Company Quick10K Filing
USA Technologies
Price5.55 EPS-1
Shares60 P/E-9
MCap334 P/FCF-12
Net Debt-25 EBIT-36
TEV308 TEV/EBIT-9
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-12-31 Filed 2021-02-05
10-Q 2020-09-30 Filed 2020-11-06
10-K 2020-06-30 Filed 2020-09-11
10-Q 2020-03-31 Filed 2020-06-24
10-Q 2019-12-31 Filed 2020-02-18
10-Q 2019-09-30 Filed 2019-11-12
10-K 2019-06-30 Filed 2019-10-09
10-Q 2019-03-31 Filed 2019-10-09
10-Q 2018-12-31 Filed 2019-10-09
10-Q 2018-09-30 Filed 2019-10-09
S-1 2018-05-09 Public Filing
10-Q 2018-03-31 Filed 2018-05-10
10-Q 2017-12-31 Filed 2018-02-09
10-Q 2017-09-30 Filed 2017-11-09
10-K 2017-06-30 Filed 2017-08-23
10-Q 2017-03-31 Filed 2017-05-10
10-Q 2016-12-31 Filed 2017-02-09
10-Q 2016-09-30 Filed 2016-11-09
10-K 2016-06-30 Filed 2016-09-13
10-Q 2016-03-31 Filed 2016-05-13
10-Q 2015-12-31 Filed 2016-02-12
10-Q 2015-09-30 Filed 2015-11-13
10-K 2015-06-30 Filed 2015-09-30
10-Q 2015-03-31 Filed 2015-05-15
10-Q 2014-12-31 Filed 2015-02-17
10-Q 2014-09-30 Filed 2014-11-14
10-K 2014-06-30 Filed 2014-09-29
10-Q 2014-03-31 Filed 2014-05-14
10-Q 2013-12-31 Filed 2014-02-12
10-Q 2013-09-30 Filed 2013-11-13
10-K 2013-06-30 Filed 2013-09-30
10-Q 2013-03-31 Filed 2013-05-14
10-Q 2012-12-31 Filed 2013-02-13
10-Q 2012-09-30 Filed 2012-11-13
10-K 2012-06-30 Filed 2012-09-26
10-Q 2012-03-31 Filed 2012-05-11
10-Q 2011-12-31 Filed 2012-02-08
10-Q 2011-09-30 Filed 2011-11-08
10-K 2011-06-30 Filed 2011-09-27
10-Q 2011-03-31 Filed 2011-05-10
10-Q 2010-12-31 Filed 2011-01-20
10-Q 2010-09-30 Filed 2010-11-10
10-K 2010-06-30 Filed 2010-09-21
10-Q 2010-03-31 Filed 2010-05-03
10-Q 2009-12-31 Filed 2010-02-11
8-K 2020-11-18
8-K 2020-11-17
8-K 2020-11-05
8-K 2020-10-08
8-K 2020-09-18
8-K 2020-09-10
8-K 2020-08-14
8-K 2020-08-10
8-K 2020-07-16
8-K 2020-06-30
8-K 2020-06-29
8-K 2020-06-15
8-K 2020-05-29
8-K 2020-05-21
8-K 2020-05-07
8-K 2020-05-07
8-K 2020-05-04
8-K 2020-04-28
8-K 2020-04-26
8-K 2020-03-20
8-K 2020-03-02
8-K 2020-02-28
8-K 2020-02-14
8-K 2020-01-31
8-K 2020-01-29
8-K 2019-11-22
8-K 2019-11-12
8-K 2019-11-08
8-K 2019-11-08
8-K 2019-10-31
8-K 2019-10-18
8-K 2019-10-17
8-K 2019-10-09
8-K 2019-10-09
8-K 2019-10-07
8-K 2019-09-27
8-K 2019-09-20
8-K 2019-09-18
8-K 2019-09-06
8-K 2019-08-30
8-K 2019-07-10
8-K 2019-06-27
8-K 2019-05-14
8-K 2019-05-09
8-K 2019-04-17
8-K 2019-04-05
8-K 2019-03-28
8-K 2019-03-27
8-K 2019-03-08
8-K 2019-02-26
8-K 2019-02-15
8-K 2019-02-01
8-K 2019-01-24
8-K 2019-01-13
8-K 2019-01-13
8-K 2019-01-07
8-K 2018-12-31
8-K 2018-11-14
8-K 2018-10-02
8-K 2018-09-28
8-K 2018-09-11
8-K 2018-05-08
8-K 2018-04-26
8-K 2018-04-14
8-K 2018-02-08
8-K 2018-01-26

USAT 10Q Quarterly Report

Part I. Financial Information
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 a20201231-exx311.htm
EX-31.2 a20201231-exx312.htm
EX-32.1 a20201231-exx321.htm
EX-32.2 a20201231-exx322.htm

USA Technologies Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
220176132884402012201420172020
Assets, Equity
4533219-3-152012201420172020
Rev, G Profit, Net Income
4018-4-26-48-702012201420172020
Ops, Inv, Fin

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Table of Contents
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, 2020
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
USA Technologies, 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 valueUSATThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 January 29, 2021 there were 65,285,674 outstanding shares of Common Stock, no par value.



Table of Contents
USA TECHNOLOGIES, INC.
TABLE OF CONTENTS



Table of Contents
Part I. Financial Information
Item 1. Consolidated Financial Statements
USA Technologies, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
($ in thousands, except share data)December 31,
2020
June 30,
2020
Assets
Current assets:
Cash and cash equivalents$28,162 $31,713 
Accounts receivable, net20,080 17,273 
Finance receivables, net7,196 7,468 
Inventory, net8,794 9,128 
Prepaid expenses and other current assets1,419 1,782 
Total current assets65,651 67,364 
Non-current assets:
Finance receivables due after one year10,296 11,213 
Property and equipment, net7,185 7,872 
Operating lease right-of-use assets4,799 5,603 
Intangibles, net21,501 23,033 
Goodwill63,945 63,945 
Other assets2,130 1,993 
Total non-current assets109,856 113,659 
Total assets$175,507 $181,023 
Liabilities, convertible preferred stock and shareholders’ equity
Current liabilities:
Accounts payable$26,907 $27,058 
Accrued expenses29,479 30,265 
Current obligations under long-term debt3,804 3,328 
Deferred revenue1,648 1,698 
Total current liabilities61,838 62,349 
Long-term liabilities:
Deferred income taxes148 137 
Long-term debt, less current portion13,901 12,435 
Operating lease liabilities, non-current4,241 4,749 
Total long-term liabilities18,290 17,321 
Total liabilities80,128 79,670 
Commitments and contingencies (Note 13)
Convertible preferred stock:
Series A convertible preferred stock, 900,000 shares authorized, 445,063 issued and outstanding, with liquidation preferences of $21,113 and $20,779 at December 31, 2020 and June 30, 2020, respectively
3,138 3,138 
Shareholders’ equity:
Preferred stock, no par value, 1,800,000 shares authorized
  
Common stock, no par value, 640,000,000 shares authorized, 65,285,674 and 65,196,882 shares issued and outstanding at December 31, 2020 and June 30, 2020, respectively
404,433 401,240 
Accumulated deficit(312,192)(303,025)
Total shareholders’ equity92,241 98,215 
Total liabilities, convertible preferred stock and shareholders’ equity$175,507 $181,023 
See accompanying notes.
3

Table of Contents
USA Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months endedSix months ended
December 31,December 31,
($ in thousands, except per share data)2020201920202019
Revenue:
License and transaction fees$33,214 $35,754 $66,322 $70,363 
Equipment sales5,071 8,297 8,840 17,047 
Total revenue38,285 44,051 75,162 87,410 
Cost of sales:
Cost of license and transaction fees20,617 22,579 39,953 44,668 
Cost of equipment sales5,367 8,710 8,668 18,564 
Total cost of sales25,984 31,289 48,621 63,232 
Gross profit12,301 12,762 26,541 24,178 
Operating expenses:
Selling, general and administrative13,831 16,161 30,641 31,342 
Investigation, proxy solicitation and restatement expenses 3,277  9,768 
Depreciation and amortization1,052 1,080 2,120 2,102 
Total operating expenses14,883 20,518 32,761 43,212 
Operating loss(2,582)(7,756)(6,220)(19,034)
Other income (expense):
Interest income325 283 675 577 
Interest expense(596)(833)(3,881)(1,298)
Total other income (expense), net(271)(550)(3,206)(721)
Loss before income taxes(2,853)(8,306)(9,426)(19,755)
Provision for income taxes(49)(72)(89)(131)
Net loss(2,902)(8,378)(9,515)(19,886)
Preferred dividends  (334)(334)
Net loss applicable to common shares$(2,902)$(8,378)$(9,849)$(20,220)
Net loss per common share
Basic$(0.04)$(0.13)$(0.15)$(0.33)
Diluted$(0.04)$(0.13)$(0.15)$(0.33)
Weighted average number of common shares outstanding
Basic64,913,364 63,664,256 64,886,183 61,891,197 
Diluted64,913,364 63,664,256 64,886,183 61,891,197 
See accompanying notes.
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USA Technologies, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)

Six Month Period Ended December 31, 2020
Common StockAccumulated
Deficit
Total
($ in thousands, except share data)SharesAmount
Balance, June 30, 202065,196,882 $401,240 $(303,025)$98,215 
Impact of adoption of ASC 326— — 348 348 
Stock based compensation56,083 1,502 — 1,502 
Net loss— — (6,613)(6,613)
Balance, September 30, 202065,252,965 402,742 (309,290)93,452 
Stock based compensation32,709 1,691 — 1,691 
Net loss— — (2,902)(2,902)
Balance, December 31, 202065,285,674 $404,433 $(312,192)$92,241 

Six Month Period Ended December 31, 2019
Common StockAccumulated
Deficit
Total
($ in thousands, except share data)SharesAmount
Balance, June 30, 201960,008,481 $376,853 $(262,430)$114,423 
Stock based compensation— 290 — 290 
Net loss— — (11,508)(11,508)
Balance, September 30, 201960,008,481 377,143 (273,938)103,205 
Issuance of common stock in relation to private placement, net of offering costs incurred of $1,102
3,800,000 16,777 — 16,777 
Stock based compensation362,941 1,742 — 1,742 
Net loss— — (8,378)(8,378)
Balance, December 31, 201964,171,422 $395,662 $(282,316)$113,346 
See accompanying notes.
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USA Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
December 31,
($ in thousands)20202019
OPERATING ACTIVITIES:
Net loss$(9,515)$(19,886)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation3,149 2,032 
Amortization of debt discount and issuance costs2,657 311 
Provision for expected losses1,286 862 
Provision for inventory reserve1,262 1,006 
Depreciation and amortization included in operating expenses2,120 2,102 
Depreciation included in cost of sales for rental equipment1,054 1,391 
Other957 1,072 
Changes in operating assets and liabilities:
Accounts receivable(2,987)2,133 
Finance receivables429 (990)
Inventory(928)(1,055)
Prepaid expenses and other assets243 (411)
Accounts payable and accrued expenses195 2,424 
Operating lease liabilities(526)(776)
Deferred revenue(50)(52)
Net cash provided by operating activities(654)(9,837)
INVESTING ACTIVITIES:
Purchase of property and equipment(970)(1,361)
Proceeds from sale of property and equipment11 31 
Net cash used in investing activities(959)(1,330)
FINANCING ACTIVITIES:
Proceeds from long-term debt issuance by Antara, net of issuance costs paid to Antara 14,790 
Proceeds from equity issuance by Antara, net of issuance costs paid to Antara 18,560 
Payment of third-party debt issuance costs (33)
Repayment of 2018 JPMorgan Revolving Credit Facility (10,000)
Proceeds from 2021 JPMorgan Revolving Credit Facility1,750  
Repayment of 2021 JPMorgan Revolving Credit Facility(1,750) 
Proceeds from long-term debt issuance by JPMorgan Chase Bank, N.A., net of debt issuance costs14,550  
Repayment of long-term debt(15,364)(2,109)
Proceeds from exercise of common stock options76  
Payment of Antara prepayment penalty and commitment termination fee(1,200) 
Net cash used in (provided by) financing activities(1,938)21,208 
Net (decrease) increase in cash and cash equivalents(3,551)10,041 
Cash and cash equivalents at beginning of year31,713 27,464 
Cash and cash equivalents at end of period$28,162 $37,505 
Supplemental disclosures of cash flow information:
Interest paid in cash$615 $565 
Supplemental disclosures of noncash financing activities:
Third-party debt issuance costs related to Antara financing, incurred during the six months ended December 31, 2019 and paid the nine months ended March 31, 2020$ $1,947 
Registration termination fee related to Antara financing, incurred during the six months ended December 31, 2019 and paid during the nine months ended March 31, 2020$ $1,223 
See accompanying notes.
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USA Technologies, Inc.
Condensed Notes to Consolidated Financial Statements
(Unaudited)
1. BUSINESS

USA Technologies, Inc. (“USAT” or the “Company”) was incorporated in the Commonwealth of Pennsylvania in January 1992. We are a provider of technology-enabled solutions and value-added services that facilitate electronic payment transactions and consumer engagement services primarily within the unattended Point of Sale (“POS”) market. We are a leading provider in the small ticket, beverage and food vending industry in the United States and are expanding our solutions and services to other unattended market segments, such as gas and car charging stations, laundromats, kiosks, amusements and more. Since our founding, we have designed and marketed systems and solutions that facilitate electronic payment options, as well as telemetry and Internet of Things services, which include the ability to remotely monitor, control, and report on the results of distributed assets containing our electronic payment solutions. Historically, these distributed assets have relied on cash for payment in the form of coins or bills, whereas, our systems allow them to accept cashless payments such as through the use of credit or debit cards or other emerging contactless forms, such as mobile payment. The ePort Connect platform also enables consumer loyalty programs, national rewards programs and digital content, including advertisements and product information to be delivered at the point of sale.

We have evolved from unlocking the potential of cashless payments in vending to transforming into the first platform as a service (PaaS) to power unattended retail operations, from hardware to software for a variety of brands. Today, the unattended retail experience is constantly expanding into new markets and enables brands and merchants to work in new ways. USAT’s mission is to deliver a superior operational and payments platform for unattended retail, that is quick to implement, easy to integrate, flexible to operate, cost effective and provides valuable, real-time customer knowledge. The Company’s PaaS is transforming the unattended retail community by offering one cohesive, integrated solution for payments processing, logistics, and back-office management. It is intended to increase consumer engagement and sales revenue through contactless payments, digital advertising and customer loyalty programs, while providing retailers with control and visibility over their operations and inventory.

Impact of COVID-19

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 mid-March, when average daily processing volume decreased approximately 40%. By mid-April, processing volumes began to recover and had steadily improved through September 2020. As of September 30, 2020, our average daily processing volume had increased 53% from the lows in April. During the second half of the current quarter, we have experienced an approximately 7% decrease in volumes driven by an increase in COVID-19 cases across the country and seasonality of the business. Continued COVID-19 recurrences could result in further reductions in foot traffic to distributed assets containing our electronic payment solutions and reduced discretionary spending by consumers. In addition, the length of time required for an effective vaccine or therapy to become widely available is uncertain. At this time, we are unable to reasonably estimate the length of time that containment measures will be needed in the United States. Furthermore, even after containment measures are lifted there can be no assurance as to the time required to regain operations and sales at levels prior to the pandemic.

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 USAT 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. As a result of an increase in COVID-19 cases during the current quarter and additional lockdowns mandated by state officials, most of our employees continue to work remotely as of December 31, 2020. All of our furloughed employees returned to work, primarily remotely, by June 26, 2020. To date, our supply chain network has not been significantly disrupted and we are continuously
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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. See Note 8 for additional information.

We continue to monitor the continuously evolving situation and follow guidance from federal, state and local public health authorities. As such, given the dynamic nature of this 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. However, based on current trends and if the pandemic is not substantially contained in the near future, COVID-19 may have a material adverse impact on our revenue growth as well as our overall profitability in fiscal year 2021, and may lead to higher sales-related, inventory-related, and operating reserves. As of December 31, 2020, 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.

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, 2020 Annual Report on Form 10-K.  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, 2020 are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2021. Actual results could differ from estimates. The balance sheet at June 30, 2020 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.

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.

As previously disclosed in the Company’s June 30, 2020 Annual Report on Form 10-K and the September 30, 2020 Quarterly Report on Form 10-Q, during the fourth quarter of fiscal year 2020, the Company reclassified certain operating expenses previously reported in the first three quarters of fiscal year 2020 as Selling, general and administrative expenses to Investigation, proxy solicitation and restatement expenses. The reclassifications resulted from management’s conclusion that those operating expenses related to non-recurring professional services fees to assist the Company with accounting and compliance activities following the filing of the 2019 Form 10-K, as well as the proxy solicitation costs incurred in fiscal year 2020. These reclassifications did not affect Total operating expenses or Net loss.

As part of the Company’s financial statement close process for the quarter ended December 31, 2020, management identified that the previously reported reclassification amounts from Selling, general and administrative expenses to Investigation, proxy solicitation and restatement expenses as disclosed in the June 30, 2020 Annual Report on Form 10-K and the September 30, 2020 Quarterly Report on Form 10-Q needed to be revised to properly reflect expense accrual amounts for certain vendors that were incorrectly excluded from the previously calculated amounts. These revisions to the reclassification amounts do not affect the previously reported Depreciation and amortization, Total operating expenses or Net loss for the quarters ended September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020 or the full year ended June 30, 2020 and other interim reporting periods. The Company analyzed the potential impact of the reclassification error in accordance with the appropriate guidance, from both a qualitative and quantitative perspective, and concluded that the error was not material to any individual interim or annual period.

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Operating expenses for each quarter of fiscal year 2020 and other reporting periods before and after the revision discussed above are as follows:
Three months endedOther reporting periods
($ in thousands)September 30, 2019December 31, 2019March 31, 2020June 30, 2020Year ended June 30, 2020Six months ended December 31, 2019Nine months ended March 31, 2020
Selling, general and administrative, before revision (a) (b)
$17,196 $12,520 $18,065 $12,485 $60,266 $29,716 $47,781 
Investigation, proxy solicitation and restatement expenses, before revision (a) (b)
4,476 6,918 2,004 7,894 21,292 11,394 13,398 
Additional amounts reclassified from (to) Selling, general and administrative to (from) Investigation, proxy solicitation and restatement expenses2,015 (3,641)2,177 (2,033)(1,482)(1,626)551 
Selling, general and administrative, after revision (c)
15,181 16,161 15,888 14,518 61,748 31,342 47,230 
Investigation, proxy solicitation and restatement expenses, after revision (c)
6,491 3,277 4,181 5,861 19,810 9,768 13,949 
Depreciation and amortization, no change (a) (b) (d)
1,022 1,080 1,107 1,098 4,307 2,102 3,209 
Total operating expenses, no change (a) (b) (d)
$22,694 $20,518 $21,176 $21,477 $85,865 $43,212 $64,388 
(a) The amounts for the three months ended September 30, 2019, December 31, 2019, March 31, 2020 and full year ended June 30, 2020 were presented in the Company’s June 30, 2020 Annual Report on Form 10-K.
(b)    The amounts for the three months ended September 30, 2019 were presented in the Company’s September 30, 2020 Quarterly Report on Form 10-Q.
(c)    The revised amounts for the three and six months ended December 2019 are presented in the Condensed Consolidated Statements of Operations.
(d)    No changes noted for these amounts. The amounts for the three and six months ended December 2019 are presented in the Condensed Consolidated Statements of Operations.

2. ACCOUNTING POLICIES

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting pronouncements adopted

ASC Topic 326 - Credit Losses

On July 1, 2020, we adopted Topic 326, Financial Instruments-Credit Losses, which was primarily introduced under Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments – Measurement of Credit Losses on Financial Instruments”. Topic 326 introduces a new credit loss impairment methodology for financial assets measured at amortized cost, requiring recognition of the full lifetime expected credit losses upon initial recognition of the financial asset and each reporting period, replacing current GAAP, which generally requires that a loss be incurred before it is recognized. The expected credit loss model is based on historical experience, current conditions, and reasonable and supportable economic forecasts of collectability.

The Company adopted Topic 326 using the modified retrospective approach through an adjustment to retained earnings, and began calculating our allowance for accounts and finance receivables under an expected loss model rather than an incurred loss model.

We estimate our allowances using an aging analysis of the receivables balances, primarily based on historical loss experience, as there have been no significant changes in the mix or risk characteristics of the receivable revenue streams used to calculate historical loss rates. We also take into consideration that receivables for monthly service fees that are collected as part of the flow of funds from our transaction processing service have a lower risk profile than receivables for equipment and service fees billed under the Company’s standard payment terms of 30 to 60 days from invoice issuance, and adjust our aging analysis to incorporate those risk assessments. Current conditions are analyzed at each measurement date 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. Lastly, we also factor reasonable and supportable economic expectations into our allowance estimate for the asset’s entire expected life, which is generally less than one year for accounts receivable and five years for finance receivables.

The adoption of this pronouncement on July 1, 2020 resulted in a net increase of $0.3 million in retained earnings, with an offsetting adjustment to the allowance for doubtful accounts and finance receivables.
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The following table represents a rollforward of the allowance for doubtful accounts for accounts and finance receivables for the six months ending December 31, 2020:
Six months ended December 31, 2020
($ in thousands)Accounts receivableFinance receivable
Beginning balance of allowance at June 30, 2020, prior to adopting ASC 326$7,676 $150 
Impact of adoption of ASC 326(757)409 
Provision for expected losses394  
Balance at September 30, 20207,313 559 
Provision for expected losses542 350 
Balance at December 31, 2020$7,855 $909 

ASU 2018-15 - Intangibles—Goodwill and Other (Topic 350): Internal-Use Software

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other (Topic 350): Internal-Use Software.” This standard aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this ASU on July 1, 2020 did not have a material impact on our condensed consolidated financial statements.

Accounting pronouncements to be adopted

The Company is evaluating whether the effects of the following recent accounting pronouncements, or any other recently issued but not yet effective accounting standards, will have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows.

ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company does not expect the changes to have a material impact on its financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This standard provides practical expedients for contract modifications with the transition from reference rates, such as LIBOR, that are expected to be discontinued. This guidance is applicable for the Company's revolving credit facility and secured term facility with JPMorgan Chase Bank, N.A., which uses LIBOR as a reference rate. In addition, the facility provides for an alternative rate of interest if LIBOR is discontinued. The Company will continue to evaluate ASU 2020-04 to determine the timing and extent to which we will apply the provided accounting relief.

ASU 2020-10, Codification Improvements

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements.” The purpose of the ASU is to update a variety of ASC Topics to make conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements. The ASU is effective for fiscal years beginning after December 15, 2020 with early application permitted. The Company does not expect the changes to have a material impact on its financial statements.

3. LEASES

Lessee Accounting
The Company determines if an arrangement is a lease at inception. The Company has operating leases for office space, warehouses, automobiles and office equipment. USAT’s leases have lease terms of one year to eight years and some include
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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.

Right-of-Use (“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. 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 received. USAT has lease agreements with lease and non-lease components. The Company elected the practical expedient related to treating lease and non-lease components as a single lease component for all leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

At December 31, 2020, the Company has the following balances recorded in the balance sheet related to its lease arrangements:
($ in thousands)ClassificationAs of December 31, 2020
AssetsOperating lease right-of-use assets$4,799 
Liabilities
CurrentAccrued expenses1,114 
Long-termOperating lease liabilities, non-current$4,241 

Components of lease cost are as follows:
($ in thousands)Three months ended December 31, 2020Three months ended December 31, 2019
Operating lease costs*535 753 
* Includes short-term lease and variable lease costs, which are not material.
($ in thousands)Six months ended December 31, 2020Six months ended December 31, 2019
Operating lease costs*1,064 1,454 
* 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, 2020Six months ended December 31, 2019
Supplemental cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities$802 $962 
Non-cash activity
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities$ $3,384 


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Weighted-average remaining lease term and discount rate for our leases are as follows:
Six months ended December 31, 2020
Weighted-average remaining lease term (years)
Operating leases4.8
Weighted-average discount rate
Operating leases6.8 %

Maturities of lease liabilities by fiscal year for our leases are as follows:
($ in thousands)Operating
Leases
Remainder of 2021$723 
20221,460 
20231,492 
20241,029 
2025707 
Thereafter893 
Total lease payments$6,304 
Less: Imputed interest(949)
Present value of lease liabilities$5,355 

Lessor Accounting

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, which are typically our JumpStart program leases, which are agreements for renting POS electronic payment devices. JumpStart terms are typically 36 months and are cancellable with 30 to 60 days' written notice.

The Company treats lease and non-lease components as a single component for those leases where the timing and pattern of transfer for the non-lease component and associated lease component are the same and the stand-alone lease component would be classified as an operating lease if accounted for separately. The combined component is then accounted for under Topic 606, Revenue from Contracts with Customers or Topic 842 depending on the predominant characteristic of the combined component, which was Topic 606 for the Company's operating leases. 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 Topic 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 Condensed 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 Condensed Consolidated Statements of Operations.

Property and equipment used for the operating lease rental program consisted of the following:
($ in thousands)December 31,
2020
June 30,
2020
Cost$32,432 32,445 
Accumulated depreciation(28,298)(27,745)
Net$4,134 $4,700 

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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, 2020 are disclosed within Note 5 - Finance Receivables.

4. REVENUE

Disaggregated Revenue

Based on similar operational and economic characteristics, the Company’s revenue from contracts with customers is disaggregated by License and transaction fees and Equipment sales, as reported in the Company’s Condensed Consolidated Statements of Operations. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are influenced by economic factors, and also represent the level at which management makes operating decisions and assesses financial performance.

Transaction Price Allocated to Future Performance Obligations

In determining the transaction price allocated to unsatisfied performance obligations, we do not include non-recurring charges. Further, we apply the practical expedient to not consider arrangements with an original expected duration of one year or less, which are primarily month to month rental agreements. The majority of our contracts have a contractual term of between 36 and 60 months based on implied and explicit termination penalties. These amounts will be converted into revenue in future periods as work is performed, primarily based on the services provided or at delivery and acceptance of products, depending on the applicable accounting method for the services or products being delivered.

The following table reflects the estimated fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:
($ in thousands)As of December 31, 2020
Remainder of 2021$6,033 
202211,154 
20239,312 
20245,160 
2025 and thereafter2,361 
Total$34,020 

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)20202019
Deferred revenue, beginning of the period$1,639 $1,649 
Deferred revenue, end of the period1,648 1,629 
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$95 $209 
Six months ended December 31,Six months ended December 31,
($ in thousands)20202019
Deferred revenue, beginning of the period$1,698 $1,681 
Deferred revenue, end of the period1,648 1,629 
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period$184 $360 

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.
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Contract Costs

At December 31, 2020 and June 30, 2020, the Company had net capitalized costs to obtain contracts of $0.4 million included in Prepaid expenses and other current assets and $1.8 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, 2020, amortization of capitalized contract costs was $0.1 million and $0.3 million. During the three and six months ended December 31, 2019, amortization of capitalized contract costs was $0.1 million and $0.2 million.

5. FINANCE RECEIVABLES

The Company's finance receivables consist of financed devices under the Quickstart program and devices contractually associated with the Seed platform. Predominately all of the Company’s finance receivables agreements are classified as non-cancellable sixty month sales-type leases. As of December 31, 2020 and June 30, 2020, finance receivables consist of the following:
($ in thousands)December 31,
2020
June 30,
2020
Current finance receivables, net$7,196 7,468 
Finance receivables due after one year, net10,296 11,213 
Total finance receivables, net of allowance of $909 and $150, respectively
$17,492 $18,681 

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 to cover monthly fees) and low ratio customers (customers that do not consistently have adequate transaction processing volumes 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, 2020, 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$4,161 $6,291 $3,127 $2,583 $683 $53 $16,898 
30 days and under16 57 25 40 7  145 
31-60 days32 84 24 34 2  176 
61-90 days30 51 15 34 2  132 
Greater than 90 days330 367 108 211 32 2 1,050 
Total finance receivables$4,569 $6,850 $3,299 $2,902 $726 $55 $18,401 
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At June 30, 2020, 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$4,950 $4,406 $4,811 $2,730 $555 $22 $17,474 
30 days and under40 66 121 28 11 1 267 
31-60 days13 15 13    41 
61-90 days10 44 62 19 3  138 
Greater than 90 days22 263 537 67 14 8 911 
Total finance receivables$5,035 $