The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included in this Form 10-K, as well as the
discussion under "Item 1A. Risk Factors." For further discussion of the
business, industry, our products and services, competitive strengths, and growth
strategy, see "Item 1. Business." Unless stated otherwise, the comparisons
presented in this discussion and analysis refer to the year-over-year comparison
of changes in our financial condition and results of operations as of and for
the fiscal years ended June 30, 2021 and June 30, 2020. Discussion of fiscal
year 2019 items and the year-over year comparison of changes in our financial
condition and results of operations as of and for the fiscal years ended June
30, 2020 and June 30, 2019 can be found in Part II, "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" of our
Annual Report on Form 10-K for the fiscal year ended June 30, 2020, which was
previously filed with the SEC on September 11, 2020.
Certain prior period amounts have been reclassified to conform with current year
presentation. Additionally, in connection with the preparation of the condensed
consolidated financial statements for the three months ended September 30, 2020,
December 31, 2020 and March 31, 2021, the Company identified adjustments that
related to prior period activity. The Company analyzed the potential impact of
the errors in accordance with the appropriate guidance, from both a qualitative
and quantitative perspective, and concluded that the errors were not material to
the previously issued quarterly or annual financial statements and the
correcting adjustments are included within the fiscal year ended June 30, 2021
financial statements.
The following discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements. Furthermore, the period to
period comparison of our historical results is not necessarily indicative of the
results that may be expected in the future.
OVERVIEW OF THE COMPANY
On March 29, 2021, USA Technologies, Inc. filed Articles of Amendment to its
Amended and Restated Articles of Incorporation with the Pennsylvania Department
of State to effect a change of the Company's name from "USA Technologies, Inc."
to "Cantaloupe, Inc.," effective as of April 15, 2021. On April 19, 2021, the
Company's common stock, no par value per share (the "Common Stock"), began
trading on the NASDAQ Global Select Market under the ticker symbol "CTLP" and
the Company's Series A Convertible Preferred Stock, no par value per share,
began trading on the OTC Markets' Pink Open Market under the trading symbol,
"CTLPP".

Cantaloupe, Inc. ("Cantaloupe" or the "Company") is a digital payments and
software services company that provides end-to-end technology solutions for the
unattended retail market. We are transforming the unattended retail world by
offering a solution for payments processing, as well as one that handles
inventory management, pre-kitting, route logistics, warehouse and back-office
management. Our enterprise-wide platform is designed to increase consumer
engagement and sales revenue through digital payments, digital advertising and
customer loyalty programs, while providing retailers with control and visibility
over their operations and inventory. As a result, customers ranging from vending
machine companies to operators of micro-markets, car wash and electric vehicle
charging stations, commercial laundry, kiosks, amusements and more, can run
their businesses more proactively, predictably, and competitively.
The Company's fiscal year ends June 30. The Company generates revenue in
multiple ways. During the fiscal years ended June 30, 2021 and June 30, 2020, we
derived approximately 83% and 82% respectively, of our revenue from recurring
license and transaction fees related to our ePort Connect service and
approximately 17% and 18%, respectively, of our revenue from equipment sales.
Active Devices on our service include point of sale ("POS") electronic payment
devices, certified payment software, or the servicing of similar third-party
installed POS terminals. Devices utilizing the ePort Connect service are the
most significant drivers of the Company's revenue, particularly the recurring
revenue from license and transaction fees. Customers can obtain POS electronic
payment devices from us in the following ways:
•Purchasing devices 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, which are
cancellable month-to-month operating leases.


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Highlights


Highlights of the Company for the fiscal year ended June 30, 2021 are below:
•As of June 30, 2021, we had approximately 19,800 Active Customers and 1.1
million Active Devices (as defined in Item 1. Business) connected to our
service;
•Three direct sales teams at the national, regional, and local customer-level
and a growing number of original equipment manufacturers and national
distribution partners;
•Entered into a new Credit Agreement with JP Morgan Chase Bank, N.A in August
2020 that provides for a $5 million secured revolving credit facility and a $15
million secured term facility. The new facility replaces the Company's previous
debt facility, which it entered into on October 9, 2019;
•Relisting of the Company on Nasdaq in November 2020;
•Added as a member of the US Small-Cap Russell 2000® Index in June 2021;
•Raised $55 million of aggregate gross proceeds from institutional accredited
investors through the sale of our stock in a private placement transaction in
March 2021;
•Completion of the rebrand of our Company from USA Technologies, Inc. to
Cantaloupe, Inc.;
•Announced a strategic partnership with Castles Technology to introduce a
next-generation cashless device solution;
•Formed partnership with Bakkt Holdings, LLC to accept cryptocurrency and
accepting participating loyalty points in Cantaloupe's network;
•Awarded a patent by the United States Patent and Trademark Office (USPTO),
titled "Method and System of Personal Vending";
•Upgraded and expanded the ePort product family to accept EMV contact and
contactless payments; and
•Launched next generation of Seed Cashless+.

COVID-19 Update



The coronavirus (COVID-19) was first identified in China in December 2019, and
subsequently declared a global pandemic in March 2020 by the World Health
Organization. COVID-19 containment measures began in parts of the United States
in March 2020 resulting in forced closure of non-essential businesses and social
distancing protocols. As a result, COVID-19 has impacted our business,
significantly reducing foot traffic to distributed assets containing our
electronic payment solutions and reducing discretionary spending by consumers.
The Company did not observe meaningful reductions in processing volume until
middle of March 2020, when average daily processing volume decreased
approximately 40%. By middle of April 2020, processing volumes began to recover
and have improved through June 2021. We are now operating at pre-pandemic levels
of volumes as businesses, schools and other organizations across the country
continue to re-open.

In response to the outbreak and business disruption, first and foremost, we
prioritized the health and safety of our employees while continuing to
diligently serve our customers. An internal task force was created at the start
of the pandemic to develop measures to protect the business in light of the
volatility and uncertainty caused by the COVID-19 pandemic. This included such
aspects as ensuring the safety of our employees and our community by
implementing work from home policies, conserving liquidity, evaluating cost
saving actions, partnering with customers to position Cantaloupe for renewed
growth post crisis, and temporarily pausing plans for international
expansion. The liquidity conservation and cost savings initiatives included:
a 20% salary reduction for the senior leadership team through December 2020;
deferral of all cash-based director fees until calendar year 2021; a temporary
furlough of approximately 10% of our employee base; negotiations with and
concessions from vendors in regard to cost reductions and/or payment deferrals;
an increased collection effort to reduce outstanding accounts receivables; and
various supply chain/inventory improvements. During the summer of 2020 as
restrictions lifted, our offices were opened with strict guidelines for social
distancing and with adherence to state and local mandates. All of our
                                       29
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furloughed employees returned to work by June 26, 2020. Many of our employees
continue to work remotely full-time or part-time throughout fiscal year 2021. To
date, our supply chain network has not been significantly disrupted and we are
continuously monitoring for the impact from COVID-19. In addition, the Company
received loan proceeds from the Paycheck Protection Program in the fourth
quarter of fiscal year 2020 and our repayment obligations were forgiven in the
fourth quarter of fiscal year 2021. See below for additional information.

While we are encouraged by the recent gradual lifting of pandemic-related
closures and other containment measures across the country, 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 in
the future. COVID-19 may have a material adverse impact on our future revenue
growth as well as our overall profitability in fiscal year 2022, and may lead to
higher sales-related, inventory-related, and operating reserves.

As of June 30, 2021, we have evaluated the potential impact of the COVID-19
outbreak on our financial statements, including, but not limited to, the
impairment of goodwill and intangible assets, impairment of long-lived assets
including operating lease right-of-use assets, property and equipment and
allowance for doubtful accounts for accounts and finance receivables. We have
concluded that there are no material impairments as a result of our evaluation.
Where applicable, we have incorporated judgments and estimates of the expected
impact of COVID-19 in the preparation of the financial statements based on
information currently available. These judgments and estimates may change, as
new events develop and additional information is obtained, and are recognized in
the consolidated financial statements as soon as they become known.

Paycheck Protection Program Loan



In the fourth quarter of fiscal year 2020, we received loan proceeds of
approximately $3.1 million (the "PPP Loan") pursuant to the Paycheck Protection
Program under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES
Act") administered by the U.S. Small Business Administration (the "SBA"). We
used the PPP Loan in accordance with the provisions of the CARES Act. The loan
bore a fixed interest rate of 1% over a two-year term from the approval date of
April 28, 2020. The application for these funds required the Company to, in good
faith, certify that the economic uncertainty caused by COVID-19 made the loan
request necessary to support the ongoing operations of the Company. This
certification further required the Company to take into account our current
business activity and our ability to access other sources of liquidity
sufficient to support ongoing operations in a manner that is not significantly
detrimental to the business. The receipt of these funds and the forgiveness of
the loan is dependent on the Company having initially qualified for the loan and
qualifying for the forgiveness of such loan based on our future adherence to the
forgiveness criteria.

On June 8, 2021, the Company received notification from the Small Business
Administration that they approved the forgiveness of the full $3.1 million PPP
loan and related accrued interest. The Company recorded the forgiveness as a
gain on debt extinguishment in Other income in our consolidated financial
statements. The SBA reserves the right to audit any PPP loan, regardless of
size. These audits may occur after forgiveness has been granted. Under the CARES
Act, all borrowers are required to maintain their loan documentation for six
years after the PPP loan was forgiven or repaid in full and to provide that
documentation to the SBA upon request.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared applying certain critical
accounting policies. The Securities 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 affect 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 our future financial condition and results of operations. Our
financial statements are prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), and they conform to general practices in our
industry. We apply critical accounting policies consistently from period to
period and intend that any change in methodology occur in an appropriate manner.
Accounting policies currently deemed critical are listed below:
Revenue Recognition. The Company derives revenue primarily from the sale or
lease of equipment and services to the small ticket, unattended POS market.
The Company's application of the accounting principles in U.S. GAAP related to
the measurement and recognition of revenue requires us to make judgments and
estimates. Complex arrangements may require significant judgment in contract
                                       30
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interpretation to determine the appropriate accounting. Specifically, the
determination of whether we are a principal to a transaction (gross revenue) or
an agent (net revenue) can require considerable judgment.
The Company enters into arrangements with multiple performance obligations,
which may include various combinations of equipment and services. Our equipment
and service deliverables qualify as separate performance obligations and can be
sold on a standalone basis. A deliverable constitutes a separate unit of
accounting when it has standalone value and, where return rights exist, delivery
or performance of the undelivered items is considered probable and substantially
within the Company's control. For these multiple deliverable arrangements, the
Company allocates revenue to the deliverables based on their relative selling
prices. To the extent that a deliverable is subject to specific guidance on
whether and/or how to allocate the consideration in a multiple element
arrangement, that deliverable is accounted for in accordance with such specific
guidance. The Company limits the amount of revenue recognition for delivered
items to the amount that is not contingent on the future delivery of products or
services or meeting other future performance obligations.
Deferred Income Tax Assets and Liabilities. The carrying values of deferred
income tax assets and liabilities reflect the application of our income tax
accounting policies in accordance with applicable accounting standards and are
based on management's assumptions and estimates regarding future operating
results and levels of taxable income, as well as management's judgment regarding
the interpretation of the provisions of applicable accounting standards. The
carrying values of liabilities for income taxes currently payable are based on
management's interpretations of applicable tax laws and incorporate management's
assumptions and judgments regarding the use of tax planning strategies in
various taxing jurisdictions.
We evaluate the recoverability of these deferred tax assets by assessing the
adequacy of future expected taxable income from all sources, including reversal
of taxable temporary differences, forecasted operating earnings and available
tax planning strategies. These sources of income inherently rely heavily on
estimates. We use our historical experience and our short and long-term business
forecasts to provide insight. To the extent we do not consider it more likely
than not that a deferred tax asset will be recovered, a valuation allowance is
established. As of June 30, 2021 and June 30, 2020, we had federal and state net
operating loss carryforwards of $408 million and $403 million, respectively, to
offset future taxable income, the majority of which expire through approximately
2039. Federal and some state net operating loss carryforwards generated in tax
years ending after December 31, 2017 can be carried forward indefinitely. These
federal and state net operating loss carryforwards are reserved with a full
valuation allowance because, based on the available evidence, we believe it is
more likely than not that we would not be able to utilize those deferred tax
assets in the future. If the actual amounts of taxable income differ from our
estimates, the amount of our valuation allowance could be materially impacted.
Federal operating loss carryforwards start to expire in 2022 and certain state
operating loss carryforwards are currently expiring.
Goodwill. We test goodwill for impairment at least annually, or more frequently
if events or changes in circumstances indicate that impairment may have
occurred. Goodwill is reviewed for impairment utilizing either a qualitative or
a quantitative goodwill impairment test. If we choose to perform a qualitative
assessment and determine the fair value more likely than not exceeds the
carrying value, no further evaluation is necessary. When we perform the
quantitative goodwill impairment test, we compare the fair value of our
reporting unit to its carrying value. If the fair value of the reporting unit
exceeds its carrying value, then goodwill is not considered impaired. An
impairment charge is recognized for the amount by which, if any, the carrying
value exceeds the reporting unit's fair value. However, the loss recognized
cannot exceed the reporting unit's goodwill balance.
The quantitative impairment test process requires valuation of the reporting
unit, which we determine using the income approach, the market approach or a
combination of the two approaches. Under the income approach, we calculate the
fair value of the reporting unit based on the present value of estimated future
cash flows derived from assumptions that include expected growth rates and
revenues, projected expenses, discount rates, capital expenditures and income
tax rates. Under the market approach, we estimate the fair value based on the
quoted stock price, recent equity transactions of our business, market
transactions involving similar businesses and market comparables.
The Company has selected April 1 as its annual test date. The Company has
concluded there has been no impairment of goodwill during the years ended
June 30, 2021, 2020, or 2019. As of the date of our annual impairment test for
fiscal year 2021, the fair value of our reporting unit exceeded its carrying
value by a significant margin. Subsequent to our annual impairment test, no
indicators of impairment were identified.
As of June 30, 2021, if our estimate of the fair value of our reporting unit was
10% lower, no goodwill impairment would have existed.

Impairment of Long-Lived Assets. Long-lived assets are reviewed for impairment
at the asset group level whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. If the sum of the expected
future undiscounted cash flow is less than the carrying amount of the asset, an
impairment is indicated. A loss is then recognized for
                                       31
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the difference, if any, between the fair value of the asset (as estimated by
management using its best judgment) and the carrying value of the asset. If
actual market value is less favorable than that estimated by management,
additional write-downs may be required. For the year ended June 30, 2021, the
Company recorded an impairment charge relating to our operating lease
right-of-use assets of $1.6 million.
Allowances for Accounts and Finance Receivables. We maintain lifetime expected
loss allowances for accounts and finance receivables based on historical
experience of payment performance, current conditions of the customer, and
reasonable and supportable economic forecasts of collectability for the asset's
entire expected life, which is generally less than one year for accounts
receivable and five years for finance receivables. Historical loss experience is
utilized as there have been no significant changes in the mix or risk
characteristics of the receivable revenue streams used to calculate historical
loss rates. Current conditions are analyzed at each measurement date to 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. Reasonable and supportable macroeconomic trends also are
incorporated into the analysis. Estimating the allowances therefore requires us
to apply judgment in relying on historical customer payment experience,
regularly analyzing the financial condition of our customers, and developing
macroeconomic forecasts to adequately cover expected credit losses on our
receivables. By nature, such estimates are highly subjective, and it is possible
that the amount of receivables that we are unable to collect may be different
than the amounts initially estimated in the allowances. Our allowance for
doubtful accounts for accounts and finance receivables on June 30, 2021 and 2020
was $7.7 million and $7.8 million, respectively.
Inventories. We determine the value of inventories using the lower of cost or
net realizable value. We write down inventories for the difference between the
carrying value of the inventories and their net realizable value. If actual
market conditions are less favorable than those projected by management,
additional write-downs may be required.
We estimate our reserves for inventory obsolescence by continuously examining
our inventories to determine if there are indicators that carrying values exceed
net realizable values. Experience has shown that significant indicators that
could require the need for additional inventory write-downs are the age of the
inventory, the length of its product life cycles, anticipated demand for our
products, changes to technical standards required by payment companies or by
law, and current economic conditions. While we believe that adequate write-downs
for inventory obsolescence have been made in the consolidated financial
statements, actual demand could be less than forecasted demand for our products
and we could experience additional inventory write-downs in the future. Our
inventory reserve on June 30, 2021 and 2020 was $3.5 million and $2.8 million,
respectively.
Loss Contingencies. Loss contingencies are uncertain and unresolved matters that
arise in the ordinary course of business and result from events or actions by
others that have the potential to result in a future loss. Such contingencies
include, but are not limited to, litigation.
When a loss is considered probable and reasonably estimable, we record a
liability in the amount of our best estimate for the ultimate loss. When there
appears to be a range of possible costs with equal likelihood, liabilities are
based on the low-end of such range. However, the likelihood of a loss with
respect to a particular contingency is often difficult to predict and
determining a meaningful estimate of the loss or a range of loss may not be
practicable based on the information available and the potential effect of
future events and decisions by third parties that will determine the ultimate
resolution of the contingency. Moreover, it is not uncommon for such matters to
be resolved over many years, during which time relevant developments and new
information must be continuously evaluated to determine both the likelihood of
potential loss and whether it is possible to reasonably estimate a range of
possible loss.
Disclosure is provided for material loss contingencies when a loss is probable
but a reasonable estimate cannot be made, and when it is reasonably possible
that a loss will be incurred or when it is reasonably possible that the amount
of a loss will exceed the recorded provision. We regularly review all
contingencies to determine whether the likelihood of loss has changed and to
assess whether a reasonable estimate of the loss or range of loss can be made.
As discussed above, development of a meaningful estimate of loss or a range of
potential loss is complex when the outcome is directly dependent on negotiations
with or decisions by third parties, such as regulatory agencies, the court
system and other interested parties. Such factors bear directly on whether it is
possible to reasonably estimate a range of potential loss and boundaries of high
and low estimates.
Sales tax reserve. The Company has recorded a contingent liability for sales
tax, included in accrued expenses in the consolidated balance sheet. On a
quarterly basis, the Company accrues interest on the unpaid balance. The
estimated liability is adjusted upon the payment of sales tax related to the
accrual, the changes in state tax laws that may impact the accrual and the
expiration of the statute of limitations for open years under review. The
liability includes significant judgments and estimates that may change in the
future, and the actual liability may be different from our current estimate.
Future changes to the sales tax reserve amount will be recorded within selling,
general, and administrative expenses in the consolidated statements of
operations and accrued expenses in the consolidated balance sheets.
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RESULTS OF OPERATIONS
The following table shows certain financial and non-financial data that
management believes give readers insight into certain trends and relationships
about the Company's financial performance. We believe the metrics (Active
Devices, Active Customers, Total Number of Transactions and Total Dollar Volume
of Transactions) are useful in allowing management and readers to evaluate our
strategy of driving growth in devices and transactions.
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 Active Devices
are devices that communicate through other devices that communicate or transact
with us. A self-service retail location that utilizes an ePort cashless payment
device 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 ability to leverage existing customers and partners.


                                                                        As of and for the years ended
                                             June 30, 2021                      June 30, 2020                      June 30, 2019
Devices:
Active Devices (thousands)                          1,094                              1,079                                994

Customers:
Active Customers                                   19,834                             17,249                             15,408

Volumes:
Total Number of Transactions
(millions)                                          868.7                              881.1                              847.2
Total Dollar Volume of Transactions
(millions)                                        1,756.6                            1,729.4                            1,647.0


Highlights for the fiscal year ended June 30, 2021 include:
•1.09 million Active Devices as of June 30, 2021 compared to 1.08 million as of
June 30, 2020, an increase of approximately 15 thousand Active Devices, or 1.4%;
•19,834 Active Customers to our service as of June 30, 2021 compared to the same
period last year of 17,249, an increase of 2,585 Active Customers, or 15%.
•Volumes for the year ended June 30, 2021 are largely consistent with volumes
for the year ended June 30, 2020 as we are now at pre-pandemic (COVID-19) levels
of processing volumes as businesses, schools and other organizations across the
country continue to re-open.



                                       33

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

[[Image Removed: ctlp-20210630_g5.jpg]][[Image Removed: ctlp-20210630_g6.jpg]]


                    [[Image Removed: ctlp-20210630_g7.jpg]]
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Revenue and Gross Profit
                                                   Year Ended June 30,                                      Percent Change
($ in thousands)                        2021               2020               2019             2021 v. 2020             2020 v. 2019

Revenue:


License and transaction fees        $ 139,242          $ 133,167          $ 122,908                    4.6  %                      8.3  %
Equipment sales                        27,697             29,986             21,558                   (7.6) %                     39.1  %
Total revenue                         166,939            163,153            144,466                    2.3  %                     12.9  %

Cost of sales:
Cost of license and transaction
fees                                   83,617             82,980             79,980                    0.8  %                      3.8  %
Cost of equipment sales                29,296             33,900             24,301                  (13.6) %                     39.5  %
Total cost of sales                   112,913            116,880            104,281                   (3.4) %                     12.1  %

Gross profit:
License and transaction fees           55,625             50,187             42,928                   10.8  %                     16.9  %
Equipment sales                        (1,599)            (3,914)            (2,743)                  59.1  %                    (42.7) %
Total gross profit                  $  54,026          $  46,273          $  40,185                   16.8  %                     15.1  %

Gross margin:
License and transaction fees             39.9  %            37.7  %            34.9  %
Equipment sales                          (5.8) %           (13.1) %           (12.7) %
Total gross margin                       32.4  %            28.4  %            27.8  %



Revenue
Total revenue for the year ended June 30, 2021 was $166.9 million, consisting of
$139.2 million of license and transactions fees and $27.7 million of equipment
sales, compared to $163.2 million for the year ended June 30, 2020, consisting
of $133.2 million of license and transaction fees and $30 million of equipment
sales. The $3.7 million increase in total revenue from the prior fiscal year was
attributable to a $6.0 million increase in license and transaction fees offset
by a $2.3 million decrease in equipment sales. The increase in license and
transaction fees revenues is driven primarily by an increase in our processing
volumes in the second half of fiscal year 2021 as we now operating at
pre-pandemic (COVID-19) levels of volumes as businesses, schools and other
organizations across the county continue to re-open, a higher transaction fee
rate on processing volumes and a slight increase in the Active Devices count
compared to the same period last year. The decrease in equipment sales is driven
primarily by lower shipments compared to last year due to a large equipment sale
made to a strategic customer during the fiscal year 2020.
Cost of sales
Despite an increase in revenues for the year ended June 30, 2021 compared to
June 30, 2020, total cost of sales were lower in the current fiscal year. Total
cost of sales for the year ended June 30, 2021 was $112.9 million, consisting of
$83.6 million of cost of license and transaction fees and $29.3 million of cost
of equipment sales, compared to $116.9 million for the year ended June 30, 2020,
consisting of $83.0 million of cost of license and transaction fees and $33.9
million of cost of equipment sales. The $4.0 million decrease in total cost of
sales from the prior fiscal year was attributable to a $4.6 million decrease in
cost of equipment sales driven primarily by lower shipments, a large equipment
sale made to a strategic customer at a significantly discounted price and
operational improvements compared to last year offset by a $0.6 million increase
in cost of services. The cost of license and transaction fees went up
proportionately less than the increase in license and transaction fees revenues
driven primarily by a $1.1 million reduction in network service fees for the
year ended June 30, 2021 compared to June 30, 2020.
                                       35
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Gross Margin
Overall gross margin increased from 28.4% for fiscal year 2020 to 32.4% for
fiscal year 2021. The increase is attributable to an increase in the license and
transaction fee margin from 37.7% for fiscal year 2020 to 39.9% for fiscal year
2021 driven primarily by $1.1 million in lower network service fees and a
reduction in negative equipment margin from (13.1)% for fiscal year 2020 to
(5.8)% for fiscal year 2021 driven primarily by a large equipment sale made to a
strategic customer during the fiscal year 2020 and operational improvements.
Operating Expenses
                                                   Year ended June 30,                                      Percent Change
Category ($ in thousands)               2021              2020              2019               2021 v. 2020                2020 v. 2019
Selling, general and administrative
expenses                             $ 58,624          $ 61,748          $ 46,527                       (5.1  %)                    32.7  %
Investigation, proxy solicitation
and restatement expenses                    -            19,810            16,073                     (100.0  %)                    23.3  %
Integration and acquisition costs           -                 -             1,338                             NM                  (100.0  %)
Depreciation and amortization           4,107             4,307             4,430                       (4.6  %)                    (2.8  %)
Total operating expenses             $ 62,731          $ 85,865          $ 68,368                      (26.9  %)                    25.6  %


____________
NM - not meaningful
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2021
were $58.6 million, compared to $61.7 million for the year ended June 30, 2020.
Year over year decreases include a $3.3 million decrease in professional fees
due to reduced reliance on external consultants who supported the Company's
accounting and financial reporting operations, a $1.3 million reduction in
travel and entertainment expenses due to COVID-19, and a $5.8 million decrease
in sales and use tax expense due to a benefit in the current year from recent
state sales tax legislation as compared to an expense in the prior year.
Offsetting these decreases were a $6.0 million increase in stock-based
compensation expense due to the hiring of our new executive leadership team who
were brought in to make needed improvements with the Company's strategy and
operations and the recently appointed board of directors and a $1.6 million
lease impairment charge due to the Company further rationalizing its location
strategy. The Company intends to use the savings from the reduced reliance on
third party consultants to invest in innovative technologies and to further
strengthen our network environment and platform.
Investigation, proxy solicitation and restatement expenses
The Company did not incur Investigation, proxy solicitation and restatement
expenses for the year ended June 30, 2021.
In fiscal year 2019, the Audit Committee, with the assistance of independent
legal and forensic accounting advisors, conducted an internal investigation of
then-current and prior period matters relating to certain of the Company's
contractual arrangements, including the accounting treatment, financial
reporting and internal controls related to such arrangements (the "2019
Investigation"). Additionally, in fiscal year 2019, significant financial
reporting issues were identified which were unrelated to the internal
investigation and which resulted in further adjustments to the Company's
previously issued or prior fiscal years' unissued financial statements. As a
result of the findings, the Company restated its consolidated financial
statements as of and for the fiscal year 2017 and our unaudited consolidated
financial statements for the quarterly periods ended September 30, 2016,
December 31, 2016, March 31, 2017, September 30, 2017, December 31, 2017, and
March 31, 2018.
Investigation, proxy solicitation and restatement expenses were incurred both in
fiscal years 2020 and 2019 in connection with the 2019 Investigation and the
restatements of previously filed financial statements, bank consents, the
remediation of deficiencies in our internal control over financial reporting,
the proxy solicitation, and professional services fees to assist with accounting
and compliance activities in fiscal year 2020 following the filing of the 2019
Form 10-K.
Integration and acquisition costs
The Company did not incur integration and acquisition costs for the fiscal years
ended June 30, 2021 and June 30, 2020.

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Depreciation and amortization
Depreciation and amortization expense was consistent for the fiscal years ended
June 30, 2021 and June 30, 2020.
Other income (expense), Net
                                                  Year ended June 30,                                      Percent Change
Category ($ in thousands)              2021              2020              2019               2021 v. 2020                2020 v. 2019
Other income (expense):
Interest income                     $  1,159          $  1,595          $  1,555                      (27.3  %)                     2.6  %
Interest expense                    $ (4,013)         $ (2,597)         $ (2,992)                      54.5  %                    (13.2  %)
Other income                           3,224                 -                 -                      100.0  %                           NM
Total other income (expense), net   $    370          $ (1,002)         $ (1,437)                    (136.9  %)                   (30.3  %)


____________
NM - not meaningful
Other income (expense), Net
Total other income (expense), net for the fiscal year ended June 30, 2021 was
$0.4 million, compared to $(1) million for the fiscal year ended June 30, 2020.
The $1.4 million increase in Other income (expense), net from the prior fiscal
year was primarily attributable to a $3.2 million increase in Other income
related primarily to the forgiveness of our PPP loan offset by a $1.4 million
increase in Interest expense.
In the fourth quarter of fiscal year 2021, the Company received notification
from the Small Business Administration that our $3.1 million PPP loan and
related accrued interest were forgiven in full. The Company recorded the
forgiveness as a gain on debt extinguishment in our consolidated financial
statements resulting in the increase in Other Income for the fiscal year ended
June 30, 2021. See Paycheck Protection Program Loan section above for details.
The increase in Interest expense for the fiscal year ended June 30, 2021 was
primarily related to the recognition of the remaining balance of unamortized
debt issuance costs and debt discount related to the senior secured term loan
facility with Antara Capital Master Fund LP of $2.6 million into interest
expense, related to the repayment of all amounts outstanding under the 2020
Antara Term Facility.
Non-GAAP Financial Measures - Adjusted EBITDA
Adjusted earnings before income taxes, depreciation, and amortization ("Adjusted
EBITDA") is a non-GAAP financial measure which is not required by or defined
under GAAP. We use this non-GAAP financial measure for financial and operational
decision-making purposes and as a means to evaluate period-to-period
comparisons. We believe that this non-GAAP financial measure provides useful
information about our operating results, enhances the overall understanding of
past financial performance and future prospects and allows for greater
transparency with respect to metrics used by our management in its financial and
operational decision making. 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 our net
income or net loss or net cash 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 our net income or net loss as
determined in accordance with GAAP, and are not a substitute for or a measure of
our profitability or net earnings. Adjusted EBITDA is presented because we
believe it is useful to investors as a measure of comparative operating
performance. Additionally, we utilize Adjusted EBITDA as a metric in our
executive officer and management incentive compensation plans.
We define Adjusted EBITDA as U.S. GAAP net loss before (i) interest income (ii)
interest expense on debt and reserves (iii) income tax expense (iv) depreciation
(v) amortization (vi) stock-based compensation expense (vii) non-recurring fees
and charges that were incurred in connection with the 2019 Investigation and
financial statement restatement activities as well as proxy solicitation costs
and (viii) certain other significant infrequent or unusual losses and gains that
are not indicative of our core operations.
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Below is a reconciliation of U.S. GAAP net loss to Adjusted EBITDA for the fiscal years ended June 30, 2021, 2020, and 2019:


                                                                      Year ended June 30,
($ in thousands)                                           2021               2020               2019

Net loss                                               $  (8,705)         $ (40,595)         $ (29,882)
Less: interest income                                     (1,159)            (1,595)            (1,555)
Plus: interest expense                                     4,013              2,597              2,992
Plus: income tax provision                                   370                  1                262

Plus: depreciation expense included in cost of sales for rentals

                                                   1,404              2,711              3,074
Plus: depreciation and amortization expense in
operating expenses                                         4,107              4,307              4,430
EBITDA                                                        30            (32,574)           (20,679)
Plus: stock-based compensation (a)                         9,075              3,029              1,750
Plus: investigation, proxy solicitation and
restatement expenses (b)                                       -             19,810             16,073
Plus: asset impairment charge (c)                          1,578                  -                  -
Less: gain on extinguishment of debt (d)                  (3,065)                 -                  -
Plus: integration and acquisition costs (e)                    -                  -              1,338
Adjustments to EBITDA                                      7,588             22,839             19,161
Adjusted EBITDA                                        $   7,618          $  (9,735)         $  (1,518)


(a)  As an adjustment to EBITDA, we have excluded stock-based compensation, as
it does not reflect our cash-based operations.
(b)  As an adjustment to EBITDA, we have excluded the professional fees incurred
in connection with the non-recurring costs and expenses related to the 2019
Investigation, financial statement restatement activities, and proxy
solicitation costs because we believe that they represent charges that are not
related to our core operations.
(c)  As an adjustment to EBITDA, we have excluded the non-cash impairment
charges related to long-lived operating lease right-of-use assets because we
believe that these do not represent charges that are related to our core
operations.
(d)   As an adjustment to EBITDA, we have excluded the one-time gain related to
the forgiveness of our PPP loan.
(e)   As an adjustment to EBITDA, we have excluded the non-recurring costs and
expenses incurred in connection with business acquisitions in order to allow
more accurate comparison of the financial results to historical operations.
































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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 has the
following primary sources of capital available: (1) cash and cash equivalents on
hand of $88.1 million as of June 30, 2021; (2) the cash that may be provided by
operating activities; and (3) up to $5 million available to be drawn on the 2021
JPMorgan Revolving Facility (as defined below in Item 7A). In addition,
management continues to implement efficiencies in working capital that are
designed to increase our cash balances.
On February 24, 2021, the Company entered into separate subscription agreements
in identical form and substance (the "Subscription Agreements") with
institutional accredited investors (the "Purchasers") relating to a private
placement (the "Private Placement") with respect to the sale of an aggregate of
5,730,000 shares of the Company's common stock. The Private Placement closed on
March 4, 2021 and the Company received aggregate gross proceeds of approximately
$55 million based on the offering price of $9.60 per share (the "Purchase
Price"). The Company incurred $2.6 million in direct and incremental issuance
costs relating to the Private Placement that were accounted as a reduction in
the proceeds of the stock.
During the year ended June 30, 2021, the Company entered into the 2021 JPMorgan
Credit Agreement (as defined below in Item 7A) and repaid all amounts
outstanding under the 2020 Antara Term Facility. The Company also paid $1.2
million to Antara for the commitment termination fee and prepayment premium, and
paid $2.6 million towards the settlement of a consolidated shareholder class
action lawsuit. For additional discussion on the litigation, see Note 17 to our
Consolidated Financial Statements.
In the fourth quarter of fiscal year 2020, we received loan proceeds of
approximately $3.1 million (the "PPP Loan") pursuant to the Paycheck Protection
Program under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES
Act") administered by the U.S. Small Business Administration (the "SBA"). On
June 8, 2021, the SBA notified the Company of the forgiveness of the PPP Loan
which covers the principal and related accrued interest. The SBA reserves the
right to audit any PPP loan, regardless of size. These audits may occur after
forgiveness has been granted. Under the CARES Act, all borrowers are required to
maintain their loan documentation for six years after the PPP loan was forgiven
or repaid in full and to provide that documentation to the SBA upon request.
The Company also has estimated and recorded for potential sales tax and related
interest and penalty liabilities of $17.1 million in the aggregate as of June
30, 2021. 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.
Below are charts that reflect our cash liquidity and outstanding debt for the
years ended June 30, 2021, 2020, and 2019.

[[Image Removed: ctlp-20210630_g8.jpg]][[Image Removed: ctlp-20210630_g9.jpg]]


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Cash Flows
See Consolidated Statement of Cash Flows in Item 8 of this Annual Report for
details on the changes in cash and cash equivalents classified by operating,
investing and financing activities during our respective reporting periods.
                    [[Image Removed: ctlp-20210630_g10.jpg]]
Net cash provided by (used in) operating activities
Cash provided by operating activities was $8.2 million for the year ended June
30, 2021 compared to cash used in operating activities of $14.1 million for the
year ended June 30, 2020. The $8.2 million cash provided by operating activities
reflects our net loss of $8.7 million, $3.6 million utilized by changes in
working capital accounts offset by $20.5 million in non-cash operating charges.
Cash utilized by working capital accounts of approximately $3.6 million was
principally a function of a $10.1 million increase in accounts receivable driven
by increased equipment sales and processing volumes in the fourth quarter of
fiscal year 2021 offset by $7 million increase in accounts payable and accrued
expenses which was comprised of funds owed to customers as a result of larger
processing volumes in the fourth quarter of fiscal year 2021 and a reduction in
the legal reserve due to the settlement of the shareholder class action lawsuit
in fiscal year 2021.
Non-cash operating charges primarily consisted of stock-based compensation,
depreciation of property and equipment, amortization of our intangible assets,
amortization of debt discounts and asset impairment charges offset by a gain
recognized on the extinguishment of our PPP loan.
Net cash used in investing activities
Cash used in investing activities was $1.8 million for the year ended June 30,
2021 compared to cash used of $2.5 million in the same period in the prior year.
Net cash provided by financing activities
Cash provided by financing activities was $50.1 million for the year ended June
30, 2021 compared to cash provided of $20.9 million in the prior year. During
the current fiscal year, the Company raised $52.4 million of proceeds (net of
issuance costs) through a private placement transaction with respect to the sale
of an aggregate of 5,730,000 shares of the Company's common stock to accredited
investors (described below). The Company paid $1.2 million as a prepayment
penalty and commitment termination fee to Antara as part of the repayment of the
2020 Antara Term Facility and paid $0.5 million of debt issuance costs as a
result of entering into the 2021 JPMorgan Credit Facility (described below in
Item 7A).

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CONTRACTUAL OBLIGATIONS
As of June 30, 2021, the Company had certain contractual obligations due over a
period of time as summarized in the following table:
                                                                      

Payments Due by Fiscal Year


                                                         Less than 1                                                More than 5
($ in thousands)                         Total              year             1-3 years           3-5 years             years
Debt and financing obligations
(a)                                   $ 16,005          $      829

$ 15,136 $ 40 $ - Operating lease obligations (b) 5,581

               1,460              2,521               1,335                     265
Purchase obligations (c)                27,750               6,938             20,812                   -                    -
Total contractual obligations         $ 49,336          $    9,227          $  38,469          $    1,375          $       265


(a)  Our debt and financing obligations include both principal and interest
obligations. As of June 30, 2021, an interest rate of 5% was used to compute the
amount of the contractual obligations for interest on the 2021 JPMorgan Credit
Agreement. See Note 10 to the consolidated financial statements for further
information.
(b)  Operating lease obligations represent our undiscounted operating lease
liabilities as of June 30, 2021. See Note 3 to the consolidated financial
statements for further information.
(c)  Purchase obligations primarily represent firm commitments to purchase
inventory. See Note 17 to the consolidated financial statements for further
information.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As of June 30, 2021 we are exposed to market risk related to changes in interest
rates on our outstanding borrowings. On August 14, 2020, the Company repaid all
amounts outstanding under the 2020 Antara Term Facility and entered into a
credit agreement with JPMorgan Chase Bank, N.A (the "2021 JPMorgan Credit
Agreement") for a $5 million secured revolving credit facility (the "2021
JPMorgan Revolving Facility") and a $15 million secured term facility (the "2021
JPMorgan Secured Term Facility" and together with the 2021 JPMorgan Revolving
Facility, the "2021 JPMorgan Credit Facility"). The 2021 JPMorgan Credit
Facility has a three-year maturity, with interest determined, at the Company's
option, on a base rate of LIBOR or Prime Rate plus an applicable spread tied to
the Company's total leverage ratio and having ranges between 2.75% and 3.75% for
Prime rate loans and between 3.75% and 4.75% for LIBOR rate loans. Currently our
borrowings are subject to a LIBOR based interest rate. An increase of 100 basis
points in Prime Rate or LIBOR Rate would not have a material impact on our
interest expense or condensed consolidated financial statements.

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 risks for interest
rate changes related to our money market funds is not material. Market risks
related to fluctuations of foreign currencies are not material and we have no
freestanding derivative instruments as of June 30, 2021.
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