10-Q 1 ctlp-20221231.htm 10-Q ctlp-20221231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from _________ to _________                         
Commission file number 001-33365
ctlp-20221231_g1.jpg
Cantaloupe, Inc.
_______________________________________________________________
(Exact name of registrant as specified in its charter)
Pennsylvania23-2679963
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
100 Deerfield Lane,Suite 300,Malvern,Pennsylvania19355
(Address of principal executive offices)(Zip Code)
(610) 989-0340
_______________________________________________________________
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName Of Each Exchange On Which Registered
Common Stock, no par valueCTLPThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 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☐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 3, 2023 there were 72,462,969 outstanding shares of Common Stock, no par value.


Cantaloupe, Inc.
TABLE OF CONTENTS


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

($ in thousands, except share data)December 31, 2022 (Unaudited)June 30,
2022
Assets
Current assets:
Cash and cash equivalents$28,143 $68,125 
Accounts receivable, net45,721 37,695 
Finance receivables, net7,757 6,721 
Inventory, net26,895 19,754 
Prepaid expenses and other current assets3,471 4,285 
Total current assets111,987 136,580 
Non-current assets:
Finance receivables due after one year, net14,520 14,727 
Property and equipment, net20,535 12,784 
Operating lease right-of-use assets1,778 2,370 
Intangibles, net29,535 17,947 
Goodwill92,241 66,656 
Other assets4,815 4,568 
Total non-current assets163,424 119,052 
Total assets$275,411 $255,632 
Liabilities, convertible preferred stock and shareholders’ equity
Current liabilities:
Accounts payable$48,575 $48,440 
Accrued expenses29,474 28,154 
Current obligations under long-term debt1,192 692 
Deferred revenue1,970 1,893 
Total current liabilities81,211 79,179 
Long-term liabilities:
Deferred income taxes217 186 
Long-term debt, less current portion38,082 13,930 
Operating lease liabilities, non-current1,808 2,366 
Total long-term liabilities40,107 16,482 
Total liabilities121,318 95,661 
Commitments and contingencies (Note 14)
Convertible preferred stock:
Series A convertible preferred stock, 900,000 shares authorized, 385,782 and 445,063 issued and outstanding, with liquidation preferences of $19,457 and $22,115 at December 31, 2022 and June 30, 2022, respectively
2,720 3,138 
Shareholders’ equity:
Preferred stock, no par value, 1,800,000 shares authorized
— — 
Common stock, no par value, 640,000,000 shares authorized, 72,462,969 and 71,188,053 shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively
473,605 469,918 
Accumulated deficit(322,232)(313,085)
Total shareholders’ equity151,373 156,833 
Total liabilities, convertible preferred stock and shareholders’ equity$275,411 $255,632 
See accompanying notes.
3
Cantaloupe, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months endedSix months ended
December 31,December 31,
($ in thousands, except per share data)2022202120222021
Revenues:
Subscription and transaction fees$48,932 $41,188 $96,007 $81,812 
Equipment sales12,398 9,903 23,105 15,059 
Total revenues61,330 51,091 119,112 96,871 
Costs of sales:
Cost of subscription and transaction fees30,202 24,919 60,572 50,944 
Cost of equipment sales12,687 10,182 25,937 15,062 
Total costs of sales42,889 35,101 86,509 66,006 
Gross profit18,441 15,990 32,603 30,865 
Operating expenses:
Sales and marketing3,210 1,745 5,735 4,084 
Technology and product development5,299 5,780 12,164 11,169 
General and administrative6,559 7,672 18,137 14,936 
Investigation, proxy solicitation and restatement expenses150 — 547 — 
Integration and acquisition expenses2,787 — 2,787 — 
Depreciation and amortization1,350 1,113 2,666 2,135 
Total operating expenses19,355 16,310 42,036 32,324 
Operating loss(914)(320)(9,433)(1,459)
Other income (expense):
Interest income878 445 1,445 918 
Interest expense(518)(475)(995)(953)
Other income (expense)23 (16)(97)(75)
Total other income (expense), net383 (46)353 (110)
Loss before income taxes(531)(366)(9,080)(1,569)
Provision for income taxes(42)(102)(67)(191)
Net loss(573)(468)(9,147)(1,760)
Preferred dividends— — (334)(334)
Net loss applicable to common shares$(573)$(468)$(9,481)$(2,094)
Net loss per common share
Basic and diluted$(0.01)$(0.01)$(0.13)$(0.03)
Weighted average number of common shares outstanding used to compute net loss per share applicable to common shares
Basic and diluted71,629,939 70,969,246 71,418,845 71,072,587 
See accompanying notes.
4
Cantaloupe, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)

Six Month Period Ended December 31, 2022
Common StockAccumulated
Deficit		Total
($ in thousands, except share data)SharesAmount
Balance, June 30, 202271,188,053 $469,918 $(313,085)$156,833 
Stock-based compensation and exercises (net)30,077 1,318 — 1,318 
Repurchase of Series A convertible preferred stock— (1,733)— (1,733)
Net loss— — (8,574)(8,574)
Balance, September 30, 202271,218,130 469,503 (321,659)147,844 
Stock-based compensation and exercises (net)3,919 160 — 160 
Common stock issued for acquisition1,240,920 3,942 — 3,942 
Net loss— — (573)(573)
Balance, December 31, 202272,462,969 $473,605 $(322,232)$151,373 

Six Month Period Ended December 31, 2021
Common StockAccumulated
Deficit		Total
($ in thousands, except share data)SharesAmount
Balance, June 30, 202171,258,047 $462,775 $(311,382)$151,393 
Stock-based compensation and exercises (net)20,958 1,762 — 1,762 
Retirement of common stock(319,823)— — — 
Net loss— — (1,291)(1,291)
Balance, September 30, 202170,959,182 464,537 (312,673)151,864 
Stock based compensation and exercises (net)28,316 1,453 — 1,453 
Net loss— — (468)(468)
Balance, December 31, 202170,987,498 $465,990 $(313,141)$152,849 
See accompanying notes.
5
Cantaloupe, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
December 31,
($ in thousands)20222021
Cash flows from operating activities:
Net loss$(9,147)$(1,760)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation1,477 3,129 
Amortization of debt issuance costs and discounts59 68 
Provision for expected losses1,527 1,313 
Provision for inventory reserve135 342 
Depreciation and amortization included in operating expenses2,666 2,135 
Depreciation included in costs of sales for rental equipment554 518 
Other979 112 
Changes in operating assets and liabilities:
Accounts receivable(6,737)1,378 
Finance receivables(1,221)245 
Inventory(5,411)(6,802)
Prepaid expenses and other assets755 (160)
Accounts payable and accrued expenses(1,057)(4,555)
Operating lease liabilities(750)(192)
Deferred revenue77 (18)
Net cash used in operating activities(16,094)(4,247)
Cash flows from investing activities:
Acquisition of business, net of cash acquired(35,913)(2,900)
Purchase of property and equipment(9,436)(4,359)
Net cash used in investing activities(45,349)(7,259)
Cash flows from financing activities:
Proceeds from long-term debt25,000 — 
Repayment of long-term debt(388)(407)
Contingent consideration paid for acquisition(1,000)— 
Proceeds from exercise of common stock options— 86 
Repurchase of Series A Convertible Preferred Stock(2,151)— 
Net cash provided by (used in) financing activities21,461 (321)
Net decrease in cash and cash equivalents(39,982)(11,827)
Cash and cash equivalents at beginning of year68,125 88,136 
Cash and cash equivalents at end of period$28,143 $76,309 
Supplemental disclosures of cash flow information:
Interest paid in cash$920 $376 
Common stock issued in business combination$3,942 $— 

See accompanying notes.
6
Cantaloupe, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BUSINESS

Cantaloupe, Inc., is organized under the laws of the Commonwealth of Pennsylvania. We are a software and payments company that provides end-to-end technology solutions for self-service commerce. Cantaloupe is transforming the self-service industry by offering one integrated solution for payments processing, logistics, and back-office management. Our enterprise-wide platform is designed to increase consumer engagement and sales revenue through digital payments, digital advertising and customer loyalty programs, while providing retailers with control and visibility over their operations and inventory. As a result, customers ranging from vending machine companies to operators of micro-markets, car wash, electric vehicle charging stations, commercial laundry, kiosks, amusements and more, can run their businesses more proactively, predictably, and competitively.

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 that power the micro market industry.

COVID-19 Update

The Company, its employees, and its customers operate in geographic locations in which its business operations and financial performance continues to be affected by the COVID-19 pandemic. While businesses, schools and other organizations re-open, which has led to increased foot-traffic to distributed assets containing our electronic payment solutions, the emergence of new strains and variants and resurgence of the virus, such as the outbreak of the Omicron variant in early calendar year 2022, have led and may in the future lead to additional shutdowns, closures, and other follow-on impacts including supply chain disruptions, which may impact our operations and financial results. During fiscal year 2023, we experienced elevated component and supply chain costs necessary for the production and distribution of our hardware products. Such impacts to our financial statements include, but are not limited to, increased costs of sales incurred, impairment of goodwill and intangible assets, impairment of long-lived assets including operating lease assets, property and equipment and allowance for doubtful accounts for accounts and finance receivables. We have concluded that there are no material impairments as a result of our evaluation for the quarter ended December 31, 2022. Where applicable, we have incorporated judgments and estimates of the expected impact of COVID-19 in the preparation of the financial statements based on information currently available. These judgments and estimates may change, as new events develop and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.

We continue to monitor the evolving situation and follow guidance from federal, state and local public health authorities. Given the potential uncertainty of the situation, the Company cannot, at this time, reasonably estimate the longer-term repercussions of COVID-19 on our financial condition, results of operations or cash flows.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements and therefore should be read in conjunction with the Company’s June 30, 2022 Annual Report on Form 10-K.

All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. Operating results for the three and six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2023. Actual results could differ from estimates. The balance sheet at June 30, 2022 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

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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.

Recently Adopted Accounting Pronouncements

Lessor Classification

In July 2021, the FASB issued ASU 2021-05, “Lessors – Certain Leases with Variable Lease Payments” which requires lessors to classify leases as operating leases if they have variable lease payments that do not depend on an index or rate and would have selling losses if they were classified as sales-type or direct financing leases. The Company adopted this pronouncement on July 1, 2022. The adoption of this accounting standard did not materially impact the Company’s condensed consolidated financial statements.

Accounting for Debt and Equity Instruments

In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies accounting for convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related earnings per share (EPS) guidance. The Company adopted this pronouncement on July 1, 2022. The adoption of this accounting standard did not materially impact the Company’s condensed consolidated financial statements.


3. LEASES

Lessee Accounting
The Company has operating leases for office space, warehouses, and office equipment. At December 31, 2022, the Company has the following balances recorded in the balance sheet related to its lease arrangements:
($ in thousands)Balance Sheet ClassificationAs of December 31, 2022As of June 30, 2022
Assets:Operating lease right-of-use assets$1,778 $2,370 
Liabilities:
CurrentAccrued expenses$1,346 $1,538 
Long-termOperating lease liabilities, non-current1,808 2,366 
Total lease liabilities$3,154 $3,904 

The operating lease right-of-use assets are significantly lower than total lease liabilities as indicated in table above. The variance is primarily driven by impairment charges recognized on our right-of-use assets of $1.6 million in fiscal year 2021, when we optimized our corporate real estate footprint.

Components of lease cost are as follows:
($ in thousands)Three months ended December 31, 2022Three months ended December 31, 2021
Operating lease costs*516 443 

8
($ in thousands)Six months ended December 31, 2022Six months ended December 31, 2021
Operating lease costs*1,052 885 
* Includes short-term lease and variable lease costs, which are not material.
Supplemental cash flow information and non-cash activity related to our leases are as follows:

($ in thousands)Six months ended December 31, 2022Six months ended December 31, 2021
Supplemental cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities$1,064 $840 
Non-cash activity:
Lease assets obtained in exchange for new operating lease liabilities$— $471 

Maturities of lease liabilities by fiscal year for our leases are as follows:
($ in thousands)Operating
Leases
Remainder of 2023$886 
20241,029 
2025707 
2026628 
2027265 
Total lease payments$3,515 
Less: Imputed interest(361)
Present value of lease liabilities$3,154 

Lessor Accounting

Property and equipment used for the operating lease rental program consisted of the following:
($ in thousands)December 31,
2022		June 30,
2022
Cost$27,025 25,242 
Accumulated depreciation(22,621)(22,914)
Net$4,404 $2,328 

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 December 31, 2022 are disclosed within Note 6 - Finance Receivables.


4. REVENUES

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

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Three months ended December 31,Six months ended December 31,
($ in thousands)2022202120222021
Transaction fees$32,392 $26,775 $63,687 $53,195 
Subscription fees16,540 14,413 32,320 28,617 
Subscription and transaction fees$48,932 $41,188 $96,007 $81,812 
Equipment sales12,398 9,903 23,105 15,059 
Total revenues$61,330 $51,091 $119,112 $96,871 




Contract Liabilities

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

Three months ended December 31,Three months ended December 31,
($ in thousands)20222021
Deferred revenue, beginning of the period$2,069 $1,720 
Deferred revenue, end of the period1,970 1,745 
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$119 $120 
Six months ended December 31,Six months ended December 31,
($ in thousands)20222021
Deferred revenue, beginning of the period$1,893 $1,763 
Deferred revenue, end of the period1,970 1,745 
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$226 $215 

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.

Contract Costs

At December 31, 2022, the Company had net capitalized costs to obtain contracts of $0.5 million included in Prepaid expenses and other current assets and $2.5 million included in Other noncurrent assets on the Condensed Consolidated Balance Sheet. At June 30, 2022, the Company had net capitalized costs to obtain contracts of $0.5 million included in Prepaid expenses and other current assets and $2.3 million included in Other noncurrent assets on the Condensed Consolidated Balance Sheet. None of these capitalized contract costs were impaired.

During the three and six months ended December 31, 2022, amortization of capitalized contract costs was $0.2 million and $0.4 million respectively. During the three and six months ended December 31, 2021, amortization of capitalized contract costs was $0.2 million and $0.3 million respectively.

Future Performance Obligations

The Company 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 amount of revenue related to unsatisfied performance obligations in which the original duration of the contract is greater than one year is not significant.


5. ACQUISITION
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We completed the following acquisitions in fiscal year 2023 and 2022. Financial results of each transaction are included in our consolidated financial statements from the date of each acquisition.

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 expands the Company’s footprint into new global markets.

The Company paid an aggregate consideration of approximately $40.8 million, which consisted of $36.9 million in cash and 1,240,920 shares of the Company's common stock (the "Stock Consideration") with an aggregate fair value of $3.9 million for the acquisition of 32M. The aggregate cash consideration includes $0.5 million of cash paid into an escrow account for net working capital and 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 and will be released 50% on the first anniversary of the acquisition date and 50% on the second anniversary of the acquisition date, less any shares that may be returned to Company on account of any indemnity claims. The Escrowed Shares are considered to be issued and outstanding shares of the Company 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 the remaining consideration utilizing existing cash on hand.

The acquisition of 32M was accounted for as a business combination using the acquisition method of accounting and which includes the results of operations of the acquired business from the date of acquisition. The purchase price of the acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values using primarily Level 3 inputs under ASC Topic 820, Fair Value Measurement, with the residual of the purchase price recorded as goodwill.

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

($ in thousands)
Closing cash consideration$36,854 
Stock Consideration3,942 
Fair value of total consideration transferred$40,796 

The following table summarizes the preliminary fair value assigned to the assets acquired and liabilities assumed at the acquisition date of December 1, 2022.
($ in thousands)Amount
Cash and cash equivalents$941 
Accounts receivable2,415 
Inventories1,865 
Intangible assets13,222 
Other assets472 
Total identifiable assets acquired18,915 
Accounts payable(1,721)
Tax liabilities(1,983)
Total liabilities assumed(3,704)
Total identifiable net assets15,211 
Goodwill25,585 
Fair value of total consideration transferred$40,796 

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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 $7.4 million related to developed technology, $5.3 million related to customer relationships, and $0.5 million related to other intangible assets. The fair value of the acquired developed technology was determined using a multi-period excess earnings method. The fair value of the acquired customer relationships was determined using the with-and-without method which estimates the value using the cash flow impact in a scenario where the customer relationships are not in place. The recognized intangible assets will be amortized on a straight-line basis over the estimated useful lives of the respective assets.

Goodwill of $25.6 million arising from the acquisition includes the expected synergies between 32M and the Company and intangible assets that do not qualify for separate recognition at the time of acquisition. The goodwill, which is deductible for income tax purposes, was assigned to the Company’s only reporting unit.

The above allocation of the purchase price is provisional and is still subject to change within the measurement period. The final allocation of the purchase price is expected to be completed as soon as practicable, but no later than one year from the date of the acquisition.

The Company recognized $2.8 million of acquisition related costs that were expensed for the three and six months ended December 31, 2022 These costs are recorded within Integration and acquisition expenses in the Condensed Consolidated Statements of Operations.

The amount of 32M revenue included in the Company’s Condensed Consolidated Statement of Operations from the acquisition date through December 31, 2022 was $1.3 million. The amount of 32M earnings included in the Company’s Condensed Consolidated Statement of Operations from the acquisition date through December 31, 2022 was $0.1 million.

Supplemental disclosure of pro forma information

The following table presents pro forma information as if the acquisition of 32M had occurred on July 1, 2021. The pro forma information presented combines the historical condensed consolidated results of operations of the Company and 32M after giving effect to the preliminary purchase accounting impact of the 32M acquisition related costs (including, but not limited to, amortization associated with the acquired intangible assets, interest expense associated with the Credit Facility to finance a portion of the purchase price, acquisition related costs) and the alignment of accounting policies. 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, 2021, nor are they indicative of any future results. Furthermore, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts.

Three months ended December 31,Six months ended December 31,
(In thousands)2022202120222021
Revenues$64,614 $54,856 $127,450 $104,665 
Net income (loss)1,357 (1,393)(7,640)(5,526)

The supplemental pro forma earnings for the three and six months ended December 31, 2022 were adjusted to exclude $2.8 million of acquisition related costs.

The supplemental pro forma earnings for the six months ended December 31, 2021 were adjusted to include $2.8 million of acquisition related costs, the components of which were previously described.

Yoke Payments

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

Through the acquisition, Yoke’s point of sale platform will now extend its offering to provide self-checkout while seamlessly integrating with Cantaloupe’s inventory management and payment processing platforms. We plan to differentiate ourselves by
12
providing a single platform to manage consumer and operational aspects of micro markets, while also integrating multiple service providers for flexibility and ultimate ease to our customers.

The consideration transferred for the acquisition includes payments of $3 million in cash at the close of the transaction and $1 million in deferred cash payment due on or before July 30, 2022 based on the achievement of certain sales growth targets for software licenses. On July 27, 2022, the Company made the cash payment of $1 million in accordance with the requirements of the purchase agreement.

Additionally in connection with the acquisition, the Company will issue common stock to the former owners of Yoke based on the achievement of certain sales growth targets for software licenses through July 31, 2024 and continued employment as of the respective measurement dates. The accounting treatment for these awards in the context of the business combination is to recognize the awards as a post-combination expense and were not included in the purchase price. We will begin recognizing compensation expense for these awards over the requisite service period when it becomes probable that the performance condition would be satisfied pursuant to ASC 718. At each reporting date, we assess the probability of achieving the sales targets and fulfilling the performance condition. As of December 31, 2022, we determined that it is not probable that the performance condition would be satisfied and, accordingly, have not recognized compensation expense related to these awards for the six months ended December 31, 2022.

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

($ in thousands)Amount
Consideration
Cash $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 value using the cash flow impact in a scenario where the customer relationships are not in place. The recognized intangible assets will be amortized on a straight-line basis over the estimated useful lives of the respective assets.

Goodwill of $2.7 million arising from the acquisition includes the expected synergies between Yoke and the Company and intangible assets that do not qualify for separate recognition at the time of acquisition. The goodwill, which is deductible for income tax purposes, was assigned to the Company’s only reporting unit.

The above table represents the final allocation of the purchase price, noting no material measurement period adjustments. The allocation of the purchase price was subject to revision during the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments to the provisional values, during the measurement period are recorded in the reporting period in which the adjustment amounts are determined.


6. FINANCE RECEIVABLES

The Company's finance receivables consist of financed devices under its QuickStart program. Predominately all of the Company’s finance receivables agreements are classified as non-cancellable sixty-month sales-type leases. As of December 31, 2022 and June 30, 2022, finance receivables consist of the following:
13
($ in thousands)December 31,
2022		June 30,
2022
Current finance receivables, net$7,757 $6,721 
Finance receivables due after one year, net14,520 14,727 
Total finance receivables, net of allowance of $864 and $760, respectively
$22,277 $21,448 

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

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

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


At December 31, 2022, the gross lease receivable by current payment performance on a contractual basis and year of origination consisted of the following:

Leases by Origination
($ in thousands)Up to 1 Year AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
Current$8,689 $5,066 $2,044 $2,312 $2,996 $(5)$21,102 
30 days and under29 59 38 57 73 8 264 
31-60 days14 37 32 50 66 8 207 
61-90 days12 22 32 42 63 9 180 
Greater than 90 days39 112 140 490 530 77 1,388 
Total finance receivables$8,783 $5,296 $2,286 $2,951 $3,728 $97 $23,141 


At June 30, 2022, 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 AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
Current$7,451 $5,047 $2,758 $2,593 $2,807 $103 $20,759 
30 days and under18 10 32 56 94 3 213 
31-60 days25 23 26 58 100 — 232 
61-90 days25 14 20 46 91 — 196 
Greater than 90 days41 47 97 232 391 — 808 
Total finance receivables$7,560 $5,141 $2,933 $2,985 $3,483 $106 $22,208 


At December 31, 2022, credit quality indicators by year of origination consisted of the following:

Leases by Origination
($ in thousands)Up to 1 Year AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
High ratio customers$8,744 $4,983 $1,956 $2,299 $3,039 $22 $21,043 
Low ratio customers39 313 330 652 689 75 2,098 
Total finance receivables$8,783 $5,296 $2,286 $2,951 $3,728 $97 $23,141 


At June 30, 2022, credit quality indicators by year of origination consisted of the following:

Leases by Origination
($ in thousands)Up to 1 Year AgoBetween 1 and 2 Years AgoBetween 2 and 3 Years AgoBetween 3 and 4 Years AgoBetween 4 and 5 Years AgoMore than 5 Years AgoTotal
High ratio customers$7,498 $4,853 $2,688 $2,623 $2,950 $102 $20,714 
Low ratio customers62 288 245 362 533 4 1,494 
Total finance receivables$7,560 $5,141 $2,933 $2,985 $3,483 $106 $22,208 


The following table represents a rollforward of the allowance for finance receivables for the six months ending December 31, 2022 and 2021:
Six months ended December 31,Six months ended December 31,
($ in thousands)20222021
Balance at June 30$760 $1,109 
Provision for expected losses392 100 
Balance at September 30$1,152 $1,209 
Provision for expected losses— 100 
Write-offs(288)(247)
Balance at December 31$864 $1,062 

15
Cash to be collected on our performing finance receivables due for each of the fiscal years are as follows:
($ in thousands)
2022$4,390 
20237,483 
20245,730 
20254,311 
20262,519 
Thereafter631 
Total amounts to be collected25,064 
Less: interest(1,923)
Less: allowance for receivables(864)
Total finance receivables$22,277 

7. ACCOUNTS RECEIVABLE

Accounts receivable primarily include amounts due to the Company for sales of equipment and subscription fees, settlement receivables for amounts due from third-party payment processors and receivables from contract manufacturers, net of the allowance for uncollectible accounts. Accounts receivable, net of the allowance for uncollectible accounts were $45.7 million as of December 31, 2022 and $37.7 million as of June 30, 2022.

Concentrations

Accounts receivable from one contract manufacturer represented 16% of accounts receivable, net of allowance as of December 31, 2022 and June 30, 2022. The Company also had accounts payable due to this contract manufacturer as of December 31, 2022. On January 31, 2023, the Company entered into an Offset and Release of Claims Agreement with this counterparty. As part of the agreement, outstanding receivables and payables were offset and the net position was settled through a cash disbursement from the Company. The accounts receivable balance with the contract manufacturer that was outstanding as of December 31, 2022 has subsequently been fully resolved.

Accounts receivable with the Company's largest customer represented represented 15% and 17% of accounts receivable, net of allowance as of December 31, 2022 and June 30, 2022 respectively. The Company has collected approximately $2.9 million of outstanding accounts receivables in January 2023 resulting in a significant reduction of this concentration.

Allowance for doubtful accounts

The Company maintains an allowance for doubtful accounts for 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 of the receivables balances, primarily based on historical loss experience. Furthermore, current conditions are analyzed on a quarterly basis as we reassess whether our receivables continue to exhibit similar risk characteristics as the prior measurement date, and determine if the reserve calculation needs to be adjusted for new developments, such as a customer’s inability to meet its financial obligations. The Company writes off receivable balances against the allowance for doubtful accounts when management determines the balance is uncollectible and the Company ceases collection efforts.

The following table represents a rollforward of the allowance for doubtful accounts for the three months ending December 31, 2022 and 2021:
Six months ended December 31,
($ in thousands)20222021
Beginning balance of allowance as of June 309,328 7,715 
Provision for expected losses1,044 312 
Write-offs(127)— 
Balance at September 3010,245 8,027 
Provision for expected losses91 801 
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Write-offs(214)(566)
Balance at December 3110,122 8,262 

8. LOSS PER SHARE CALCULATION

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the
period. Diluted earnings per share, applicable only to years ended with reported income, is computed by dividing net income by the weighted average number of common shares outstanding during the period plus the dilutive effect of outstanding stock options and restricted stock-based awards using the treasury stock method. The calculation of basic and diluted loss per share is
presented below:
Three months ended
December 31,
($ in thousands, except per share data)20222021
Numerator for basic and diluted loss per share
Net loss$(573)$(468)
Preferred dividends— — 
Net loss applicable to common shareholders(573)(468)
Denominator for basic loss per share - Weighted average shares outstanding
71,629,939 70,969,246 
Effect of dilutive potential common shares— — 
Denominator for diluted loss per share - Adjusted weighted average shares outstanding
71,629,939 70,969,246 
Basic and diluted loss per share$(0.01)$(0.01)
Six months ended December 31,
($ in thousands, except per share data)20222021
Numerator for basic and diluted loss per share
Net loss$(9,147)$(1,760)
Preferred dividends(