A Pennsylvania-based electronic payments software company agreed to pay a $1.5 million penalty to settle allegations of accounting fraud levied by the Securities and Exchange Commission (SEC) arising from improper revenue recognition practices.

Cantaloupe, formerly known as USA Technologies (USAT), filed materially misstated financial statements with the SEC beginning in the fourth quarter of fiscal year 2017 through the third quarter of FY2018, according to the agency. The alleged misconduct occurred while the company was preparing a May 2018 public offering, the prospectus of which included the misstated financials, the SEC noted.

The details: The improper accounting practices occurred in two forms, the SEC explained in its order filed Monday.

“First, USAT entered into purported ‘bill and hold’ sales transactions … without conforming those transactions to GAAP (generally accepted accounting principles),” the SEC said. “Second, USAT inflated its quarterly sales revenue by deliberately shipping to its customers devices the customers had not ordered or had explicitly told USAT they did not want.”

As a result of these alleged actions, the company restated its FY2017 annual report and its filings for the first three quarters of FY2018. In total, it overstated revenue by $4.61 million, according to the SEC.

The agency penalized USAT’s former chief services officer, Michael Lawlor, and its former vice president for sales and marketing, Maeve Duska, $75,000 and $15,000, respectively, in separate settlements regarding their alleged role in the misconduct.

Compliance considerations: Cantaloupe promptly self-reported the alleged misconduct to the SEC and cooperated with the agency’s investigation. The company also undertook further, unspecified remedial measures, which the SEC said it considered in determining a fine amount.

Company response: “The company believes it has fully remediated the conduct described in the SEC’s order related to USA Technologies, Inc. and its former executives and has implemented enhanced revenue recognition and other financial reporting practices since the periods covered by the SEC’s final order,” Cantaloupe said in a regulatory filing, adding, “None of the company’s current officers were employed by the company during the period covered by the SEC’s investigation and final order.”