LEASES

9 Months Ended

Mar. 31, 2020

Leases [Abstract]

LEASES

LEASES

Lessee Accounting

The Company determines if an arrangement is a lease at inception. The Company has operating and finance leases for office space, warehouses, automobiles and office equipment. USAT’s leases have lease terms of one year to eight years and some include options to extend and/or terminate the lease. The exercise of lease renewal options is at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term. The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or any material restrictive covenants.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is the collateralized rate of interest that we would pay to borrow over a similar term an amount equal to the lease payments, based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. USAT has lease agreements with lease and non-lease components, which are accounted for together as a single lease component. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term.

Variable lease payments that are not based on an index or that result from changes to an index subsequent to the initial measurement of the corresponding lease liability are not included in the measurement of lease ROU assets or liabilities and instead are recognized in earnings in the period in which the obligation for those payments is incurred.

At March 31, 2020, the Company has the following balances recorded in the balance sheet related to its lease arrangements:

($ in thousands)	Classification	As of March 31, 2020
Assets
Operating leases	Operating lease right-of-use assets	$	5,903
Finance leases	Property and equipment, net	73
Liabilities
Current:
Operating leases	Accrued expenses	1,082
Finance leases	Finance lease obligations and current obligations under long-term debt	55
Non-current:
Operating leases	Operating lease liabilities, non-current	5,025
Finance leases	Finance lease obligations and long-term debt, less current portion	$	24

Components of lease cost are as follows:

($ in thousands)	Three months ended March 31, 2020		Nine months ended March 31, 2020
Finance lease costs:
Amortization of ROU assets	$	25	$	79
Interest on lease assets	3		8
Operating lease costs*	515		1,970
Total	$	543	$	2,057

* 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)	Nine months ended March 31, 2020
Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases	$	73
Operating cash flows from finance leases	9
Operating cash flows from operating leases	1,350
Non-cash activity
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	12
Operating lease liabilities	$	3,384

Weighted-average remaining lease term and discount rate for our leases are as follows:

	Nine months ended March 31, 2020
Weighted-average remaining lease term (years)
Finance leases	1.4
Operating leases	5.4
Weighted-average discount rate
Finance leases	9.9	%
Operating leases	6.8	%

Maturities of lease liabilities by fiscal year for our leases are as follows:

($ in thousands)	Operating Leases			Finance Leases
Remainder of 2020	$	384		$	27
2021	1,440			46
2022	1,461			16
2023	1,493			2
2024	1,030			1
Thereafter	1,520			—
Total lease payments	$	7,328		$	92
Less: Imputed interest	(1,221		)	(13		)
Present value of lease liabilities	$	6,107		$	79

The Company's future minimum lease commitments as of June 30, 2019, under ASC Topic 840, the predecessor to Topic 842, are as follows:

($ in thousands)	Operating Leases		Capital Leases
2020	$	1,326	$	106
2021	1,151		34
2022	1,180		12
2023	1,208		1
2024	859		1
Thereafter	1,550		—
Total minimum lease payments	$	7,274	$	154
Less: interest			(14		)
Present value of minimum lease payments, net			140
Less: current obligations under capital leases			(106		)
Obligations under capital leases, noncurrent			$	34

Lessor Accounting

Lessor accounting remained substantially unchanged with the adoption of ASC Topic 842. The Company offers its customers financing for the lease of our POS electronic payment devices. We account for these transactions as sales-type leases. Our sales-type leases generally have a non-cancellable term of 60 months. Certain leases contain an end-of-term purchase option that is generally insignificant and is reasonably certain to be exercised by the lessee. Leases that do not meet the criteria for sales-type lease accounting are accounted for as operating leases, typically our JumpStart program leases. JumpStart terms are typically 36 months and are cancellable with 30 to 60 days' written notice. As discussed in Note 2, the Company has elected to combine lease and non-lease components for its operating leases and account for the combined components under ASC 606, which is the predominant characteristic of the combined components. All QuickStart leases are sales-type and do not qualify for the election.

Lessor consideration is allocated between lease components and the non-lease components using the requirements under ASC 606. Revenue from sales-type leases is recognized upon shipment to the customer and the interest portion is deferred and recognized as earned. The revenues related to the sales-type leases are included in Equipment sales in the Consolidated Statements of Operations and a portion of the lease payments as interest income. Revenue from operating leases is recognized ratably over the applicable service period with service fee revenue related to the leases included in License and transaction fees in the Consolidated Statements of Operations.

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

($ in thousands)	March 31, 2020			June 30, 2019
Cost	$	32,572		36,190
Accumulated depreciation	(27,664		)	(30,473		)
Net	$	4,908		$	5,717

The Company’s net investment in sales-type leases (carrying value of lease receivables) and the future minimum amounts to be collected on these lease receivables as of March 31, 2020 are disclosed within Note 6 - Finance Receivables.

LEASES

LEASES

Lessee Accounting

The Company determines if an arrangement is a lease at inception. The Company has operating and finance leases for office space, warehouses, automobiles and office equipment. USAT’s leases have lease terms of one year to eight years and some include options to extend and/or terminate the lease. The exercise of lease renewal options is at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term. The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or any material restrictive covenants.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is the collateralized rate of interest that we would pay to borrow over a similar term an amount equal to the lease payments, based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. USAT has lease agreements with lease and non-lease components, which are accounted for together as a single lease component. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term.

Variable lease payments that are not based on an index or that result from changes to an index subsequent to the initial measurement of the corresponding lease liability are not included in the measurement of lease ROU assets or liabilities and instead are recognized in earnings in the period in which the obligation for those payments is incurred.

At March 31, 2020, the Company has the following balances recorded in the balance sheet related to its lease arrangements:

($ in thousands)	Classification	As of March 31, 2020
Assets
Operating leases	Operating lease right-of-use assets	$	5,903
Finance leases	Property and equipment, net	73
Liabilities
Current:
Operating leases	Accrued expenses	1,082
Finance leases	Finance lease obligations and current obligations under long-term debt	55
Non-current:
Operating leases	Operating lease liabilities, non-current	5,025
Finance leases	Finance lease obligations and long-term debt, less current portion	$	24

Components of lease cost are as follows:

($ in thousands)	Three months ended March 31, 2020		Nine months ended March 31, 2020
Finance lease costs:
Amortization of ROU assets	$	25	$	79
Interest on lease assets	3		8
Operating lease costs*	515		1,970
Total	$	543	$	2,057

* 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)	Nine months ended March 31, 2020
Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases	$	73
Operating cash flows from finance leases	9
Operating cash flows from operating leases	1,350
Non-cash activity
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	12
Operating lease liabilities	$	3,384

Weighted-average remaining lease term and discount rate for our leases are as follows:

	Nine months ended March 31, 2020
Weighted-average remaining lease term (years)
Finance leases	1.4
Operating leases	5.4
Weighted-average discount rate
Finance leases	9.9	%
Operating leases	6.8	%

Maturities of lease liabilities by fiscal year for our leases are as follows:

($ in thousands)	Operating Leases			Finance Leases
Remainder of 2020	$	384		$	27
2021	1,440			46
2022	1,461			16
2023	1,493			2
2024	1,030			1
Thereafter	1,520			—
Total lease payments	$	7,328		$	92
Less: Imputed interest	(1,221		)	(13		)
Present value of lease liabilities	$	6,107		$	79

The Company's future minimum lease commitments as of June 30, 2019, under ASC Topic 840, the predecessor to Topic 842, are as follows:

($ in thousands)	Operating Leases		Capital Leases
2020	$	1,326	$	106
2021	1,151		34
2022	1,180		12
2023	1,208		1
2024	859		1
Thereafter	1,550		—
Total minimum lease payments	$	7,274	$	154
Less: interest			(14		)
Present value of minimum lease payments, net			140
Less: current obligations under capital leases			(106		)
Obligations under capital leases, noncurrent			$	34

Lessor Accounting

Lessor accounting remained substantially unchanged with the adoption of ASC Topic 842. The Company offers its customers financing for the lease of our POS electronic payment devices. We account for these transactions as sales-type leases. Our sales-type leases generally have a non-cancellable term of 60 months. Certain leases contain an end-of-term purchase option that is generally insignificant and is reasonably certain to be exercised by the lessee. Leases that do not meet the criteria for sales-type lease accounting are accounted for as operating leases, typically our JumpStart program leases. JumpStart terms are typically 36 months and are cancellable with 30 to 60 days' written notice. As discussed in Note 2, the Company has elected to combine lease and non-lease components for its operating leases and account for the combined components under ASC 606, which is the predominant characteristic of the combined components. All QuickStart leases are sales-type and do not qualify for the election.

Lessor consideration is allocated between lease components and the non-lease components using the requirements under ASC 606. Revenue from sales-type leases is recognized upon shipment to the customer and the interest portion is deferred and recognized as earned. The revenues related to the sales-type leases are included in Equipment sales in the Consolidated Statements of Operations and a portion of the lease payments as interest income. Revenue from operating leases is recognized ratably over the applicable service period with service fee revenue related to the leases included in License and transaction fees in the Consolidated Statements of Operations.

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

($ in thousands)	March 31, 2020			June 30, 2019
Cost	$	32,572		36,190
Accumulated depreciation	(27,664		)	(30,473		)
Net	$	4,908		$	5,717

The Company’s net investment in sales-type leases (carrying value of lease receivables) and the future minimum amounts to be collected on these lease receivables as of March 31, 2020 are disclosed within Note 6 - Finance Receivables.

LEASES

LEASES

Lessee Accounting

The Company determines if an arrangement is a lease at inception. The Company has operating and finance leases for office space, warehouses, automobiles and office equipment. USAT’s leases have lease terms of one year to eight years and some include options to extend and/or terminate the lease. The exercise of lease renewal options is at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term. The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or any material restrictive covenants.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is the collateralized rate of interest that we would pay to borrow over a similar term an amount equal to the lease payments, based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. USAT has lease agreements with lease and non-lease components, which are accounted for together as a single lease component. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term.

Variable lease payments that are not based on an index or that result from changes to an index subsequent to the initial measurement of the corresponding lease liability are not included in the measurement of lease ROU assets or liabilities and instead are recognized in earnings in the period in which the obligation for those payments is incurred.

At March 31, 2020, the Company has the following balances recorded in the balance sheet related to its lease arrangements:

($ in thousands)	Classification	As of March 31, 2020
Assets
Operating leases	Operating lease right-of-use assets	$	5,903
Finance leases	Property and equipment, net	73
Liabilities
Current:
Operating leases	Accrued expenses	1,082
Finance leases	Finance lease obligations and current obligations under long-term debt	55
Non-current:
Operating leases	Operating lease liabilities, non-current	5,025
Finance leases	Finance lease obligations and long-term debt, less current portion	$	24

Components of lease cost are as follows:

($ in thousands)	Three months ended March 31, 2020		Nine months ended March 31, 2020
Finance lease costs:
Amortization of ROU assets	$	25	$	79
Interest on lease assets	3		8
Operating lease costs*	515		1,970
Total	$	543	$	2,057

* 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)	Nine months ended March 31, 2020
Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases	$	73
Operating cash flows from finance leases	9
Operating cash flows from operating leases	1,350
Non-cash activity
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	12
Operating lease liabilities	$	3,384

Weighted-average remaining lease term and discount rate for our leases are as follows:

	Nine months ended March 31, 2020
Weighted-average remaining lease term (years)
Finance leases	1.4
Operating leases	5.4
Weighted-average discount rate
Finance leases	9.9	%
Operating leases	6.8	%

Maturities of lease liabilities by fiscal year for our leases are as follows:

($ in thousands)	Operating Leases			Finance Leases
Remainder of 2020	$	384		$	27
2021	1,440			46
2022	1,461			16
2023	1,493			2
2024	1,030			1
Thereafter	1,520			—
Total lease payments	$	7,328		$	92
Less: Imputed interest	(1,221		)	(13		)
Present value of lease liabilities	$	6,107		$	79

The Company's future minimum lease commitments as of June 30, 2019, under ASC Topic 840, the predecessor to Topic 842, are as follows:

($ in thousands)	Operating Leases		Capital Leases
2020	$	1,326	$	106
2021	1,151		34
2022	1,180		12
2023	1,208		1
2024	859		1
Thereafter	1,550		—
Total minimum lease payments	$	7,274	$	154
Less: interest			(14		)
Present value of minimum lease payments, net			140
Less: current obligations under capital leases			(106		)
Obligations under capital leases, noncurrent			$	34

Lessor Accounting

Lessor accounting remained substantially unchanged with the adoption of ASC Topic 842. The Company offers its customers financing for the lease of our POS electronic payment devices. We account for these transactions as sales-type leases. Our sales-type leases generally have a non-cancellable term of 60 months. Certain leases contain an end-of-term purchase option that is generally insignificant and is reasonably certain to be exercised by the lessee. Leases that do not meet the criteria for sales-type lease accounting are accounted for as operating leases, typically our JumpStart program leases. JumpStart terms are typically 36 months and are cancellable with 30 to 60 days' written notice. As discussed in Note 2, the Company has elected to combine lease and non-lease components for its operating leases and account for the combined components under ASC 606, which is the predominant characteristic of the combined components. All QuickStart leases are sales-type and do not qualify for the election.

Lessor consideration is allocated between lease components and the non-lease components using the requirements under ASC 606. Revenue from sales-type leases is recognized upon shipment to the customer and the interest portion is deferred and recognized as earned. The revenues related to the sales-type leases are included in Equipment sales in the Consolidated Statements of Operations and a portion of the lease payments as interest income. Revenue from operating leases is recognized ratably over the applicable service period with service fee revenue related to the leases included in License and transaction fees in the Consolidated Statements of Operations.

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

($ in thousands)	March 31, 2020			June 30, 2019
Cost	$	32,572		36,190
Accumulated depreciation	(27,664		)	(30,473		)
Net	$	4,908		$	5,717

The Company’s net investment in sales-type leases (carrying value of lease receivables) and the future minimum amounts to be collected on these lease receivables as of March 31, 2020 are disclosed within Note 6 - Finance Receivables.

LEASES

LEASES

Lessee Accounting

The Company determines if an arrangement is a lease at inception. The Company has operating and finance leases for office space, warehouses, automobiles and office equipment. USAT’s leases have lease terms of one year to eight years and some include options to extend and/or terminate the lease. The exercise of lease renewal options is at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term. The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or any material restrictive covenants.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is the collateralized rate of interest that we would pay to borrow over a similar term an amount equal to the lease payments, based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. USAT has lease agreements with lease and non-lease components, which are accounted for together as a single lease component. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term.

Variable lease payments that are not based on an index or that result from changes to an index subsequent to the initial measurement of the corresponding lease liability are not included in the measurement of lease ROU assets or liabilities and instead are recognized in earnings in the period in which the obligation for those payments is incurred.

At March 31, 2020, the Company has the following balances recorded in the balance sheet related to its lease arrangements:

($ in thousands)	Classification	As of March 31, 2020
Assets
Operating leases	Operating lease right-of-use assets	$	5,903
Finance leases	Property and equipment, net	73
Liabilities
Current:
Operating leases	Accrued expenses	1,082
Finance leases	Finance lease obligations and current obligations under long-term debt	55
Non-current:
Operating leases	Operating lease liabilities, non-current	5,025
Finance leases	Finance lease obligations and long-term debt, less current portion	$	24

Components of lease cost are as follows:

($ in thousands)	Three months ended March 31, 2020		Nine months ended March 31, 2020
Finance lease costs:
Amortization of ROU assets	$	25	$	79
Interest on lease assets	3		8
Operating lease costs*	515		1,970
Total	$	543	$	2,057

* 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)	Nine months ended March 31, 2020
Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases	$	73
Operating cash flows from finance leases	9
Operating cash flows from operating leases	1,350
Non-cash activity
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	12
Operating lease liabilities	$	3,384

Weighted-average remaining lease term and discount rate for our leases are as follows:

	Nine months ended March 31, 2020
Weighted-average remaining lease term (years)
Finance leases	1.4
Operating leases	5.4
Weighted-average discount rate
Finance leases	9.9	%
Operating leases	6.8	%

Maturities of lease liabilities by fiscal year for our leases are as follows:

($ in thousands)	Operating Leases			Finance Leases
Remainder of 2020	$	384		$	27
2021	1,440			46
2022	1,461			16
2023	1,493			2
2024	1,030			1
Thereafter	1,520			—
Total lease payments	$	7,328		$	92
Less: Imputed interest	(1,221		)	(13		)
Present value of lease liabilities	$	6,107		$	79

The Company's future minimum lease commitments as of June 30, 2019, under ASC Topic 840, the predecessor to Topic 842, are as follows:

($ in thousands)	Operating Leases		Capital Leases
2020	$	1,326	$	106
2021	1,151		34
2022	1,180		12
2023	1,208		1
2024	859		1
Thereafter	1,550		—
Total minimum lease payments	$	7,274	$	154
Less: interest			(14		)
Present value of minimum lease payments, net			140
Less: current obligations under capital leases			(106		)
Obligations under capital leases, noncurrent			$	34

Lessor Accounting

Lessor accounting remained substantially unchanged with the adoption of ASC Topic 842. The Company offers its customers financing for the lease of our POS electronic payment devices. We account for these transactions as sales-type leases. Our sales-type leases generally have a non-cancellable term of 60 months. Certain leases contain an end-of-term purchase option that is generally insignificant and is reasonably certain to be exercised by the lessee. Leases that do not meet the criteria for sales-type lease accounting are accounted for as operating leases, typically our JumpStart program leases. JumpStart terms are typically 36 months and are cancellable with 30 to 60 days' written notice. As discussed in Note 2, the Company has elected to combine lease and non-lease components for its operating leases and account for the combined components under ASC 606, which is the predominant characteristic of the combined components. All QuickStart leases are sales-type and do not qualify for the election.

Lessor consideration is allocated between lease components and the non-lease components using the requirements under ASC 606. Revenue from sales-type leases is recognized upon shipment to the customer and the interest portion is deferred and recognized as earned. The revenues related to the sales-type leases are included in Equipment sales in the Consolidated Statements of Operations and a portion of the lease payments as interest income. Revenue from operating leases is recognized ratably over the applicable service period with service fee revenue related to the leases included in License and transaction fees in the Consolidated Statements of Operations.

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

($ in thousands)	March 31, 2020			June 30, 2019
Cost	$	32,572		36,190
Accumulated depreciation	(27,664		)	(30,473		)
Net	$	4,908		$	5,717

The Company’s net investment in sales-type leases (carrying value of lease receivables) and the future minimum amounts to be collected on these lease receivables as of March 31, 2020 are disclosed within Note 6 - Finance Receivables.