred to as the full retrospective method; or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings – referred to as the modified retrospective method. The method of adoption has not yet been determined and is not expected to be finalized until the second phase of the project plan has been completed.

Income Tax Disclosures

In ~~February 2016,~~December 2023, the FASB issued ASU ~~2016-02, "Leases (Topic 842)." ASU 2016-02 requires that a lessee recognize~~2023-09, which expands income tax disclosure requirements to include additional information related to the ~~assets and liabilities that arise from operating leases. A lessee should recognize~~rate reconciliation of effective tax rates to statutory rates as well as additional disaggregation of taxes paid. The amendments in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The company is the lessee under various agreements which are accounted for as operating leases. This amendment will be effective for the Company beginning with the year ending June 30, 2020, including interim periods within those fiscal years. Early application is permitted.

~~In June 2016,~~ ~~the FASB issued~~ ASU ~~No. 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The new guidance introduces the accounting for estimated credit losses pertaining~~also remove disclosures related to certain ~~types~~unrecognized tax benefits and deferred taxes. ASU

Table of ~~financial instruments, including but not limited to, trade and lease receivables. This pronouncement will be~~Contents

2023-09 is effective for fiscal years beginning after December 15, ~~2019. Early~~2024, which is the Company's fiscal year 2026 annual reporting period. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. We are currently assessing the impact of the ~~guidance is permitted~~requirements on our consolidated financial statements and disclosures.

ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. Annual disclosures are required for fiscal years beginning after December 15, ~~2018.~~

~~In August 2016,~~2023, which is the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments.” The new guidance makes eight targeted changes to how cash receipts and cash paymentsCompany's fiscal year 2025 annual reporting period. Interim disclosures are ~~presented and classified in the statement of cash flows. This pronouncement will be effective~~required for ~~the Company beginning with the year ending June 30, 2019, and interim~~ periods within ~~that~~ fiscal year. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the company would be required to apply the amendments prospectively as of the earliest date practicable. Upon adoption, the Company does not anticipate significant changes to the Company's existing accounting policies or presentation of the Statement of Cash Flows.

~~In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805), Clarifying the Definition of a Business.”~~ ASU 2017-01 provides guidance in ascertaining whether a collection of assets and activities is considered a business. Adoption of the amendment will be applied prospectively effective for annual periodsyears beginning after December 15, ~~2017 with~~2024, which is the Company's fiscal year 2026 interim reporting periods. Retrospective application is required for all prior periods presented, and early adoption ~~permissible for specific transactions. Adoption~~ is ~~not~~permitted. We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.

No other new accounting pronouncements, issued or effective during the period ended March 31, 2024, have had or are expected to have a ~~material effect~~significant impact on the Company’s ~~consolidated~~ financial statements.

3. ACCOUNTS RECEIVABLE

Accounts receivable includes amounts due to the Company for sales of equipment and subscription fees, settlement receivables for amounts due from third-party payment processors, receivables from contract manufacturers and unbilled amounts due from customers, net of the allowance for credit losses. Accounts receivable, net of the allowance for uncollectible accounts were $43.3 million as of March 31, 2024 and $30.2 million as of June 30, 2023. The increase in accounts receivable at March 31, 2024 compared to June 30, 2023 is primarily due to the timing of the settlement receivables due from third-party payment processors which varies depending on the timing of the last business day of each period.

Concentrations

As of March 31, 2024 and June 30, 2023, no customer represented more than 10% of the Company's accounts receivable, net of allowance.

Allowance for credit losses

The Company maintains an allowance for credit losses resulting from the inability of its customers to make required payments, including from a shortfall in the customer transaction fund flow from which the Company would normally collect amounts due. The allowance is calculated under an expected loss model. We estimate our allowance using an aging analysis (days past due status) of the receivables balances, primarily based on historical loss experience. Additionally, current conditions are analyzed to determine if the allowance calculation needs to be adjusted further for any qualitative factors impacting a customer’s ability to meet its financial obligations that is not already reflected through the historical loss analysis. The Company writes off receivable balances against the allowance for credit losses when management determines the balance is uncollectible and the Company ceases collection efforts.

The following table represents a rollforward of the allowance for credit losses for the nine months ended March 31, 2024 and 2023:

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	Nine months ended March 31,
($ in thousands)	2024		2023
Beginning balance of allowance as of June 30	$	10,815	$	9,328
Provision for expected losses	958		1,044
Write-offs	(60)		(127)
Balance at September 30	11,713		10,245
Provision for expected losses	1,266		91
Write-offs	(134)		(214)
Balance at December 31	12,845		10,122
Provision for expected losses	1,085		296
Write-offs	(735)		—
Balance at March 31	$	13,195	$	10,418

4. FINANCE RECEIVABLES

The Company's finance receivables consist of financed devices under its financing 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 March 31, 2024 and June 30, 2023, finance receivables consist of the following:


($ in thousands)	March 31, 2024		June 30, 2023
Current finance receivables, net	$	5,781	$	6,668
Finance receivables due after one year, net	11,041		13,307
Total finance receivables, net of allowance of $2,212 and $2,098, respectively	$	16,822	$	19,975

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.

Credit risk for finance receivables is continuously monitored by management and reflected within the allowance for finance receivables. As our finance receivables generally have similar risk characteristics, our key credit quality indicator is the aging (days past due status) of our aggregated finance receivables balances. Specifically, we estimate our allowance by using an aging analysis of the aggregated finance receivables balances, primarily based on historical loss experience. Additionally, current conditions are analyzed to determine if the allowance calculation needs to be adjusted further for any qualitative factors impacting a customer’s ability to meet its financial obligations that is not already reflected through the historical loss analysis. The Company writes off finance receivable balances against the allowance for credit losses when management determines the balance is uncollectible and the Company ceases collection efforts.

At March 31, 2024, the gross lease receivable by current payment performance on a contractual basis and year of origination consisted of the following:

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	Leases by Origination
($ in thousands)	Up to 1 Year Ago		Between 1 and 2 Years Ago		Between 2 and 3 Years Ago		Between 3 and 4 Years Ago		Between 4 and 5 Years Ago		More than 5 Years Ago		Total
Current	$	2,284	$	7,423	$	4,399	$	1,225	$	523	$	25	$	15,879
30 days and under	12		70		87		40		72		42		323
31-60 days	6		48		65		31		45		40		235
61-90 days	5		43		54		26		40		35		203
Greater than 90 days	41		716		436		65		272		864		2,394
Total finance receivables	$	2,348	$	8,300	$	5,041	$	1,387	$	952	$	1,006	$	19,034

At June 30, 2023, 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 Ago		Between 1 and 2 Years Ago		Between 2 and 3 Years Ago		Between 3 and 4 Years Ago		Between 4 and 5 Years Ago		More than 5 Years Ago		Total
Current	$	6,595	$	6,505	$	3,304	$	1,306	$	846	$	829	$	19,385
30 days and under	66		73		69		52		22		68		350
31-60 days	53		40		32		42		19		71		257
61-90 days	60		52		26		32		16		71		257
Greater than 90 days	155		132		197		233		271		836		1,824
Total finance receivables	$	6,929	$	6,802	$	3,628	$	1,665	$	1,174	$	1,875	$	22,073

The following table represents a rollforward of the allowance for finance receivables for the nine months ended March 31, 2024 and 2023:


	Nine months ended March 31,
($ in thousands)	2024		2023

Balance at June 30	$	2,098	$	760
Provision for expected losses	51		392
Write-offs	—		—
Balance at September 30	2,149		1,152
Provision for expected losses	108		—
Write-offs	—		(288)
Balance at December 31	2,257		864
Provision for expected losses	(45)		—
Write-offs	—		—
Balance at March 31	$	2,212	$	864

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Cash to be collected on our performing finance receivables due for each of the fiscal years is as follows:


($ in thousands)
2024	$	7,096
2025	6,228
2026	4,371
2027	2,295
2028	695
Thereafter	14
Total amounts to be collected	20,699
Less: interest	(1,665)
Less: allowance for uncollectible receivables	(2,212)
Total finance receivables	$	16,822

5. LEASES

Lessee Accounting

We have operating leases which are primarily real estate leases used for corporate functions, product development, sales, and other purposes. The following table provides supplemental balance sheet information related to the Company's operating leases:


($ in thousands)	Balance Sheet Classification	As of March 31, 2024		As of June 30, 2023

Assets:	Operating lease right-of-use assets	$	8,164	$	2,575

Liabilities:
Current	Accrued expenses	$	738	$	1,266
Long-term	Operating lease liabilities, non-current	9,035		2,504
Total lease liabilities		$	9,773	$	3,770

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


($ in thousands)	Nine months ended March 31, 2024		Nine months ended March 31, 2023

Supplemental cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,827	$	1,793

Non-cash activity:
Lease assets obtained in exchange for new operating lease liabilities	$	6,657	$	—

Maturities of lease liabilities by fiscal year for our leases as of March 31, 2024 are as follows:

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($ in thousands)	Operating Leases
Remainder of 2024	$	321
2025	1,623
2026	2,341
2027	1,792
2028	1,359
Thereafter	$	6,570
Total lease payments	$	14,006
Less: Imputed interest	(4,233)
Present value of lease liabilities	$	9,773

In February 2023, the Company extended the lease for its existing Atlanta, Georgia office for an additional 73-months period including rent-free periods. The lease commenced on July 1, 2023 and we recognized right-of-use operating lease assets of $1.8 million in exchange for operating lease liabilities.

In May ~~2017,~~2023, the ~~FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting.”~~Company signed a new lease for its office in Malvern, Pennsylvania. The ~~standard provides guidance about which changes~~new lease has a 133-months term starting in March 2024. The Company determined the lease commenced on November 1, 2023 when the lessor granted early access to the ~~terms~~Company to begin making leasehold improvements prior to start of the formal lease term. We recognized right-of-use operating lease assets of $4.9 million in exchange for operating lease liabilities on the commencement date.

Lessor Accounting

Property and equipment used for the operating lease rental program consisted of the following:


($ in thousands)	March 31, 2024		June 30, 2023
Cost	$	30,955	28,398
Accumulated depreciation	(24,605)		(23,221)
Net	$	6,350	$	5,177

For the three months ended March 31, 2024 and 2023, the Company recognized $2.1 million and $2.0 million of revenue from its device rental program, respectively, included in the Subscription and Transaction fees on its Condensed Consolidated Statements of Operations.

For the nine months ended March 31, 2024 and 2023, the Company recognized $6.1 million and $5.7 million of revenue from its device rental program, respectively, included in the Subscription and Transaction fees on its Condensed Consolidated Statements of Operations.

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 March 31, 2024 are disclosed within Note 4 - Finance Receivables.

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6. DEBT AND OTHER FINANCING ARRANGEMENTS

The Company's debt and other financing arrangements as of March 31, 2024 and June 30, 2023 consisted of the following:


	As of March 31,		As of June 30,
($ in thousands)	2024		2023

JPMorgan Credit Facility*	$	38,188	$	38,563
Other obligations	36		50
Less: unamortized issuance costs and debt discount	(127)		(183)
Total	38,097		38,430
Less: debt and other financing arrangements, current	(1,450)		(882)
Debt and other financing arrangements, noncurrent	$	36,647	$	37,548

* See discussion below on amendment to the JPMorgan Credit Facility.

Details of interest expense presented on the condensed consolidated statements of operations are as follows:


	Three months ended				Nine months ended
	March 31,				March 31,
($ in thousands)	2024		2023		2024		2023
JPMorgan Credit Facility*	894		1,142		2,718		1,733
Other interest (income) expense on tax liabilities	(1,056)		(879)		(771)		(475)
Total interest (income) expense, net on debt and tax liabilities	$	(162)	$	263	$	1,947	$	1,258

JPMorgan Chase Bank Credit Agreement

On March 17, 2022, the Company entered into an amended and restated credit agreement with JPMorgan Chase Bank, N.A. which provides for a $15 million secured revolving credit facility (the “Amended Revolving Facility”) and a $25 million secured term facility (the “Amended Secured Term Facility” and together with the Amended Revolving Facility, the “Amended JPMorgan Credit Facility”), and fully replaces our previous 2021 JPMorgan Credit Facility. The Amended Secured Term Facility includes a $10 million increase from the 2021 JPMorgan Secured Term Facility which is available for a period of up to twelve months following the Closing Date.

On December 1, 2022, the Company entered into a first amendment (the “2022 Amendment”) to its Amended and Restated Credit Agreement, dated as of March 17, 2022, which, among other things, amended the definition of the Company’s EBITDA under the Credit Agreement. On December 1, 2022, the Company borrowed an additional $25 million under the Amended JPMorgan Credit Facility, including $15 million from the revolving credit facility and $10 million from the term facility, to partially fund the cash consideration of the 32M acquisition as referenced in Note 9 - Acquisition. No issuance costs were capitalized in connection with this amendment.

The proceeds of the Amended JPMorgan Credit Facility may be used to refinance certain existing indebtedness of the Company and its subsidiaries, to finance the working capital needs, and for general corporate purposes (including permitted acquisitions), of the Company and its subsidiaries.

The Amended JPMorgan Credit Facility matures on March 16, 2026. Interest on the Amended JPMorgan Credit Facility will be based, at the Company’s option, on a base rate or ~~conditions~~SOFR plus an applicable margin tied to the Company’s total leverage ratio and having ranges of between 2.50% and 3.00% for base rate loans and between 3.50% and 4.00% for SOFR loans. Subject to the occurrence of a ~~share-based payment award require modification accounting, which~~material acquisition and the Company’s total leverage ratio exceeding 3.00 to 1.00, the interest rate on the loans may ~~result in~~increase by 0.25%. In an event of default, the interest rate may be increased by 2.00%. The Amended JPMorgan Credit Facility will also carry a ~~different fair value~~commitment fee of 0.50% per annum on the unused portion. As of March 31, 2024, the weighted-average interest rate for the ~~award. This ASU~~Amended JPMorgan Credit Facility is ~~effective for annual periods~~approximately 9.0%.

The Amended JPMorgan Credit Facility includes customary representations, warranties and ~~interim periods beginning after December 15, 2017, with early adoption permissible.~~covenants, and acceleration, indemnity and events of default provisions, including, among other things, two financial covenants. One financial covenant

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requires the Company to maintain, at all times, a total leverage ratio of not more than 3.00 to 1.00 on the last day of any fiscal quarter. The ~~guidance~~other financial covenant is conditional on a material acquisition occurring: if a material acquisition occurs, the Company is required to ~~be applied prospectively~~maintain a total leverage ratio not greater than 4.00 to ~~awards modified on or after~~1.00 for the ~~effective date. Historically, modifications to our share-based payment awards have been limited. As such, we do not expect~~next four fiscal quarters following the ~~application~~material acquisition.

The Company’s obligations under its long-term debt agreements are carried at amortized cost, which approximates their fair value as of ~~this standard to have a material effect on our results~~March 31, 2024, as the debt facility was amended in December 2022 and the interest rates applicable are variable in nature.

The Company was in compliance with its financial covenants for the Amended JPMorgan Credit Facility as of ~~operations or financial position.~~

March 31, 2024.

The expected maturities associated with the Company’s outstanding debt and other financing arrangements as of March 31, 2024, were as follows:


2024	$	568
2025	1,333
2026	36,323
Principal amounts payable	38,224
Unamortized issuance costs	(127)
Total outstanding debt	$	38,097

7. ACCRUED EXPENSES

Accrued expenses consisted of the following as of March 31, 2024 and June 30, 2023:


	As of March 31,		As of June 30,
($ in thousands)	2024		2023

Sales tax reserve	10,793		$	13,597
Accrued compensation and related sales commissions	3,112		4,069
Operating lease liabilities, current	738		1,266
Accrued professional fees	5,726		4,196
Accrued taxes and filing fees payable	1,630		1,944

Other accrued expenses	1,333		762
Consideration withheld for acquisitions*	1,492		442
Total accrued expenses	$	24,824	$	26,276

* See Note 9 - Acquisition for description of the arrangement.

8. GOODWILL AND INTANGIBLES

Intangible asset balances and goodwill consisted of the following:


	As of March 31, 2024
($ in thousands)	Gross		Accumulated Amortization		Net		Amortization Period
Intangible assets:
Brand and tradenames	$	2,611	$	(1,747)	$	864	1 - 7 years
Developed technology	20,462		(12,868)		7,594		5 - 6 years
Customer relationships	27,224		(8,995)		18,229		5 - 18 years
Total intangible assets	$	50,297	$	(23,610)	$	26,687

Goodwill	94,008		—		94,008		Indefinite

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~~3. ACQUISITION OF CANTALOUPE SYSTEMS, INC.~~

As of June 30, 2023
($ in thousands) Gross Accumulated
Amortization Net Amortization
Period
Intangible assets:
Brand and tradenames 2,161 (1,414) 747 1 - 7 years
Developed technology 20,188 (11,066) 9,122 5 - 6 years
Customer relationships 24,714 (6,771) 17,943 5 - 18 years
Total intangible assets $ 47,063 $ (19,251) $ 27,812
Goodwill 92,005 — 92,005 Indefinite

During the three and nine months ended March 31, 2024, the Company recognized $1.3 million and $4.3 million, respectively, in amortization expense related to intangible assets.

During the three and nine months ended March 31, 2023, there was $1.7 million and $3.4 million for each respective period in amortization 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 one single reporting unit for purposes of testing goodwill for impairment. During the three and nine months ended March 31, 2024 and March 31, 2023, the Company did not recognize any impairment charges related to goodwill.

9. ACQUISITIONS

CHEQ

On ~~November 9, 2017,~~February 1, 2024, the Company acquired all of the ~~outstanding~~ equity interests of ~~Cantaloupe pursuant to the Merger Agreement,~~Cheq Lifestyle Technology, Inc. ("CHEQ"). Founded in 2021, CHEQ powers payments for ~~approximately $85.0 million in aggregate consideration, net of cash acquired. Cantaloupe is a premier provider of cloud~~numerous professional sports teams, entertainment venues and festival operators through its enterprise-grade payment devices and mobile ~~solutions for vending, micro markets, and office coffee service.~~

ordering platform. The acquisition ~~expanded~~positions Cantaloupe for expansion into the ~~Company’s existing platform to become an end-to-end enterprise platform integrating Cantaloupe’s Seed Cloud which provides cloud~~large and ~~mobile solutions for dynamic route scheduling, automated pre-kitting, responsive merchandising, inventory management, warehouse~~rapidly growing sports, entertainment, and accounting management, as well as cashless vending. In addition to new technology and services, due to Cantaloupe’s existing customer base, the acquisition expands the Company’s footprint into new global markets.

~~The preliminary fair value~~restaurant sectors with a comprehensive suite of ~~the purchase price consideration consisted of the following:~~


~~($ in thousands)~~
~~Cash consideration, net of cash acquired~~ ~~(1)~~	$	~~(65,181)~~
~~USAT shares issued as stock consideration~~ ~~(2)~~		~~(19,810)~~
~~Total consideration~~	$	~~(84,991)~~

~~(1)~~

~~The Cash Consideration is subject to certain post-closing adjustments, including with respect to the Company’s net working capital, as set forth in the Merger Agreement.~~

self-service solutions.

~~(2)~~

Represents the stock consideration amount pursuant to the terms and conditions of the Merger Agreement equal to the 3,423,367 USAT Shares issued by the Company, multiplied by the fair market value per share of the USAT common stock, as determined by the Merger Agreement. Pursuant to an Escrow Agreement, 1,496,707 of the USAT Shares, with a value of $8.7 million as determined under the Merger Agreement, were not delivered to the former stockholders or warrant holders of Cantaloupe but are to be held in escrow for a minimum of fifteen months following the acquisition as partial security for certain indemnification obligations of the former stockholders and warrant holders of Cantaloupe under the Merger Agreement.

The Company financed a portion of the purchase price with proceeds from a $25.0 million term loan (“Term Loan”) and $10.0 million of borrowings under a line of credit (“Revolving Credit Facility”), provided by JPMorgan Chase Bank, N.A., for an aggregate principal amount of $35.0 million. Refer to Note 9 for additional details.

The acquisition of ~~Cantaloupe~~CHEQ was accounted for as a business combination using the acquisition ~~method. Under the acquisition~~ method of ~~accounting,~~accounting. The purchase price of the acquired company was 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.

The Company paid an aggregate purchase price consideration of $4.8 million including $1.1 million cash held back by the Company for net working capital and other post-closing adjustments. The acquisition was funded by the Company's cash on hand.

The following table summarizes the preliminary fair value assigned to the assets acquired and liabilities assumed in the transaction were recorded at the date of acquisition at their respective fair values using assumptions that are subject to change. The Company has not finalized its valuation of certain assets and liabilities recorded in connection with this transaction. Thus, the estimated measurements recorded to date are subject to change and any changes will be recorded as adjustments to the fair value of those assets and liabilities and residual amounts will be allocated to goodwill. The final valuation adjustments may also require adjustment to the consolidated statements of operations and cash flows. The final determination of these fair values will be completed as soon as possible but no later than one year from the acquisition date.

~~Table of Contents~~

~~The following table summarizes the fair value of total consideration transferred to the holders of all of the outstanding equity interests of Cantaloupe~~ at the acquisition date of ~~November 9, 2017:~~

February 1, 2024.

Cantaloupe
($ in thousands)

Systems, Inc.
Accounts receivable

$
3,232
Finance receivables, current portion

1,640
Inventory

782
Prepaid expense and other current assets

682
Finance receivables, less current portion

3,483
Other assets

50
Property and equipment

1,573
Intangibles

30,800
Goodwill

52,957
Total assets acquired

95,199
Accounts payable

(1,591)
Accrued expenses

(1,832)
Deferred revenue

(626)
Capital lease obligations and current obligations under long-term debt

(666)
Capital lease obligations and long-term debt, less current portion

(1,134)
Deferred income tax liabilities

(4,359)
Total net assets acquired

$
84,991

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($ in thousands)	Amount
Cash and cash equivalents	$	84
Property and equipment, net	1,160
Intangible assets	2,600
Other assets	381
Total identifiable assets acquired	4,225
Accounts payable	(442)
Other liabilities	(52)
Total liabilities assumed	(494)
Total identifiable net assets	3,731
Goodwill	1,105
Fair value of total consideration transferred	$	4,836

The Company determined the fair value of the identifiable intangible assets acquired with the assistance of third-party valuation consultants. Amounts allocated to identifiable intangible assets ~~included $18.9~~included $1.7 million related to developed technology, $0.4 million related to customer relationships, ~~$10.3 million related to developed technology,~~ and ~~$1.6~~$0.5 million related to trade names. 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 ~~excess earnings method.~~distributor method which estimates the value using the cash flow impact in a scenario where the customer relationships are not in place. The fair value of ~~both the acquired developed technology and~~ the acquired trade names was determined using the relief from royalty ~~method. The estimated useful life~~method which estimates the value using the discounted value of the ~~acquired~~royalty that a company would pay to license the trade name. The recognized intangible assets ~~ranged from 6 to 18 years, with a weighted average estimated useful life of 13 years. The related amortization~~ will be ~~recorded~~amortized on a straight-line ~~basis.~~

basis over the estimated useful lives of the respective assets.

Goodwill of ~~$53.0~~$1.1 million ~~arising~~arising from the acquisition includes the expected synergies between ~~Cantaloupe~~CHEQ and the Company ~~the value of the employee workforce,~~ and intangible assets that do not qualify for separate recognition at the time of acquisition. The goodwill, which is ~~not~~ deductible for income tax purposes, was assigned to the Company’s only reporting unit.

The amount of Cantaloupe revenues included in the Company’s Consolidated Statements of Operations for both the three and six months ended December 31, 2017 is $4.7 million. The amount of Cantaloupe earnings included in the Company’s Consolidated Statements of Operations for both the three and six months ended December 31, 2017 is $1.8 million, which was primarily driven by an income tax benefit of $1.7 million.

As a result of the acquisition of Cantaloupe, the Company incurred the following integration and acquisition costs and other one-time charges related to the acquisition in the three and six months ended December 31, 2017:

Three months ended

Six months ended
($ in thousands)

December 31, 2017

December 31, 2017
Cost of equipment

Acquired inventory fair market value step-up

$
23

$
23
Operating expenses

Integration and acquisition costs

3,335

4,097
Interest expense

Write-off of deferred financing costs

55

55
Total integration and acquisition-related costs

$
3,413

$
4,175

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~~Supplemental disclosure of pro forma information~~

The following supplemental unaudited pro forma information presents the combined results of USAT and Cantaloupe as if the acquisition of Cantaloupe occurred on July 1, 2016. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on July 1, 2016, nor are they indicative of any future results.

The pro forma results include adjustments for the preliminary purchase accounting impact of the Cantaloupe acquisition (including, but not limited to, amortization associated with the acquired intangible assets, and the interest expense and amortization of deferred financing fees associated with the Term Loan and Revolving Credit Facility that were used to finance a portionabove allocation of the purchase price ~~along with~~is provisional and is still subject to change within the ~~related tax impacts) and~~measurement period. The final allocation of the ~~alignment~~purchase price is expected to be completed as soon as practicable, but no later than one year from the date of ~~accounting policies. Other material non-recurring adjustments are reflected in~~ the ~~pro forma and described below:~~

acquisition.

Three months ended December 31,

Six months ended December 31,
(In thousands, except per share data)

2017

2016

2017

2016
Revenues

$
34,772

$
27,521

$
67,642

$
54,704
Net loss attributable to USAT

(10,632)

(428)

(10,552)

(5,458)
Net loss attributable to USAT common shares

$
(10,632)

$
(428)

$
(10,886)

$
(5,792)
Net loss per share - basic and diluted

(0.20)

(0.01)

(0.20)

(0.11)
Weighted average number of common shares outstanding - basic and diluted

53,619,921

53,315,633

53,584,368

52,369,824

The ~~supplemental unaudited pro forma earnings for the three and six months ended December 31, 2017 were adjusted to exclude $3.3~~Company recognized $0.9 million and ~~$4.1~~$1.0 million of integration and acquisition related costs ~~respectively.~~

~~The supplemental unaudited pro forma earnings~~that were expensed for the ~~six~~three and nine months ended ~~December~~March 31, ~~2016 were adjusted to include $4.1 million of~~2024. These costs are recorded within integration and acquisition ~~costs.~~

~~4. FINANCE RECEIVABLES~~

~~Finance receivables consist~~expenses in the Condensed Consolidated Statements of Operations. Pro forma financial information of the ~~following:~~

acquisition is not presented due to the immaterial impact of the financial results of CHEQ in the Company's Consolidated Financial Statements.

December 31,

June 30,
($ in thousands)

2017

2017
Total finance receivables

$
16,732

$
19,617
Less current portion

5,517

11,010
Non-current portion of finance receivables

$
11,215

$
8,607

Three Square Market

On December 1, 2022, the Company acquired all of the equity interests of Three Square Market, Inc., a Wisconsin corporation, and Three Square Market Limited, a UK private limited company (collectively "32M") pursuant to an Equity Purchase Agreement. 32M is a leading provider of software and self-service kiosk-based point of sale and payment solutions to the micro market industry and the acquisition expanded the Company's presence in that industry. In addition to new technology and services, due to 32M’s existing customer base, the acquisition expanded the Company’s footprint into new global markets.

The acquisition of 32M was accounted for as a business combination using the acquisition method of accounting. The purchase price of the acquired company was 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.

The Company ~~accounts~~paid an aggregate purchase price consideration of $41.1 million, which consisted of $36.6 million in cash and 1,240,920 shares of the Company's common stock (the "Stock Consideration") with an aggregate fair value of $4.5 million for ~~their finance receivables using delinquency~~the acquisition of 32M. The aggregate cash consideration includes $0.5 million of cash paid into an escrow account for net working capital and ~~nonaccrual data~~other post-closing adjustments. Additionally, the Stock Consideration of 1,240,920 shares ("Escrowed Shares") referred to above were placed into an escrow account to resolve indemnification claims for breach of certain representations and warranties. 50% of the Escrowed Shares were released as ~~key performance indicators.~~of the first anniversary of the acquisition date and

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the remaining 50% will be released on the second anniversary of the acquisition date, less any shares that may be returned to the Company on account of any indemnity claims. The Escrowed Shares are considered to be issued and outstanding shares of the Company ~~classified $407 thousand~~as of the acquisition date.

The company funded the cash consideration of the acquisition by borrowing $25 million of debt from the JPMorgan Credit Facility and ~~$102 thousand as outstanding~~the remaining consideration utilizing existing cash on hand.

The estimated fair value of the purchase price consideration consisted of the following:


($ in thousands)
Closing cash consideration	$	36,605
Stock consideration	4,506
Fair value of total consideration transferred	$	41,111

The following table summarizes the adjusted fair value assigned to the assets acquired and ~~nonperforming~~liabilities assumed as of December ~~31, 2017 and June 30, 2017, respectively.~~ 1, 2023.


($ in thousands)	Amount
Cash and cash equivalents	$	391
Accounts receivable	1,780
Inventories	2,011
Intangible assets	15,538
Other assets	629
Total identifiable assets acquired	20,349
Accounts payable	(2,410)
Tax liabilities	(3,033)
Total liabilities assumed	(5,443)
Total identifiable net assets	14,906
Goodwill	26,205
Fair value of total consideration transferred	$	41,111

The Company ~~expects to collect on their outstanding finance receivables, less any portion currently reserved, without~~determined the ~~contracting of third parties. At December 31, 2017 and June 30, 2017, credit quality indicators consisted~~fair value of the ~~following:~~

December 31,

June 30,
($ in thousands)

2017

2017
Performing

$
16,325

$
19,515
Nonperforming

407

102
Total

$
16,732

$
19,617

~~Table~~identifiable intangible assets acquired with the assistance of ~~Contents~~

~~Age Analysis of Past Due Finance Receivables~~

~~As of December 31, 2017~~

30 and Under

31 – 60

61 – 90

Greater than

Total

Total

Days Past

Days Past

Days Past

90 Days Past

Non-

Finance
($ in thousands)

Due

Due

Due

Due

Performing

Performing

Receivables
QuickStart Leases

$
40

$
85

$
162

$
120

$
407

$
16,325

$
16,732

~~Age Analysis of Past Due Finance Receivables~~

~~As of June 30, 2017~~

~~5. INVENTORY~~

~~Inventory, net of reserves, was $11.~~2third-party valuation consultants. Amounts allocated to identifiable intangible assets included $7.5 million related to developed technology, $7.5 million related to customer relationships, and ~~$4.6~~$0.5 million ~~as of December 31, 2017 and June 30, 2017, respectively. Inventory consists of finished goods. The Company's inventories are valued at the lower of cost or net realizable value.~~

~~The Company establishes allowances for obsolescence of inventory based upon quality considerations and assumptions about future demand and market conditions.~~

related to trade names. The fair value of ~~Cantaloupe inventories~~the acquired ~~included~~developed technology was determined using a multi-period excess earnings method. The fair ~~market~~ value ~~step-up~~ of ~~$23 thousand. In~~ the ~~three~~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 significant unobservable inputs used in the valuation of the customer relationship asset and ~~six months ended December 31, 2017,~~acquired developed technology asset are the revenue growth rates used in the development of the projected financial information used as an input to calculate those values and the discount rate applied. The recognized intangible assets will be amortized on a straight-line basis over the estimated useful lives of the respective assets. The estimated useful lives for developed technology, customer relationship, trade names were 5, 5 and 3 years, respectively.

Goodwill of $26.2 million arising from the acquisition includes the expected synergies between 32M and the Company ~~recognized~~and intangible assets that do not qualify for separate recognition at the ~~$23 thousand fair market value step-up as a component~~time of ~~cost of equipment, as the inventory acquired~~acquisition. The goodwill, which is deductible for income tax purposes, was ~~sold~~assigned to the Company’s ~~customers.~~

~~6. EARNINGS PER SHARE~~

~~The calculation~~only reporting unit.

Subsequent to the acquisition closing date and within the one-year measurement period, the Company adjusted the purchase price allocation from what was initially recognized to reflect facts and circumstances in existence as of ~~basic earnings per share (“EPS”)~~the acquisition close date. These adjustments included a net increase of $0.3 million to the overall purchase price consideration, a $2.3 million increase in intangible assets, a net decrease of $1.0 million in working capital, a $0.2 million increase in other assets, a $1.1 million increase in tax liabilities, and ~~diluted EPS are presented below:~~

Three months ended December 31,

2017

2016

Net Loss

Shares

Per-Share

Net Income

Shares

Per-Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount
Net (loss) income from continuing operations

$
(12,516)

$
233

Less: Preferred stock dividends

-

-

Basic EPS

Net (loss) income available to common shareholders

(12,516)

52,150,106

$
(0.24)

233

40,308,934

$
0.01

Effect of Dilutive Securities

Incremental shares

-

-
(a)

-

421,778

Diluted EPS

Net (loss) income available to common shareholders plus assumed conversions

$
(12,516)

52,150,106

$
(0.24)

$
233

40,730,712

$
0.01

a $0.7 million decrease in accounts payable. Recognized goodwill increased by $0.6 million as a result of these adjustments. Furthermore, the Company recorded additional amortization expense of $0.5 million associated with the increase in fair value of the recognized intangible assets in its Consolidated Statement of Operations during the measurement period.

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Six months ended December 31,

2017

2016

Net Loss

Shares

Per-Share

Net Loss

Shares

Per-Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount
Net loss from continuing operations

$
(12,729)

$
(2,231)

Less: Preferred stock dividends

(334)

(334)

Basic EPS

Net loss available to common shareholders

(13,063)

49,861,735

$
(0.26)

(2,565)

39,398,469

$
(0.07)

Effect of Dilutive Securities

Incremental shares

-

-
(a)

-

-
(a)

Diluted EPS

Net loss available to common shareholders plus assumed conversions

$
(13,063)

49,861,735

$
(0.26)

$
(2,565)

39,398,469

$
(0.07)

~~645,417, 581,621, and 851,407 shares were excluded for the three and six months ended December 31, 2017 and six months ended December 31, 2016, respectively, as the effects would be anti-dilutive.~~

The ~~changes in~~above table represents the average number of shares that were anti-dilutive in the three and six months ended December 31, 2017 compared to the same period last year, were due to warrants exercised in connection with our common stock during September 2016.

~~7. GOODWILL AND INTANGIBLES~~

~~Intangible asset balances and goodwill consisted~~final allocation of the ~~following:~~

As of December 31, 2017

Accumulated

Amortization
($ in thousands)

Gross

Amortization

Net

Period
Intangible assets:

Non-compete agreements

2

(2)

—

2 years
Brand and tradenames

1,695

(96)

1,599

3 - 7 years
Developed technology

10,939

(499)

10,440

5 - 6 years
Customer relationships

19,049

(178)

18,871

10 - 18 years
Total intangible assets

$
31,685

$
(775)

$
30,910

Goodwill

64,449

—

64,449

Indefinite

Total intangible assets & goodwill

$
96,134

(775)

$
95,359

purchase price.

Yoke Payments

~~Table~~In August 2021, we completed the acquisition of ~~Contents~~

As of June 30, 2017

Accumulated

Amortization
($ in thousands)

Gross

Amortization

Net

Period
Intangible assets:

Non-compete agreements

2

(2)

—

2 years
Brand

95

(48)

47

3 years
Developed technology

639

(191)

448

5 years
Customer relationships

149

(22)

127

10 years
Total intangible assets

$
885

$
(263)

$
622

Goodwill

11,492

—

11,492

Indefinite

Total intangible assets & goodwill

$
12,377

(263)

$
12,114

~~For~~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 ~~three~~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 ~~six months ended December 31, 2017, there was $472 thousand and $516 thousand in amortization expense related to~~ intangible assets ~~respectively,~~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 ~~compared~~goodwill.

Through the acquisition, Yoke’s point of sale platform extended its offering to provide self-checkout while seamlessly integrating with Cantaloupe’s inventory management and payment processing platforms.

The consideration transferred for the ~~three~~acquisition included payments of $3 million in cash at the close of the transaction and ~~six months ended December 31, 2016, for which there was $43 thousand and $87 thousand~~$1 million in ~~amortization expense related to intangible assets, respectively.~~

~~8. LINE OF CREDIT~~

~~During the fiscal year ended June~~deferred cash payment due on or before July 30, 2016, the Company entered into a Loan and Security Agreement and other ancillary documents (as amended, the “Heritage Loan Documents”) with Heritage Bank of Commerce (“Heritage Bank”), providing for a secured asset-based revolving line of credit in an amount of up to $12.0 million (the “Heritage Line of Credit”) at an interest rate calculated2022 based on the ~~Federal Reserves’ Prime plus 2.25%. The Heritage Line~~achievement of ~~Credit and the Company’s obligations under the Heritage Loan Documents were secured by substantially all of the Company’s assets, including its intellectual property.~~

~~During March 2017,~~certain sales growth targets. On July 27, 2022, the Company ~~entered into~~made the ~~third amendment~~cash payment of $1 million in accordance with ~~Heritage Bank that extended~~ the ~~maturity date of the Heritage Line of Credit from March 29, 2017 to September 30, 2018.~~

On November 9, 2017, the Company paid all amounts due in respect of principal, interest, and fees, and satisfied all of its obligations under the Loan and Security Agreement dated as of March 29, 2016, as amended, and ancillary agreements by and between the Company and Heritage Bank of Commerce. The Company recorded a charge of $55 thousand to write-off any remaining deferred financing costs related to the Heritage Line of Credit to interest expense for the three and six months ended December 31, 2017. Pursuant to such payment, all commitments of Heritage Bank of Commerce were terminated, and the Heritage Loan and Security Agreement was terminated. As such, there was no outstanding balance on the Heritage Line of Credit at December 31, 2017.

~~9. DEBT~~

~~Revolving Credit Facility and Term Loan~~

~~On November 9, 2017,~~agreement consideration.

Additionally in connection with the acquisition, ~~of Cantaloupe,~~ the Company ~~entered into~~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 ~~five year credit agreement among~~post-combination expense and were not included in the ~~Company, as~~purchase price. We will begin recognizing compensation expense for these awards over that requisite service period when it becomes probable that the ~~borrower, its subsidiaries, as guarantors,~~performance condition would be satisfied. At each reporting date, we assess the probability of achieving the sales targets and ~~JPMorgan Chase Bank, N.A., as~~fulfilling the ~~lender~~performance condition. As of March 31, 2024, we determined that it is not probable that the performance condition would be satisfied and, ~~administrative agent~~accordingly, have not recognized compensation expense related to these awards.

The following table summarizes the total consideration paid for Yoke, total net assets acquired, identifiable assets and goodwill recognized at the ~~lender (the “Lender”), pursuant~~acquisition date:


($ in thousands)	Amount
Consideration
Cash	$	2,966
Contingent consideration arrangement	1,000
Fair value of total consideration transferred	3,966

Recognized amounts of identifiable assets
Total net assets acquired	21
Identifiable intangible assets	1,235
Total identifiable net assets	1,256

Goodwill	$	2,710

Amounts allocated to identifiable intangible assets included $0.9 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 ~~Lender (i) made~~value using the cash flow impact in a ~~$25~~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 $2.7 million ~~Term Loan to~~arising from the acquisition includes the expected synergies between Yoke and the Company and ~~(ii) provided~~intangible assets that do not qualify for separate recognition at the ~~Company with~~time of acquisition. The goodwill, which is deductible for income tax purposes, was assigned to the ~~Revolving Credit Facility under which~~Company’s only reporting unit.

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The above table represents the ~~Company may borrow revolving credit loans in an aggregate principal amount not to exceed $12.5 million at any time.~~

~~The proceeds of the Term Loan and borrowings under the Revolving Credit Facility, in an aggregate principal amount equal to $35.0 million, were used by the Company to finance a portion~~final allocation of the purchase price, ~~for~~noting no material measurement period adjustments. Pro forma financial information of the acquisition ~~of Cantaloupe ($27.8 million) and repay existing indebtedness~~is not presented due to ~~Heritage Bank of Commerce ($7.2 million). Future borrowings under~~ the ~~Revolving Credit Facility may be used by the Company for working capital and general corporate purposes~~immaterial impact of the financial results of Yoke in the Company's Consolidated Financial Statements.

10. REVENUES

Based on similar operational characteristics, the Company's revenues are disaggregated as follows:


	Three months ended March 31,			Nine months ended March 31,
($ in thousands)		2024		2023		2024		2023
Transaction fees		$	40,034	$	33,389	$	114,956	$	97,076
Subscription fees		19,173		17,856		55,415		50,176
Subscription and transaction fees		$	59,207	$	51,245	$	170,371	$	147,252
Equipment sales		8,690		9,111		25,568		32,216
Total revenues		$	67,897	$	60,356	$	195,939	$	179,468

Contract Liabilities

The Company’s contract liability (i.e., deferred revenue) balances are as follows:


	Three months ended March 31,
($ in thousands)	2024		2023

Deferred revenue, beginning of the period	$	1,788	$	1,970
Deferred revenue, end of the period	1,893		1,894
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period	$	268	$	94


	Nine months ended March 31,
($ in thousands)	2024		2023

Deferred revenue, beginning of the period	$	1,666	$	1,893
Deferred revenue, end of the period	1,893		1,894
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period	$	475	$	319

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.

Future Performance Obligations

The Company ~~and its subsidiaries.~~will recognize revenue in future periods related to remaining performance obligations for certain open contracts. Generally, these contracts have terms of one year or less. The ~~principal~~ amount of revenue related to unsatisfied performance obligations in which the ~~Term Loan~~original duration of the contract is ~~payable quarterly beginning on December~~greater than one year are primarily associated with the Company's Cantaloupe ONE rental program which has a contractual term of 36 months. The following table reflects the estimated fees to be recognized in the future related to performance obligations that are unsatisfied as of March 31, ~~2017, and the Term Loan, all advances under the Revolving Credit Facility, and all other obligations must be paid in full at maturity, on November 9, 2022.~~

2024:

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~~Loans under~~
($ in thousands) As of March 31, 2024
Remainder of fiscal year 2024 $ 1,520
2025 5,941
2026 3,793
Thereafter —
Total $ 11,254

Contract Costs

At March 31, 2024, the ~~five year credit agreement bear interest, at the Company's option, by reference~~Company had net capitalized costs to ~~a base rate or a rate based on LIBOR,~~obtain contracts of $0.9 million included in ~~either case, plus an applicable margin determined quarterly based~~Prepaid expenses and other current assets and $2.4 million included in Other noncurrent assets on the ~~Company's Total Leverage Ratio as~~Condensed Consolidated Balance Sheet. At June 30, 2023, the Company had net capitalized costs to obtain contracts of ~~the last day of each fiscal quarter. The applicable interest rate~~$0.6 million included in Prepaid expenses and other current assets and $2.8 million included in Other noncurrent assets on the loans for the three and six months ended December 31, 2017 is LIBOR plus 4%. The Term Loan and Revolving Credit Facility contain customary representations and warranties and affirmative and negative covenants and require the Company to maintain a minimum quarterly Total Leverage Ratio and Fixed Charge Coverage Ratio.

AsCondensed Consolidated Balance Sheet. None of ~~December 31, 2017, the outstanding balances for the Revolving Credit Facility and the Term Loan~~these capitalized contract costs were ~~$10.0 million and $24.6 million, respectively.~~

~~Other Long-Term Borrowings~~

The Company periodically enters into capital lease obligations to finance network servers, computers, office furniture and equipment related support for use in its daily operations. During the six months ended December 31, 2017, the Company entered into capital lease obligations totaling $227 thousand, comprised of monthly installments of $7 thousand due within three years. The value of the acquired equipment is included in property and equipment and depreciated accordingly.

In connection with the acquisition of Cantaloupe, the Company assumed debt of $1.8 million. At December 31, 2017, the debt is comprised of $550 thousand of promissory notes bearing an interest rate of a 5% and maturing on April 5, 2020 with principal and interest payments due monthly, $830 thousand of promissory notes bearing an interest rate of 10% and maturing on September 30, 2021 with principal and interest payments due quarterly, and $356 thousand of promissory notes bearing an interest rate of 12% and maturing on December 15, 2019 with principal and interest payments due quarterly.

~~10. FAIR VALUE OF FINANCIAL INSTRUMENTS~~

~~As of December 31, 2017, the Company held no level 1, level 2, or level 3 financial instruments.~~

As of June 30, 2016, 2.2 million warrants with a fair value of $3.7 million comprised the Company’s Level 3 financial instruments. The Level 3 financial instruments consisted of common stock warrants issued by the Company in March 2011 to purchase shares of the Company’s common stock. The Level 3 financial instruments included features requiring liability treatment of the warrants, with the fair value of the common stock based on valuations performed by an independent third-party valuation firm. The fair value was determined using proprietary valuation models using the quality of the underlying securities of the warrants, restrictions on the warrants and security underlying the warrants, time restrictions and precedent sale transactions completed in the secondary market or in other private transactions. During the three months ended September 30, 2016, all of the aforementioned warrants were exercised resulting in a $5.2 million reclassification to Common Stock and the net difference of $1.5 million was recorded as a loss on fair value associated with the warrant liability.

~~11. INCOME TAXES~~

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Act”) was signed into law. Substantially all of the provisions of the Act are effective for taxable years beginning after December 31, 2017. The Act includes significant changes to the Internal Revenue Code of 1986 (as amended, the “Code”), including amendments which significantly change the taxation of individuals, and business entities. The Act contains numerous provisions impacting the Company, the most significant of which reduces the Federal corporate statutory tax rate from 34% to 21%.

The staff of the US Securities and Exchange Commission (“SEC”) has recognized the complexity of reflecting the impacts of the Act, and on December 22, 2017 issued guidance in Staff Accounting Bulletin 118 (“SAB 118”), which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or “buckets”) associated with a company’s status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted.

impaired.

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The various provisions under the Act deemed most relevant to the Company have been considered in preparation of its financial statements as of December 31, 2017. To the extent that clarifications or interpretations materialize in the future that would impact upon the effects of the Act incorporated into the December 31, 2017 financial statements, those effects will be reflected in the future as or if they materialize.

For the three and six months ended December 31, 2017, the Company recorded income tax provisions of $9,073 thousand and $8,605 thousand, respectively, (substantially all deferred income taxes) which include a charge of $6,592 thousand related to the Act. These provisions are based upon income (loss) before income taxes using an estimated negative annual effective income tax rate of 49.20%, which is primarily driven by the impact of permanent differences. The tax rate reduction related to the Act was treated as a discrete item in the tax provisions for the three and six months ended December 31, 2017.

The accounting for deferred income taxes in the acquisition of Cantaloupe did not consider the potential effects of IRS Code Section 382 relating to the limitation on use of operating loss carryforwards created by Cantaloupe for its changes in ownership because the analysis required for such determination has not yet been completed. If upon completion of such analysis there are limitations on the use of operating loss carryforwards created by Cantaloupe totaling approximately $13,271 thousand, the potential effect would be to record a valuation allowance in the opening balance sheet, as well as a tax benefit to reverse the provision recorded during the three months ended December 31, 2017 related to the rate reduction of the deferred tax assets acquired.

For the three and six months ended December 31, 2016, income tax benefits of $0 and $115 thousand, respectively, (substantially all deferred income taxes) were recorded. The benefits are based upon income (loss) before income taxes using an estimated annual effective income tax rate of 30% for the fiscal year ended June 30, 2017. However, such benefits actually calculated have been limited to $115 thousand pending the materialization of additional income before income taxes resulting in an increase of $30 thousand in valuation allowances for the calculated additional benefits. The benefits for the six months ended December 31, 2016 were reduced by a provision for the tax effect of the change in the fair value of warrant liabilities which was treated discretely. All of those warrants were exercised as of September 30, 2016.

~~12. EQUITY~~

On July 25, 2017, the Company closed its underwritten public offering of 9,583,332 shares of its common stock at a public offering price of $4.50 per share. The foregoing included the full exercise of the underwriters' option to purchase 1,249,999 additional shares from the Company. The gross proceeds to the Company from the offering, before deducting underwriting discounts and commissions and other offering expenses, was approximately $43.1 million.

On November 6, 2017, the Company entered into a Merger Agreement with Cantaloupe for cash and 3,423,367 shares of the company’s stock valued at $19.8 million. Refer to Footnote 3 for details on the Merger Agreement.

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~~WARRANTS~~

During the three and ~~six~~nine months ended ~~December~~March 31, ~~2017, no warrants were exercised as compared to~~2024, amortization of capitalized contract costs was $0.2 million and $0.7 million, respectively. During the three and ~~six~~nine months ended ~~December~~March 31, ~~2016 where 2.4~~2023, amortization of capitalized contract costs was $0.2 million ~~warrants were exercised at $2.6058 per share, yielding proceeds of $6.2 million. The following table summarizes warrant activity for the three~~ and ~~six months ended December 31, 2017 and 2016:~~

$0.6 million, respectively.

Three months ended

Six months ended

December 31,

December 31,


2017

2016

2017

2016
Beginning balance

23,978

68,978

23,978

2,445,653
Issued

—

—

—

—
Exercised

—

(24,733)

—

(2,401,408)
Expired

—

—

—

—
Cancelled

—

(20,267)

—

(20,267)
Ending balance

23,978

23,978

23,978

23,978

~~STOCK OPTIONS~~

11. SHARE BASED COMPENSATION

Stock Options

The Company estimates the grant date fair value of the stock options with service conditions (i.e., a condition that requires an employee to render services to the Company for a stated period of time to vest) it grants using a Black-Scholes valuation model. The Company’s assumption for expected volatility is based on its historical volatility data related to market trading of its own common stock. The Company ~~bases its assumptions for~~uses the simplified method to determine expected term, as the Company does not have adequate historical exercise and forfeiture behavior on which to base the expected life ~~of the new stock option grants on the life of the option granted, and if relevant, its analysis of the historical exercise patterns of its stock options.~~assumption. The dividend yield assumption is based on dividends expected to be paid over the expected life of the stock option. The risk-free interest rate assumption is determined by using the U.S. Treasury rates of the same period as the expected option term of each stock option.

In July 2017, 135,000 stock options were granted for 11 employees vesting 1/3 on July 26, 2018, 1/3 on July 26, 2019 and 1/3 on July 26, 2020 expiring if not exercised prior to July 26, 2022. The options are intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended.

In August 2017, the Company awarded stock options to its Chief Executive Officer (CEO) and Chief Financial Officer (CFO) to purchase up to 19,047 and 25,000 shares respectively of common stock at an exercise price of $5.25 per share. The CEO options vest on August 16, 2018, expiring if not exercised prior to August 16, 2024. The CFO options vest 1/3 on August 16, 2018, 1/3 on August 16, 2019 and 1/3 on August 16, 2020, expiring if not exercised prior to August 16, 2024. The CEO options are intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, and the CFO options are non-qualified stock options.

The fair value of options granted during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2024 and ~~2016 was~~2023 were determined using the following ~~weighted average assumptions:~~

assumptions and includes only options with an established grant date under ASC 718:


		Six months ended
		December 31,
		2017			2016
	Nine months ended March 31,										Nine months ended March 31,
				2024						2024				2023
Expected volatility (percent)			50.21 - 50.89			50.00	Expected volatility (percent)	52.6% - 69.7%				74.6% - 77.6%
Expected life (years)			4.0 - 4.5			4.0
Expected dividends			—			—
Weighted average expected life (years)							Weighted average expected life (years)	4.2 - 4.5				4.4 - 4.6
Dividend yield (percent)							Dividend yield (percent)	0.0	%			0.0	%
Risk-free interest rate (percent)			1.64 - 1.72			1.06	Risk-free interest rate (percent)	4.1% - 4.3%				2.7% - 4.1%
Number of options granted			179,047			20,080
Weighted average exercise price		$	5.66		$	4.98
Weighted average grant date fair value		$	2.42		$	1.98

Stock based compensation related to ~~all~~ stock options with an established grant date for the ~~six~~three and nine months ended ~~December~~March 31, ~~2017~~2024 was $0.6 million and ~~2016~~$2.4 million, respectively, and for the three and nine months ended March 31, 2023 was ~~$276 thousand~~$1.1 million and ~~$95 thousand,~~$2.7 million, respectively.

Performance based awards

The Company has awarded stock options to certain executives which vest each year over a three to four year period. These stock options are subject to the achievement of performance goals to be established by the Company's Board for each fiscal year.

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~~COMMON STOCK~~

~~On July 1, 2017, $90 thousand~~The Compensation Committee of the Board of Directors has established the performance metrics as a price target for the trading price of the Company’s common stock ~~grants were awarded to~~in each ~~non-employee Director based on~~applicable fiscal year. The price target is achieved if the average closing price of the ~~Company’s Common Stock~~common stock during any consecutive 30-trading-day period during the applicable fiscal year meets or exceeds: (i) $10.50 in the case of fiscal year 2021; (ii) $13.50 in the case of fiscal year 2022; (iii) $16.50 in the case of fiscal year 2023; and (iv) $19.50 in the case of fiscal year 2024. If at least 80% of the performance goals for an applicable fiscal year are achieved, the Compensation Committee may determine that the portion of the option eligible to vest based on ~~June 8, 2017 (the date for which the stock grants were initially approved), for a total of 98,184 shares. The shares~~such fiscal year’s performance will vest ~~ratably~~ on a ~~monthly basis over~~prorated basis. In so determining, the ~~two~~Compensation Committee will consider the Company’s performance relative to its market competitors and any other considerations deemed relevant by the Compensation Committee. The Compensation Committee’s guideline is generally that for every percentage point the achieved price falls below the price target, the percentage of the performance options eligible to vest in respect of the applicable fiscal year should be reduced by 2%, but the Compensation Committee may vary this formula in its sole discretion.

For these performance based awards that provide discretion to the Compensation Committee, a mutual understanding of the key terms and conditions between the Company and the employees have not yet been met and a "Grant Date" as defined in ASC Topic 718 Compensation — Stock Compensation, has not been established. When the service period ~~following July 1, 2017.~~begins prior to the grant date, the Company begins recognizing compensation cost before there is a grant date. The Company estimates the award's fair value at each reporting period for these equity-classified awards, until the grant date, utilizing a Monte Carlo simulation valuation model. The total expense recognized for the three ended March 31, 2024 was immaterial for these awards. Total expense recognized for the nine months ended March 31, 2024 was $0.1 million. We did not recognize any related expenses during the three months ended March 31, 2023. The total benefit recognized for the nine months ended March 31, 2023 for these awards was $1.1 million, as a result of reversing unvested grants for terminated executives during the ~~six~~period.

Restricted Stock Awards

The Company grants service based restricted stock awards to employees. The Company determines expense related to restricted stock awards using the closing stock price on the grant date and these awards are expensed under the accelerated method over the vesting period which is typically a three-year service period. The total expense recognized for restricted stock awards for the three and nine months ~~ending December~~ended March 31, ~~2017~~2024 was ~~$315 thousand.~~

$0.5 million and $1.6 million, respectively. The total expense recognized for restricted stock awards for the three and nine months ended March 31, 2023 was $0.3 million and $1.3 million, respectively.

12. INCOME TAXES

For the three and nine months ended March 31, 2024, the Company recorded an income tax provision of $0.1 million and $0.2 million, respectively. The income tax provision primarily relates to state income and franchise taxes and deferred taxes related to goodwill. As of March 31, 2024, the Company had a total unrecognized income tax benefit of $0.7 million. The provision is based upon actual income before income taxes for the three months ended March 31, 2024, as this provides a more reliable estimate of the income tax provision than an estimated annual effective income tax rate.

As of March 31, 2024, the Company assessed its existing deferred tax assets and continues to record a full valuation allowance against its deferred tax assets. We considered both positive and negative evidence when evaluating the need for the valuation allowance on our deferred tax assets in accordance with ASC 740. Available evidence includes historical financial information supplemented by currently available information about future years. Generally, historical financial information is more objectively verifiable than projections of future income and is therefore given more weight in our assessment. In management’s judgement there is not enough objectively verifiable information to provide sufficient positive evidence to counteract the negative evidence of historic losses. However, given the Company’s current earnings and anticipated future earnings, the Company believes that there is a reasonable possibility that sufficient positive evidence may become available in future reporting periods to allow the Company to reach a conclusion that a portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. The exact timing and amount of a potential valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to actually achieve and limitations to the use of certain historical net operating losses.

For the three months ended March 31, 2023, the Company recorded an income tax provision of $0.1 million. For the nine months ended March 31, 2023, the Company recorded an income tax provision of $0.1 million. As of March 31, 2023, the Company reviewed the existing deferred tax assets and continues to record a full valuation allowance against its deferred tax assets. The income tax provisions primarily relate to the Company's uncertain tax positions, as well as state income and franchise taxes. As of March 31, 2023, the Company had a total unrecognized income tax benefit of $0.7 million. The provision

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is based upon actual loss before income taxes for the nine months ended March 31, 2023, as this provides a more reliable estimate of the income tax provision than an estimated annual effective income tax rate.

13. EARNINGS (LOSS) PER SHARE CALCULATION

Basic earnings (loss) per share is computed by dividing net earnings (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 earnings (loss) per share is presented below:


	Three months ended March 31,
($ in thousands, except per share data)	2024		2023

Numerator for basic and diluted loss per share
Net income (loss)	$	4,656	6,948
Preferred dividends	(289)		$	(289)
Net income (loss) applicable to common shareholders	4,367		6,659

Denominator for basic earnings (loss) per share - Weighted average shares outstanding	72,851,498		72,491,373
Effect of dilutive potential common shares	1,216,939		374,848
Denominator for diluted earnings (loss) per share - Adjusted weighted average shares outstanding	74,068,437		72,866,221

Basic earnings (loss) per share	$	0.06	$	0.09
Diluted earnings (loss) per share	$	0.06	$	0.09


	Nine months ended March 31,
($ in thousands, except per share data)	2024		2023

Numerator for basic and diluted loss per share
Net income (loss)	9,787		$	(2,199)
Preferred dividends	(578)		$	(623)
Net income (loss) applicable to common shareholders	9,209		(2,822)

Denominator for basic earnings (loss) per share - Weighted average shares outstanding	72,770,582		71,771,135
Effect of dilutive potential common shares	1,284,238		—
Denominator for diluted earnings (loss) per share - Adjusted weighted average shares outstanding	74,054,820		71,771,135

Basic earnings (loss) per share	$	0.13	$	(0.04)
Diluted earnings (loss) per share	$	0.12	$	(0.04)

Potentially anti-dilutive shares excluded from the calculation of diluted earnings per share were approximately 1 million for the three and nine months ended March 31, 2024. Potentially anti-dilutive shares excluded from the calculation of diluted earnings per share were approximately 4.5 million for the three months ended March 31, 2023.

14. SHAREHOLDERS' EQUITY AND PREFERRED STOCK

During the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2023, the Company ~~awarded~~retired 59,281 shares of its Series A convertible preferred stock that it purchased for an aggregate amount of ~~177,363 shares~~approximately $2.45 million. The repurchase transaction was primarily accounted

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for as an extinguishment of preferred stock and recorded as a decrease to ~~its Chief Executive Officer, Chief Financial Officer~~the carrying value of the preferred stock in the amount of $0.42 million and ~~Chief Services Officer under its fiscal year 2017 long term stock incentive plan and an aggregate of 6,007 shares to two non-employee Directors in satisfaction of board fees.~~

~~LONG TERM INCENTIVE PLANS~~

~~The Board approved the Fiscal Year 2018 Long-Term Stock Incentive Plan (the “2018 LTI Stock Plan”) which provides that executive officers would be awarded shares of~~ common stock of $1.73 million for an aggregate amount of $2.15 million that was included within the cash flows from financing activities in the condensed consolidated statements of cash flows. The remaining $0.3 million was deemed to be an amount in excess of the fair value of the preferred stock and was recorded within operating expenses in the condensed consolidated statements of operations and cash flows from operating activities in the condensed consolidated statements of cash flows.

15. COMMITMENTS AND CONTINGENCIES

Litigation

We are a party to litigation and other proceedings that arise in the ordinary course of our business. These types of matters could result in fines, penalties, compensatory or treble damages or non-monetary sanctions or relief. In accordance with the accounting guidance for contingencies, we reserve for litigation claims and assessments asserted or threatened against us when a loss is probable and the amount of the loss can be reasonably estimated. We cannot predict the outcome of legal or other proceedings with certainty.

Leases

The Company has entered into various operating lease obligations. See Note 5 - Leases for additional information.

Outstanding Debt

The Company has debt and other financing arrangements. See Note 6 - Debt and other financing arrangements for additional information.

Purchase Commitments

As of March 31, 2024, the Company inhad no material firm purchase commitments over the ~~event~~next year.

16. RELATED PARTY TRANSACTIONS

A member of our Board of Directors serves as a strategic advisor to a consulting firm that ~~certain metrics relating~~we utilize for payments analytics and advisory services. These services are utilized by the Company to reduce the ~~Company’s 2018 fiscal year would result in specified ranges~~cost of ~~year-over-year percentage growth.~~ our interchange and other processing fees charged by payment processors and credit card networks. As consideration for the services, we pay the consulting firm a success fee based on the savings realized by the Company, and a recurring monthly subscription fee for the analytical services. The ~~metrics are~~ total ~~number~~expense recognized within Cost of ~~connections as~~subscription and transaction fees for the three and nine months ended March 31, 2024 for these arrangements was $0.1 million and $0.2 million, respectively. The total expense recognized within Cost of ~~June 30, 2018 as compared~~subscription and transaction fees for the three and nine months ended March 31, 2023 for these arrangements was $0.1 million and $0.2 million respectively.

17. SUBSEQUENT EVENTS

On April 11, 2024, the Company agreed to ~~total number~~a net settlement of connections as of June 30, 2017 (40% weighting) and adjusted EBITDA earned during the 2018 fiscal year as compared to the adjusted EBITDA earned during the 2017 fiscal year (60% weighting). If none of the minimum threshold year-over-year percentage target goals are achieved, the executive officers would not be awarded any shares. If all of the year-over-year percentage target goals are achieved, the executive officers would be awarded shares having the following value: Chief Executive Officer - $840,000 (160% of base salary), Chief Financial Officer - $300,000 (100% of base salary), Chief Services Officer - $275,000 (100% of base salary), and Chief Product Officer - $280,000 (100% of base salary and subject to pro ration). If all of the maximum distinguished year over year percentage target goals are achieved, the executive officers would be awarded shares having the following value: Chief Executive Officer - $1,260,000 (240% of base salary), Chief Financial Officer - $450,000 (150% of base salary), Chief Services Officer - $412,500 (150% of base salary), and Chief Product Officer - $420,000 (150% of base salary and subject to pro ration). Assuming the minimum threshold year-over-year percentage target goal would be achieved forapproximately $1.5 million with a particular metric, the number of shares to be awarded for that metric would be determined on a pro rata basis, provided that the award would not exceed the maximum distinguished award for that metric. The shares awarded under the 2018 LTI Stock Plan would vest as follows: one-third at the time of issuance; one-third on June 30, 2019; and one-third on June 30, 2020.

~~The Company had long-term stock incentive plans (“LTI”) in prior fiscal years for its then executive officers. Stock based compensation~~third party insurance carrier related to the ~~LTI plans was~~reimbursement of expenses associated with the closed SEC investigation of the Company's accounting practices from fiscal years 2017 and 2018. The settlement will be recognized as ~~follows~~a gain in the ~~three and six months ended December 31, 2017 and 2016:~~

Three months ended

Six months ended

December 31,

December 31,
($ in thousands, except per share data)

2017

2016

2017

2016
FY18 LTI Plan

$
273

$
—

$
489

$
—
FY17 LTI Plan

64

85

128

155
FY16 LTI Plan

9

23

19

50
FY15 LTI Plan

—

3

—

3
Total

$
346

$
111

$
636

$
208

~~13. COMMITMENTS AND CONTINGENCIES~~

~~During~~Company's consolidated financial statements in the current fiscal year, the Company expanded the leased space for its headquarters in Malvern, Pennsylvania to a total of 23,138 square feet. The company’s monthly base rent now is approximately $47 thousand with a lease expiration date of November 30, 2023.

Through the Cantaloupe acquisition, the Company absorbed a noncancelable operating lease pertaining to Cantaloupe’s headquarters based in San Francisco, California. The leased premise consists of approximately 8,400 square feet and calls for rental payments of approximately $46 thousand due each month through its January 31, 2020 expiration date.

fourth quarter.

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From time to time, the Company is involved in various legal proceedings arising during the normal course of business. In the opinion of the Company’s management, these proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

~~14. SUBSEQUENT EVENTS~~

The Company has evaluated subsequent events that occurred through the date of the filing of this Form 10-Q. No significant events occurred subsequent to the balance sheet date and prior to the filing date of this Form 10-Q that would have a material impact on the Consolidated Financial Statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and related notes included in this Form 10-Q.

Forward-Looking Statements

This Form ~~10-Q~~10‑Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, the anticipated financial and operating results of ~~the Company.~~Cantaloupe, Inc. For this purpose, forward-looking statements are any statements contained herein that are not statements of historical fact and include, but are not limited to, those preceded by or that include the words, “estimate,” “could,” “should,” “would,” “likely,” “may,” “will,” “plan,” “intend,” “believes,” “expects,” “anticipates,” “projected,” or similar expressions. Those statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Important factors that could cause the Company’s actual results to differ materially from those projected include, for example:

~~general economic, market or business conditions unrelated to our operating performance;~~

~~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;~~

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

~~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;~~

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;

~~the ability of the Company to satisfy its trade obligations included in accounts payable and accrued expenses;~~

~~the ability of the Company to sell to third party lenders all or a portion of our finance receivables;~~

~~the ability of a sufficient number of our customers to utilize third party financing companies under our QuickStart program in order to improve our net cash used by operating activities;~~

~~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;~~

~~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;~~

~~the ability of the Company to retain key customers from whom a significant portion of its revenues are derived;~~

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

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

•general economic, market or business conditions unrelated to our operating performance, including inflation, rising interest rates, financial institution disruptions, public health emergencies and declines in consumer confidence and discretionary spending;

• our ability to compete with our competitors and increase market share;

• failure to comply with the financial covenants in the Amended JPMorgan Credit Facility;

• our ability to raise funds in the future through sales of securities or debt financing in order to sustain operations in the normal course of business or if an unexpected or unusual event were to occur;

• our ability to maintain compliance with rules and regulations applicable to our business operations and industry

• disruptions in or inefficiencies to our supply chain and/or operations;

• the risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, packaging and transportation;

•weather, climate conditions, natural disasters or other unexpected events;

• whether our current or future customers purchase, lease, rent or utilize our devices, software solutions or our other products in the future at levels currently anticipated;

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

•our ability to acquire and develop relevant technology offerings for current, new and potential customers and partners;

•risks and uncertainties associated with our expansion into and our operations in Europe, Latin America and other foreign markets, including general economic conditions, policy changes affecting international trade, political instability, inflation rates, recessions, sanctions, foreign currency exchange rates and controls, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, armed conflict, war and other economic and political factors;

• our ability to satisfy our trade obligations included in accounts payable and accrued expenses;

•our ability to attract, develop and retain key personnel, or our loss of the services of our key executives;

• the incurrence by us of any unanticipated or unusual non-operating expenses, which may require us to divert our cash resources from achieving our business plan;

• our ability to predict or estimate our future quarterly or annual revenue and expenses given the developing and unpredictable market for our products;

• our ability to integrate acquired companies into our current products and services structure;

• our ability to add new customers and retain key existing customers from whom a significant portion of our revenue is derived;

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

• our ability to obtain widespread commercial acceptance of our products and service offerings;

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• whether any patents issued to us will provide any competitive advantages or adequate protection for our products, or would be challenged, invalidated or circumvented by others;

~~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~~• our ability to operate without infringing the intellectual property rights of others;

~~the ability of the Company to operate without infringing the intellectual property rights of others;~~

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

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

• geopolitical conflicts, such as the ongoing conflict between Russia and Ukraine, and the conflict between Israel and Hamas;

• whether we are able to fully remediate our material weaknesses in our internal controls over financial reporting or continue to experience material weaknesses in our internal controls over financial reporting in the future, and are not able to accurately or timely report our financial condition or results of operations;

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

• the ability to remain in compliance with the continued listing standards of the Nasdaq Global Select Market (“Nasdaq”) and continue to remain as a member of the US Small-Cap Russell 2000®;

~~our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may be impaired.~~

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

• the risks associated with cyber attacks and data breaches.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Actual results or business conditions may differ materially from those projected or suggested in forward-looking statements as a result of various factors including, but not limited to, those described ~~above.~~above, or those discussed under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“2023 Form 10-K”). We cannot assure you that we have identified all the factors that create uncertainties. Moreover, new risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Readers should not place undue reliance on forward-looking statements.

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

OVERVIEW OF THE COMPANY

~~USA Technologies,~~

Cantaloupe, Inc. ~~was incorporated in~~is a global technology leader powering self-service commerce. With over a million active locations across the ~~Commonwealth~~globe processing more than a billion transactions every year, Cantaloupe is enabling businesses of ~~Pennsylvania in January 1992. We are a provider of technology-enabled~~all sizes to provide self-service experiences for consumers. The company's vertically integrated solutions and value-added services that facilitate electronic payment transactions and consumer engagement services primarily within the unattended Point of Sale (“POS”) market. We are a leading provider in the small ticket, beverage and food vending industry and are expanding our solutions and services to other unattended market segments, such as amusement, commercial laundry, kiosk and others. Since our founding, we have designed and marketed systems and solutions that facilitate electronic payment options,fuel growth by offering micro-payments processing, enterprise cloud software, IoT technology, as well as ~~telemetry Internet~~kiosk and POS innovations. Cantaloupe’s end-to-end platform increases consumer engagement and sales revenue through digital payments, consumer promotions and loyalty programs, while providing business owners increased profitability by leveraging software to drive efficiencies across an entire operation. Cantaloupe’s solutions are used by a wide variety of ~~Things (“IoT”)~~consumer services in North America, Europe, Latin America, and ~~machine-to-machine (“M2M”)~~Australia including vending machines, micro markets and smart retail, laundromats, metered parking terminals, amusement and entertainment venues, IoT services ~~which include the ability to remotely monitor, control,~~ and report on the results of distributed assets containing our electronic payment solutions. Historically, these distributed assets have relied on cash for payment in the form of coins or bills, whereas, our systems allow them to accept cashless payments such as through the use of credit or debit cards or other emerging contactless forms, such as mobile payment.

more.

The recent acquisition of Cantaloupe expanded the Company’s existing platform to become an end-to-end enterprise platform integrating Cantaloupe’s Seed Cloud which provides cloud and mobile solutions for dynamic route scheduling, automated pre-kitting, responsive merchandising, inventory management, warehouse and accounting management, as well as cashless vending. The combined companies complete the value chain for customers by providing both top-line revenue generating services as well as bottom line business efficiency services to help operators of unattended retail machines run their business better. The combination also marries the data-rich Seed system with USAT’s consumer benefits, providing operators with valuable consumer data that results in customized experiences. In addition to new technology and services, due to Cantaloupe’s existing customer base, the acquisition expands the Company’s footprint into new global markets.

Company's fiscal year ends June 30. The Company generates ~~revenue~~revenues in multiple ways. During the three ~~and six~~ months ended ~~December~~March 31, ~~2017,~~2024 and March 31, 2023, we derived ~~70.3%~~approximately 87% and ~~73.6% of our revenues~~85%, respectively, from ~~recurring license~~subscription and transaction fees, ~~related to our ePort Connect service or Seed Cloud solution~~ and ~~29.7%~~13% and ~~26.4% of our revenue~~15%, respectively, from equipment ~~sales, respectively. Connections to~~sales. During the nine months ended March 31, 2024 and

March 31, 2023, we derived approximately 87% and 82%, respectively, from subscription and transaction fees and 13% and 18%, respectively, from equipment sales.

Active Devices (as defined below) operating on the Company’s platform and using our ~~service stem~~services include those resulting from the sale or lease of our ~~POS~~point of sale ("POS") electronic payment devices, telemetry devices or certified payment software or the servicing of similar third-party installed POS ~~terminals. Connections to the ePort Connect service~~terminals or ~~Seed Cloud solution are the most~~

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~~significant driver of the Company’s revenues, particularly the recurring revenues from license and transaction fees.~~telemetry devices. Customers can obtain POS electronic payment devices from us in the following ways:

~~Purchasing devices~~

•Purchasing hardware directly from the Company or one ~~of its authorized resellers;~~

Financing devices under the Company’s QuickStart Program, which are non-cancellable sixty month sales-type leases, through an unrelated equipment financing company, if available, or directly from the Company; and

~~Renting devices under the Company’s JumpStart Program or Cantaloupe’s rental program, which are cancellable month-to-month operating leases.~~

As of ~~December 31, 2017, highlights~~its authorized resellers;

•Financing hardware under the Company’s financing program, which are non-cancellable 60-month sales-type leases, through an unrelated equipment financing company, if available, or directly from the Company; and

•Renting devices under the Company’s Cantaloupe One program, which are typically 36-months duration agreements.

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Key Developments during the Quarter

Highlights of the Company ~~include:~~

for the fiscal quarter ended March 31, 2024 are below:

~~Over 150 employees, primarily located in our corporate headquarters in Malvern, Pennsylvania and a newly acquired Cantaloupe office location in San Francisco, California.~~

~~Over 15,000 customers and 900,000 connections to our services, including approximately 1,400 customers and 270,000 connections related to the acquisition of Cantaloupe;~~

•Approximately 30,670 Active Customers (as defined below) and 1.22 million Active Devices on our service;

~~Three direct sales teams at the national, regional, and local customer-level and a growing number of OEMs and national distribution partners;~~

~~85 United States and foreign patents are in force;~~

~~The Company’s fiscal year ends June 30~~th~~; and~~

~~The Company has traded on the NASDAQ under the symbol “USAT” since 2007.~~

•Revenues of $67.9 million, an increase of 12.5% year over year. The ~~Company has net deferred tax assets~~increase was led by higher transaction fees and subscription fees revenue;

•We announced the acquisition of ~~approximately $14.8 million predominantly resulting from~~CHEQ Lifestyle Technology, Inc (“CHEQ”). This acquisition offers a ~~series~~portfolio of ~~operating loss carry forwards~~POS solutions that ~~may~~include both register and self-service kiosk ordering, handheld devices for taking payments on-the-go, and mobile app ordering for pick-up or in-seat delivery – serving the sports stadium, entertainment venues and festival industries;

•We held our annual user conference, Cantaloupe University, in Las Vegas, NV, where we had 240+ attendees join us in viewing some of the latest technologies by Cantaloupe as well as getting access to 2 days of training and education around our entire platform and suite of products;

•We partnered with Turbo Air and Imbera at Expo Antad, in Guadalajara, MX, to showcase our solutions for the Mexico market which include our cashless device the P30, the Seed platform, micro market technology and our smart coolers with age verification;

As of March 31, 2024, we have approximately 300 full-time employees in the United States, United Kingdom, and Mexico and offices in Malvern, Pennsylvania; Atlanta, Georgia; River Falls, Wisconsin; Seattle, Washington; Birmingham, United Kingdom; and Mexico City, Mexico.

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QUARTERLY RESULTS OF OPERATIONS

The following discussion should be ~~available to offset future taxable income.~~

~~CRITICAL ACCOUNTING POLICIES~~

~~Our~~read in conjunction with the condensed consolidated financial statements and related notes included in this Form 10-Q.

Selected Operating Metrics

We use certain operating metrics (Active Devices, Active Customers, Total Number of Transactions and Total Dollar Volume, Average Revenue Per Unit) and certain non-GAAP financial measures (Adjusted EBITDA) which are ~~prepared applying certain critical accounting policies. The Securities~~defined below to evaluate our business and Exchange Commission (“SEC”) defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments. Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affectoperations, measure our ~~reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on~~performance, identify trends affecting our business, project our future ~~financial condition~~performance, and ~~results~~make strategic decisions. Additionally, refer to the non-GAAP Financial Measures section below for additional information and their reconciliation to the most comparable GAAP measure.

Active Devices

Active Devices are devices that have communicated with us or have had a transaction in the last twelve months. Included in the number of ~~operations. Our financial statements~~Active Devices are ~~prepared in accordance~~devices that communicate through other devices that communicate or transact with ~~U.S. GAAP, and they conform to general practices in our industry. We apply critical accounting policies consistently from period to period and intend~~us. A self-service retail location that ~~any change in methodology occur in~~utilizes an ~~appropriate manner. Accounting policies currently deemed critical are listed below:~~

~~Revenue Recognition~~

~~Revenue from the sale or QuickStart lease of equipment is recognized on the terms of free-on-board shipping point. Activation fee revenue, if applicable, is recognized when the Company’s~~ePort cashless payment device ~~is initially activated for use on~~as well as Seed management services constitutes only one device.

Active Customers

The Company defines Active Customers as all customers with at least one active device.

Total Number of Transactions and Total Dollar Volume of Transactions

Transactions are defined as electronic payment transactions that are processed by our technology-enabled solutions. Management uses Total Number and Dollar Volume of transactions to evaluate the effectiveness of our new customer strategy and our ability to leverage existing customers and partners.

Average Revenue Per Unit

The Company ~~network. Transaction processing~~defines average revenue ~~is recognized upon the usage of the Company’s cashless payment~~per unit ("ARPU") as our total subscription and ~~control network. License~~transaction fees for ~~access to~~ the ~~Company’s~~trailing 12 months divided by average total active devices and network services are recognized on a monthly basis. In all cases, revenue is only recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered,for the ~~price is fixed and determinable, and collection of the resulting receivable is reasonably assured.~~ trailing 12 months.

Adjusted EBITDA (non-GAAP)

The Company ~~estimates an allowance for product returns at~~defines Adjusted EBITDA (non-GAAP) as U.S. GAAP net income (loss) before (i) interest income from cash and leases, (ii) interest (income) expense from debt and tax liabilities, (iii) income tax provision, (iv) depreciation, (v) amortization, (vi) stock-based compensation expense, (vii) fees and charges, net of reimbursement from insurance proceeds, that were incurred in connection with the ~~date~~2019 Investigation and financial statement restatement activities as well as proxy solicitation costs that are not indicative of ~~sale~~our core operations, (viii) certain other significant infrequent or unusual losses and ~~license~~gains that are not indicative of our core operations such as integration and ~~transaction fee refunds on a monthly basis.~~

ePort hardware is available to customers under the QuickStart program pursuant to which the customer would enter into a five-year non-cancelable lease with either the Company or a third-party financing companyacquisition expenses, and (ix) severance expenses that are non-recurring and are not indicative of our core operations.

The following table represents our selected operating metrics for the ~~devices. The Company utilizes its best estimate of selling price when calculating the revenue to be recorded under these leases. The QuickStart~~

periods indicated:

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contracts qualify for sales type lease accounting. Accordingly, the Company recognizes a portion of lease payments as interest income. At the end of the lease period, the customer would have the option to purchase the device at its residual value.

~~Long Lived Assets~~

In accordance with ASC 360, “Impairment or Disposal of Long-Lived Assets”, the Company reviews its definite lived long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amount of an asset or group of assets exceeds its net realizable value, the asset will be written down to its fair value. In the period when the plan of sale criteria of ASC 360 are met, definite lived long-lived assets are reported as held for sale, depreciation and amortization cease, and the assets are reported at the lower of carrying value or fair value less costs to sell.

~~Goodwill and Intangible Assets~~

Goodwill represents the excess of cost over fair value of the net assets purchased in acquisitions. The Company accounts for goodwill in accordance with ASC 350, “Intangibles – Goodwill and Other”. Under ASC 350, goodwill is not amortized to earnings, but instead is subject to periodic testing for impairment. Testing for impairment is to be done at least annually and at other times if events or circumstances arise that indicate that impairment may have occurred.

Company intangible assets include non-compete agreements, brand, developed technology, and customer relationships. They are carried at cost less accumulated amortization, which is calculated on a straight-line basis over their estimated economic life. The Company reviews intangibles, subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

~~Allowance for Doubtful Accounts~~

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, including from a shortfall in the customer transaction fund flow from which the Company would normally collect amounts due.

The allowance is determined through an analysis of various factors including the aging of the accounts receivable, the strength of the relationship with the customer, the capacity of the customer transaction fund flow to satisfy the amount due from the customer, an assessment of collection costs and other factors. The allowance for doubtful accounts receivable is management’s best estimate as of the respective reporting date. The Company writes off accounts receivable against the allowance when management determines the balance is uncollectible and the Company ceases collection efforts. Management believes that the allowance recorded is adequate to provide for its estimated credit losses.

~~Valuation Allowance~~

~~The Company follows the provisions of FASB ASC 740, Accounting for Uncertainty in Income Taxes,~~ ~~which~~ provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the consolidated financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods.

Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent that, based on available evidence, it is more likely than not such benefits will be realized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in selling, general and administrative expenses. No interest or penalties related to uncertain tax positions were accrued or incurred during the three and six months ended December 31, 2017 and 2016.

~~Recent Accounting Pronouncements~~

~~See Note 2 to the interim Consolidated Financial Statements for a description of recent accounting pronouncements.~~


	As of and for the three months ended
	March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023		March 31, 2023
Devices:
Active Devices (thousands)	1,217		1,226		1,192		1,168		1,150

Customers:
Active Customers	30,670		30,027		29,670		28,584		27,598

Volumes:
Total Number of Transactions (millions)	283.3		286.7		283.6		278.6		267.8
Total Dollar Volume of Transactions (millions)	767.4		730.1		724.8		703.5		653.6

Subscription and transaction fees - Trailing 12 months (thousands)	$	223,342	$	215,380	$	208,283	$	200,223	$	192,147
Average revenue per unit (ARPU)	$	186.00	$	181.91	$	178.78	$	173.39	$	167.52

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~~TRENDING QUARTERLY FINANCIAL DATA~~

~~The following tables show certain financial and non-financial data that management believes give readers insight into certain trends and relationships about the Company’s financial performance.~~

~~Five Quarter Select Key Performance Indicators including Connections~~

As of and for the three months ended

December 31,

September 30,

June 30,

March 31,

December 31,

2017

2017

2017

2017

2016
Connections:

Gross new connections

317,000

28,000

70,000

40,000

25,000
% from existing customer base

44%

82%

93%

88%

80%
Net new connections (a)

311,000

26,000

64,000

35,000

21,000
Total connections

905,000

594,000

568,000

504,000

469,000

Customers:

New customers added (a)

1,800

550

300

500

500
Total customers

15,050

13,250

12,700

12,400

11,900

Volumes:

Total number of transactions (millions)

144.8

121.1

114.8

104.9

100.1
Total volume (millions)

$
272.7

$
239.2

$
225.6

$
202.5

$
191.5

Financing structure of connections:

JumpStart

0.4%

4.1%

3.3%

8.6%

6.8%
QuickStart & all others (b)

99.6%

95.9%

96.7%

91.4%

93.2%
Total

100.0%

100.0%

100.0%

100.0%

100.0%

~~Activity for the three months ended December 31, 2017 includes net new connections and new customers related to the acquisition of Cantaloupe of approximately 270,000 and 1,400, respectively.~~

~~Includes credit sales with standard trade receivable terms.~~

Highlights ~~of USAT’s connections~~ for the quarter ended ~~December~~March 31, ~~2017~~2024 include:

~~270,000 net new connections related to the acquisition of Cantaloupe;~~

~~41,000 additional net new connections during the quarter; and~~

•1.22 million Active Devices compared to the same quarter last year of 1.15 million, an increase of approximately 67 thousand Active Devices, or 5.9%;

~~905,000 total connections to our service compared to the same quarter last year of approximately 469,000 total connections to our service, an increase of 436,000 connections, or 93%.~~

•30,670 Active Customers on our service compared to the same quarter last year of 27,598, an increase of 3,072 Active Customers, or 11.1%; and

•$767.4 million in Total Dollar Volume of Transactions for the quarter ended March 31, 2024 compared to $653.6 million for the quarter ended March 31, 2023, an increase of $113.8 million, or 17.4%. See "Revenues and Gross Margin" in Management’s Discussion and Analysis of Financial Condition and Results of Operations below for additional information.

FINANCIAL PERFORMANCE

The following tables summarize our results of operations and significant changes in our financial performance for the periods presented:

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3553

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Three Months Ended ~~December~~March 31, ~~2017~~2024 Compared to Three Months Ended ~~December~~March 31, ~~2016~~

~~Revenue and Gross Profit~~

2023

For the three months ended December 31,

Percent
($ in thousands)

2017

2016

Change
Revenues:

License and transaction fees

$
22,853

$
16,639

37.3%
Equipment sales

9,653

5,117

88.6%
Total revenues

32,506

21,756

49.4%

Costs of sales:

Cost of services

14,362

11,389

26.1%
Cost of equipment

8,943

4,033

121.7%
Total costs of sales

23,305

15,422

51.1%

Gross profit:

License and transaction fees

8,491

5,250

61.7%
Equipment sales

710

1,084

(34.5%)
Total gross profit

$
9,201

$
6,334

45.3%

~~Revenue.~~


	Three months ended March 31,						Change
($ in thousands)	2024			2023			Amount		Percentage
Revenues:
Subscription and transaction fees	$	59,207		$	51,245		$	7,962	15.5	%
Equipment sales	8,690			9,111			(421)		(4.6)	%
Total revenues	67,897			60,356			7,541		12.5	%

Costs of sales:
Cost of subscription and transaction fees	32,926			29,577			3,349		11.3	%
Cost of equipment sales	8,064			7,886			178		2.3	%
Total costs of sales	40,990			37,463			3,527		9.4	%

Gross profit:
Subscription and transaction fees	26,281			21,668			4,613		21.3	%
Equipment sales	626			1,225			(599)		48.9	%
Total gross profit	$	26,907		$	22,893		$	4,014	17.5	%

Gross margin:
Subscription and transaction fees	44.4		%	42.3		%
Equipment sales	7.2		%	13.4		%
Total gross margin	39.6		%	37.9		%

Revenues.Total ~~revenue~~revenues increased ~~$10.7~~by $7.5 million for the three months ended ~~December~~March 31, ~~2017~~2024 compared to the same period in ~~2016.~~2023. The ~~growth~~increase in ~~total revenue resulted from~~revenues is attributed to a ~~$6.2~~$8.0 million increase in ~~license~~subscription and transaction ~~fee revenue~~fees, partially offset by a $0.4 million decrease in equipment sales.

The increase in subscription and transaction fees was primarily driven by increased processing volumes with an approximately 17.4% increase in total dollar volumes of transactions for the current fiscal year quarter relative to the prior year quarter. There was an increase in the average revenue per unit and an increase in the total number of active devices relative to the same period in the prior year. Our subscription fees have increased 7.4% for the three months ended ~~December~~March 31, ~~2017~~2024 compared to the same period in ~~2016,~~2023 which is attributed to a continued focus of management to grow our recurring subscription services to our customer base and ~~a $4.5 million increase in equipment revenue for three months ended December 31, 2017 compared to the same period last year, both driven by~~ an increase in ~~connections~~our active devices compared to last year.

The decrease in equipment sales in the current fiscal year quarter was due to the prior year still benefiting from the required upgrade to 4G compatible devices. Our equipment margin decreased during the current year quarter primarily driven by increased freight and supply chain costs associated with the ~~Cantaloupe acquisition.~~

~~Cost~~anticipated ramp in international sales.

Costs of sales. ~~Cost~~ Costs of sales increased ~~by $7.9~~$3.5 million for the three months ended ~~December~~March 31, ~~2017~~2024 compared to the prior year period. The increase in costs of sales was primarily due to a $3.3 million increase in subscription and transaction costs as a direct result of increased transaction processing fees corresponding with an increase in processing volumes.

Gross margin. Total gross margin increased to 39.6% for the three months ended March 31, 2024 from 37.9% for the three months ended March 31, 2023. The increase was primarily a result of an increase in subscription and transaction fees which yield higher margins compared to equipment fees.

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Operating Expenses


	Three months ended March 31,				Change
Category ($ in thousands)	2024		2023		Amount		Percentage
Sales and marketing	$	5,747	$	3,154	$	2,593	82.2	%
Technology and product development	4,916		4,594		322		7.0	%
General and administrative expenses	8,552		7,041		1,511		21.5	%
Investigation, proxy solicitation and restatement expenses, net of insurance recoveries	—		(1,000)		1,000		(100.0)	%
Integration and acquisition expenses	907		—		907		100.0	%
Depreciation and amortization	2,493		2,364		129		5.5	%
Total operating expenses	$	22,615	$	16,153	$	6,462	40.0	%

Total operating expenses.Operating expenses increased 40.0% for the three months ended March 31, 2024 compared to the same period ~~last year. The increase was~~in 2023. This is largely driven by increased operating expenses related to the Cheq acquisition and professional service fees related to SOX remediation work. Additionally, prior year had a ~~$3.0~~net $1 million ~~increase~~benefit related to insurance proceeds and expenses incurred in ~~cost of services~~connection with the 2019 Investigation. See further details on individual categories below.

Sales and ~~a $4.9 million increase in cost of equipment sales, both driven by an increase in connections~~marketing. Sales and ~~the Cantaloupe acquisition.~~

~~Gross margin~~. The overall gross margin decreased 0.8% from 29.1% for the three months ended December 31, 2016 to 28.3% for the three months ended December 31, 2017. The decrease in the equipment margin, from 21.2% for the three months ended December 31, 2016 to 7.4% for the three months ended December 31, 2017, reflected our strategy of using equipment sales as an enabler for driving long-term, higher margin license and transaction fees. This decrease was partially offset by an increase in the license fee and transaction margin from 31.6% for the three months ended December 31, 2016 to 37.2% for the three months ended December 31, 2017, which was driven by the impact of the Cantaloupe acquisition.

~~Operational Expenses~~

For the three months ended December 31,

Percent
Category ($ in thousands)

2017

2016

Change
Selling, general and administrative expenses

$
8,329

$
5,785

44.0%
Integration and acquisition costs

3,335

8

41,587.5%
Depreciation and amortization

737

307

140.1%
Total operating expenses

$
12,401

$
6,100

103.3%

~~Selling, general and administrative expenses.~~ ~~Selling~~, ~~general and administrative~~marketing expenses increased approximately ~~$2.5~~$2.6 million for the three months ended March 31, 2024 compared to the same period in 2023 due to increased compensation costs of approximately $1.3 million, and increased infrastructure, travel and entertainment costs of approximately $0.7 million to support our expanding business and service offerings in the United States and internationally. Additionally, marketing expense increased $0.6 million related to international expansion and the acquisition of Cheq.

Technology and product development. Technology and product development expenses increased by $0.3 million for the three months ended March 31, 2024. The increase in the current year was driven by increased headcount partially offset by lower expensed personnel costs as we continued to invest in internal-use software which resulted in higher capitalized costs compared to the prior year.

General and administrative expenses. General and administrative expenses increased by $1.5 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to a $1.3 million increase in connection with non-recurring project work related to remediating previously identified material weaknesses in our internal controls over financial reporting, $0.6 million increase in bad debt expense, and a $0.4 million increase in compensation related expenses; partially offset by a reduction of $0.5 million to our sales tax liability and $0.2 million in other administrative expenses compared to the same period in the prior year.

Integration and acquisition expenses. On February 1, 2024, the Company acquired all of the equity interests of Cheq Lifestyle Technology, Inc. ("Cheq"). For the three months ended March 31, 2024, the Company incurred integration and acquisition expenses of $0.9 million primarily due to professional services from accounting and legal advisors, as well as consulting services from Cheq predecessors. The Company did not incur integration and acquisition expenses during the three month period ended March 31, 2023.

Depreciation and amortization. Depreciation and amortization expenses increased $0.1 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily driven by the amortization of intangible assets associated with the acquisition of 32M in December 2022.

Other Income, Net


	Three months ended March 31,				Change
($ in thousands)	2024		2023		Amount		Percentage
Other income (expense):
Interest income from cash and leases	$	495	$	540	$	(45)	(8.3)	%
Interest income (expense) from debt and tax liabilities	162		(263)		425		161.6	%
Other (expense), net	(209)		(13)		(196)		(1,507.7)	%
Total other income, net	$	448	$	264	$	184	(69.7)	%

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Other income, net. Other income increased $0.2 million for the three months ended March 31, ~~2017,~~2024 as compared to the same period in ~~2016. This change~~2023. Our interest expense from debt and tax liabilities decreased $0.4 million primarily due to the reduction of the interest component of the sales tax liability offset by incurred interest expense related to our outstanding debt balances. Decrease in interest income from cash and leases is primarily due to lower outstanding balances for our finance receivables. Other expense, net increased primarily due to foreign currency transaction losses.

Nine Months Ended March 31, 2024 Compared to Nine Months Ended March 31, 2023


	Nine months ended March 31,						Change
($ in thousands)	2024			2023			Amount		Percent
Revenues:
Subscription and transaction fees	$	170,371		$	147,252		$	23,119	15.7	%
Equipment sales	25,568			32,216			(6,648)		(20.6)	%
Total revenues	195,939			179,468			16,471		9.2	%

Costs of sales:
Cost of subscription and transaction fees	96,539			90,149			6,390		7.1	%
Cost of equipment sales	23,849			33,823			(9,974)		(29.5)	%
Total costs of sales	120,388			123,972			(3,584)		(2.9)	%

Gross profit:
Subscription and transaction fees	73,832			57,103			16,729		29.3	%
Equipment sales	1,719			(1,607)			3,326		(207.0)	%
Total gross profit	$	75,551		$	55,496		$	20,055	36.1	%

Gross margin:
Subscription and transaction fees	43.3		%	38.8		%
Equipment sales	6.7		%	(5.0)		%
Total gross margin	38.6		%	30.9		%

Revenues. Total revenues increased by $16.5 million for the nine months ended March 31, 2024 compared to the same period in 2023. The increase in revenues was attributed to a $23.1 million increase in subscription and transaction fees, and a $6.6 million decrease in equipment sales.

The increase in subscription and transaction fees was primarily driven by increased processing volumes, with an approximately 14% increase in total dollar volumes for the nine months ended March 31, 2024 compared to the same period in 2023. Our transaction fees increased $17.9 million, or 18.4%, due to an increase in the average price per transaction and total number of transactions relative to the same period in the prior year. Our subscription fees increased approximately $5.2 million, or 10.4% for the nine months ended March 31, 2024 compared to the same period in 2023 which was attributed to a continued focus of management to grow our recurring subscription services, the successful expansion of the Cantaloupe One program to our customer base, and the acquisition of 32M.

The decrease in equipment sales in the current fiscal year period was primarily driven by decreased equipment shipments compared to the prior year fiscal period. In the prior year, our customers continued upgrading their devices to ensure compatibility with the emerging 4G network, resulting in a surge in equipment shipments. As of December 31, 2022, the 3G to 4G network upgrade has been fully completed in the U.S. market.

Costs of sales. Costs of sales decreased $3.6 million for the nine months ended March 31, 2024 compared to the same period in 2023. The decrease was driven by a $10.0 million decrease in equipment costs partially offset by an increase of $6.4 million in subscription and transaction costs.

The decrease in costs of sales for equipment was primarily driven by decreased equipment sales. The increased demand in the first half of the prior fiscal year was related to our customers upgrading their payment devices in anticipation of the 3G network discontinuation events described above (See 3G Network discontinuation and upgrade cycle section).

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The increase in subscription and transaction costs was primarily driven by an increase in ~~selling, general~~transaction processing fees corresponding with an increase in processing volumes and ~~administrative costs incurred~~total dollar volume of transactions.

Gross margin. Total gross margin increased to 38.6% for the nine months ended March 31, 2024 from 30.9% for the nine months ended March 31, 2023. The increase was primarily driven by improved gross margin on equipment sales. The prior year period experienced inflated cost within our supply chain due to unfavorable prices paid to secure certain key component parts to meet production and delivery timelines caused by a greater than anticipated surge in the demand for our ePort hardware products. The increased demand in the first half of fiscal year 2023 was related to ~~Cantaloupe as well as~~our customers upgrading their payment devices in anticipation of the 3G to 4G network upgrade. This resulted in a negative 5% gross margin on equipment sales for the nine months ending March 31, 2023. Additionally, we had an increase in subscription and transaction fees which yield higher margins compared to equipment fees.

Operating Expenses


	Nine months ended March 31,				Change
Category ($ in thousands)	2024		2023		Amount		Percentage
Sales and marketing	$	14,256	$	8,888	5,368		60.4	%
Technology and product development	12,115		16,757		(4,642)		(27.7)	%
General and administrative expenses	29,493		25,179		4,314		17.1	%
Investigation, proxy solicitation and restatement expenses	—		(453)		453		(100.0)	%
Integration and acquisition expenses	1,078		2,787		(1,709)		(61.3)	%
Depreciation and amortization	7,976		5,029		2,947		58.6	%
Total operating expenses	$	64,918	$	58,187	$	6,731	11.6	%

Total operating expenses. Operating expenses increased approximately $6.7 million for the nine months ended March 31, 2024 compared to the same period in 2023. The increase was attributed to a $5.4 million increase in sales and marketing ~~related consulting~~ expenses, ~~as we continue to~~a $4.3 million increase ~~our market share~~ in ~~the cashless-transaction vending industry.~~

~~Integration~~general and ~~acquisition costs. Integration~~administrative expenses, a $2.9 million increase in depreciation and ~~acquisition costs~~amortization, partially offset by a $4.6 million decrease in technology and product development expenses. See further details on individual categories below.

Sales and marketing. Sales and marketing expenses increased ~~$3.3~~approximately $5.4 million for the ~~three~~nine months ended ~~December~~March 31, ~~2017~~2024 compared to the same period in 2023 primarily due to higher sales and marketing employee headcount in the current year to support our expanding business in the United States and internationally, in addition to the execution of several marketing campaigns to introduce new product and service offerings leading to increased customer engagement.

Technology and product development. Technology and product development decreased $4.6 million for the nine months ended March 31, 2024 compared to the same period in 2023. The decrease was driven by $2.6 million decrease in professional services related to expenses incurred in the prior year upgrading our network environment and platform. Decrease is also a result of $1 million in lower personnel costs as we continued to invest in internal-use software which resulted in higher capitalized costs compared to the prior year.

General and administrative expenses. General and administrative expenses increased approximately $4.3 million for the nine months ended March 31, 2024, as compared to the same period in ~~2016, due~~2023. The increase in general and administrative expenses was primarily driven by a $3.8 million increase in personnel compensation cost as a result of our growing business, $1.7 million related to ~~the costs incurred~~professional services related to remediating previously identified material weaknesses in ~~connection with the acquisition~~

~~Table of Contents~~

~~of Cantaloupe,~~our internal controls over financial reporting; partially offset by ~~$8 thousand of acquisition costs incurred~~a $0.7 million decrease in ~~the second quarter of fiscal year 2017 pertaining to the acquisition of VendScreen, Inc. (“VendScreen”).~~

~~Depreciation~~administrative expenses and ~~amortization.~~ ~~Depreciation and amortization expenses increased approximately~~a $0.4 million ~~for the three months ended December 31, 2017 primarily due~~reduction to ~~the amortization of intangible assets recognized in connection with the Cantaloupe acquisition.~~

~~Other Expense, net~~

For the three months ended December 31,

Percent
($ in thousands)

2017

2016

Change
Other income (expense):

Interest income

$
251

$
200

25.5%
Interest expense

(494)

(201)

145.8%
Total other expense, net

$
(243)

$
(1)

24200.0%

~~Other expense, net. Other expense, net increased $242 thousand for the three months ended December 31, 2017~~our sales tax reserve compared to the same period in ~~2016. The~~the prior year.

Integration and acquisition. On February 1, 2024, the Company acquired Cheq Lifestyle Technology, Inc for $4.8 million in cash. During the nine months ended March 31, 2024, the Company incurred expenses of $1.0 million associated with both the closing of the acquisition and the initial integration of CHEQ operations. During the nine months ended March 31, 2023, the Company acquired Three Square Market Inc pursuant to the Purchase Agreement and incurred $2.8 million from accounting, legal and investing banking advisors related to the completion of the acquisition and post-acquisition integration.

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Depreciation and amortization. During the nine months ended March 31, 2024, the Company had an increase ~~was~~in depreciation and amortization costs of $2.9 million compared to the same period in the prior year due to the acquisition of 32M in December 2022, increased depreciation from our Cantaloupe One program, and increased depreciation for our growing Internal-use software as various projects and initiatives are implemented. Our increase in internal-use software is attributable to management's focus on developing innovative technologies to further strengthen our network environment and platform.

Other Income (Expense), Net


	Nine months ended March 31,				Change
($ in thousands)	2024		2023		Amount	Percentage
Other income (expense):
Interest income from cash and leases	$	1,505	$	1,985	(480)	(24.2)	%
Interest income (expense) from debt and tax liabilities	(1,947)		(1,258)		(689)	54.8	%
Other (expense), net	(158)		(112)		(46)	41.1	%
Total other income (expense), net	$	(600)	$	615	(1,215)	(197.6)	%

Other income (expense), net. Other income (expense), net decreased $1.2 million for the nine months ended March 31, 2024 as compared to the same period in 2023 primarily driven by ~~the~~an increase in interest ~~incurred in connection with the Term Loan~~expense from debt and ~~Revolving Credit Facility utilized to fund a portion~~tax liabilities of ~~the acquisition of Cantaloupe.~~

~~Income Taxes~~

For the three months ended December 31,

Percent
($ in thousands)

2017

2016

Change
Provision for income taxes

$
(9,073)

$
-

100%

~~Income taxes. For the three months ended December 31, 2017, an income tax provision of 9,073 thousand (substantially all deferred income taxes) was recorded which includes a charge of $6,592 thousand related~~$0.7 million due to the recent enactment of the U.S. Tax Cuts and Jobs Act. The tax provision is based upon income (loss) before income taxes using an estimated negative annual effective income tax rate of 49.20%, which is primarily driven by the impact of permanent differences. The tax rate reduction related to tax reform was treated as a discrete itemhigher outstanding debt balance in the ~~tax provision for the three months ended December 31, 2017.~~

~~For the three months ended December 31, 2016, no adjustment for the~~current year and a decrease in interest income ~~tax benefit (provision) (substantially all deferred income taxes) was recorded based upon loss before benefit for income taxes using an estimated annual effective income tax rate~~ of ~~30.0% for the fiscal year ended June 30, 2017 net of a provision for the tax effect of the change in the fair value of warrant liabilities which was treated discretely.~~

~~Reconciliation of Net (Loss) Income~~approximately $0.5 million due to ~~Adjusted EBITDA:~~

For the three months ended December 31,
($ in thousands)

2017

2016
Net (loss) income

$
(12,516)

$
233
Less interest income

(251)

(200)
Plus interest expense

494

201
Plus income tax provision

9,073

—
Plus depreciation expense

1,512

1,220
Plus amortization expense

472

43
EBITDA

(1,216)

1,497

Plus stock-based compensation

780

233
Plus integration and acquisition costs and inventory step-up

3,358

8
Adjustments to EBITDA

4,138

241
Adjusted EBITDA

$
2,922

$
1,738

lower outstanding balances on finance receivables.

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~~As used herein, Adjusted EBITDA represents net (loss) income before interest income, interest expense, income tax provision (benefit), depreciation, amortization, stock-based compensation expense,~~Non-GAAP Financial Measures

We use certain financial measures internally to evaluate our performance and ~~non-recurring integration~~make financial and ~~acquisition costs~~operational decisions that ~~were incurred~~are presented in ~~connection~~a manner that adjusts from their equivalent GAAP measures or that supplement the information provided by our GAAP measures. We use these adjusted results because we believe they more clearly highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our core operating performance.

We use these measures in communicating certain aspects of our results and performance, including in this Quarterly Report, and believe that these measures, when viewed in conjunction with ~~the acquisition of Cantaloupe, including a charge for inventory fair value step-up, in the current fiscal year~~our GAAP results and the ~~acquisition~~accompanying reconciliations, can provide investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the ~~VendScreen business~~presentation of these measures is useful to investors for making period-to-period comparisons of results because the previous fiscal year. We have excluded the non-cash expense, stock-based compensation, as it does not reflect the cash-based operations of the Company. We have excluded the integration and acquisition expenses incurred in connection with the Cantaloupe acquisition, including a charge for inventory fair value step-up, during the current fiscal year and the VendScreen transaction from the previous fiscal year in orderadjustments to ~~allow for a more accurate comparison of the financial results to historical operations, as they pertain to period operational expenses that~~GAAP are not ~~a core function~~reflective of our business. Adjusted EBITDA is a non-GAAP financial measure which is not required by or defined under GAAP (Generally Accepted Accounting Principles). The presentation of this financial measure is not intended to be consideredcore business performance. Furthermore, certain measures are utilized as metrics in ~~isolation or as a substitute for the~~our executive offer and management incentive compensation plans.

These financial measures ~~prepared and~~are not presented in accordance with, ~~GAAP, including the net income~~ or ~~net loss of the Company or net cash used in operating activities. Management recognizes that non-GAAP~~as an alternative to, GAAP financial measures ~~have limitations~~and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in ~~that they do not reflect all~~this Quarterly Report, including our condensed consolidated financial statements, to aid in their analysis and understanding of ~~the items associated with the Company’s net income or net loss as determined~~our performance and in ~~accordance with GAAP, and are not a substitute for or a measure of the Company’s profitability or net earnings.~~ making comparisons.

Adjusted EBITDA ~~is presented because we believe it is useful to investors as a measure of comparative operating performance. Additionally, the Company utilizes~~ (Non-GAAP)

Adjusted ~~EBTIDA as a metric in its executive officer and management incentive compensation plans.~~

~~Reconciliation of Operating (Loss) Income to Adjusted Operating Income:~~

Three months ended December 31,
($ in thousands)

2017

2016
Operating (loss) income

$
(3,200)

$
234
Plus integration and acquisition costs and inventory step-up

3,358

8
Plus amortization expense

472

43
Adjusted operating income

$
630

$
285

~~As used herein, adjusted operating~~earnings before income represents operating (loss) income before the non-recurring integration and acquisition costs incurred in connection with the acquisition of Cantaloupe, including a charge for inventory fair value step-up, and VendScreen transactiontaxes, depreciation, and amortization expenses related to our acquisition-related intangibles. We have excluded these non-recurring costs and amortization expenses in order to allow for a more accurate comparison of the financial results to historical operations and we believe such a comparison is useful to investors as a measure of comparative operating performance. This is the first financial period for which we have adjusted for the amortization expenses related to our acquisition-related intangibles, and we intend to make such adjustments for future financial periods.

~~Reconciliation of Net (Loss) Income to Non-GAAP Net Income:~~

Three months ended December 31,
($ in thousands)

2017

2016
Net (loss) income

$
(12,516)

$
233
Non-GAAP adjustments:

Non-cash portion of income tax provision (benefit)

9,073

—
Amortization expense

472

43
Stock-based compensation

780

233
Litigation related professional fees

—

—
Integration and acquisition-related costs

3,413

8
Non-GAAP net income

$
1,222

$
517

As used herein, non-GAAP net income represents GAAP net (loss) income excluding costs or benefits relating to any non-cash portions of the Company’s income tax benefit, adjustment for fair value of warrant liabilities, non-recurring costs and expenses that were incurred in connection with the acquisition and integration of Cantaloupe, including a charge for inventory fair value step-up and write-off of deferred financing costs, during the current fiscal year and VendScreen during the prior fiscal year, and non-cash expenses for equity awards under our equity incentive plans. This is the first financial period for which we have adjusted for the non-cash expenses attributable to equity awards, and we intend to make such

~~Table of Contents~~

~~adjustments for future financial periods. Management believes that non-GAAP net income is an important measure of USAT’s business. Non-GAAP net income~~(“Adjusted EBITDA”) is a non-GAAP financial measure which is not required by or defined under GAAP. ~~The presentation of this financial measure is not intended to be considered in isolation or~~We define Adjusted EBITDA as ~~a substitute for the financial measures prepared and presented in accordance with~~U.S. GAAP ~~including the~~ net income ~~or net loss of the Company or net~~(loss) before (i) interest income from cash provided by or (used in) operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company’s net (loss) income as determined in accordance with GAAP, and ~~are not a substitute for or a measure of the Company’s profitability or net earnings. Management uses the aforementioned non-GAAP measure to monitor~~leases, (ii) interest (income) expense on debt and evaluate ongoing operating results and trends and to gain an understanding of our comparative operating performance. We believe that this non-GAAP financial measure serves as a useful metric for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors’ overall understanding of our current and future financial performance. Additionally, the Company utilizes non-GAAP net income as a metric in its executive officer and management incentive compensation plans.

~~Six Months Ended December 31, 2017 Compared to Six Months Ended December 31, 2016~~

~~Revenue and Gross Profit~~

For the six months ended December 31,

Percent
($ in thousands)

2017

2016

Change
Revenues:

License and transaction fees

$
42,797

$
33,004

29.7%
Equipment sales

15,326

10,340

48.2%
Total revenues

58,123

43,344

34.1%

Costs of sales:

Cost of services

27,688

22,632

22.3%
Cost of equipment

14,033

8,211

70.9%
Total costs of sales

41,721

30,843

35.3%

Gross profit:

License and transaction fees

15,109

10,372

45.7%
Equipment sales

1,293

2,129

(39.3%)
Total gross profit

$
16,402

$
12,501

31.2%

~~Revenue.~~ Total revenue increased $14.8 million for the six months ended December 31, 2017 compared to the same period in 2016. The growth in total revenue resulted from a $9.8 million increase in license and transaction fee revenue for the six months ended December 31, 2017 compared to the same period in 2016, and a $5.0 million increase in equipment revenue for the six months ended December 31, 2017 compared to the same period last year; both driven by an increase in connections and the Cantaloupe acquisition.

~~Cost of sales.~~ Cost of sales increased $10.9 million for the six months ended December 31, 2017 compared to the same period last year. The increase was driven by a $5.1 million increase in cost of services and a $5.8 million increase in cost of equipment sales, both arising from an increase in connections and the Cantaloupe acquisition.

~~Gross margin~~. The overall gross margin decreased 0.6% from 28.8% for the six months ended December 31, 2016 to 28.2% for the six months ended December 31, 2017. The decrease in the equipment margin, from 20.6% for the six months ended December 31, 2016 to 8.4% for the six months ended December 31, 2017 reflected our strategy of using equipment sales as an enabler for driving long-term, higher margin license and transaction fees. This decrease was partially offset by an increase in the license fee and transaction margin from 31.4% for the six months ended December 31, 2016 to 35.3% for the six months ended December 31, 2017 which was primarily driven by the impact of the Cantaloupe acquisition.

~~Table of Contents~~

~~Operational Expenses~~

For the six months ended December 31,

Percent
Category ($ in thousands)

2017

2016

Change
Selling, general and administrative expenses

$
15,075

$
12,593

19.7%
Integration and acquisition costs

4,097

109

3,658.7%
Depreciation and amortization

982

515

90.7%
Total operating expenses

$
20,154

$
13,217

52.5%

~~Selling, general and administrative expenses.~~ ~~Selling~~, general and administrative expenses increased approximately $2.5 million for the six months ended December 31, 2017, as compared to the same period in 2016. This change was primarily driven by an increase in selling, general and administrative costs related to Cantaloupe as well as an increase in sales and marketing related consulting expenses as we continue to increase our market share in the cashless-transaction vending industry.

~~Integration and acquisition costs~~. Integration and acquisition costs increased $4.0 million for the six months ended December 31, 2017 as compared to the same period in 2016, due to the $4.1 million incurred in connection with the acquisition of Cantaloupe, partially offset by $0.1 million of acquisition costs incurred in the same period of fiscal year 2017 pertaining to the acquisition of VendScreen.

~~Depreciation and amortization.~~ Depreciation and amortization expenses increased approximately $0.5 million for the six months ended December 31, 2017 primarily due to the amortization of intangible assets recognized in connection with the Cantaloupe acquisition.

~~Other Expense, net~~

For the six months ended December 31,

Percent
($ in thousands)

2017

2016

Change
Other income (expense):

Interest income

$
331

$
273

21.2%
Interest expense

(703)

(413)

70.2%
Change in fair value of warrant liabilities

-

(1,490)

(100.0%)
Total other expense, net

$
(372)

$
(1,630)

(77.2%)

~~Other expense, net~~. Other expense, net decreased $1.3 million for the six months ended December 31, 2017 compared to the same period in 2016. The decrease was primarily driven by the change in fair value associated with the exercised warrants recognized during September 2016.

~~Income Taxes~~

For the six months ended December 31,

Percent
($ in thousands)

2017

2016

Change
(Provision) benefit for income taxes

$
(8,605)

$
115

(7,583)%

~~Income taxes. For the six months ended December 31, 2017, an~~tax liabilities, (iii) income tax provision, of $8,605 thousand (substantially all deferred income taxes) was recorded which includes a charge of $6,592 thousand related to tax reform. The tax provision is based upon income (loss) before income taxes using an estimated negative annual effective income tax rate of 49.20%, which is primarily driven by the impact of permanent differences. The tax rate reduction related to tax reform was treated as a discrete item in the tax provision for the six months ended December 31, 2017.

For the six months ended December 31, 2016, an income tax benefit of $115 thousand (substantially all deferred income taxes) was recorded based upon loss before benefit for income taxes using an estimated annual effective income tax rate of 30.0% for the fiscal year ending June 30, 2017 net of a provision for the tax effect of the change in the fair value of warrant liabilities which was treated discretely.

~~Table of Contents~~

~~Reconciliation of Net Loss to Adjusted EBITDA:~~

For the six months ended December 31,
($ in thousands)

2017

2016
Net loss

$
(12,729)

$
(2,231)
Less interest income

(331)

(273)
Plus interest expense

703

413
Plus income tax provision (benefit)

8,605

(115)
Plus depreciation expense

2,960

2,477
Plus amortization expense

516

87
EBITDA

(276)

358

Plus loss on fair value of warrant liabilities

—

1,490
Plus stock-based compensation

1,356

445
Plus litigation related professional fees

—

33
Plus integration and acquisition costs and inventory step-up

4,120

109
Adjustments to EBITDA

5,476

2,077
Adjusted EBITDA

$
5,200

$
2,435

~~As used herein, Adjusted EBITDA represents net loss before interest income, interest expense, income tax provision (benefit),~~(iv) depreciation, (v) amortization, ~~change in fair value of warrant liabilities,~~(vi) stock-based compensation expense, (vii) fees and ~~non-recurring integration and acquisition-related costs~~charges, net of reimbursement from insurance proceeds, that were incurred in connection with the 2019 Investigation and financial statement restatement activities as well as proxy solicitation costs that are not indicative of our core operations, (viii) certain other significant infrequent or unusual losses and gains that are not indicative of our core operations such as integration and acquisition expenses, and (ix) severance expenses that are non-recurring and are not indicative of ~~Cantaloupe, including~~our core operations.

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Below is a ~~charge for inventory fair value step-up, in the current fiscal year and the acquisition~~reconciliation of ~~the VendScreen business the previous fiscal year. We~~U.S. GAAP net income (loss) to Adjusted EBITDA (non-GAAP):


	Three months ended March 31,				Nine months ended March 31,
($ in thousands)	2024		2023		2024		2023
U.S. GAAP net income (loss)	$	4,656	$	6,948	$	9,787	$	(2,199)
Less: interest income from cash and leases	(495)		(540)		(1,505)		(1,985)
Plus: interest (income) expense from debt and tax liabilities	(162)		263		1,947		1,258
Plus: income tax provision	84		56		246		123
Plus: depreciation included in cost of subscription and transaction fees for rental equipment	415		297		1,137		852
Plus: depreciation and amortization in operating expenses	2,493		2,364		7,976		5,029
EBITDA	6,991		9,388		19,588		3,078
Plus: stock-based compensation (1)	1,004		1,410		4,047		2,889
Plus: integration and acquisition expenses (2)	907		—		1,078		2,787
Plus: remediation expenses (3)	1,258		—		1,755		—
Plus: investigation, proxy solicitation and restatement expenses, net of insurance recoveries (4)	—		(1,000)		—		(453)
Plus: severance expenses (5)	26		273		26		273

Adjustments to EBITDA	3,195		683		6,906		5,496
Adjusted EBITDA (non-GAAP)	$	10,186	$	10,071	$	26,494	$	8,574

(1) As an adjustment to EBITDA, we have excluded the non-operating item, change in fair value of warrant liabilities, because it represents a non-cash gain or charge that is not related to the Company’s operations. We have excluded the non-cash expense, stock-based compensation, as it does not reflect ~~the~~our cash-based ~~operations of the Company. We~~operations.

(2) As an adjustment to EBITDA, we have excluded ~~the integration and acquisition~~ expenses incurred in connection with business acquisitions as it does not represent recurring costs or charges related to our core operations.

(3) As an adjustment to EBITDA, we have excluded expense incurred in connection with non-recurring work related to remediating previously identified material weaknesses in our internal control over financial reporting.

(4) As an adjustment to EBITDA, we have excluded the ~~Cantaloupe acquisition, including a charge for inventory fair value step-up, during~~costs and corresponding reimbursements related to the ~~current fiscal year and the VendScreen transaction from the previous fiscal year in order to allow for a more accurate comparison of the financial results to historical operations, as~~2019 Investigation, because we believe that they ~~pertain to period operational expenses~~represent charges that are not arelated to our core ~~function of our business. Adjusted~~operations.

(5) As an adjustment to EBITDA, is a non-GAAP financial measure which is not required by or defined under GAAP (Generally Accepted Accounting Principles). The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of the Company or net cash used in operating activities. Management recognizes that non-GAAP financial measureswe have limitations in that they do not reflect all of the items associated with the Company’s net income or net loss as determined in accordance with GAAP, and are not a substitute for or a measure of the Company’s profitability or net earnings. Adjusted EBITDA is presented because we believe it is useful to investors as a measure of comparative operating performance. Additionally, the Company utilizes Adjusted EBTIDA as a metric in its executive officer and management incentive compensation plans.

~~Reconciliation of Operating Loss to Adjusted Operating Income (Loss):~~

Six months ended December 31,
($ in thousands)

2017

2016
Operating loss

$
(3,752)

$
(716)
Plus integration and acquisition costs and inventory step-up

4,120

109
Plus amortization expense

516

87
Adjusted operating income (loss)

$
884

$
(520)

~~As used herein, adjusted operating loss represents operating loss before the non-recurring integration and acquisition costs and~~excluded expenses incurred in connection with ~~the acquisition of Cantaloupe, including a charge for inventory fair value step-up, and VendScreen transaction, and the amortization expenses~~severance related to our acquisition-related intangibles. We have excluded these non-recurring costs and expenses in order to allow for a more accurate comparison of the financial results to historical operations and we believe such a comparison is useful to investors as a measure of comparative operating performance. This is the first financial period for which we have adjusted for the amortization expenses related to our acquisition-related intangibles, and we intend to make such adjustments for future financial periods.

charges.

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~~Reconciliation of Net Loss to Non-GAAP Net Income (Loss):~~

Six months ended December 31,
($ in thousands)

2017

2016
Net loss

$
(12,729)

$
(2,231)
Non-GAAP adjustments:

Non-cash portion of income tax benefit

8,605

(115)
Fair value of warrant adjustment

—

1,490
Amortization expense

516

87
Stock-based compensation

1,356

445
Litigation related professional fees

—

33
Integration and acquisition-related costs

4,175

109
Non-GAAP net income (loss)

$
1,923

$
(182)

As used herein, non-GAAP net income (loss) represents GAAP net income (loss) excluding costs or benefits relating to any non-cash portions of the Company’s income tax benefit, adjustment for fair value of warrant liabilities, professional fees incurred in connection with the class action litigation and the special litigation committee investigation, and non-recurring costs and expenses that were incurred in connection with the acquisition and integration of Cantaloupe, including a charge for inventory fair value step-up and a write-off of deferred financing costs, during the current fiscal year and VendScreen during the prior fiscal year. This is the first financial period for which we have adjusted for the non-cash expenses attributable to equity awards under our equity incentive plans, and we intend to make such adjustments for future financial periods. Management believes that non-GAAP net income (loss) is an important measure of USAT’s business. Non-GAAP net income (loss) is a non-GAAP financial measure which is not required by or defined under GAAP. The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income or net loss of the Company or net cash provided by or (used in) operating activities. Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company’s net loss as determined in accordance with GAAP, and are not a substitute for or a measure of the Company’s profitability or net earnings. Management uses the aforementioned non-GAAP measure to monitor and evaluate ongoing operating results and trends and to gain an understanding of our comparative operating performance. We believe that this non-GAAP financial measure serves as a useful metric for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods, and when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors’ overall understanding of our current and future financial performance. Additionally, the Company utilizes non-GAAP net income (loss) as a metric in its executive officer and management incentive compensation plans.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Historically, we have financed our operations primarily through cash from operating activities, debt financings, and equity issuances. The Company's primary sources of capital available are cash and cash equivalents on hand of $50.2 million as of March 31, 2024 and the cash that we expect to be provided by operating activities ~~was $4.1~~by the Company.

The Company also has estimated and recorded for potential sales tax and related interest and penalty liabilities of $10.8 million in the aggregate as of March 31, 2024. The Company continues to evaluate these liabilities and the amount and timing of any such payments.

The Company believes that its current financial resources will be sufficient to fund its current twelve-month operating budget from the date of issuance of these condensed consolidated financial statements. Our primary focus as part of our core operations to increase cash flow from operating activities is to prioritize collection efforts to reduce outstanding accounts receivable, utilize existing inventory to support equipment sales over the next year, focusing on various operational efficiencies to improve overall profitability of the business and continued to grow our business both domestically and internationally.

Below are charts that reflect our cash liquidity and outstanding debt as of March 31, 2024 and June 30, 2023:

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Cash Flows

See Condensed Consolidated Statement of Cash Flows in Part I, Item 1 of this Quarterly Report for details on the ~~six~~changes in cash and cash equivalents classified by operating, investing and financing activities during our respective reporting periods.

Net cash used in operating activities

For the nine months ended ~~December~~March 31, ~~2017 compared to cash of $5.1 million used in the same period in 2016. The $9.3 million increase in~~2024, net cash provided by operating activities was $13.5 million which reflects our net income of $9.8 million and non-cash operating charges of $18.5 million, partially offset by $14.8 million of cash utilized by working capital accounts. The change in working capital accounts was primarily driven by a ~~cash inflow~~$16.5 million increase of $5.8 million from the payment for finance receivables related to a significant order received by us during the fourth quarter of the prior fiscal year as well as a cash inflow of $10.8 million related to the timing ofaccounts receivable and an increase in accounts payable and accrued expenses ~~partially offset~~of $8.5 million in the period. Increase in cash utilized by accounts receivable was a ~~$2.8 million increase in merchant receivables due to timing differences related~~result of increased sales during the nine months ended March 31, 2024 compared to the ~~remittance~~prior year period as well as the timing of ~~credit card~~the cash receipts compared to the prior year period.

For the nine months ended March 31, 2023, net cash used in operating activities was $5.8 million, which reflected our net loss of $2.2 million adjusted by $10.7 million in non-cash operating charges and $2.7 million of cash utilized by working capital accounts. The change in working capital accounts is primarily driven by cash used of $8.2 million to increase our inventory on hand and a ~~$3.1~~decrease of accounts receivable of $9.6 million ~~increase related~~in the period. Increase in inventory was driven by increased equipment sales as well as strategic planning to ~~inventory due~~mitigate potential supply chain disruptions. Increase in cash provided by accounts receivable was a result of increased sales during the nine months ended March 31, 2023 compared to ~~purchases made~~the prior year period as well as the timing of the cash receipts compared to ~~support~~ the ~~company’s anticipated future growth.~~

~~Cash~~prior year period.

Non-cash operating charges primarily consisted of stock-based compensation, depreciation of property and equipment, amortization of our intangible assets, and provisions for expected losses for the nine months ended March 31, 2024 and 2023.

Net cash used in investing activities

Net cash used in investing activities was ~~$66.8~~$13.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017 compared~~2024. We invested $9.2 million in property and equipment as the Company continued to ~~$1.9~~focus on investing in innovative technologies and products, and increasing rental devices enrolled in the Company's Cantaloupe One program. Additionally, the Company invested $4.8 million through its CHEQ acquisition.

Net cash used in investing activities was $48.5 million for the ~~same period~~nine months ended March 31, 2023. Increase in ~~2016. The $64.9 million increase~~cash used is ~~primarily related~~due to ~~net~~the cash ~~consideration~~ paid for the 32M acquisition of ~~Cantaloupe.~~

~~Cash~~$35.9 million and $12.6 million for increased property and equipment balances driven primarily by the Company's continued focus on investing in technologies and products and increasing rental devices enrolled in the Company's Cantaloupe one program.

Net cash provided by financing activities

Net cash used in financing activities was ~~$65.3~~$0.3 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017 compared to $5.8~~2024, which is primarily driven by debt repayments on the JPMorgan Credit Facility.

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Net cash provided of financing activities was $21.3 million for the ~~same period in 2016. The $59.5 million increase~~nine months ended March 31, 2023 which was primarily due to the ~~public offering which closed in July 2017 with net proceeds~~borrowing of ~~$39.9~~$25 million ~~as well as an increase~~from our Credit Facility to fund a portion of ~~$35.0~~the cash consideration for the 32M acquisition offset by $2.2 million ~~related~~to repurchase our series A Convertible Stock and a $1 million payment for contingent consideration relating to the ~~Term Loan and Revolving Credit Facility, partially offset by $6.2 million in proceeds received from~~Yoke acquisition.

CONTRACTUAL OBLIGATIONS

During the ~~exercise of the warrants during the six~~nine months ended ~~September 30, 2016~~March 31, 2024, there were no significant changes to our contractual obligations from those disclosed in the section “Management’s Discussion and ~~an increase~~Analysis of Financial Condition and Results of Operations” in ~~repayments of debt during the six months ended December 31, 2017 of $8.9 million.~~

~~Table of Contents~~

~~In September 2014, the Company reintroduced QuickStart, a program whereby~~ our customers are able to purchase our ePort hardware via a five-year, non-cancellable finance agreement. Under the QuickStart program, the Company sells the equipment to customers and creates a long-term and current finance receivable for five-year agreements. In the third and fourth quarters of fiscal 2015, the Company signed vendor agreements with two finance companies, whereby our customers would enter into agreements directly with the finance companies as part of our QuickStart program. Under this scenario, the Company invoices the finance companyAnnual Report on Form 10-K for the ~~equipment financed by~~fiscal year ended June 30, 2023.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to our ~~customer, and typically receives full payment within thirty days. Prior~~critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies to the ~~reintroduction~~condensed consolidated financial statements for a description of QuickStart, the Company had financed its customers’ acquisition of ePort equipment primarily through the JumpStart rental program. Under Jumpstart, the Company records an investing capital expenditure cash outflow for the equipment provided and fixed assets on the balance sheet, and then receives rental income from a month-to-month lease. Customers who utilize third party finance companies in connection with the QuickStart program improve our cash flow from operations, and our QuickStart program reduces cash flow needed for investing activities otherwise incurred by us for our JumpStart program.

Since entering into vendor agreements with two third-party finance companies, the majority of QuickStart sales consummated have been with customers entering into agreements directly with the finance companies. Our customers have shifted from acquiring our products via JumpStart, which accounted for 65% of our gross connections in fiscal year 2014, to QuickStart and sales under normal trade receivable terms, which accounted for 89%, 91%, and 93% of our gross connections in fiscal years 2015, 2016, and 2017 respectively. JumpStart was approximately 1% of our gross new connections for the six months ended December 31, 2017.

~~The Company is continually seeking to expand its outside financing partners in order to accommodate expected growth.~~

~~Sources of Cash~~

The Company’s net working capital, which is defined as current assets less current liabilities, increased $7.3 million from $5.8 million as of June 30, 2017, to $13.1 million as of December 31, 2017. As of December 31, 2017, the Company’s primary sources of cash include:

recent accounting pronouncements.

~~Cash on hand of approximately $15.4 million;~~

$2.5 million available under the Revolving Credit Facility provided we continue to satisfy the various covenants set forth in the loan agreement, including the requirement to meet the minimum quarterly Total Leverage Ratio and Fixed Charge Coverage Ratio;

~~Sales to third party lenders of all or a portion of our $16.7 million of finance receivables which may occur in future quarters; and~~

~~Anticipated cash which may be provided by operating activities in future quarters.~~

~~The Company believes its existing cash and available cash resources described above, would provide sufficient capital resources to operate its anticipated business over the next twelve months.~~

Item 3. Quantitative and Qualitative Disclosures about Market ~~Risk.~~

~~There have been no significant changes~~Risk

As of March 31, 2024, we are exposed to ~~our~~ market risk ~~since June 30, 2017. For~~related to changes in interest rates on our outstanding borrowings. Our Amended JPMorgan Credit Facility has a ~~discussion~~four-year maturity. Interest on the Amended JPMorgan Credit Facility will be based, at the Company’s option, on a base rate or SOFR plus an applicable margin tied to the Company’s total leverage ratio and having ranges of between 2.50% and 3.00% for base rate loans and between 3.50% and 4.00% for SOFR loans. As of March 31, 2024, we have $38.2 million total outstanding borrowings, an increase of 100 basis points in SOFR Rate would result in a change in interest expense of $0.4 million per year.

We are also exposed to market risk related to changes in interest rates on our cash investments. We invest our excess cash in money market funds that we believe are highly liquid and marketable in the short term. These investments earn a floating rate of interest and are not held for trading or other speculative purposes. Consequently, our exposure to market ~~risk, refer~~risks for interest rate changes related to ~~Part II, Item 7A. “Quantitative~~our money market funds is not material. Market risks related to fluctuations of foreign currencies are not material and ~~Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the year ended June 30, 2017.~~

we have no freestanding derivative instruments as of March 31, 2024.

~~Table of Contents~~

Item 4. Controls and ~~Procedures.~~

Procedures

(a) Disclosure Controls and Procedures

Our management evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness as of the end of the period covered by this Form 10-Q of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")).

We maintain disclosure controls and procedures to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in ~~Securities~~the SEC’s rules and ~~Exchange Commission rules,~~forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness as of the end of the period covered by this Form 10-Q of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, our management, including our chief executive officer and chief financial officer, has concluded that our disclosure controls and ~~procedures~~procedures were not effective as of March 31, 2024, as a result of the ~~end~~material weaknesses in our internal control over financial reporting, which are described in Item 9A. of ~~such period.~~

our 2023 Form 10-K.

(b) Changes in Internal Control over Financial Reporting

~~There were~~

Other than the remediation plan disclosed in Item 9A. of our 2023 Form 10-K, there have been no changes in ~~our~~the Company’s internal ~~controls~~control over financial reporting that occurred during the fiscal quarter ended ~~December~~March 31, ~~2017~~2024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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We are in the process of executing remediation activities to alleviate the material weaknesses identified in the remediation plan disclosed in Item 9A. of our 2023 Form 10-K. The Company hired a public accounting firm to assist with the remediation efforts. As part of the remediation work performed specifically in the third quarter of fiscal year 2024, the Company implemented a series of control enhancements to remediate the material weaknesses for both business process and IT general controls. As of the filing date of our third quarter 2024 Form 10Q, the remediation of the prior year material weaknesses and overall operating effectiveness of our control environment remains subject to evaluation. The material weaknesses cannot be considered remediated until the related controls have operated for a sufficient period of time and until management has concluded, through testing, that the controls are operating effectively.

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Part II - Other Information

Item 1. Legal Proceedings

The information required by this Item is incorporated herein by reference to the Notes to condensed consolidated financial statements, Note 15 – Commitments and Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

For a discussion of the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

N/A

Item 3. Defaults Upon Senior Securities

There were no defaults on any senior securities. The total liquidation preference including accrued and unpaid dividends on our Series A Convertible Preferred Stock as of March 31, 2024 was $22.7 million. The dividend accrual dates for our Preferred Stock are February 1 and August 1. The annual cumulative dividend on our Preferred Stock is $1.50 per share.

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the fiscal quarter ended March 31, 2024, none of the Company's director or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

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Item 6. Exhibits


Exhibit Number		Description
~~Number~~
3.1		~~Description~~ Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 10-Q filed on February 4, 2022).

3.2		Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to Form 8-K filed on August 10, 2021)
~~10.1~~		~~Visa Small Ticket Deployment and Incentive Agreement dated as of October 31, 2017 (Portions of this exhibit were redacted pursuant to a confidential treatment request).~~
31.1*
~~10.2~~	Credit Agreement by and among the Company, its subsidiaries, and JPMorgan Chase Bank, N.A., dated November 9, 2017 (Portions of this exhibit were redacted pursuant to a confidential treatment request).

~~10.3~~	~~Employment, Non-Interference, Non-Solicitation, Non-Competition and Invention Assignment Agreement by and between the Company and Mandeep Arora dated November 9, 2017.~~

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

~~31.2~~ 31.2*		Certifications of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

~~32.1~~ 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~~ 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.

101		The following financial information from our Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2017,~~2024, filed with the SEC on ~~February 8, 2018,~~May 9, 2024, is formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(“iXBRL”): (1) the Condensed Consolidated Balance Sheets as of ~~December~~March 31, ~~2017~~2024 and June 30, ~~2017,~~2023, (2) the Condensed Consolidated Statements of Operations for the three-month and ~~six-month~~nine-month periods ended ~~December~~March 31, ~~2017~~2024 and ~~2016,~~2023, (3) the Condensed Consolidated Statements of Other Comprehensive Income (Loss) for the three-month and nine-month periods ended March 31, 2024 and 2023, (4) the Condensed Consolidated Statements of Convertible Preferred Stock and Shareholders’ Equity for the ~~six-month period~~three-month and nine-month periods ended ~~December~~March 31, ~~2017, (4)~~2024 and 2023, (5) the Condensed Consolidated Statements of Cash Flows for the ~~six-month period~~nine-month periods ended ~~December~~March 31, ~~2017~~2024 and ~~2016,~~2023, and ~~(5)~~(6) the Notes to Condensed Consolidated Financial Statements.

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase

104		The cover page from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 9, 2024, is formatted as Inline iXBRL and contained in Exhibit 101.

* Filed herewith.

** Furnished herewith.

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Cantaloupe, Inc.

Date: May 9, 2024			~~USA TECHNOLOGIES, INC.~~ /s/ Ravi Venkatesan
			Ravi Venkatesan
~~Date: February 9, 2018~~			~~/s/ Stephen P. Herbert~~
	~~Stephen P. Herbert,~~
	Chief Executive Officer

Date: May 9, 2024			/s/ Scott Stewart
~~Date: February 9, 2018~~			~~/s/ Priyanka Singh~~ Scott Stewart
			~~Priyanka Singh~~
	Chief Financial Officer


	December 31,		June 30,
($ in thousands, except shares)	2017		2017
	(unaudited)		(audited)
Assets
Current assets:
Cash and cash equivalents	$	15,386	$	12,745
Accounts receivable, less allowance of $3,740 and $3,149, respectively		15,472		7,193
Finance receivables, less allowance of $49 and $19, respectively		5,517		11,010
Inventory		11,215		4,586
Prepaid expenses and other current assets		1,971		968
Total current assets		49,561		36,502

Non-current assets:
Finance receivables, less current portion		11,215		8,607
Other assets		1,120		687
Property and equipment, net		12,622		12,111
Deferred income taxes		14,774		27,670
Intangibles, net		30,910		622
Goodwill		64,449		11,492
Total non-current assets		135,090		61,189

Total assets	$	184,651	$	97,691

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	23,775	$	16,054
Accrued expenses		6,798		4,130
Line of credit, net		—		7,036
Capital lease obligations and current obligations under long-term debt		5,121		3,230
Income taxes payable		6		10
Deferred revenue		595		—
Deferred gain from sale-leaseback transactions		198		239
Total current liabilities		36,493		30,699

Long-term liabilities:
Revolving credit facility		10,000		—
Capital lease obligations and long-term debt, less current portion		23,874		1,061
Accrued expenses, less current portion		65		53
Deferred gain from sale-leaseback transactions, less current portion		49		100
Total long-term liabilities		33,988		1,214

Total liabilities	$	70,481	$	31,913

Commitments and contingencies (Note 13)
Shareholders’ equity:
Preferred stock, no par value, 1,800,000 shares authorized, no shares issued		—		—
Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and outstanding, with liquidation preferences of $19,109 and $18,775 at December 31, 2017 and June 30, 2017, respectively		3,138		3,138
Common stock, no par value, 640,000,000 shares authorized, 53,619,898 and 40,331,645 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively		307,053		245,999
Accumulated deficit		(196,021)		(183,359)
Total shareholders’ equity		114,170		65,778
Total liabilities and shareholders’ equity	$	184,651	$	97,691


	Series A
	Convertible
	Preferred Stock			Common Stock			Accumulated
($ in thousands, except shares)	Shares	Amount		Shares	Amount		Deficit		Total
Balance, June 30, 2017	445,063	$	3,138	40,331,645	$	245,999	$	(183,359)	$	65,778
Issuance of common stock in relation to public offering, net of offering costs incurred of $3,237 (a)	—		—	9,583,332		39,888		—		39,888
Issuance of common stock as merger consideration(b)	—		—	3,423,367		19,810		—		19,810
Stock based compensation	—		—	281,554		1,356		—		1,356
Excess tax benefit from stock plans(c)	—		—	—		—		67		67
Net loss	—		—	—		—		(12,729)		(12,729)
Balance, December 31, 2017	445,063	$	3,138	53,619,898	$	307,053	$	(196,021)	$	114,170


	Cantaloupe
($ in thousands)	Systems, Inc.
Accounts receivable	$	3,232
Finance receivables, current portion		1,640
Inventory		782
Prepaid expense and other current assets		682
Finance receivables, less current portion		3,483
Other assets		50
Property and equipment		1,573
Intangibles		30,800
Goodwill		52,957
Total assets acquired		95,199
Accounts payable		(1,591)
Accrued expenses		(1,832)
Deferred revenue		(626)
Capital lease obligations and current obligations under long-term debt		(666)
Capital lease obligations and long-term debt, less current portion		(1,134)
Deferred income tax liabilities		(4,359)
Total net assets acquired	$	84,991


	Three months ended December 31,				Six months ended December 31,
(In thousands, except per share data)	2017		2016		2017		2016
Revenues	$	34,772	$	27,521	$	67,642	$	54,704
Net loss attributable to USAT		(10,632)		(428)		(10,552)		(5,458)
Net loss attributable to USAT common shares	$	(10,632)	$	(428)	$	(10,886)	$	(5,792)
Net loss per share - basic and diluted		(0.20)		(0.01)		(0.20)		(0.11)
Weighted average number of common shares outstanding - basic and diluted		53,619,921		53,315,633		53,584,368		52,369,824


	30 and Under		31 – 60		61 – 90		Greater than		Total				Total
	Days Past		Days Past		Days Past		90 Days Past		Non-				Finance
($ in thousands)	Due		Due		Due		Due		Performing		Performing		Receivables
QuickStart Leases	$	40	$	85	$	162	$	120	$	407	$	16,325	$	16,732


	As of December 31, 2017
			Accumulated				Amortization
($ in thousands)	Gross		Amortization		Net		Period
Intangible assets:
Non-compete agreements		2		(2)		—	2 years
Brand and tradenames		1,695		(96)		1,599	3 - 7 years
Developed technology		10,939		(499)		10,440	5 - 6 years
Customer relationships		19,049		(178)		18,871	10 - 18 years
Total intangible assets	$	31,685	$	(775)	$	30,910

Goodwill		64,449		—		64,449	Indefinite

Total intangible assets & goodwill	$	96,134		(775)	$	95,359


	As of June 30, 2017
			Accumulated				Amortization
($ in thousands)	Gross		Amortization		Net		Period
Intangible assets:
Non-compete agreements		2		(2)		—	2 years
Brand		95		(48)		47	3 years
Developed technology		639		(191)		448	5 years
Customer relationships		149		(22)		127	10 years
Total intangible assets	$	885	$	(263)	$	622

Goodwill		11,492		—		11,492	Indefinite

Total intangible assets & goodwill	$	12,377		(263)	$	12,114


($ in thousands)	As of March 31, 2024
Remainder of fiscal year 2024	$	1,520
2025	5,941
2026	3,793
Thereafter	—
Total	$	11,254


	As of and for the three months ended
	December 31,		September 30,		June 30,		March 31,		December 31,
	2017		2017		2017		2017		2016
Connections:
Gross new connections		317,000		28,000		70,000		40,000		25,000
% from existing customer base		44%		82%		93%		88%		80%
Net new connections (a)		311,000		26,000		64,000		35,000		21,000
Total connections		905,000		594,000		568,000		504,000		469,000

Customers:
New customers added (a)		1,800		550		300		500		500
Total customers		15,050		13,250		12,700		12,400		11,900

Volumes:
Total number of transactions (millions)		144.8		121.1		114.8		104.9		100.1
Total volume (millions)	$	272.7	$	239.2	$	225.6	$	202.5	$	191.5

Financing structure of connections:
JumpStart		0.4%		4.1%		3.3%		8.6%		6.8%
QuickStart & all others (b)		99.6%		95.9%		96.7%		91.4%		93.2%
Total		100.0%		100.0%		100.0%		100.0%		100.0%


	For the three months ended December 31,				Percent
($ in thousands)	2017		2016		Change
Revenues:
License and transaction fees	$	22,853	$	16,639	37.3%
Equipment sales		9,653		5,117	88.6%
Total revenues		32,506		21,756	49.4%

Costs of sales:
Cost of services		14,362		11,389	26.1%
Cost of equipment		8,943		4,033	121.7%
Total costs of sales		23,305		15,422	51.1%

Gross profit:
License and transaction fees		8,491		5,250	61.7%
Equipment sales		710		1,084	(34.5%)
Total gross profit	$	9,201	$	6,334	45.3%


	For the six months ended December 31,				Percent
($ in thousands)	2017		2016		Change
Revenues:
License and transaction fees	$	42,797	$	33,004	29.7%
Equipment sales		15,326		10,340	48.2%
Total revenues		58,123		43,344	34.1%

Costs of sales:
Cost of services		27,688		22,632	22.3%
Cost of equipment		14,033		8,211	70.9%
Total costs of sales		41,721		30,843	35.3%

Gross profit:
License and transaction fees		15,109		10,372	45.7%
Equipment sales		1,293		2,129	(39.3%)
Total gross profit	$	16,402	$	12,501	31.2%